By Patterson S.B. No. 1372
75R7106 CBH-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the computation and mitigation of an investor-owned
1-3 electric utility's excess costs over market.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Title II, Public Utility Regulatory Act of 1995
1-6 (Article 1446c-0, Vernon's Texas Civil Statutes), is amended by
1-7 adding Subtitle G to read as follows:
1-8 SUBTITLE G. EXCESS COSTS OVER MARKET
1-9 Sec. 2.301. DEFINITION. In this subtitle, "excess costs
1-10 over market" means those legitimate, reasonable, and verifiable
1-11 costs of jurisdictional assets in this state, including generation
1-12 facilities, regulatory assets, purchased power contracts, and fuel
1-13 contracts that were being recovered in rates approved by the
1-14 regulatory authority as of September 1, 1995, and that the
1-15 commission determines are above market value on or after September
1-16 1, 1997. The term does not include:
1-17 (1) costs incurred after September 1, 1995;
1-18 (2) administrative or general expenses, operation or
1-19 maintenance expenses, or fuel expenses;
1-20 (3) any costs incurred by a utility for a reason other
1-21 than to meet the utility's obligations to provide service as a
1-22 holder of a certificate of convenience and necessity; or
1-23 (4) any costs that have been determined by the
1-24 regulatory authority not to be prudent.
2-1 Sec. 2.302. APPLICATION. This subtitle applies only to an
2-2 investor-owned electric utility.
2-3 Sec. 2.303. DUTY TO MITIGATE. Each electric utility shall
2-4 aggressively mitigate the utility's excess costs over market. The
2-5 utility may use different mitigation methods including:
2-6 (1) increasing operational efficiencies;
2-7 (2) reducing expenses;
2-8 (3) selling generation-related facilities;
2-9 (4) retiring generating facilities that are not
2-10 operationally economic according to standard financial and economic
2-11 measures and principles; and
2-12 (5) enhancing revenues by methods such as marketing
2-13 excess capacity.
2-14 Sec. 2.304. IDENTIFICATION AND MONITORING. (a) The
2-15 commission shall:
2-16 (1) identify the excess costs over market of each
2-17 electric utility; and
2-18 (2) prescribe the method or methods each utility must
2-19 use in tracking the utility's excess costs over market and
2-20 mitigation efforts.
2-21 (b) Each electric utility shall submit to the commission
2-22 annual reports describing:
2-23 (1) the status of the utility's excess costs over
2-24 market; and
2-25 (2) the utility's mitigation efforts.
2-26 Sec. 2.305. ANALYSIS OF ISSUES. (a) The commission shall
2-27 analyze issues related to electric utilities' excess costs over
3-1 market, including:
3-2 (1) methods to reimburse electric utilities for any
3-3 remaining excess costs over market in accordance with Section 2.306
3-4 of this Act;
3-5 (2) whether electric utility rates should continue to
3-6 reflect a risk premium;
3-7 (3) whether an electric utility's risk premium should
3-8 be considered in computing the utility's excess costs over market;
3-9 and
3-10 (4) any other issue the commission determines is
3-11 appropriate.
3-12 (b) Before January 15 of each odd-numbered year, the
3-13 commission shall report to the legislature on the issues analyzed
3-14 under this section. The report must include recommendations to the
3-15 legislature on legislation that the commission believes are
3-16 necessary or appropriate. The commission may include the report
3-17 required under this section with the report required under Section
3-18 2.003 of this Act.
3-19 Sec. 2.306. RECONCILIATION OF EXCESS COSTS OVER MARKET. (a)
3-20 Not later than the 60th day after the fifth anniversary of the date
3-21 retail competition is allowed in this state, each electric utility
3-22 shall file with the commission a report that includes:
3-23 (1) information on any remaining excess costs over
3-24 market;
3-25 (2) information describing the utility's mitigation
3-26 efforts;
3-27 (3) the efforts and changes the utility has made to
4-1 respond to competition; and
4-2 (4) a proposed method by which the utility may recover
4-3 any remaining excess costs over market.
4-4 (b) The commission shall determine whether and in what
4-5 manner an electric utility may recover any remaining excess costs
4-6 over market. In making this determination, the commission shall
4-7 consider:
4-8 (1) the extent to which the utility thoroughly and
4-9 aggressively mitigated its excess costs over market;
4-10 (2) the extent to which the utility achieved operating
4-11 efficiencies;
4-12 (3) the utility's efforts to become competitive; and
4-13 (4) the amount the utility recovered in its rates
4-14 through its risk premium.
4-15 SECTION 2. This Act takes effect September 1, 1997.
4-16 SECTION 3. The importance of this legislation and the
4-17 crowded condition of the calendars in both houses create an
4-18 emergency and an imperative public necessity that the
4-19 constitutional rule requiring bills to be read on three several
4-20 days in each house be suspended, and this rule is hereby suspended.