LEGISLATIVE BUDGET BOARD

                              Austin, Texas

                    FISCAL NOTE, 77th Regular Session

                              March 19, 2001

          TO:  Honorable Warren Chisum, Chair, House Committee on

               Environmental Regulation

        FROM:  John Keel, Director, Legislative Budget Board

       IN RE:  HB724  by Turner, Sylvester (Relating to the transfer of

               the Texas Natural Resource Conservation Commission's

               powers and duties regarding water rates and services to

               the Public Utility Commission of Texas.), As Introduced

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*  Estimated Two-year Net Impact to General Revenue Related Funds for    *

*  HB724, As Introduced:  negative impact of $(437,265) through the      *

*  biennium ending August 31, 2003.                                      *

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General Revenue-Related Funds, Five-Year Impact:

          ****************************************************

          *  Fiscal Year  Probable Net Positive/(Negative)   *

          *               Impact to General Revenue Related  *

          *                             Funds                *

          *       2002                           $(222,045)  *

          *       2003                            (215,220)  *

          *       2004                            (215,220)  *

          *       2005                            (215,220)  *

          *       2006                            (215,220)  *

          ****************************************************

All Funds, Five-Year Impact:

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*Fiscal    Probable Savings/(Cost) from     Change in Number of State     *

* Year         General Revenue Fund           Employees from FY 2001      *

*                      0001                                               *

*  2002                        $(222,045)                             2.5 *

*  2003                         (215,220)                             2.5 *

*  2004                         (215,220)                             2.5 *

*  2005                         (215,220)                             2.5 *

*  2006                         (215,220)                             2.5 *

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Technology Impact

Since the bill would transfer all Texas Natural Resource Conservation

Commission (TNRCC) property related to water rights and services to the

Public Utility Commission (PUC), it is anticipated that the PUC would not

experience any significant costs associated with the acquisition of

information technology resources. Any costs incurred in relocating and

installing computer-related equipment are expected to be absorbed using

PUC's existing resources.

It is estimated that there will be a one-time cost of $6,000 to the

Office of Public Utility Counsel (OPUC) for the purchase of computers

and software associated with an additional 2.5 FTEs.

Fiscal Analysis

The bill would transfer the Texas Natural Resource Conservation

Commission's (TNRCC's) duties and responsibilities for the administration

of the state's water rates program to the Public Utility Commission on

September 1, 2001. The PUC would be authorized to collect regulatory

assessments from water utilities to cover costs related to water rates

administration.

The bill would transfer all funds, obligations contracts property,

records right, powers, duties, functions, programs, employees and

appropriations relating to water rights and services from TNRCC to the

PUC.

The bill would add the definition of water and sewer utilities to the

definition of a public utility, bringing water and sewer utilities under

the PUC's general administrative, regulatory and enforcement duties and

powers. This would give the Office of Public Utility Counsel (OPUC)

jurisdiction over water rates, as OPUC now has over rates for electric

and telecommunications utilities.

Methodology

Based on the level of resources TNRCC currently allocates to its water

rights program for personnel and administration, it is estimated that

$1,394,483 in appropriations out of the Water Resource Management Account

No. 158, as well as 25 FTEs, would be transferred from the TNRCC to the

PUC beginning in fiscal year 2002 and continuing in future years.

Since the OPUC currently has no staff with expertise in water rates

issues, it is estimated that 2.5 new FTEs would be required to represent

consumers on issues relating to water rights. It also is estimated that

the OPUC would need to hire various expert witnesses for litigation.

The bill does not provide for cost recovery by the OPUC. TNRCC's current

expenditures on water rates in the Public Interest Counsel Division is

reported by the TNRCC to be insignificant. Therefore, new costs to the

OPUC, $222,045 in 2002 and $215,220 in future years, would require

general revenue.

Upon passage of the bill, the TNRCC's annual interagency contract with

the State Office of Administrative Hearings (SOAH) would likely be

reduced and the PUC's interagency contract with SOAH would be increased

by the same amount, reflecting the shift of water rights cases from the

TNRCC to the PUC.

This estimate assumes that the TNRCC would retain approximately $1.3

million per year in appropriations from fee revenues not related to

water rates in the Water Resource Management Account No. 158.

Local Government Impact

No fiscal implication to units of local government is anticipated.

Source Agencies:   304   Comptroller of Public Accounts, 307   Secretary

                   of State, 360   State Office of Administrative

                   Hearings, 473   Public Utility Commission of Texas,

                   582   Texas Natural Resource Conservation

                   Commission, 475   Office of Public Utility Counsel

LBB Staff:         JK, CL, TL