By Black                                              H.B. No. 1777
       74R7130 CBH-F
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to the regulation of small telecommunications utilities
    1-3  and telephone cooperative corporations.
    1-4        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-5        SECTION 1.  Article VI, Public Utility Regulatory Act
    1-6  (Article 1446c, Vernon's Texas Civil Statutes), is amended by
    1-7  amending Section 43B and adding Section 43C to read as follows:
    1-8        Sec. 43B.  (a)  Policy.  The legislature finds that
    1-9  regulatory policy should recognize differences between the small
   1-10  and large local exchange companies, that there are a large number
   1-11  of customer-owned telephone cooperatives and small, locally owned
   1-12  investor companies, and that it is appropriate to provide
   1-13  incentives and flexibility to allow local exchange companies that
   1-14  serve the rural areas to provide existing services and to introduce
   1-15  new technology and new services in a prompt, efficient, and
   1-16  economical manner.
   1-17        (b)  Except as otherwise provided by this section, a local
   1-18  exchange company that is a cooperative corporation, or that,
   1-19  together with all affiliated local exchange companies, has fewer
   1-20  than 31,000 access lines in service in this state, may offer
   1-21  extended local calling services or new services on an optional
   1-22  basis or make minor changes in its rates or tariffs if the company:
   1-23              (1)  files with the commission and the office a
   1-24  statement of intent, as prescribed by Subsection (c) of this
    2-1  section, not later than the 91st day before the date on which the
    2-2  proposed change will take effect;
    2-3              (2)  provides notice as prescribed by Subsection (d) of
    2-4  this section; and
    2-5              (3)  files with the commission affidavits verifying the
    2-6  provision of notice as prescribed by Subsection (d) of this
    2-7  section.
    2-8        (c)  The statement of intent required by Subsection (b)(1) of
    2-9  this section must include:
   2-10              (1)  a copy of a resolution approving the proposed
   2-11  change by the local exchange telephone company's board of
   2-12  directors;
   2-13              (2)  a description of the services affected by the
   2-14  proposed change;
   2-15              (3)  a copy of the proposed tariff for the affected
   2-16  service;
   2-17              (4)  a copy of the customer notice required by
   2-18  Subsection (b)(2) of this section;
   2-19              (5)  the number of access lines the company and each
   2-20  affiliate has in service in this state; and
   2-21              (6)  the amount by which the company's total gross
   2-22  annual revenues will increase or decrease as a result of the
   2-23  proposed change.
   2-24        (d)  The local exchange company shall provide notice to
   2-25  affected customers in the manner prescribed by the commission no
   2-26  later than the 61st day before the date on which the proposed
   2-27  change will take effect.  Each notice prescribed by the commission
    3-1  must include:
    3-2              (1)  a description of the services affected by the
    3-3  proposed change;
    3-4              (2)  the effective date of the proposed change;
    3-5              (3)  an explanation of the customer's right to petition
    3-6  the commission for a review under Subsection (e) of this section,
    3-7  including the number of persons required to petition before a
    3-8  commission review will occur;
    3-9              (4)  an explanation of the customer's right to obtain
   3-10  information concerning how to obtain a copy of the proposed tariff
   3-11  from the company;
   3-12              (5)  the amount by which the company's total gross
   3-13  revenues will increase or decrease as a result of the proposed
   3-14  change; and
   3-15              (6)  a list of rates that are affected by the proposed
   3-16  rate change.
   3-17        (e)  The commission shall review a proposed change filed
   3-18  under this section if:
   3-19              (1)  the commission receives complaints relating to the
   3-20  proposed change signed by the lesser of five percent or 1,500 of
   3-21  the affected local service customers;
   3-22              (2)  the commission receives a complaint relating to
   3-23  the proposed change from an affected intrastate access customer, or
   3-24  a group of affected intrastate access customers, that in the
   3-25  preceding 12 months accounted for more than 10 percent of the
   3-26  company's total intrastate access revenues;
   3-27              (3)  the proposed change is not a minor change;
    4-1              (4)  the company does not comply with the procedural
    4-2  requirements of this section; or
    4-3              (5)  the proposed change is inconsistent with the
    4-4  commission's substantive policies as expressed in its rules.
    4-5        (f)  On review, the commission may suspend the proposed
    4-6  tariff during the pendency of review.
    4-7        (g)  This section does not prohibit a local exchange
    4-8  telephone company from filing for a new service or rate change
    4-9  under another applicable section of this Act or the commission from
   4-10  conducting a review in accordance with Section 42 of this Act.
   4-11        (h)  In this section, "minor change" means a change,
   4-12  including the restructuring of rates of existing services, that
   4-13  decreases the rates or revenues of the local exchange telephone
   4-14  company or that, together with any other rate or proposed or
   4-15  approved tariff changes in the 12 months preceding the date on
   4-16  which the proposed change will take effect, results in an increase
   4-17  of the company's total annual gross revenues by not more than five
   4-18  percent.  Further, with regard to a change to a basic local access
   4-19  line rate, a minor change may not, together with any other change
   4-20  to that rate that went into effect during the 12 months preceding
   4-21  the proposed effective date of the requested change, result in an
   4-22  increase of more than 10 percent.  <Except as otherwise provided by
   4-23  this section, a local exchange company that is a cooperative
   4-24  corporation or that has fewer than 5,000 access lines in service in
   4-25  this state may change rates by publishing notice of the change at
   4-26  least 60 days before the date of the change in the place and form
   4-27  as prescribed by the commission.  The notice must include:>
    5-1              <(1)  the reasons for the rate change;>
    5-2              <(2)  a description of the affected service;>
    5-3              <(3)  an explanation of the right of the subscriber to
    5-4  petition the commission for a hearing on the rate change; and>
    5-5              <(4)  a list of rates that are affected by the proposed
    5-6  rate change.>
    5-7        <(b)  At least 60 days before the date of the change, the
    5-8  local exchange company shall file with the commission a statement
    5-9  of intent to change rates containing:>
   5-10              <(1)  a copy of the notice required by Subsection (a)
   5-11  of this section;>
   5-12              <(2)  the number of access lines the company has in
   5-13  service in this state;>
   5-14              <(3)  the date of the most recent commission order
   5-15  setting rates of the company;>
   5-16              <(4)  the increase in total gross annual local revenues
   5-17  that will be produced by the proposed rates;>
   5-18              <(5)  the increase in total gross annual local revenues
   5-19  that will be produced by the proposed rates together with any local
   5-20  rate changes which went into effect during the 12 months preceding
   5-21  the proposed effective date of the requested rate change and any
   5-22  other proposed local rate changes then pending before the
   5-23  commission;>
   5-24              <(6)  the increase in rates for each service category;
   5-25  and>
   5-26              <(7)  other information the commission by rule
   5-27  requires.>
    6-1        <(c)  The commission shall review a proposed change in the
    6-2  rates set by a local exchange company under this section upon the
    6-3  receipt of complaints signed by at least five percent of all
    6-4  affected subscribers or upon its own motion.  The commission may
    6-5  require notice to ratepayers as it considers appropriate.  If
    6-6  sufficient complaints are presented to the commission within 60
    6-7  days after the date notice of the rate change was sent to
    6-8  subscribers, the commission shall review the proposed change.
    6-9  After notice to the local exchange company, the commission may
   6-10  suspend the rates during the pendency of the review and reinstate
   6-11  the rates previously in effect.  Review under this subsection shall
   6-12  be as provided by Section 43 of this Act.  The period for review by
   6-13  the commission does not begin until the local exchange company
   6-14  files a complete rate-filing package.>
   6-15        <(d)  If the commission has entered an order setting a rate,
   6-16  the affected local exchange company may not change that rate under
   6-17  this section before 365 days after the date of the commission's
   6-18  order setting the rate.>
   6-19        <(e)  This section does not prohibit a local exchange company
   6-20  from filing for a rate change under any other applicable section of
   6-21  this Act.>
   6-22        <(f)  The commission shall review a proposed change in the
   6-23  rates of a local exchange company under this section if the
   6-24  proposed rates, together with any local rate changes which went
   6-25  into effect during the 12 months preceding the proposed effective
   6-26  date of the requested rate change as well as any other proposed
   6-27  local rate changes then pending before the commission, will
    7-1  increase its total gross annual local revenues by more than 2 1/2
    7-2  percent or if the proposed change would increase the rate of any
    7-3  service category by more than 25 percent, except for basic local
    7-4  service, which shall be limited to a maximum of 2 1/2 percent of
    7-5  the total gross annual local revenue.  Review under this subsection
    7-6  shall be as provided by Section 43 of this Act.  Each local
    7-7  exchange company may receive a change in its local rates or in any
    7-8  service category pursuant to this section only one time in any
    7-9  12-month period.>
   7-10        (i) <(g)>  Rates established under this section must be in
   7-11  accordance with the rate-setting principles of Article VI of this
   7-12  Act.  However, such companies may provide to their board members,
   7-13  officers, employees, and agents free or reduced rates for services.
   7-14        (j)(1)  Small Company Policy Review.  The commission shall,
   7-15  within 120 days of the effective date of this section, examine its
   7-16  policies, its reporting requirements, and its procedural and
   7-17  substantive rules as they relate to rural and small local exchange
   7-18  companies and cooperatives to eliminate or revise those that place
   7-19  unnecessary burdens and expenses on such companies.
   7-20  Notwithstanding any other provisions of this Act, the commission
   7-21  shall consider and may adopt policies that include the following:
   7-22                    (A)  policies to allow such companies to provide
   7-23  required information by report or otherwise as necessary, including
   7-24  a rate filing package when required, in substantially less
   7-25  burdensome and complex form than required of larger local exchange
   7-26  companies;
   7-27                    (B)  policies that permit consideration of the
    8-1  company's future construction plans and operational changes in
    8-2  evaluating the reasonableness of current rates;
    8-3                    (C)  policies that provide for evaluation of the
    8-4  overall reasonableness of current rates no more frequently than
    8-5  once every three years;
    8-6                    (D)  policies that permit companies to change
    8-7  depreciation and amortization rates when customer rates are not
    8-8  affected by notice to the commission, subject to review by the
    8-9  commission in a proceeding under Sections 42 and 43 of this Act;
   8-10                    (E)  policies to allow the local exchange
   8-11  companies to adopt for new services the rates for the same or
   8-12  substantially similar services offered by a larger local exchange
   8-13  company, without commission requirement of additional cost
   8-14  justification; and
   8-15                    (F)  policies that allow a local exchange
   8-16  company, in lieu of any management audit that would otherwise be
   8-17  required by law, policy, or rule, to instead submit to the
   8-18  commission financial audits of the company regularly performed by
   8-19  independent auditors or required and performed as a result of the
   8-20  company's participation in federal or state financing or
   8-21  revenue-sharing programs.
   8-22              (2)  Notwithstanding any other relevant provision of
   8-23  this Act, the commission may adopt policies under this subsection
   8-24  that the commission considers appropriate.
   8-25        (k) <(h)>  The commission is granted all necessary power and
   8-26  authority to prescribe and collect fees and assessments from local
   8-27  exchange companies necessary to recover the commission's and the
    9-1  Office of Public Utility Counsel's costs of activities carried out
    9-2  and services provided under Subsection (i) of Section 43 and
    9-3  Sections 43A, <and> 43B, and 43C of this Act.
    9-4        (l)  Except as provided in Subsection (j), this section may
    9-5  not apply to any local exchange company that is a cooperative
    9-6  corporation partially deregulated under the provisions of Section
    9-7  43C of this Act.
    9-8        Sec. 43C.  (a)  A local exchange company that is a
    9-9  cooperative corporation may vote to partially deregulate the
   9-10  cooperative by sending a ballot to each cooperative member.  The
   9-11  ballot may be included in a bill or sent separately.  The ballot
   9-12  shall provide for voting for or against the proposition:
   9-13  "Authorizing the partial deregulation of the (name of the
   9-14  cooperative)."
   9-15        (b)  The cooperative is deemed to be partially deregulated if
   9-16  a majority of the ballots returned to the cooperative not later
   9-17  than the 45th day after the date on which the ballots are mailed
   9-18  favor deregulation.
   9-19        (c)  After the initial balloting, the cooperative may offer
   9-20  extended local calling services, new services on an optional basis,
   9-21  or make changes in its rates or tariffs if the cooperative:
   9-22              (1)  provides notice of the proposed action under this
   9-23  section to all customers and municipalities as prescribed by
   9-24  Subsection (e) of this section;
   9-25              (2)  files with the commission affidavits verifying the
   9-26  provision of notice as prescribed by Subsection (f) of this
   9-27  section; and
   10-1              (3)  files a statement of intent pursuant to Subsection
   10-2  (d) of this section.
   10-3        (d)  A statement of intent to use this section must be filed
   10-4  with the commission and the office not later than the 61st day
   10-5  before the date on which a proposed change will take effect and
   10-6  must include:
   10-7              (1)  a copy of a resolution approving the proposed
   10-8  action and authorizing the filing of the statement of intent signed
   10-9  by a majority of the members of the cooperative's board of
  10-10  directors;
  10-11              (2)  a description of the services affected by the
  10-12  proposed action;
  10-13              (3)  a copy of the proposed tariff for the affected
  10-14  service; and
  10-15              (4)  a copy of the customer notice required by this
  10-16  section.
  10-17        (e)  The cooperative shall provide to all affected customers
  10-18  and parties, including municipalities, at least two notices of the
  10-19  proposed action by bill insert or by individual notice.  The
  10-20  cooperative shall provide the first notice not later than the 61st
  10-21  day before the date on which the proposed action will take effect.
  10-22  The cooperative shall provide the last notice not later than the
  10-23  31st day before the date on which the proposed action will take
  10-24  effect.  Each notice prescribed by this subsection must include:
  10-25              (1)  a description of the services affected by the
  10-26  proposed action;
  10-27              (2)  the effective date of the proposed action;
   11-1              (3)  an explanation of the customer's right to petition
   11-2  the commission for a review under Subsection (g) of this section;
   11-3              (4)  an explanation of the customer's right to obtain a
   11-4  copy of the proposed tariff from the cooperative;
   11-5              (5)  the amount by which the cooperative's total gross
   11-6  annual revenues will increase or decrease and a statement
   11-7  explaining the effect on the cooperative revenues as a result of
   11-8  the proposed action; and
   11-9              (6)  a list of rates that are affected by the proposed
  11-10  rate action, showing the effect of the proposed action on each such
  11-11  rate.
  11-12        (f)  Not later than the 15th day before the date on which the
  11-13  proposed action will take effect, the cooperative shall file with
  11-14  the commission affidavits that verify that the cooperative provided
  11-15  each notice prescribed under Subsection (e) of this section.
  11-16        (g)(1)  The commission shall review a proposed action filed
  11-17  under this section if:
  11-18                    (A)  the commission receives, not later than the
  11-19  45th day after the first notice is provided under Subsection (e) of
  11-20  this section, complaints relating to the proposed action:
  11-21                          (i)  signed by at least five percent of the
  11-22  affected local service customers; or
  11-23                          (ii)  from an affected intrastate access
  11-24  customer, or group of affected intrastate access customers, that in
  11-25  the preceding 12 months accounted for more than 10 percent of the
  11-26  cooperative's total intrastate access revenues;
  11-27                    (B)  the cooperative does not comply with the
   12-1  procedural requirements of this section; or
   12-2                    (C)  the proposed action is inconsistent with the
   12-3  commission's substantive policies as expressed in its rules.
   12-4              (2)  If the commission conducts a review of the
   12-5  proposed action under this subsection or under Section 42 of this
   12-6  Act before the effective date, the commission may suspend  the
   12-7  proposed actions of the cooperative during the pendency of the
   12-8  review.
   12-9        (h)  A cooperative that is partially deregulated under this
  12-10  section may vote to reverse the deregulation by sending  a ballot
  12-11  to each cooperative member.  Upon its own motion or within 60 days
  12-12  upon receipt of a written request of 10 percent of its members, the
  12-13  cooperative's board of directors shall reballot.  The ballot may be
  12-14  included in a bill or sent separately.  The ballot shall provide
  12-15  for voting for or against the proposition:  "Reversing the partial
  12-16  deregulation of the (name of the cooperative)."  The partial
  12-17  deregulation is reversed if a majority of the ballots returned to
  12-18  the cooperative not later than the 45th day after the date on which
  12-19  the ballots are mailed favor reversal.
  12-20        (i)  The commission by rule shall prescribe the voting
  12-21  procedures a cooperative is required to use under this section.
  12-22        (j)  This section does not:
  12-23              (1)  prohibit a cooperative from filing for a new
  12-24  service or rate change under another applicable section of this
  12-25  Act; or
  12-26              (2)  affect the application of other provisions of this
  12-27  Act not directly related to rate-making or the authority of the
   13-1  commission to require the cooperative to file reports as required
   13-2  under this  Act, Section 43B(j) of this Act, or under the rules
   13-3  adopted by the commission.
   13-4        (k)  Notwithstanding any other provision of this section, the
   13-5  commission may conduct a review in accordance with Section 42 of
   13-6  this Act.
   13-7        SECTION 2.  This Act takes effect September 1, 1995.
   13-8        SECTION 3.  The importance of this legislation and the
   13-9  crowded condition of the calendars in both houses create an
  13-10  emergency and an imperative public necessity that the
  13-11  constitutional rule requiring bills to be read on three several
  13-12  days in each house be suspended, and this rule is hereby suspended.