The Honorable Ron Clower 

Chairman 

Consumer Affairs 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 regulated utility to furnish 

financial data concerning 

;ps;;ions outside city 

. 

for a public utility operating within its regulatory jurisdiction may require information concerning 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 information and to 

consider it in setting rates. 

Under the regulatory scheme of the Act, the governing 

body of each municipality retains exclusive original jurisdiction over the rates of any gas utility within its city 

or town limits [section 19(a)], and the Public Utility Commission (hereinafter referred to as "Commission") is granted 

exclusive original jurisdiction over telecommunications 

utility rates (section 18). Each municipality retains 

original jurisdiction to regulate electric, water, and sewer 

orates within city or town limits, unless electing to surrender 

that jurisdiction to the Commission (section 17). Utility 

service subject to regulation by the governing body of a 

municipality is exempt from regulation by the Commission 

(or Railroad Commission for gas rates), and the area within 

the municipal boundaries is thus considered an "exempt area." 

Parts of the state which are subject to regulation by the 

Commission (or Railroad Commission) are thus "nonexempt areas." 

Section 22 of the Act provides that: 

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

[I]n fixing 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 some means 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 governing body 

of each municipality -- is to assume jurisdiction over rates 

under the Act on September 1, 1976. Until that effective 

date, municipalities must look to pre-Act law for authority 

to require profit and loss information from public utilities. 

SUMMARY 

Under the Public Utility Regulatory Act, 

the governing body of a municipality 

regulating rates of a public utility 

furnishing service within city or town 

limits may, after September 1, 1976, 

require that the utility furnish 

information concerning profits and losses 

in areas outside the city or town limits. 

Very truly yours, 

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

Opinion Committee 

jwb 

p. 3678