LEGISLATIVE BUDGET BOARD
                              Austin, Texas
                                     
                    FISCAL NOTE, 77th Regular Session
                                Revision 1
  
                                May 7, 2001
  
  
          TO:  Honorable Steven Wolens, Chair, House Committee on State
               Affairs
  
        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 Introduced
  
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*  If the entire $4.9 billion in negative stranded costs were refunded   *
*  to customers before December 31, 2001, the total estimated revenue    *
*  loss to the state's General Revenue Fund 0001 could potentially be    *
*  $210.3 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
this entire amount during the freeze period September 1, 1999 through
December 31, 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 2001 or 2002,
depending on the bill's effective date.

Assuming that the entire $4.9 billion would be returned to customers in
the form of a credit, the following revenue losses to the state are
anticipated:
*  Sales tax revenue from commercial electricity sales would decrease
$90.6 million.
*  Franchise tax data would decrease $45 million in any one year.
*  Gas, Electric and Water Utility tax revenue loss would be $66.5
million.
*  The public utility assessment would decrease $8.2 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 $47.5 million, if the entire $4.9 billion
were to be refunded.
  
  
Source Agencies:   473   Public Utility Commission of Texas, 475
                   Office of Public Utility Counsel, 304   Comptroller
                   of Public Accounts
LBB Staff:         JK, RB, WP, BR, KM