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 * * * * *