HBA-BSM H.B. 1281 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 1281
By: Counts
Natural Resources
2/27/2001
Introduced



BACKGROUND AND PURPOSE 

Currently,  a case is pending at the Texas Natural Resource Conservation
Commission (TNRCC) involving a private water utility company that has
acquired approximately 270 systems.  The company has applied to TNRCC for a
rate increase that would impose a single water rate and a single sewer rate
to its customers. TNRCC and SOAH are investigating the matter and will hold
a hearing on the case in September 2001.  

House Bill 1281 prohibits the consolidation of more than one system under a
single rare unless certain conditions apply, and sets forth provisions
regarding factors and costs to be considered in setting rates. 

RULEMAKING AUTHORITY
It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the Texas Natural Resource Conservation
Commission in SECTION 2 (Section 13.145, Water Code) of this bill. 

ANALYSIS

House Bill 1281 amends the Water Code to provide that a utility may
consolidate more than one system under a single tariff only if: 

_the tariff includes not more than 20 systems;
_the systems under the tariff serve contiguous areas or are interconnected;
_the systems under the tariff are substantially similar in terms of
facilities, quality of service, and cost of service; and 
_for a tariff that relates to more than five systems, the tariff provides
for rates that promote water conservation for single-family residences. 

The Texas Natural Resource Conservation Commission (TNRCC) is required by
rule to ensure that a utility may not consolidate systems under multiple
tariffs in a manner that would be a violation if the systems were
consolidated under a single tariff.  The bill authorizes TNRCC or the
governing body of a municipality (regulatory authority) to adopt by rule or
ordinance, as appropriate, specific alternative methodologies for water or
sewer rates.  The regulatory authority is prohibited from  approving rates
under an alternative methodology unless the regulatory authority adopts the
methodology before the beginning of the rate proceeding in which the
methodology is applied.   

The regulatory authority is prohibited from authorizing the use of a
uniform rate across unconnected systems or another alternative methodology
that would allow revenues from customers of a system with a lower cost of
service or higher quality of service to subsidize the costs of service of
or improvements to an unconnected system.  The bill sets forth provisions
regarding the costs which may be considered when developing the alternative
methodology. 

An owner of more than 50 systems is not authorized to supply service to an
affiliate utility unless the wholesale service is provided for not more
than 30 days to remedy an emergency condition, or TNRCC  finds, after a
hearing, that the utility cannot obtain wholesale water service from
another source at a lower cost than from the affiliate.  The bill also
provides that a retail public utility, wholesale water service, or other
person providing a retail public utility with a wholesale water supply is
required to provide TNRCC with disclosure of any affiliated interest
between the parties to the contract.  H.B. 1281 is applicable to a
proceeding in which TNRCC has not issued a final order before the effective
date of this Act. 

EFFECTIVE DATE

On passage, or if the Act does not receive the necessary vote, the Act
takes effect September 1, 2001.