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