By:  Keffer of Eastland                                           H.B. No. 821


A BILL TO BE ENTITLED
AN ACT
relating to the regulation of transportation services for natural gas. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Title 3, Utilities Code, is amended by adding Chapter 125 to read as follows:
Chapter 125. Transportation and Market Access
Sec. 125.001. Short Title This Chapter may be cited as the Texas Competitive Gas Market Act. Sec. 125.002. Findings and Purpose (a) Findings: (1) A free market economy is central to the freedoms and economic well-being of the citizens of Texas. Access to the benefits of choice and market competition is essential to a free market economy. Any entity with monopoly power over a portion of the journey of natural gas from the wellhead to its point of end use has the power to deprive producers, marketers and consumers of natural gas of the economic benefits of free market competition. For this reason the drafters of the Texas Constitution declared in Article I, Section 26, that "monopolies are contrary to the genius of a free government and shall never be allowed." (2) To that end, the Legislature has previously established the Railroad Commission of Texas and provided by statute a system for regulating gas utilities and protecting producers, marketers and consumers of natural gas from the abuse of monopoly power. Such regulation is especially appropriate in light of the public nature of gas utilities who have been given the extraordinary power of eminent domain and rights to use public rights of way in order to lay and operate pipelines in the public interest. (3) At present, natural gas markets are not competitive in many areas of the state because of pipeline monopoly power. In many situations, producers, marketers, and purchasers have only one available means of transportation for natural gas and are thereby prevented from access to competitive markets. This lack of competition in natural gas markets results in higher costs to residential, commercial, and industrial customers, reduced transportation, reduced drilling and production for oil and gas, waste, and the impairment of correlative rights in oil and gas. It is costly to the Texas economy, to the State of Texas, and to local taxing authorities, and imposes an undue and unnecessary burden on the citizens of Texas. (4) It is desirable to clarify and strengthen the power of the Railroad Commission, acting in tandem with the courts of Texas, to require fair, reasonable, and nondiscriminatory transportation of natural gas by those pipelines that possess monopoly power over all or any portion of the journey from wellhead to place of end use, so that the full benefits of free and open competitive markets in the production, marketing and consumption of natural gas may be obtained by the citizens of Texas. Clarification will also promote efficiency and cost savings in the administrative and court legal processes. (5) The public interest in free market competition will be well-served by clarifying the rights of producers, marketers and consumers of natural gas to seek and obtain relief from the exercise of monopoly power by natural gas pipelines. (b) Purpose. This Chapter is enacted to provide more clear and explicit authority on the part of the Railroad Commission of Texas and the courts of Texas to curb the abuse of monopoly power by natural gas pipelines and thereby promote the free market and competition in the purchase and sale of natural gas. Sec. 125.003. Transportation required A gas utility shall transport natural gas on behalf of any person requesting transportation. Such transportation shall be on reasonable terms and conditions, is required whether or not the gas utility is transporting on behalf of parties other than itself, and shall be without discrimination in favor of any person or place, and without any unreasonable preference or advantage concerning the rates or services to any person or classification. The transportation component included within any transportation by a gas utility of gas owned by the utility shall be considered "transportation" for purposes of assessing any rate, discrimination, unreasonable preference, or advantage. Sec. 125.004. Rates and tariffs (a) The transportation rates and services of gas utilities are subject to regulation. For purposes of this Chapter, "rates" and "services" have the meanings defined in Sec. 101.003 of this Title and specifically include all services required by a gas utility to undertake transportation of gas between any two points whether those services are provided by the gas utility, its affiliates, or a third party designated by the gas utility to the extent such services are required as a condition for the transportation of natural gas. (b) A gas utility shall file with the railroad commission schedules for all of its transportation rates, including the transportation rates available to any person who may request transportation. The information on such schedules shall include, but not be limited to, the geographical identity of receipt and delivery points, the identity of the persons for whom gas is transported, and the nature or type of service to which it applies. The information on such schedules shall not be confidential and shall be available for public inspection. (c) Upon the request for transportation services required to be provided under this Chapter, a utility that does not have a tariff on file for such services shall provide transportation to the person requesting the transportation at the lowest rate charged by the utility for any transportation provided to any person, which rate shall be the valid and lawful rate until such time at it is changed by final decision and order of the Railroad Commission. (d) Upon complaint or on its own motion, the railroad commission shall establish the just and reasonable rates and terms of service applicable to transportation by a gas utility. (1) The rates shall be established under the cost of service standards in this Title for ratesetting. For purposes of ratesetting, the rate base and depreciation allowance shall be based on the lesser of the purchase price or the original cost of the property when first placed into service. (2) Upon complaint by any affected person, the provisions of Section 104.003(b) of this Title (insulating certain rates from review on a cost of service basis) shall not apply, and the rate or rates complained of shall be established under the cost of service standards in this Title for ratemaking. (3) If the rate so established is less than the rate charged by the gas utility, it shall be effective from and after the filing of the complaint. (4) If the rate otherwise found to be just and reasonable does not exceed one hundred and ten percent (110%) of the applicable transportation rate on file and available prior to the filing of the complaint, the rate on file shall be deemed to be just and reasonable. (e) Upon the establishment of a just and reasonable transportation rate that is less than the rate that has been charged, the railroad commission shall order the gas utility to make a refund. The refund shall be equal to three times the difference between the rate charged and the rate determined to be reasonable, from and after the filing of the complaint, plus reasonable interest. Sec. 125.005. Interim relief The railroad commission shall provide relief to affected persons through the granting of interim orders where necessary and appropriate to effectuate transportation under this Chapter. Sec. 125.006. Limited jurisdiction over certain pipelines (a) Upon complaint, a person or river authority not otherwise a "gas utility" under Sections 101.003(7)(B)(i), 121.004, or 121.005 of this Chapter (related to certain gathering or gathering-type transportation) shall be considered to be a gas utility under this Title for the limited purpose and only as necessary to effectuate the purposes of this Chapter. (b) A person or river authority not otherwise a "gas utility" under Sections 101.003(7)(B)(i), 121.004, or 121.005 of this Chapter shall be entitled to the safe harbor protection of Section 125.003(c)(2) of this Chapter if it has filed rates and tariffs for gas transportation under Section 125.003 as if it were a gas utility and acted in conformance with such rates and tariffs. Sec. 125.007. Waivers and Contracts Waivers of the protections of this Chapter are against public policy and shall not be enforceable. Contracts may not be used to defeat the policies set forth in this Chapter. Sec. 125.008. Governmental entities, agencies, and municipalities included Governmental entities, state and federal agencies, and municipalities shall be considered to be "persons" entitled to the protections set forth in this Chapter. Sec. 125.009. Cost Reimbursement (a) To the extent the regulatory authority determines the costs are reasonable, a gas utility shall reimburse the costs a complainant in a proceeding filed under this Title, if the complainant is wholly or partially successful in prosecuting the complaint before a regulatory authority or a court. (b) Costs for which a successful complainant may receive reimbursement under this section include any reasonable expenses related to the investigation, preparation, prosecution and litigation of the matter before any regulatory authority or court, including the reasonable costs of consultants, accountants, auditors, attorneys, expert witnesses, and engineers, including costs not yet paid because payment has been deferred pending reimbursement by a gas utility. (c) Notwithstanding any other provision of this Title, a gas utility may not recover as or through a charge to the gas utility's customers any amounts paid as reimbursement under this section or any expenses incurred in defending against a claim for which reimbursement under this section is ordered. (d) Nothing in this Section is intended to diminish or restrict the right of municipalities to obtain rate assistance and receive cost reimbursement under Section 103.022 of this Title. Sec. 125.010. Mediation In any proceeding under this Chapter, the parties shall attempt to resolve their differences by participating in an informal confidential mediation prior to a hearing on the merits. Sec. 125.011. Railroad Commission Enforcement and Actions The railroad commission shall actively enforce the provisions of this Chapter in order to promote and protect competitive gas markets. In fulfilling its enforcement duties, the railroad commission shall not rely solely or primarily on the filing of complaints before taking action. The railroad commission shall also monitor and study gas markets and gas transportation to determine and report the extent to which market choices are available at the wellhead and the extent to which markets in different parts of the state are competitive. Sec. 125.012. Coordination with Common Purchaser Act The requirements for the non-discriminatory taking of gas by common purchasers under the Texas Common Purchaser Act, Chapter 111, Subchapter D, Texas Natural Resources Code, are important to preventing waste and protecting correlative rights in oil and gas. By facilitating gas transportation and open gas markets, the provisions of this Chapter are intended to complement and strengthen the requirements for the nondiscriminatory taking of gas by common purchasers, and these provisions shall be so administered and applied. Sec. 125.013. Damages and penalty recoverable by aggrieved party (a) In addition to remedies available before the Railroad Commission, any person aggrieved by a violation of the provision of this Chapter is entitled to recover treble civil damages in a civil suit in a district court of Texas. (b) In addition to damages, if any, a penalty of not less than $100 and not more than $1,000 for each violation is recoverable against a transporter of natural gas by any person aggrieved by a violation of the provisions of this Chapter. (c) Each violation and each day that the violation continues is subject to a separate penalty as to each delivery point into the pipeline, each well behind any delivery point, or redelivery point out of the pipeline, whichever is greater, for transportation under this Chapter. (d) A person who recovers a penalty or damages under this section is also entitled to reasonable litigation expenses, including, but not limited to, attorney's fees, expert witness and consultant fees, and costs of court. (e) A suit to collect a penalty under this section must be brought in the name of and for the benefit of a person or persons aggrieved. In addition to the counties in which suit may be brought pursuant to Chapter 15, Tex. Civ. Prac. Rem. Code, suit may be brought in any county in which an aggrieved person resides. (f) A finding of violation of the provisions of this Chapter may be made by any court of competent jurisdiction. (g) The penalty under this section is in addition to any other penalty or damages recoverable under the laws of the State of Texas. Sec. 125.014. Condemnation and Use of Public Properties In recognition of the paramount importance that there be a public use and public interest to justify the condemnation of private property or the use of public properties for pipeline rights of way, a gas utility or pipeline that does not comply with the provisions of this Chapter shall not have the rights of condemnation under Sec. 181.004 of Title 4 of this Code and shall not have the authority to maintain facilities along, across, or over any public highway, public road, public street and alley, or public water under Sec. 181.022 of Title 4 of this Code Sec. 125.015. Construction With Federal Authority This Chapter shall be construed to apply so as not to conflict with any authority of the United States. Sec. 125.016. Cumulative Effect (a) This Chapter is cumulative of laws relating to the jurisdiction, power, or authority of the railroad commission over gas pipelines and gas utilities and, except as specifically in conflict with this Chapter, that jurisdiction, power, and authority are not limited by this Chapter. (b) This Chapter applies to all gas utilities, including gas utilities that are under the jurisdiction, power, or authority of the railroad commission in accordance with a law other than this Chapter. Sec. 125.017. Liberal Construction This Chapter shall be construed liberally to promote the effectiveness and efficiency of regulation of gas utilities and to promote competitive natural gas markets. SECTION 2. This Act takes effect September 1, 2005.