1-1 By: Stiles (Senate Sponsor - Armbrister) H.B. No. 176
1-2 (In the Senate - Received from the House April 18, 1995;
1-3 April 20, 1995, read first time and referred to Committee on State
1-4 Affairs; May 12, 1995, reported favorably by the following vote:
1-5 Yeas 9, Nays 2; May 12, 1995, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to components of net income used in establishing rates of
1-9 a gas utility.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Section 5.06, Gas Utility Regulatory Act (Article
1-12 1446e, Vernon's Texas Civil Statutes), is amended to read as
1-13 follows:
1-14 Sec. 5.06. Components of Net Income. (a) The components of
1-15 net income used to establish just and reasonable rates shall be
1-16 determined in accordance with this section.
1-17 (b) "Net income" means the total revenues of the gas utility
1-18 from gas utility service less all reasonable and necessary expenses
1-19 related to that gas utility service as determined by the regulatory
1-20 authority. The regulatory authority shall determine those expenses
1-21 and revenues in a manner consistent with Subsections (c)-(e)
1-22 <(b)-(d)> of this section.
1-23 (c) <(b)> Payment to affiliated interests for costs of any
1-24 services, or any property, right, or thing, or for interest expense
1-25 may not be used to establish just and reasonable rates for gas
1-26 utility service <allowed> either as capital costs or as expense
1-27 related to gas utility service except to the extent that the
1-28 regulatory authority shall find such payment to be reasonable and
1-29 necessary for each item or class of items as determined by the
1-30 regulatory authority <railroad commission>. Any such finding shall
1-31 include specific findings of the reasonableness and necessity of
1-32 each item or class of items included in the establishment of the
1-33 rates <allowed> and a finding that the price to the gas utility is
1-34 no higher than prices charged by the supplying affiliate to its
1-35 other affiliates or divisions for the same item or class of items,
1-36 or to unaffiliated persons or corporations.
1-37 (d) If an expense is allowed to be included in utility
1-38 rates, or an investment is included in the utility rate base, the
1-39 related income tax deduction or benefit shall be included in the
1-40 computation of income tax expense to reduce the rates. If an
1-41 expense is disallowed or not included in utility rates, or an
1-42 investment is not included in the utility rate base, the related
1-43 income tax deduction or benefit may not be included in the
1-44 computation of income tax expense to reduce the rates. The income
1-45 tax expense shall be computed using the statutory income tax rates.
1-46 <(c) If the gas utility is a member of an affiliated group
1-47 that is eligible to file a consolidated income tax return, and if
1-48 it is advantageous to the gas utility to do so, income taxes shall
1-49 be computed as though a consolidated return had been so filed and
1-50 the utility had realized its fair share of the savings resulting
1-51 from the consolidated return, unless it is shown to the
1-52 satisfaction of the regulatory authority that it was reasonable to
1-53 choose not to consolidate returns. The amounts of income taxes
1-54 saved by a consolidated group of which a gas utility is a member by
1-55 reason of the elimination in the consolidated return of the
1-56 intercompany profit on purchases by the gas utility from an
1-57 affiliate shall be applied to reduce the cost of the property or
1-58 services so purchased. The investment tax credit allowed against
1-59 federal income taxes, to the extent retained by the utility, shall
1-60 be applied as a reduction in the rate based contribution of the
1-61 assets to which the credit applies, to the extent and at the rate
1-62 allowed by the Internal Revenue Code.>
1-63 (e) <(d)> The regulatory authority may promulgate reasonable
1-64 rules and regulations complying with this section with respect to
1-65 including and not including <the allowance or disallowance of>
1-66 certain expenses in the computation of the rates to be established
1-67 <for ratemaking purposes>.
1-68 (f) This legislation is not intended to increase gas utility
2-1 rates to the customer not caused by utility service. Utility rates
2-2 shall include only expenses caused by utility service.
2-3 SECTION 2. This Act applies only to a rate proceeding for
2-4 which the statement of intent is filed on or after the effective
2-5 date of this Act and to any appeal of that proceeding. A
2-6 proceeding for which the statement of intent is filed before the
2-7 effective date of this Act or an appeal of that proceeding is
2-8 governed by the law in effect when the statement of intent was
2-9 filed, and that law is continued in effect for that purpose.
2-10 SECTION 3. The importance of this legislation and the
2-11 crowded condition of the calendars in both houses create an
2-12 emergency and an imperative public necessity that the
2-13 constitutional rule requiring bills to be read on three several
2-14 days in each house be suspended, and this rule is hereby suspended,
2-15 and that this Act take effect and be in force from and after its
2-16 passage, and it is so enacted.
2-17 * * * * *