LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE
74th Regular Session
April 7, 1995
TO: Honorable Curtis Seidlits, Chair IN RE: Committee Substitute
Committee on State Affairs for House
House of Representatives Bill No. 2128
Austin, Texas
FROM: John Keel, Director
In response to your request for a Fiscal Note on House Bill No.
2128 (relating to the regulation of telecommunications utilities,
to the provision of telecommunications and related services, and
to the continuation of the Public Utility Commission of Texas)
this office has determined the following:
The bill would make no appropriation but could provide the legal
basis for an appropriation of funds to implement the provisions
of the bill.
Fiscal implications of the bill are calculated from agency grand
total amounts included in the General Appropriations Bill
(Seventy-fourth Regular Session), as introduced: approximately
$10 million each year of the 1996-1997 biennium for the Public
Utility Commission (PUC) and approximately $1.3 each year for the
Office of Public Utility Counsel (OPUC). The General
Appropriations Bill would provide for 211.5 PUC employees and 21
OPUC employees each year of the biennium.
Sections 15-17 of the bill would amend the Public Utility
Regulatory Act to establish a system of regulatory flexibility
and partial deregulation for small local exchange companies and
telephone cooperatives. Additional resources of $117,614,
including 2 employees, would be needed in fiscal year 1996 and
$36,230, including 0.5 position, in each subsequent year.
Sections 19-36 of the bill would require a number of changes,
including establishing certificates of operating authority (COA)
and special provider certificates of operating authority (SPCOA)
as alternative requisites to certificates of public convenience
and necessity (CCN) for authority to provide local exchange
services in Texas. Approximately 200 interexchange carriers
would be eligible to apply for SPCOA certification. Other
provisions would allow the PUC to grant price deregulation of
specific services in particular areas, investigate complaints,
resolve disputes and regulate pay telephone rates and compliance.
Implementation of these provisions would result in additional
workload relating to certification hearings, compliance
monitoring, dispute resolution and adoption of rules relating to
pay phones. Estimated PUC costs would be $528,249 for fiscal
year 1996, including 8.5 additional employees, and $644,710 for
1997, including 11 additional positions. Thereafter, annual
costs would fluctuate below the level for 1997.
Sections 39 and 40 would amend current law relating to toll-free
calling areas and charges for extended area service. The agency
would anticipate one major case resulting from these provisions
during fiscal year 1996, requiring additional resources of
$81,856, including one full-time position, and $12,896 in each
subsequent year for program maintenance.
Section 41, Subtitle H, would provide for a new system of
incentive regulation for local exchange carriers who elect
regulation under the new system as an alternative to rate of
return regulation. Three service baskets would define variable
levels of rate regulation by the PUC. The PUC would perform a
review of electing companies and report to the legislature by
January 1, 2001 regarding consumer benefits, impact of
competition, infrastructure investments and quality of service.
Local exchange carriers electing incentive regulation would make
infrastructure commitments for six-year implementation schedules
and file annual progress reports with the PUC. Subtitle H
provisions would require policy rule adoption proceedings,
administrative cases for rate adjustments, and compliance
monitoring. The PUC estimates additional costs of $196,902 for
fiscal year 1996, including 3.5 additional employees, and
$235,280 for $1997, including 4 additional employees. Costs
would increase in each subsequent year to $413,477 in 2000,
including 7.5 additional employees.
Section 41, Subtitle J, would assign exclusive jurisdiction to
the PUC to implement competitive safeguards that would require:
hearings for unbundling local exchange company networks; filings
of loop resale tariffs; and policy rules adoption for service
price imputation, telephone number portability, competitively
neutral number assignment, and expanded interconnection networks.
Estimated additional PUC costs would be $187,505 in fiscal year
1996 and $186,154 in 1997, including 3 positions in both years.
Costs would decline to $33,872 in 2000.
Section 41, Subtitle K, would establish new requirements for
broadcaster safeguards relating to the use of specific Customer
Proprietary Network Information. The PUC anticipates that rule
adoption proceedings would require additional resources of
$44,537 during fiscal year 1996 and $42,029 during 1997,
declining to $38,689 in 2000, including one additional employee
each year.
Section 41, Subtitle L, would establish provisions relating to
electronic publishing, including prohibiting local exchange
companies (LECs) or affiliates from providing electronic
publishing through the basic telephone service of the LEC or LEC
affiliate under certain circumstances. Adoption of new policy
rules and compliance monitoring would require additional
resources of $10,502 during the first fiscal year and $12,892 in
each subsequent year.
Section 41, Subtitle M, would create the Telecommunications
Infrastructure Fund and a nine-member board to administer the
fund. The board would serve without pay but would be reimbursed
for related expenses and would be authorized to employ necessary
personnel and enter into contracts with state agencies and
private entities as necessary. The Fund would be financed with
an annual assessment of $75 million from all telecommunications
providers based on total annual intrastate receipts. The Fund
would be a dedicated fund within the State Treasury. Funds
appropriated to the board would be used to award grants and loans
to school districts, institutions of higher education and public
libraries recommended by the Texas Education Agency or the Texas
Higher Education Coordinating Board.
Section 41, Subtitle M, also contains provisions delegating
additional authority to the PUC relating to the Universal Service
Fund and establishing the Regulatory Transition Fund (RTF),
administered by the PUC to promote universal local exchange
service where no competition exists. Estimated PUC costs for
rule adoption proceedings necessary to implement these provisions
would be $74,520 for fiscal year 1996, including one additional
position, and $179,752 for 1997, including 3.5 positions. Costs
would decline to $126,400 in fiscal year 2000, including 2
additional positions.
The commission estimates that the magnitude of changes to the
Public Utility Regulatory Act would result in significant
additional costs for several categories of staffing not directly
attributable to specific sections of the bill. Such costs would
include an additional supervisor in the Telephone Division and
clerical staff. A large number of application filings resulting
from newly adopted policy rules would require additional staff
for the Central Records Division. The Public Information Section
would need additional staff to respond to public and media
inquiries relating to regulatory changes. The agency estimates
additional costs of $242,066 during fiscal year 1996, including 6
employees, and $202,590 in 1997, including 5.5 employees.
The Office of Public Utility Counsel also projects needs for
significant additional resources to participate adequately in
rule adoption proceedings and other regulatory changes to current
law. The agency estimates total costs of $324,969 for fiscal
year 1996 and $310,707 each year thereafter. Five additional
employees and expert witness fees of $50,000 are included in cost
estimates for each year.
Overall, analysis of potential fiscal impacts upon the PUC and
the OPUC resulting from the bill's provisions do not include
detailed estimates of potential savings related to reduced
functions. More detailed information is anticipated for
subsequent fiscal notes for House Bill 2128.
Revenue impacts in addition to those previously discussed cannot
be estimated at this time. Revisions to definitions for "public
utility" in combination with other provisions of the bill could
reduce collections if fewer utilities are subject to the utility
gross receipts tax. In addition, access line fee revenue is
based on cost reimbursement that may decline significantly if
relevant functions are reduced as a result of provisions for
incentive regulation in Section 41. Access line fee revenue
decreases could result in estimated general losses each year of
$676,000.
The probable fiscal implication of implementing the provisions of
the bill during each of the first five years following passage
is estimated as follows:
Fiscal Probable Cost Out Probable Revenue Probable Revenue
Year of General Gain/(Loss) from Gain to
Revenue Fund 001 General Revenue Telecommunications
Fund 001 Infrastructure
Fund
1996 $1,808,720 ($676,000) $75,000,000
1997 1,863,244 (676,000) 75,000,000
1998 1,591,493 (676,000) 75,000,000
1999 1,712,216 (676,000) 75,000,000
2000 1,519,084 (676,000) 75,000,000
Fiscal Change in
Year Number of State
Employees from
FY 1995
1996 31.0
1997 34.5
1998 30.0
1999 32.0
2000 28.5
Similar annual fiscal implications would continue as long as the
provisions of the bill are in effect.
The fiscal implication to units of local government cannot be
determined.
Source: Public Utility Commission, Office of the Public Utility
Counsel
LBB Staff: JK, RM, DF