Austin, Texas
                    FISCAL NOTE, 76th Regular Session
                              March 10, 1999
          TO:  David Sibley, Chair, Senate Committee on Electric Utility
        FROM:  John Keel, Director, Legislative Budget Board
       IN RE:  SB7  by Sibley (relating to electric utility
               restructuring and to the powers and duties of the Public
               Utility Commission of Texas), Committee Report 1st
               House, Substituted
*  Estimated Two-year Net Impact to General Revenue Related Funds for    *
*  SB7, Committee Report 1st House, Substituted:  negative impact of     *
*  $(99,000) through the biennium ending August 31, 2001.                *
General Revenue-Related Funds, Five-Year Impact:
          *  Fiscal Year  Probable Net Positive/(Negative)   *
          *               Impact to General Revenue Related  *
          *                             Funds                *
          *       2000                            $(99,000)  *
          *       2001                                    0  *
          *       2002                                    0  *
          *       2003                                    0  *
          *       2004                                    0  *
All Funds, Five-Year Impact:
*Fiscal      Probable        Probable        Probable       Change in     *
* Year    Savings/(Cost)     Revenue      Savings/(Cost) Number of State  *
*          from General    Gain/(Loss)      from New -    Employees from  *
*          Revenue Fund     from New -    System Benefit     FY 1999      *
*              0001       System Benefit       Fund                       *
*                              Fund                                       *
*  2000         $(99,000)    $147,653,000  $(147,653,000)             5.0 *
*  2001                 0     152,082,000   (152,082,000)            21.0 *
*  2002                 0     155,855,000   (155,855,000)            11.0 *
*  2003                 0     159,782,000   (159,782,000)            12.0 *
*  2004                 0     163,775,000   (163,775,000)             5.0 *
Fiscal Analysis
The bill would amend the Public Utility Regulatory Act to allow
competition in the retail sale of electricity beginning January 1, 2002.

The bill would require all retail electric providers to be certified by
the Public Utility Commission of Texas (PUC).  It would also establish
specific consumer rights and require extensive consumer education

The PUC would be required to value stranded costs and to "true-up" the
costs two years after the start of competition.

The bill would provide for a new System Benefit Fund, whose proceeds
could be used as a means to replace any property tax revenues lost to a
school district as a result of altered property valuations resulting from
utility restructuring.  The Texas Education Agency would determine the
amount of property taxes that would be lost as a result of the
restructuring impact and would notify the PUC of the loss.  The PUC would
then transfer from the System Benefit Fund to the Foundation School Fund
amounts necessary to compensate the state and local school districts for
any reduction.  The bill would appropriate the dollars transferred in
this manner for the support of the Foundation School Fund.

The PUC would be allowed to set and impose a charge not to exceed 50
cents per megawatt hour on the electric usage to finance the System
Benefit Fund.  The fund could also be used to provide customer education
services, funding for low-income consumers, and to pay administrative
costs incurred by the PUC in implementing electric utility restructuring.

The bill would allow the General Land Office (GLO) to sell or convey
power directly to a public retail customer, such as a state agency,
institution of higher education, public school district, or unit of
local government.  The bill would provide the state with access to all
transmission and distribution system utilities serving public retail
customers.  These electric utilities would be required to provide
services to the state at the lowest applicable rate charged for a
similar service to other customers.
No significant impact to the sales tax, the gas, water and utility tax,
or the public utility assessment is anticipated.

The estimated gain to the System Benefit Fund is calculated based on the
maximum rate assessment of 50 cents per megawatt hour.  It is assumed
that all of the balances in the System Benefit Fund would be distributed.
If no transfer to the Foundation School Fund is warranted, it is
assumed that all money remaining in the System Benefit Fund would be
distributed for customer education, low-income customer assistance, and
to offset any administrative costs at the PUC.

The PUC estimates that $1.05 per affected customer per year would be
needed from the System Benefit Fund to provide a comprehensive public
education campaign.  The PUC would also bear increased costs for
rulemaking, stranded cost hearings, market power determinations and other
proceedings, complaint resolution, and implementation of a pilot
project.  However, the PUC would have decreased costs due to a reduction
in traditional rate cases under the rate freeze, and lessened
responsibility for rate regulation.  Any additional administrative costs
to the PUC could be paid from the System Benefit Fund.

It is estimated that there would be General Revenue costs for the
Comptroller of Public Accounts who will have additional responsibilities
in implementing the provisions of the bill.  The Comptroller of Public
Accounts anticipates a need to implement changes to the state's
accounting system.

Authorizing the GLO to convert in-kind natural gas into electricity to be
sold to public entities could result in some savings for electricity
costs for state entities.  There could also be some additional revenue to
the state from the sale of electricity to the Permanent School Fund and
the Permanent University Fund.

Similar annual fiscal implications would continue as long as the
provisions of the bill are in effect.
Local Government Impact
No significant fiscal impact to school districts is anticipated, as any
decreases in taxable property values would be offset by transfers from
the System Benefit Fund.  School districts could experience some savings
in electricity costs if they are able to purchase electricity at lower

Municipal utilities could experience some loss of revenues if previous
public customers choose to buy electricity from the GLO.  However, no
individual utility would be expected to experience a revenue decline
greater than 2.5 percent, and some portion of such losses could be
offset by a decrease in costs associated with providing service to fewer
Source Agencies:   305   General Land Office and Veterans' Land Board,
                   473   Public Utility Commission of Texas
LBB Staff:         JK, SD, RT, CB