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Texas Legislature Enrolls Distribution Cost Recovery Factor Bill
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May 25, 2011
The Texas legislature has enrolled and sent to the governor SB 1693, which authorizes the PUCT to allow the use of mechanisms, such as a Distribution Cost Recovery Factor, to adjust certain distribution rate components paid by retail electric providers outside of full rate cases.
Specifically, if enacted, the legislation would permit the PUCT to approve an electric utility tariff or rate schedule in which a non-fuel rate may be periodically adjusted upward or downward, based on changes in the parts of the utility's invested capital that are categorized as distribution plant, distribution-related intangible plant, and distribution-related communication equipment and networks. Such rate requests would be required to be adjudicated in 60 days or less.
The rate adjustment would be required to take into account changes in the number of an electric utility's customers and the effects, on a weather-normalized basis, that energy consumption and energy demand have on the amount of revenue recovered through the electric utility's base rates. Additionally, the adjustment would be required to be consistent with the manner in which costs for invested capital were allocated to each rate class in the utility's most recent base rate statement of intent proceeding, with changes to residential and commercial class rates reflected in volumetric charges to the extent that residential and commercial class rates are collected in that manner based on the electric utility's most recent base rate statement of intent proceeding.
For utilities offering customer choice, all non-fuel rates to be adjusted in a 12-month period that are charged by the utility to retail electric providers shall, "to the extent possible," be implemented simultaneously, recognizing that the current Transmission Cost Recovery Factor already has a pre-set schedule.
Distribution utilities would be required to provide notice to retail electric providers of the approved rates not later than the 45th day before the date the rates take effect.
Adjustments to rates under the process established by SB 1693 could not occur more than once per year, and not more than four times between comprehensive base rate proceedings.
The PUCT shall deny a periodic rate adjustment if the electric utility is earning more than the utility's authorized rate of return on investment, on a weather-normalized basis, at the time the periodic rate adjustment request is filed. The legislation also does not bar the PUCT from ordering refunds of any amount improperly recovered through the periodic rate adjustments, with appropriate carrying costs.
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