The Honorable Ron Clower

Chairman ConsumerAffairs Sub-Committee Texas Senate State Capitol Building Austin, Texas 78711

Dear Senator Clower:

You ask whether, under the Public Utility Regulatory Act, article 1446c,V.T.C.S., a municipality setting rates Opinion No. H-872

Re: Municipality's authority to require regulatedutility to furnish financialdata concerning ;ps;;ions outside city

.

for a public utility operatingwithin its regulatory jurisdictionmay require informationconcerning the utility's profits and losses in areas outside the city or town limits. We believe that the Act clearly authorizes cities exercising regulatory jurisdiction to require such informationand to consider it in setting rates.

Under the regulatory scheme of theAct, the governing body of eachmunicipality retains exclusive original jurisdiction over the rates of any gas utilitywithin its city
or town limits [section19(a)], and the Public Utility Commission (hereinafterreferred to as "Commission")is granted exclusive original jurisdictionover telecommunications utility rates (section18). Each municipality retains original jurisdiction to regulate electric,water, and sewer orateswithin city or town limits, unless electing to surrender that jurisdiction to the Commission (section17). Utility service subject to regulation by the governingbody of a municipality is exempt from regulationby the Commission (orRailroad Commission for gas rates), and the area within the municipal boundaries is thus considered an "exempt area." Parts of the statewhich are subject to regulationby the Commission (orRailroad Commission) are thus "nonexemptareas." Section 22 of theAct provides that:

p. 3676The Honorable Ron Clower - page 2 (H-872)

[I]nfixing rates and charges in the exempt area, the governing body [of the municipality] may consider a public utility's revenues and return on investment in nonexempt areas.
Section 22, then, authorizes any municipality's governing body to take into account, in setting rates within city or town limits, the utility's revenues and return on investment in certain areas beyond city or town limits. In order to give meaning to section 22's authorization, it is reasonable to infer that the Act contemplates that the governing body should have somemeans of obtaining such information,especially since section 89 requires that the Act be construed "liberally to promote the effectiveness and efficiency of regulation of public utilities

. . . ."
The municipality's authority to require this information under the Act will not arise until September 1, 1976. Section 87(b) of the Act provides that the regulatory authority -- again, for our purposes in this opinion, the governingbody of eachmunicipality -- is to assume jurisdictionover rates under theAct on September 1, 1976. Until that effective date,municipalitiesmust look to pre-Act law for authority to requireprofit and loss information from public utilities.

SUMMARY
Under the Public Utility RegulatoryAct, the governing body of a municipality regulating rates of a public utility furnishing servicewithin city or town limitsmay, after September 1, 1976, require that the utility furnish information concerningprofits and losses in areas outside the city or town limits.
Very trulyyours,

p.3677The Honorable Ron Clower - page 3 (H-872)

Opinion Committee
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