IMF S.B. 1571 75(R)BILL ANALYSIS STATE AFFAIRS S.B. 1571 By: Madla (Puente) 5-23-97 Committee Report (Amended) BACKGROUND Wholesale competition was introduced in the electric utility industry by the passage of S.B. 373 during the 74th Legislature. During the rulemaking proceeding at the Public Utility Commission of Texas (PUC), PUC adopted substantive rules to implement pricing of transmission service as required by the statute. There are concerns that these rules create disproportionate and inequitable shifting of cost among electric transmission providers in this state. This bill sets forth requirements relating to transmission pricing methodology for wholesale wheeling. PURPOSE As proposed, S.B. 1571 sets forth requirements for transmission pricing methodology for wheeling in the electric utility industry. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 2.057(c), Article 1446c-0, V.T.C.S. (Public Utility Regulatory Act of 1995), to prohibit the Public Utility Commission (PUC) from employing certain transmission pricing methods. SECTION 2. Amends Section 2.105, Article 1446c-0, V.T.C.S., to authorize a municipally owned utility to elect to use a cash flow method for determining certain rates for investor-owned utilities. Requires PUC to apply rate making principles based on the flow of funds set forth in the municipality's revenue bond ordinance and other debt ordinances to allow for a cash flow level sufficient to cover all items determined by the municipally owned utility's governing board to be required to be paid or funded from certain sources under certain conditions. Requires PUC to ensure that costs of nontransmission functions are used in a certain manner. Prohibits PUC from considering certain factors applicable to investor-owned utilities, if the cash flow method is used. Requires PUC to specifically acknowledge that provisions contained in certain sections of this Act do not apply to municipally owned utilities. SECTION 3. Effective date: September 1, 1997. SECTION 4. Emergency clause. EXPLANATION OF AMENDMENT Committee amendment no. 1 adds a new SECTION 1 (Sec. 2.057 (c), PURA) that clarifies that transmission users should pay only for the share of the transmission system that they use. It states that the PUC may not employ a transmission pricing method that uses a statewide loadratio pricing methodology or produces cost shifting when comparing a utility's use of other transmission facilities to the others' use of its systems.