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. 2-20 COMMITTEE AMENDMENT NO. 1 2-21 Amend S.B. No. 1571, by adding a new SECTION 1 to read as 2-22 follows and renumbering all succeeding sections accordingly: 2-23 SECTION 1. Subsection (c), Section 2.057, Public Utility 2-24 Regulatory Act of 1995 (Article 1446c-0, Vernon's Texas Civil 2-25 Statutes), is amended to read as follows: 3-1 (c) To the extent a utility provides transmission of 3-2 electric energy at the request of a third party, the commission 3-3 shall ensure that the costs of the transmission are not borne by 3-4 the utility's other customers by requiring the utility to recover 3-5 from the entity for which transmission is provided all reasonable 3-6 costs incurred by the utility in providing transmission services 3-7 necessary for the transaction. The commission may not employ a 3-8 transmission pricing method that: 3-9 (1) uses a statewide load-ratio pricing methodology; 3-10 (2) causes a transmission customer to share in the 3-11 cost of all or a portion of a utility's transmission system that: 3-12 (A) is not actually used by the transmission 3-13 customer for the transmission of wholesale power and energy; or 3-14 (B) is affected by the transmission customer's 3-15 use of the statewide transmission grid for the transmission of 3-16 wholesale power and energy but is not required by the transmission 3-17 customer for the transmission of wholesale power and energy; or 3-18 (3) produces cost shifting when measured by a 3-19 utility's use of transmission facilities owned by others in 3-20 comparison to others' use of its transmission system. 3-21 Carter