AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
The cost of providing pensions and other postemployment benefits can significantly increase from year to year. Such increases in pension and retiree health care expenses can force gas utilities to file more frequent rate cases, at a cost to the ratepayer.
S.B. 403 applies the existing accounting and rate treatment of postretirement Public Utility Regulatory Act language to the Gas Utility Regulatory Act for the accounting and rate treatment of postretirement benefits of gas utilities whose rates are set by the Railroad Commission of Texas or by municipalities. The bill allows a gas utility to establish one or more reserve accounts for expenses related to pension and other postemployment benefits. Once the reserve accounts are established, the variation in expenses will be captured and reviewed by the regulatory body for inclusion in rates during subsequent proceedings. This change will allow gas utilities to better manage the challenges of volatile and escalating pension and retiree health care expenses.
As proposed, S.B. 403 amends current law relating to the consideration of pension and other postemployment benefits in establishing the rates of a gas utility.
RULEMAKING AUTHORITY
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Subchapter B, Chapter 104, Utilities Code, by adding Section 104.059, as follows:
Sec. 104.059. PENSION AND OTHER POSTEMPLOYMENT BENEFITS. (a) Requires the Railroad Commission of Texas or the governing body of a municipality (regulatory authority), in establishing a gas utility's rates, to allow expenses for pension and other postemployment benefits, as determined by actuarial or other similar studies in accordance with generally accepted accounting principles, in amounts the regulatory authority finds reasonable and necessary.
(b) Requires the gas utility, if a gas utility establishes one or more reserve accounts for expenses for pension and other employment benefits, to periodically record in the reserve account any difference between:
(1) the annual amount of pension and other postemployment benefits approved as an operating expense in the gas utility's then current rates or, if that annual amount cannot be determined from the regulatory authority's order, the amount recorded for pension and other postemployment benefits under generally accepted accounting principles during the first year that rates from the gas utility's last general rate proceeding are in effect; and
(2) the annual amount of pension and other postemployment benefits as determined by actuarial or other similar studies that are chargeable to the gas utility's operating expense.
(c) Provides that a surplus in a reserve account exists if the amount of pension and other post employment benefits under Section (b)(1) is greater than the amount determined under Subsection (b)(2). Provides that a shortage in a reserve account exists if the amount of pension and other postemployment benefits under Subsection (b)(1) is less than the amount determined under Subsection (b)(2).
(d) Requires the regulatory authority, if the gas utility establishes a reserve account for expenses for pension and other postemployment benefits, at a subsequent general rate proceeding to review the amounts recorded to the reserve account to determine whether the amounts are reasonable and necessary expenses, determine in accordance with Subsection (c) whether the reserve account has a surplus or shortage, and subtract any surplus from or add any shortage to the gas utility's rate base with the surplus or shortage amortized over a reasonable time.
SECTION 2. Provides that Sections 104.059(b)-(d), Utilities Code, as added by this Act, apply on in relation to a reserve account established by a gas utility on or after January 1, 2012.
SECTION 3. Effective date: upon passage or September 1, 2011.