LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session May 10, 2001 TO: Honorable David Sibley, Chair, Senate Committee on Business & Commerce FROM: John Keel, Director, Legislative Budget Board IN RE: HB2107 by Turner, Sylvester (Relating to the recovery of stranded costs and the crediting of negative stranded costs.), As Engrossed ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds If * * 50 percent of the entire $4.9 billion in negative stranded costs * * were ordered refunded to customers in September 2001, the total * * estimated revenue loss to the state's General Revenue Fund 0001 * * could potentially be $105.1 million. * ************************************************************************** The bill's fiscal implications are based on the following illustrative example provided by the Comptroller's office. According to the Public Utility Commission (PUC), negative stranded costs were estimated to be $4.9 billion as of March 26, 2001. If PUC required utilities to refund 50 percent of this amount during September 2001, electric utility revenues could be reduced and there would be a corresponding revenue loss in state and local sales taxes, the franchise tax, the gas, electric, and water utility tax, the public utility assessment, and municipal franchise fees in fiscal 2002. Assuming that 50 percent of the $4.9 billion would be returned to customers in the form of a credit, the following revenue losses to the state are anticipated: 1) Sales tax revenue from commercial electricity sales would decrease $45.3 million. 2) Franchise tax data would decrease $22.5 million. 3) Gas, Electric and Water Utilitiy tax revenue loss would be $33.2 million. 4) The public utility assessment would decrease $4.1 million. Local Government Impact Electric utilities pay municipal franchise fees to cities based on their revenues. The amount of fees, however, cannot be determined because PUC does not collect data on the fees. This impact would only affect cities. The total estimated annual revenue loss to certain units of local government from sales taxes only (franchise fee effects cannot be estimated) could be as high as $24 million, if 50 percent of the $4.9 billion were to be refunded. Source Agencies: 304 Comptroller of Public Accounts, 473 Public Utility Commission of Texas LBB Staff: JK, JO, KM