By Turner of Harris, Longoria, Bailey                 H.B. No. 2107
         77R7116 CBH-F                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the recovery of stranded costs and the crediting of
 1-3     negative stranded costs.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1. Section 39.201(d), Utilities Code, is amended to
 1-6     read as follows:
 1-7           (d)  In accordance with a schedule and procedures it
 1-8     establishes, the commission shall hold a hearing and approve or
 1-9     modify and make effective as of January 1, 2002, the transmission
1-10     and distribution utility's proposed tariffs for transmission and
1-11     distribution services, the system benefit fund fee, and the
1-12     expected competition transition charge as determined under
1-13     Subsections (g) and (h) and as implemented under Subsections
1-14     (i)-(l), if any.  If at any time before January 1, 2002, the
1-15     commission determines that a utility that is subject to Section
1-16     39.254 does not have positive stranded costs based on a computation
1-17     under Subsection (h), the commission shall order the utility to
1-18     discontinue the mitigation tools that are allowed by this chapter
1-19     and to reverse any prior mitigation to the extent required to
1-20     eliminate any estimated excess of the market value over the net
1-21     book value of generation assets.  The commission shall reflect the
1-22     reversal of previous mitigation in the transmission and
1-23     distribution rates.  In addition, the commission shall reduce the
1-24     affiliated retail electric provider's price to beat as necessary to
 2-1     flow through any reductions to the transmission and distribution
 2-2     rates associated with the reversal of the previous mitigation.
 2-3           SECTION 2. Section 39.251, Utilities Code, is amended by
 2-4     adding Subdivision (8) to read as follows:
 2-5                 (8)  "Negative stranded costs" means the excess of the
 2-6     market value of generation assets over the net book value of those
 2-7     assets.
 2-8           SECTION 3. The heading to Section 39.255, Utilities Code, is
 2-9     amended to read as follows:
2-10           Sec. 39.255.  [USE OF REVENUES FOR] UTILITIES WITH NO
2-11     STRANDED COSTS.
2-12           SECTION 4. Section 39.255, Utilities Code, is amended by
2-13     adding Subsection (d) to read as follows:
2-14           (d)  During the freeze period, the commission may require an
2-15     electric utility that has negative stranded costs under Section
2-16     39.254, together with the utility's affiliated retail electric
2-17     provider and affiliated transmission and distribution utility, to
2-18     credit the negative stranded costs to customers.  The commission
2-19     shall prescribe the manner in which the credit of negative stranded
2-20     costs is made.  The electric utility, together with its affiliated
2-21     electric retail provider, affiliated power generation company, and
2-22     affiliated transmission and distribution utility, shall file to
2-23     finalize stranded costs and reconcile those costs as required by
2-24     Section 39.262.
2-25           SECTION 5. Sections 39.262(a) and (c), Utilities Code, are
2-26     amended to read as follows:
2-27           (a)  An electric utility, together with its affiliated retail
 3-1     electric provider and its affiliated transmission and distribution
 3-2     utility, may not be permitted to overrecover stranded costs through
 3-3     the procedures established by this section or through the
 3-4     application of the measures provided by the other sections of this
 3-5     chapter.  An electric utility, together with its affiliated retail
 3-6     electric provider and its affiliated transmission and distribution
 3-7     utility, shall credit negative stranded costs to customers in
 3-8     accordance with this section.
 3-9           (c)  After January 10, 2004, at a schedule and under
3-10     procedures to be determined by the commission, each transmission
3-11     and distribution utility, its affiliated retail electric provider,
3-12     and its affiliated power generation company shall jointly file to
3-13     finalize stranded costs.  If the commission determines under
3-14     Subsections (h) and (i) that the transmission utility, its
3-15     affiliated retail electric provider, and its affiliated power
3-16     generation company have stranded costs, those stranded costs shall
3-17     be reconciled [under Subsections (h) and (i) and reconcile those
3-18     costs] with the estimated stranded costs used to develop the
3-19     competition transition charge in the proceeding held under Section
3-20     39.201.  Any resulting difference shall be applied to the
3-21     nonbypassable delivery rates of the transmission and distribution
3-22     utility, except that at the utility's option, any or all of the
3-23     remaining stranded costs may be securitized under Subchapter G. If
3-24     the commission determines under Subsections (h) and (i) that the
3-25     transmission utility, its affiliated retail electric provider, and
3-26     its affiliated power generation company have negative stranded
3-27     costs, those negative stranded costs may be used to improve or
 4-1     expand transmission or distribution facilities or on capital
 4-2     expenditures to improve air quality, as included in a plan
 4-3     submitted to and approved by the commission.  An expenditure
 4-4     included in a plan approved by the commission for those purposes
 4-5     may not be recovered at any time from the ratepayers. Any amounts
 4-6     that are not included in a plan approved by the commission for
 4-7     those purposes shall be applied to reduce the transmission and
 4-8     distribution utility's nonbypassable delivery rates.  The
 4-9     commission shall adjust the affiliated retail electric provider's
4-10     price to beat as necessary to flow through any reductions to the
4-11     transmission and distribution rates associated with the reversal of
4-12     negative stranded costs.
4-13           SECTION 6.  This Act takes effect immediately if it receives
4-14     a vote of two-thirds of all the members elected to each house, as
4-15     provided by Section 39, Article III, Texas Constitution.  If this
4-16     Act does not receive the vote necessary for immediate effect, this
4-17     Act takes effect September 1, 2001.