By:  Madla, et al.                                    S.B. No. 1571

                                A BILL TO BE ENTITLED

                                       AN ACT

 1-1     relating to ratemaking proceedings for certain utilities.

 1-2           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-3           SECTION 1.  Section 2.105, Public Utility Regulatory Act of

 1-4     1995 (Article 1446c-0, Vernon's Texas Civil Statutes), is amended

 1-5     by adding Subsection (d) to read as follows:

 1-6           (d)  Notwithstanding any other provisions of this Act to the

 1-7     contrary, in any ratemaking proceeding pertaining to a municipally

 1-8     owned utility, the utility may elect, in its sole discretion, to

 1-9     use a cash flow method for determining appropriate rates instead of

1-10     the standard rate of return method used to determine rates for

1-11     investor-owned utilities.  If the utility elects the cash flow

1-12     method, the commission shall apply ratemaking principles based on

1-13     the flow of funds set forth in the municipality's revenue bond

1-14     ordinance and other debt ordinances to allow for a cash flow level

1-15     sufficient to cover all items determined by the municipally owned

1-16     utility's governing board to be required to be paid or funded from

1-17     revenues, including the annual cost of operating and maintaining

1-18     the systems, annual payments of debt service, reserve requirements

1-19     and debt expense on long-term and short-term debt, annual payments

1-20     for transfers to the city's general fund, and annual payments to

1-21     provide adequate internally generated funds for construction and

1-22     other system needs deposited in the construction or the repair and

1-23     replacement fund.   In a wholesale transmission rate proceeding for

 2-1     such a municipally owned utility, the commission shall ensure that

 2-2     costs of nontransmission functions are not allocated to third-party

 2-3     wholesale transmission users and that no more than a proportionate

 2-4     part of the transfer to the municipality's general fund, based on

 2-5     transmission investment, is allocated to third-party wholesale

 2-6     transmission users.  If the cash flow method is used, the

 2-7     commission may not consider historic test year, rate base, rate of

 2-8     return, depreciation accounting, or other cost-of-service

 2-9     ratemaking principles applicable to investor-owned utilities.  In

2-10     its implementation of this subsection, the commission shall

2-11     specifically acknowledge that provisions contained in Sections

2-12     2.151, 2.203, 2.205, 2.206, and 2.208 of this Act do not apply to

2-13     municipally owned utilities.

2-14           SECTION 2.  This Act takes effect September 1, 1997.

2-15           SECTION 3.  The importance of this legislation and the

2-16     crowded condition of the calendars in both houses create an

2-17     emergency and an imperative public necessity that the

2-18     constitutional rule requiring bills to be read on three several

2-19     days in each house be suspended, and this rule is hereby suspended.