1-1     By:  Madla, et al.                                    S.B. No. 1571

 1-2           (In the Senate - Filed March 14, 1997; March 20, 1997, read

 1-3     first time and referred to Committee on State Affairs;

 1-4     April 25, 1997, reported adversely, with favorable Committee

 1-5     Substitute by the following vote:  Yeas 8, Nays 5; April 25, 1997,

 1-6     sent to printer.)

 1-7     COMMITTEE SUBSTITUTE FOR S.B. No. 1571                  By:  Nelson

 1-8                            A BILL TO BE ENTITLED

 1-9                                   AN ACT

1-10     relating to pricing methodology for wheeling and to ratemaking

1-11     proceedings for certain utilities.

1-12           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-13           SECTION 1.  Subsection (c), Section 2.057, Public Utility

1-14     Regulatory Act of 1995 (Article 1446c-0, Vernon's Texas Civil

1-15     Statutes), is amended to read as follows:

1-16           (c)  To the extent a utility provides transmission of

1-17     electric energy at the request of a third party, the commission

1-18     shall ensure that the costs of the transmission are not borne by

1-19     the utility's other customers by requiring the utility to recover

1-20     from the entity for which the transmission is provided all

1-21     reasonable costs incurred by the utility in providing transmission

1-22     services necessary for the transaction.  The commission may not

1-23     employ a transmission pricing method that:

1-24                 (1)  uses a statewide pricing methodology;

1-25                 (2)  causes a transmission customer to share in the

1-26     cost of all or a portion of a utility's transmission system that:

1-27                       (A)  is not actually used by the transmission

1-28     customer for the transmission of wholesale power and energy; or

1-29                       (B)  is used by the transmission customer for the

1-30     transmission of wholesale power and energy but is not required by

1-31     the transmission customer for the transmission of wholesale power

1-32     and energy; or

1-33                 (3)  produces cost shifting when measured by a

1-34     utility's use of transmission facilities owned by others in

1-35     comparison to others' use of its transmission system.

1-36           SECTION 2.  Section 2.105, Public Utility Regulatory Act of

1-37     1995 (Article 1446c-0, Vernon's Texas Civil Statutes), is amended

1-38     by adding Subsection (d) to read as follows:

1-39           (d)  Notwithstanding any other provisions of this Act to the

1-40     contrary, in any ratemaking proceeding pertaining to a municipally

1-41     owned utility, the utility may elect, in its sole discretion, to

1-42     use a cash flow method for determining appropriate rates instead of

1-43     the standard rate of return method used to determine rates for

1-44     investor-owned utilities.  If the utility elects the cash flow

1-45     method, the commission shall apply ratemaking principles based on

1-46     the flow of funds set forth in the municipality's revenue bond

1-47     ordinance and other debt ordinances to allow for a cash flow level

1-48     sufficient to cover all items determined by the municipally owned

1-49     utility's governing board to be required to be paid or funded from

1-50     revenues, including the annual cost of operating and maintaining

1-51     the systems, annual payments of debt service, reserve requirements

1-52     and debt expense on long-term and short-term debt, annual payments

1-53     for transfers to the city's general fund, and annual payments to

1-54     provide adequate internally generated funds for construction and

1-55     other system needs deposited in the construction or the repair and

1-56     replacement fund.   In a wholesale transmission rate proceeding for

1-57     such a municipally owned utility, the commission shall ensure that

1-58     costs of nontransmission functions are not allocated to third-party

1-59     wholesale transmission users and that no more than a proportionate

1-60     part of the transfer to the municipality's general fund, based on

1-61     transmission investment, is allocated to third-party wholesale

1-62     transmission users.  If the cash flow method is used, the

1-63     commission may not consider historic test year, rate base, rate of

1-64     return, depreciation accounting, or other cost-of-service

 2-1     ratemaking principles applicable to investor-owned utilities.  In

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

 2-3     specifically acknowledge that provisions contained in Sections

 2-4     2.151, 2.203, 2.205, 2.206, and 2.208 of this Act do not apply to

 2-5     municipally owned utilities.

 2-6           SECTION 3.  This Act takes effect September 1, 1997.

 2-7           SECTION 4.  The importance of this legislation and the

 2-8     crowded condition of the calendars in both houses create an

 2-9     emergency and an imperative public necessity that the

2-10     constitutional rule requiring bills to be read on three several

2-11     days in each house be suspended, and this rule is hereby suspended.

2-12                                  * * * * *