| TO: | Honorable Phil King, Chair, House Committee on Regulated Industries |
| FROM: | John Keel, Director, Legislative Budget Board |
| IN RE: | HB1942 by West, George "Buddy" (relating to incentives to encourage gas utilities to invest in new infrastructure. ), Committee Report 1st House, Substituted |
| Fiscal Year | Probable Net Positive/(Negative) Impact to General Revenue Related Funds |
|---|---|
| 2004 | ($231,337) |
| 2005 | ($223,087) |
| 2006 | ($223,087) |
| 2007 | ($223,087) |
| 2008 | ($223,087) |
| Fiscal Year | Probable Savings/(Cost) fromGENERAL REVENUE FUND 1 |
Change in Number of State Employees from FY 2003 |
|---|---|---|
| 2004 | ($231,337) | 3.0 |
| 2005 | ($223,087) | 3.0 |
| 2006 | ($223,087) | 3.0 |
| 2007 | ($223,087) | 3.0 |
| 2008 | ($223,087) | 3.0 |
The bill would allow gas utilities to file tariffs reflecting an adjustment to its base rates to recover the cost of new investment made in the preceding calendar year to provide gas utility service. Only utilities that have filed a rate case within the preceding two years would be allowed to implement this rate adjustment and that the factors used to calculate the rate adjustment be the same as the factors reflected in the most recent rate order issued by, or settlement agreement approved by, the regulatory authority. The bill would require that the regulatory authority (municipality or Railroad Commission) be given at least 60 days notice of the increase prior to implementation of the rate adjustment. The regulatory authority would also review annual reports of each utility to justify that the rates are reasonable.
A utility implemening a rate adjustment as provided by the bill would be required to file an annual report describing the investment projects completed and placed in service during the preceding calendar year and the investments retired or abandoned during the preceding calendar year. The utility also would be required to file with the regulatory authority an annual earnings monitoring report demonstrating the utility's earnings during the preceding calendar year. If the report shows earnings have exceeded a prescribed level, the gas utility would be required to file a statement with that report stating the reasons why it believes the rates are not unreasonable.
This estimate assumes that four of the five largest gas utilities in Texas would take advantage of the provisions in this legislation to implement rate adjustments to recover system investments. An additional 20 to 25 investor owned utilities also would be expected to implement rate adjustments. It is expected that none of these utilities has filed rate cases in the past two years, so all would need to file rate cases, thereby resulting in additional workload for the Railroad Commission.
Commission staff would ned to review filings within 60 days. Commission staff would also need to account for, monitor and analyze each utility's compliance with reporting requirements of the bill to ensure that utilities are not over-earning as a result of the annual rate adjustments. It is expected that the Commission's overall level of rate case review would increase as a result of the bill's passage, resulting in the need for three additional FTEs and $223,087 each fiscal year.
| Source Agencies: | 455 Railroad Commission
|
| LBB Staff: | JK, JRO, MS, TL
|