S.B. No. 1227 AN ACT 1-1 relating to the regulation of electric cooperative corporations. 1-2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-3 SECTION 1. Subtitle E, Title II, Public Utility Regulatory 1-4 Act of 1995, as enacted by S.B. No. 319, Acts of the 74th 1-5 Legislature, Regular Session, 1995, is amended by adding Section 1-6 2.2011 to read as follows: 1-7 Sec. 2.2011. COOPERATIVE CORPORATIONS. (a) An electric 1-8 cooperative corporation that provides retail electric utility 1-9 service at distribution voltage is exempt from rate regulation if a 1-10 majority of the members voting in an election on the deregulation 1-11 of the electric cooperative vote to approve the exemption and the 1-12 electric cooperative sends notice of the action to each applicable 1-13 regulatory authority. An electric cooperative that wants to hold 1-14 an election under this section shall send a ballot by mail to each 1-15 electric cooperative member. The electric cooperative may include 1-16 the ballot in a monthly billing. The ballot shall provide for 1-17 voting for or against rate deregulation of the electric 1-18 cooperative. If the proposition is approved, the electric 1-19 cooperative shall send each ballot to the commission not later than 1-20 the 10th day after the date the electric cooperative counts the 1-21 ballots. Based on the ballots received, the commission shall 1-22 administratively certify that the electric cooperative is or is not 1-23 deregulated for ratemaking purposes. An electric cooperative may 1-24 not hold another election on the issue of being exempt from rate 2-1 regulation before the first anniversary of the most recent election 2-2 on the issue. Subsections (b) through (n) of this section apply to 2-3 an electric cooperative that has elected to be exempt from rate 2-4 regulation. 2-5 (b) No regulatory authority shall fix and regulate the rates 2-6 of an electric cooperative that has made an election under this 2-7 section to be exempt from rate regulation except as provided for 2-8 the commission in Subsections (g) and (i) of this section. 2-9 Notwithstanding Section 2.101(a) of this Act, the commission has 2-10 exclusive original jurisdiction in all of the electric 2-11 cooperative's service area in a proceeding initiated under 2-12 Subsection (g) or (i) of this section. 2-13 (c) An electric cooperative may change its rates by: 2-14 (1) adopting a resolution approving the proposed 2-15 change; 2-16 (2) mailing notice of the proposed change to: 2-17 (A) the commission; 2-18 (B) each affected municipality; 2-19 (C) each affected customer, which notice may be 2-20 included in a monthly billing; and 2-21 (D) each electric utility providing retail 2-22 service in the electric cooperative's service area or in the 2-23 adjoining service area; and 2-24 (3) making available at each of the electric 2-25 cooperative's business offices for review by all interested persons 2-26 a cost-of-service study that: 2-27 (A) is not more than five years old at the time 3-1 the electric cooperative adopts rates under this subsection; and 3-2 (B) bears the certification of a professional 3-3 engineer or certified public accountant. 3-4 (d)(1) The notice required by Subsection (c) of this section 3-5 must contain the following information: 3-6 (A) the increase or decrease in total operating 3-7 revenues over actual test year revenues or over test year revenues 3-8 adjusted to annualize the recovery of changes in the cost of 3-9 purchased electricity, stated both as a dollar amount and as a 3-10 percentage; 3-11 (B) the classes of utility customers affected 3-12 and the creation and application of any new rate classes; 3-13 (C) the increase or decrease for each class 3-14 stated as a percentage of actual test year revenues for the class 3-15 or of test year revenues for the class adjusted to annualize the 3-16 recovery of changes in the cost of purchased electricity; 3-17 (D) a statement that the commission may review 3-18 the rate change if the commission receives a petition within 60 3-19 days in accordance with Subsection (g) of this section; 3-20 (E) the address and telephone number of the 3-21 commission; 3-22 (F) a statement that a customer opposed to the 3-23 rate change should notify the electric cooperative in writing of 3-24 the person's opposition and should provide a return address; and 3-25 (G) a statement that members may review a copy 3-26 of any written opposition the electric cooperative receives. 3-27 (2) The electric cooperative may not be required to 4-1 include additional information in the notice. 4-2 (e) The electric cooperative shall make available for review 4-3 by a member of the cooperative at each of the electric 4-4 cooperative's business offices a copy of any written opposition to 4-5 the rate change the electric cooperative receives. 4-6 (f) The electric cooperative shall file tariffs with the 4-7 commission. If the electric cooperative complies with Subsection 4-8 (c) of this section, the commission shall approve the tariffs not 4-9 later than the 10th day after the 60-day period prescribed by 4-10 Subsection (g) of this section expires unless a review is required 4-11 under Subsection (g) or (i) of this section. If the tariffs are 4-12 approved or if a review is not required and the commission fails to 4-13 act during the period prescribed by this subsection, the change in 4-14 rates takes effect on the 70th day after the date on which the 4-15 electric cooperative first complies with all requirements of 4-16 Subsection (c) of this section or on a later date determined by the 4-17 electric cooperative. Except as provided by Subsections (g) and 4-18 (i) of this section, the rates of the electric cooperative are not 4-19 subject to review. 4-20 (g) The commission shall review a change in rates under this 4-21 section if, not later than the 60th day after the date the electric 4-22 cooperative first complies with all requirements of Subsection (c) 4-23 of this section, the commission receives a petition requesting 4-24 review signed by: 4-25 (1) at least 10 percent of the members of the electric 4-26 cooperative; 4-27 (2) members of the electric cooperative who purchased 5-1 more than 50 percent of the electric cooperative's annual energy 5-2 sales to a customer class in the test year, provided that the 5-3 petition includes a certification of the purchases; or 5-4 (3) an executive officer of an affected electric 5-5 utility, provided that the petition prescribes the particular class 5-6 or classes for which a review is requested. 5-7 (h) When a person files a petition under Subsection (g) of 5-8 this section, the person shall notify the electric cooperative in 5-9 writing of the action. 5-10 (i) The commission may on its own motion review the rates of 5-11 an electric cooperative if the commission first finds that there is 5-12 good cause to believe that the electric cooperative is earning more 5-13 than a reasonable return on overall system revenues or on revenue 5-14 from a rate class. 5-15 (j) The commission shall conduct a review under Subsection 5-16 (g)(1) or (2) of this section or under Subsection (i) of this 5-17 section in accordance with Section 2.212 of this Act and the other 5-18 applicable rate-setting principles of this subtitle, except that: 5-19 (1) the period for review does not begin until the 5-20 electric cooperative files a rate-filing package as required by 5-21 commission rules; 5-22 (2) the proposed change may not be suspended during 5-23 the pendency of the review; however, the electric cooperative shall 5-24 refund or credit against future bills all sums collected in excess 5-25 of the rate finally set by the commission, if the commission so 5-26 orders; and 5-27 (3) the electric cooperative shall observe the rates 6-1 set by the commission until the rates are changed as provided by 6-2 this section or by other sections of this Act. 6-3 (k) For a review conducted under Subsection (g)(3) of this 6-4 section, the electric cooperative shall file with the commission a 6-5 copy of the cost-of-service study required under Subsection (c)(3) 6-6 of this section not later than the 10th day after the date the 6-7 electric cooperative receives from the affected electric utility 6-8 notice that a petition has been filed. The commission shall 6-9 determine for each class for which review has been requested the 6-10 annual cost of providing service to the class, as stated in the 6-11 electric cooperative's cost-of-service study, and the revenues for 6-12 the class that would be produced by multiplying the rate set by the 6-13 electric cooperative by the annual billing units for the class, as 6-14 stated in the cost-of-service study. If the electric cooperative 6-15 proposes a rate class solely for a new customer, the electric 6-16 cooperative shall estimate the reasonable annual cost of providing 6-17 service to the class, and the electric cooperative shall base class 6-18 revenues on reasonable estimates of billing units. 6-19 (l) The rate for each class for which review has been 6-20 requested under Subsection (g)(3) of this section is suspended 6-21 during the pendency of the review. The commission shall dismiss 6-22 the petition and approve the rates if the revenues for the class 6-23 are equal to or greater than the cost of providing service to the 6-24 class. The commission shall disapprove the rate if the revenues 6-25 for the class are less than the cost of providing service to the 6-26 class; however, this action does not affect reconsideration of the 6-27 rate as a part of any subsequent ratemaking proceeding. The rate 7-1 adopted by the electric cooperative is deemed approved and may be 7-2 placed into effect if the commission fails to make its final 7-3 determination administratively not later than the 45th day after 7-4 the date the electric cooperative files its cost-of-service study. 7-5 (m) Except as provided by Subsection (a) of this section, 7-6 the members of an electric cooperative may at any time revoke the 7-7 electric cooperative's election to be exempt from rate regulation 7-8 or elect to again be exempt from rate regulation by majority vote 7-9 of the members voting. 7-10 (n) This section does not affect the application of other 7-11 provisions of this Act not directly related to rates or to the 7-12 authority of the commission to require an electric cooperative to 7-13 file reports required under this Act or rules adopted by the 7-14 commission. A service fee or a service rule or regulation set by 7-15 the electric cooperative under this section must comply with 7-16 commission rules applicable to all electric utilities. The 7-17 commission may determine whether an electric cooperative has 7-18 unlawfully charged, collected, or received a rate for electric 7-19 utility service. 7-20 (o) A single customer may seek a review of the rates of an 7-21 electric cooperative pursuant to Section 2.211 of this Act if the 7-22 customer consumes more than 250,000,000 kwh and purchases more than 7-23 10 percent of the total energy sales or more than 7-1/2 percent of 7-24 the total revenues of the electric cooperative in any period of 12 7-25 consecutive months within the 36 months preceding the date on which 7-26 that customer initiates a proceeding under Section 2.211 of this 7-27 Act. The rights under this subsection shall be in addition to 8-1 rights that a customer has under Subsection (g) of this section, 8-2 and not in limitation or in lieu of rights under Subsection (g) of 8-3 this section. 8-4 (p) An electric cooperative that has elected to be exempt 8-5 from rate regulation may by resolution adopt retail tariffs or 8-6 contracts containing charges that are less than average embedded 8-7 cost retail rates but equal to or greater than the cooperative's 8-8 marginal cost. The standards of Section 2.052 of this Act, rather 8-9 than other standards in this section, shall be applied in reviewing 8-10 rates adopted pursuant to this subsection, however, the 8-11 cooperative's marginal cost shall be the lowest marginal cost of 8-12 any of the cooperative's wholesale power suppliers. 8-13 SECTION 2. The importance of this legislation and the 8-14 crowded condition of the calendars in both houses create an 8-15 emergency and an imperative public necessity that the 8-16 constitutional rule requiring bills to be read on three several 8-17 days in each house be suspended, and this rule is hereby suspended, 8-18 and that this Act take effect and be in force from and after its 8-19 passage, and it is so enacted.