BILL ANALYSIS

Senate Research Center	S.B. 1016
88R3201 DIO-F	By: King
	Business & Commerce
	3/10/2023
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

In 2019, the Texas Legislature passed a law, H.B. 1767 (which passed the Senate 30-1), that directed the Railroad Commission of Texas to presume reasonable the total compensation paid to gas utility employees as long as that pay was consistent with recent market compensation studies. This was aimed at reducing litigation in gas utility rate cases at the Railroad Commission over how utility employees are paid (that is, what company goals might affect their compensation), versus how much they are paid. If they are paid the right amount, there is no further litigation over those costs. Importantly, though, this presumption of reasonableness does not apply to named executive officers of the gas utility; this is only about front-line utility workers and other support personnel and the recovery of their compensation in utility rates. That law has had the desired effect of reducing litigation at the Railroad Commission as long as utility employees are paid the right amount. And importantly, that 2019 law did not allow for recovery of one-time or supplemental bonus payments to employees or executives.

S.B. 1016 would make the same change in electric utility rate cases at the Public Utility Commission of Texas. S.B. 1016 would clarify that the total compensation�including base salary, benefits, and performance incentives�for electric utility employees is presumed to be reasonable and necessary when establishing utility rates, provided the expenses are consistent with recent market compensation studies. It does so by defining "employee compensation and benefits" to include base salaries, wages, incentive compensation and benefits, and to exclude pensions and incentive compensation for executive officers.

Electric utilities support this legislation, as does the Association of Electric Companies of Texas. Cities that intervene in rate cases may oppose the legislation.

As proposed, S.B. 1016 amends current law relating to the consideration of employee compensation and benefits in establishing the rates of electric utilities.

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Subchapter B, Chapter 36, Utilities Code, by adding Section 36.067, as follows:

Sec. 36.067. CONSIDERATION OF COMPENSATION AND BENEFIT EXPENSES. (a) Provides that "employee compensation and benefits" in this section includes base salaries, wages, incentive compensation, and benefits. Provides that the term does not include:

(1) pension or other postemployment benefits; and

(2) incentive compensation related to attaining financial metrics for an executive officer whose compensation is required to be disclosed under 17 C.F.R. Section 229.402(a).

(b) Requires the regulatory authority, when establishing an electric utility's rates, to presume that employee compensation and benefits expenses are reasonable and necessary if the expenses are consistent with market compensation studies issued not earlier than three years before the initiation of the proceeding to establish the rates.

SECTION 2. (a) Provides that Section 36.067, Utilities Code, as added by this Act, applies only to a proceeding for the establishment of rates for which the regulatory authority has not issued a final order or decision before the effective date of this Act.

(b) Provides that a proceeding for which the regulatory authority has issued a final order or decision before the effective date of this Act is governed by the law in effect immediately before that date, and that law is continued in effect for that purpose.

SECTION 3. Effective date: upon passage or September 1, 2023.