HBA-TYH H.B. 3750 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3750 By: Puente State Affairs 4/12/1999 Introduced BACKGROUND AND PURPOSE Intrastate switched-access charges are paid by long-distance companies to the incumbent local exchange company (ILEC), so that long-distance customers can access the local telecommunications network. Historically, switched-access service has been priced higher than cost, in part to recover the ILECs' cost of providing basic local telecommunications service in high-cost rural areas of the state. In effect, long-distance customers have been subsidizing the cost of basic local service through high rates paid to long-distance companies. If the Public Utility Commission of Texas (commission) were to determine that ILECs' switched-access rates should be reduced, and that the reductions should be replaced by Universal Service Fund (USF) support, then the rate reduction experienced by the long distance companies should be passed through to the customers of those same long-distance companies. If this pass-through is not guaranteed, then long-distance customers could pay twice for supporting basic local telecommunications service, once through high long-distance rates and a second time through the USF charges on their bills. H.B. 3750 implements a commission recommendation that access charge reductions made through the USF proceeding be passed on to customers of all classes, no matter how large or small. This bill also specifies that any USF charges passed on to local phone customers pursuant to access charge reductions cannot exceed an amount determined by the commission to be a subsidy to basic service. Under H.B. 2128, the telecommunications reform bill passed in 1995, ILECs were allowed to choose a new form of regulation called incentive regulation under Chapter 58 of the Utilities Code. As a condition of election under Chapter 58, an electing company agreed to cap basic network services, which include local residential and business services, for four years. H.B. 3750 specifies that an election under Chapter 58 remains in effect until the legislature acts to eliminate incentive regulation. This bill allows an electing company serving fewer than five million access lines (GTE and smaller companies) to continue the election to incentive regulation, but allows them to remove themselves from such treatment after September 1, 2001, or the fourth anniversary of the election date if they so choose. This bill also specifies that the cap on basic network services is extended for two more years. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter C, Chapter 52, Utilities Code, by adding Section 52.112, as follows: Sec. 52.112. PASS-THROUGH OF ACCESS RATE REDUCTION. (a) Requires an interexchange telecommunications utility doing business in this state to pass through to all customers reductions in intrastate access charges ordered by the Public Utility Commission ofTexas (commission), including reductions ordered under Chapter 56 (Telecommunications Assistance and Universal Service Fund). (b) Authorizes the commission to require an interexchange telecommunications utility to file with the commission a plan detailing how the utility intends to pass through reductions. Provides that a plan submitted to the commission must provide for reductions for each customer class that are proportional to the reductions in intrastate access charges for that customer class. (c) Provides that, notwithstanding Section 52.102 (Limited Regulatory Authority), the commission has all jurisdiction necessary to implement and enforce this section, including the authority to enter any necessary order and to impose an administrative penalty under Chapter 15 (Judicial Review, Enforcement, and Penalties). SECTION 2. Amends Section 56.026, Utilities Code, by adding Subsection (c), as follows: (c) Authorizes a local exchange company regulated under the Public Utility Regulatory Act, Chapter 58 (Incentive Regulation), to receive a disbursement from the high cost universal service fund through a mechanism designed to offset any implicit subsidy of basic local telecommunications service contained in access charges to the extent the disbursement does not exceed the amount determined by the commission to be an implicit subsidy of basic local telecommunications service. SECTION 3. Amends Section 58.021, Utilities Code, by adding Subsections (c) and (d), as follows: (c) Provides that except as provided by Subsection (d), an election under this chapter remains in effect until the legislature eliminates the incentive regulation authorized by this chapter and Chapter 59 (Infrastructure Plan). (d) Authorizes an electing company serving fewer than five million access lines in this state, notwithstanding any other provision of this chapter, to withdraw its election under this chapter at any time after the later of September 1, 2001, or the fourth anniversary of the company's election date. SECTION 4. Amends Section 58.054, Utilities Code, by adding Subsection (c), as follows: (c) Prohibits the cap on the rates for basic network services for a company electing under this subchapter (Basic Network Services), notwithstanding Subsections (a) and (b) (relating to the increase of and charge for rates), from expiring before September 1, 2001. SECTION 5. Emergency clause. Effective date: upon passage.