82R5762 JJT-F

By: Miller of Comal H.B. No. 2895

A BILL TO BE ENTITLED

AN ACT

relating to rate proceedings before a regulatory authority regarding water utility rates.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 13.182, Water Code, is amended by amending Subsection (b) and adding Subsection (b-1) to read as follows:

(b) Except as provided by Subsection (b-1), rates may [Rates shall] not be unreasonably preferential, prejudicial, or discriminatory but shall be sufficient, equitable, and consistent in application to each class of consumers.

(b-1) In establishing a utility's rates, the regulatory authority may authorize reduced rates for a minimal level of service to be provided to a class or classes of low-income or elderly customers to ensure that members of the class or classes may receive that level of service at affordable rates. The regulatory authority shall allow the utility to recover the cost of providing the reduced rates through charges to the utility's other customer classes.

SECTION 2. Section 13.185, Water Code, is amended by amending Subsections (b) and (d) and adding Subsections (d-1) and (d-2) to read as follows:

(b) Utility rates shall be based on the original cost of property used by and useful to the utility in providing service and [, including, if necessary to the financial integrity of the utility,] construction work in progress at cost as recorded on the books of the utility. [The inclusion of construction work in progress is an exceptional form of rate relief to be granted only on the demonstration by the utility by clear and convincing evidence that the inclusion is in the ratepayers' best interest and is necessary to the financial integrity of the utility.] Construction work in progress may not be included in the rate base for major projects under construction to the extent that those projects have been inefficiently or imprudently planned or managed. Original cost is the actual money cost or the actual money value of any consideration paid, other than money, of the property at the time it shall have been dedicated to public use, whether by the utility that is the present owner or by a predecessor, less depreciation. Utility property funded by explicit customer agreements or customer contributions in aid of construction such as surcharges may not be included in invested capital.

(d) Net income is the total revenues of the utility less all reasonable and necessary expenses as determined by the regulatory authority. The regulatory authority shall determine expenses and revenues in a manner consistent with Subsections (d-1), (d-2), and (e) through (h) of this section.

(d-1) In Subsection (d-2):

(1) "Forward-looking test year" means a period of 12 consecutive months that begins on or after the date a rate application is filed and ends not later than the second anniversary of the date the rate application is filed.

(2) "Historical test year" means a period of 12 consecutive months that ends before the date a rate application is filed.

(d-2) The regulatory authority shall base a utility's expenses, at the utility's choice, on information from a historical test year or on information projected for a forward-looking test year, as provided by the filed rate application. The utility has the burden of proving to the commission that the chosen forward-looking or historical test year is reasonably representative of the utility's operations. For purposes of this subsection:

(1) a rate application filed for a forward-looking test year must provide projected information for the utility's revenue requirements for the period, based on information from 12 months of the utility's historical experience, adjusted for known and measurable changes or estimates; and

(2) a rate application filed for a historical test year must provide information, adjusted for known and measurable conditions reasonably expected to occur after the end of the period, for the most recent 12-month period for which representative operating information is available and that ended less than 12 months before the date the rate application is filed.

SECTION 3. Section 13.189, Water Code, is amended by adding Subsection (c) to read as follows:

(c) For purposes of this section, a reduced rate authorized under Section 13.182(b-1) does not:

(1) make or grant an unreasonable preference or advantage to any corporation or person;

(2) subject a corporation or person to an unreasonable prejudice or disadvantage; or

(3) constitute an unreasonable difference as to rates of service between classes of service.

SECTION 4. Subchapter F, Chapter 13, Water Code, is amended by adding Section 13.193 to read as follows:

Sec. 13.193. NONSERVICE CHARGES. The regulatory authority shall authorize nonservice charges of the following types and amounts to be included in a utility's tariff:

(1) customer deposits of not more than one-sixth of a customer's estimated annual billing, according to the customer's class;

(2) a one-time late-payment penalty for a bill that is not paid in full at the utility's business office before the close of business on the date the payment is due, in an amount equal to the greater of:

(A) 10 percent of the billed amount; or

(B) $10;

(3) a one-time reconnection fee in an amount not to exceed $50 for restoration of a customer's service that was disconnected for failure to pay a bill due; and

(4) a one-time penalty for tampering with, diverting, or damaging a water meter or sewer service connection or any appurtenance of a water meter or sewer service connection, including a lock, meter box, or sewer pump, in varying amounts of not less than $50 and not more than $800, according to the type and extent of the tampering, diversion, or damage.

SECTION 5. Section 13.002(22), Water Code, is repealed.

SECTION 6. (a) The changes in law made by this Act apply only to proceedings before a regulatory authority regarding water utility rates concerning an application filed on or after January 1, 2012. Proceedings before a regulatory authority regarding water utility rates concerning an application filed before January 1, 2012, are governed by the law in effect when the application was filed, and the former law is continued in effect for that purpose.

(b) The Texas Commission on Environmental Quality or other regulatory authority shall adopt rules as necessary to implement the changes in law made by this Act not later than December 31, 2011.

SECTION 7. This Act takes effect September 1, 2011.