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UTILITIES CODE

TITLE 2. PUBLIC UTILITY REGULATORY ACT

SUBTITLE C. TELECOMMUNICATIONS UTILITIES

CHAPTER 53. RATES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 53.001. AUTHORIZATION TO ESTABLISH AND REGULATE RATES. (a)

Except as otherwise provided by this title, the commission may

establish and regulate rates of a public utility and may adopt

rules for determining:

(1) the classification of customers and services; and

(2) the applicability of rates.

(b) A rule or order of the commission may not conflict with a

ruling of a federal regulatory body.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.002. COMPLIANCE WITH TITLE. A utility may not charge or

receive a rate for utility service except as provided by this

title.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.003. JUST AND REASONABLE RATES. (a) The commission

shall ensure that each rate a public utility or two or more

public utilities jointly make, demand, or receive is just and

reasonable.

(b) A rate may not be unreasonably preferential, prejudicial, or

discriminatory but must be sufficient, equitable, and consistent

in application to each class of consumer.

(1) grant an unreasonable preference or advantage concerning

rates to a person in a classification;

(2) subject a person in a classification to an unreasonable

prejudice or disadvantage concerning rates; or

(3) establish or maintain an unreasonable difference concerning

rates between localities or between classes of service.

(d) In establishing a public utility's rates, the commission may

treat as a single class two or more municipalities that a public

utility serves if the commission considers that treatment to be

appropriate.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.004. EQUALITY OF RATES AND SERVICES. (a) A public

utility may not directly or indirectly charge, demand, or receive

from a person a greater or lesser compensation for a service

provided or to be provided by the utility than the compensation

prescribed by the applicable tariff filed under Section 52.251.

(b) A person may not knowingly receive or accept a service from

a public utility for a compensation greater or less than the

compensation prescribed by the tariff.

returning to its members net earnings resulting from its

operations in proportion to the members' purchases from or

through the corporation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.005. RATES FOR AREA NOT IN MUNICIPALITY. Without the

approval of the commission, a public utility's rates for an area

not in a municipality may not exceed 115 percent of the average

of all rates for similar services for all municipalities served

by the same utility in the same county as that area.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.006. BURDEN OF PROOF. (a) In a proceeding involving a

proposed rate change, the public utility has the burden of

proving that:

(1) the rate change is just and reasonable, if the utility

proposes the change; or

(2) an existing rate is just and reasonable, if the proposal is

to reduce the rate.

(b) In a proceeding in which the rate of an incumbent local

exchange company is in issue, the incumbent local exchange

company has the burden of proving that the rate is just and

reasonable.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.007. LIMIT ON RECONNECTION FEE. The commission shall

establish a reasonable limit on the amount that a local exchange

company may charge a customer for changing the location at which

the customer receives service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. COMPUTATION OF RATES

Sec. 53.051. ESTABLISHING OVERALL REVENUES. In establishing a

public utility's rates, the commission shall establish the

utility's overall revenues at an amount that will permit the

utility a reasonable opportunity to earn a reasonable return on

the utility's invested capital used and useful in providing

service to the public in excess of the utility's reasonable and

necessary operating expenses.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.052. ESTABLISHING REASONABLE RETURN. In establishing a

reasonable return on invested capital, the commission shall

consider applicable factors, including:

(1) the quality of the utility's services;

(2) the efficiency of the utility's operations; and

(3) the quality of the utility's management.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.053. COMPONENTS OF INVESTED CAPITAL. (a) Public

utility rates shall be based on the original cost, less

depreciation, of property used by and useful to the utility in

providing service.

(b) The original cost of property shall be determined at the

time the property is dedicated to public use, whether by the

utility that is the present owner or by a predecessor.

or the actual money value of consideration paid other than money.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.054. CONSTRUCTION WORK IN PROGRESS. (a) Construction

work in progress, at cost as recorded on the public utility's

books, may be included in the utility's rate base. The inclusion

of construction work in progress is an exceptional form of rate

relief that the commission may grant only if the utility

demonstrates that inclusion is necessary to the utility's

financial integrity.

(b) Construction work in progress may not be included in the

rate base for a major project under construction to the extent

that the project has been inefficiently or imprudently planned or

managed.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.055. SEPARATIONS AND ALLOCATIONS. Costs of facilities,

revenues, expenses, taxes, and reserves shall be separated or

allocated as prescribed by the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.056. DEPRECIATION, AMORTIZATION, AND DEPLETION. (a)

The commission shall establish proper and adequate rates and

methods of depreciation, amortization, or depletion for each

class of property of a public utility.

(b) On application of a utility, the commission shall establish

depreciation rates that promote the use of new technology and

infrastructure. In establishing rates under this subsection, the

commission shall consider depreciation practices of nonregulated

telecommunications providers.

depreciation account required by Section 52.252 shall be used

uniformly and consistently throughout rate-setting and appeal

proceedings.

(d) Notwithstanding this section, a company electing under

Chapter 58 may determine its own depreciation rates and

amortizations. The company shall notify the commission of any

change in those rates or amortizations.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.057. NET INCOME; DETERMINATION OF REVENUES AND EXPENSES.

(a) A public utility's net income is the total revenues of the

utility less all reasonable and necessary expenses as determined

by the commission.

(b) The commission shall determine revenues and expenses in a

manner consistent with this subchapter.

whether an expense is allowed for ratemaking purposes.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.058. CONSIDERATION OF PAYMENT TO AFFILIATE. (a) Except

as provided by Subsection (b), the commission may not allow as

capital cost or as expense a payment to an affiliate for:

(1) cost of a service, property, right, or other item; or

(2) interest expense.

(b) The commission may allow a payment described by Subsection

(a) only to the extent that the commission finds the payment is

reasonable and necessary for each item or class of items as

determined by the commission.

(1) a specific finding of the reasonableness and necessity of

each item or class of items allowed; and

(2) except as provided by Subsection (d), a finding that the

price to the utility is not higher than the prices charged by the

supplying affiliate to:

(A) its other affiliates or divisions for the same item or class

of items; or

(B) a nonaffiliated person within the same market area or having

the same market conditions.

(d) A finding under this section is not required as to the

prices charged by the supplying affiliate to its other affiliates

or divisions if the supplying affiliate computed its charges to

the utility in a manner consistent with Federal Communications

Commission rules.

(e) If the commission finds that the affiliate expense for the

test period is unreasonable, the commission shall:

(1) determine the reasonable level of the expense; and

(2) include that expense in determining the utility's cost of

service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.059. TREATMENT OF CERTAIN TAX BENEFITS. (a) In

determining the allocation of tax savings derived from

liberalized depreciation and amortization, the investment tax

credit, and the application of similar methods, the commission

shall:

(1) balance equitably the interests of present and future

customers; and

(2) apportion accordingly the benefits between consumers and the

public utility.

(b) If a public utility retains a portion of the investment tax

credit, that portion shall be deducted from the original cost of

the facilities or other addition to the rate base to which the

credit applied to the extent allowed by the Internal Revenue

Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.060. COMPUTATION OF INCOME TAX; CONSOLIDATED RETURN.

(a) Unless it is shown to the satisfaction of the commission

that it was reasonable to choose not to consolidate returns, a

public utility's income taxes shall be computed as though a

consolidated return had been filed and the utility had realized

its fair share of the savings resulting from that return, if:

(1) the utility is a member of an affiliated group eligible to

file a consolidated income tax return; and

(2) it is advantageous to the utility to do so.

(b) The amount of income tax that a consolidated group of which

a public utility is a member saves, because the consolidated

return eliminates the intercompany profit on purchases by the

utility from an affiliate, shall be applied to reduce the cost of

the property or service purchased from the affiliate.

taxes, to the extent retained by the utility, shall be applied as

a reduction in the rate-based contribution of the assets to which

the credit applies, to the extent and at the rate allowed by the

Internal Revenue Code.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.061. ALLOWANCE OF CERTAIN EXPENSES. (a) The commission

may not allow as a cost or expense for ratemaking purposes:

(1) an expenditure for legislative advocacy; or

(2) an expenditure described by Section 52.254 that the

commission determines to be not in the public interest.

(b) The commission may allow as a cost or expense reasonable

charitable or civic contributions not to exceed the amount

approved by the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.062. CONSIDERATION OF CERTAIN EXPENSES. The commission

may not consider for ratemaking purposes:

(1) an expenditure for legislative advocacy, made directly or

indirectly, including legislative advocacy expenses included in

trade association dues;

(2) an expenditure for costs of processing a refund or credit

under Section 53.110; or

(3) any other expenditure, including an executive salary,

advertising expense, legal expense, or civil penalty or fine the

commission finds to be unreasonable, unnecessary, or not in the

public interest.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.063. CONSIDERATION OF PROFIT OR LOSS FROM SALE OR LEASE

OF MERCHANDISE. In establishing a public utility's rates, the

commission may not consider a profit or loss that results from

the sale or lease of merchandise, including appliances, fixtures,

or equipment, to the extent that merchandise is not integral to

providing utility service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.064. SELF-INSURANCE. (a) A public utility may

self-insure all or part of the utility's potential liability or

catastrophic property loss, including windstorm, fire, and

explosion losses, that could not have been reasonably anticipated

and included under operating and maintenance expenses.

(b) The commission shall approve a self-insurance plan under

this section if the commission finds that:

(1) the coverage is in the public interest;

(2) the plan, considering all costs, is a lower cost alternative

to purchasing commercial insurance; and

(3) ratepayers will receive the benefits of the savings.

under this subchapter, the commission, to the extent the

commission finds is in the public interest, shall allow as a

necessary expense money credited to a reserve account for

self-insurance. The commission shall determine reasonableness

under this subsection:

(1) from information provided at the time the self-insurance

plan and reserve account are established; and

(2) on the filing of a rate case by a utility that has a reserve

account.

(d) After a reserve account for self-insurance is established,

the commission shall:

(1) determine whether the account has a surplus or shortage

under Subsection (e); and

(2) subtract any surplus from or add any shortage to the

utility's rate base.

(e) A surplus in the reserve account exists if the charges

against the account are less than the money credited to the

account. A shortage in the reserve account exists if the charges

against the account are greater than the money credited to the

account.

(f) The commission shall adopt rules governing self-insurance

under this section.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.065. INTEREXCHANGE SERVICES; RATES OF INCUMBENT LOCAL

EXCHANGE COMPANY. (a) An incumbent local exchange company's

rates for interexchange telecommunications services must be

statewide average rates except as ordered by the commission after

application and hearing.

(b) This section does not limit the ability of an incumbent

local exchange company to contract for high-speed private line

services of 1.544 megabits or greater under Section 52.057.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER C. GENERAL PROCEDURES FOR RATE CHANGE PROPOSED BY

UTILITY

Sec. 53.101. DEFINITION. In this subchapter, "major change"

means an increase in rates that would increase the aggregate

revenues of the applicant more than the greater of $100,000 or

2-1/2 percent. The term does not include an increase in rates

that the commission allows to go into effect or the utility makes

under an order of the commission after hearings held with public

notice.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.102. STATEMENT OF INTENT TO CHANGE RATES. (a) A

utility may not change its rates unless the utility files a

statement of its intent with the commission at least 35 days

before the effective date of the proposed change.

(b) The utility shall also mail or deliver a copy of the

statement of intent to the appropriate officer of each affected

municipality.

(1) proposed revisions of tariffs; and

(2) a detailed statement of:

(A) each proposed change;

(B) the effect the proposed change is expected to have on the

revenues of the utility;

(D) any other information required by the commission's rules.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.103. NOTICE OF INTENT TO CHANGE RATES. (a) The utility

shall:

(1) publish, in conspicuous form and place, notice to the public

of the proposed change once each week for four successive weeks

before the effective date of the proposed change in a newspaper

having general circulation in each county containing territory

affected by the proposed change; and

(2) mail notice of the proposed change to any other affected

person as required by the commission's rules.

(b) The commission may waive the publication of notice

requirement prescribed by Subsection (a) in a proceeding that

involves only a rate reduction for each affected ratepayer. The

applicant shall give notice of the proposed rate change by mail

to each affected utility customer.

which the publication of notice requirement prescribed by

Subsection (a) may be waived on a showing of good cause. A waiver

may not be granted in a proceeding involving a rate increase to

any class or category of ratepayer.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.104. EARLY EFFECTIVE DATE OF RATE CHANGE. (a) For good

cause shown, the commission may allow a rate change, other than a

major change, to take effect:

(1) before the end of the 35-day period prescribed by Section

53.102; and

(2) under conditions the commission prescribes, subject to

suspension as provided by this subchapter.

(b) The utility shall immediately revise its tariffs to include

the change.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.105. DETERMINATION OF PROPRIETY OF CHANGE; HEARING. (a)

If a tariff changing rates is filed with the commission, the

commission shall, on complaint by an affected person, or may, on

its own motion, not later than the 30th day after the effective

date of the change, enter on a hearing to determine the propriety

of the change.

(b) The commission shall hold a hearing in every case in which

the change constitutes a major change. The commission may,

however, use an informal proceeding if the commission does not

receive a complaint before the 46th day after the date notice of

the change is filed.

including notice to the governing body of each affected

municipality and county. The utility is not required to provide a

formal answer or file any other formal pleading in response to

the notice, and the absence of an answer does not affect an order

for a hearing.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.106. REGIONAL HEARING. The commission shall hold a

regional hearing at an appropriate location in a case in which

the commission determines it is in the public interest to hear

testimony at a regional hearing for inclusion in the record.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.107. PREFERENCE TO HEARING. The commission shall:

(1) give preference to a hearing under this subchapter and to

deciding questions arising under this subchapter and Subchapter E

over any other question pending before it; and

(2) decide the questions as quickly as possible.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.108. RATE SUSPENSION; DEADLINE. (a) Pending the

hearing and a decision, the commission, after delivering to the

utility a written statement of the commission's reasons, may

suspend the rate change for not longer than 150 days after the

date the rate change would otherwise be effective.

(b) The 150-day period prescribed by Subsection (a) shall be

extended two days for each day the actual hearing on the merits

of the case exceeds 15 days.

concerning a rate change before expiration of the suspension

period, the commission is considered to have approved the change.

This approval is subject to the authority of the commission

thereafter to continue a hearing in progress.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.109. TEMPORARY RATES. (a) The commission may establish

temporary rates to be in effect during the suspension period

under Section 53.108.

(b) If the commission does not establish temporary rates, the

rates in effect when the suspended tariff was filed continue in

effect during the suspension period.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.110. BONDED RATES. (a) A utility may put a changed

rate into effect by filing a bond with the commission if:

(1) the 150-day suspension period has been extended under

Section 53.108(b); and

(2) the commission fails to make a final determination before

the 151st day after the date the rate change would otherwise be

effective.

(b) The bonded rate may not exceed the proposed rate.

(1) payable to the commission in an amount, in a form, and with

a surety approved by the commission; and

(2) conditioned on refund.

(d) The utility shall refund or credit against future bills:

(1) money collected under the bonded rates in excess of the rate

finally ordered; and

(2) interest on that money, at the current interest rate as

determined by the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.111. ESTABLISHMENT OF FINAL RATES. (a) If, after

hearing, the commission finds the rates are unreasonable or in

violation of law, the commission shall:

(1) enter an order establishing the rates the utility shall

charge or apply for the service in question; and

(2) serve a copy of the order on the utility.

(b) The rates established in the order shall be observed

thereafter until changed as provided by this title.

Chapter 58 or 59 except as otherwise provided by those chapters

or by Chapter 60.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.112. EXPIRATION OF SUSPENSION; EFFECT ON CERTAIN RATES.

(a) Notwithstanding Section 53.111(a), if the commission does

not make a final determination concerning an incumbent local

exchange company's rate change before expiration of the 150-day

suspension period, the rates finally approved by the commission

take effect on and the incumbent local exchange company is

entitled to collect those rates from the date the 150-day

suspension period expired.

(b) A surcharge or other charge necessary to effectuate this

section may not be recovered over a period of less than 90 days

from the date of the commission's final order.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.113. FCC-APPROVED TARIFFS FOR SWITCHED-ACCESS SERVICE.

(a) An incumbent local exchange company may file with the

commission tariffs for switched-access service that have been

approved by the Federal Communications Commission. The tariffs

must include all rate elements in the company's interstate access

tariff other than end-user charges.

(b) Not later than the 60th day after the date a company files

tariffs under Subsection (a), the commission shall order the

rates and terms to be the incumbent local exchange company's

intrastate switched-access rates and terms if, on review, the

tariffs contain the same rates and terms, excluding end-user

charges, as approved by the Federal Communications Commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. RATE CHANGES PROPOSED BY COMMISSION

Sec. 53.151. UNREASONABLE OR VIOLATIVE EXISTING RATES. (a) If

the commission, on its own motion or on complaint by an affected

person, after reasonable notice and hearing, finds that the

existing rates of a public utility for a service are unreasonable

or in violation of law, the commission shall:

(1) enter an order establishing the just and reasonable rates to

be observed thereafter, including maximum or minimum rates; and

(2) serve a copy of the order on the utility.

(b) The rates established under Subsection (a) constitute the

legal rates of the public utility until changed as provided by

this title.

Chapter 58 or Chapter 59 except as otherwise provided by those

chapters.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.152. INVESTIGATING COSTS OF OBTAINING SERVICE FROM

ANOTHER SOURCE. If a public utility does not produce or generate

the service that it distributes, transmits, or furnishes to the

public for compensation but obtains the service from another

source, the commission may investigate the cost of that

production or generation in an investigation of the

reasonableness of the utility's rates.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER E. COST RECOVERY AND RATE ADJUSTMENTS

Sec. 53.201. AUTOMATIC ADJUSTMENT FOR CHANGE IN COSTS

PROHIBITED. The commission may not establish a rate or tariff

that authorizes a utility to automatically adjust and pass

through to the utility's customers a change in the utility's

costs.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER F. REGULATORY POLICY FOR SMALL INCUMBENT LOCAL

EXCHANGE COMPANIES AND COOPERATIVES

Sec. 53.251. GENERAL POLICY. Regulatory policy should recognize

that:

(1) there are differences between small and large incumbent

local exchange companies;

(2) there are a large number of customer-owned telephone

cooperatives and small, locally owned investor companies; and

(3) it is appropriate to provide incentives and flexibility to

allow an incumbent local exchange company that serves a rural

area to:

(A) provide existing services; and

(B) introduce new technology and new services in a prompt,

efficient, and economical manner.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.252. ADOPTION OF CERTAIN POLICIES. Notwithstanding any

other provision of this title, the commission shall consider and

may adopt policies to:

(1) provide for evaluation of the overall reasonableness of the

rates of a rural or small incumbent local exchange company or

cooperative not more frequently than once every three years;

(2) permit consideration of future construction plans and

operational changes in evaluating the reasonableness of the rates

of a rural or small incumbent local exchange company or

cooperative; or

(3) allow a rural or small incumbent local exchange company or

cooperative to:

(A) provide required information by report or by other means, as

necessary, including a required rate filing package, in

substantially less burdensome and complex form than is required

of a larger incumbent local exchange company;

(B) change depreciation and amortization rates, if customer

rates are not affected, after notice to the commission, subject

to commission review in a proceeding under Subchapter C or

Subchapter D;

substantially similar service offered by a larger incumbent local

exchange company, without additional cost justification; and

(D) submit to the commission, instead of a management audit

otherwise required by law, policy, or rule, financial audits

regularly performed by an independent auditor or required and

performed as a result of the company's or cooperative's

participation in a federal or state financing or revenue-sharing

program.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER G. SPECIAL PROCEDURES FOR SMALL LOCAL EXCHANGE

COMPANIES AND COOPERATIVES

Sec. 53.301. DEFINITION. (a) In this subchapter, "minor

change" means a change, including the restructuring of rates of

existing services, that:

(1) decreases the rates or revenues of an incumbent local

exchange company; or

(2) together with any other rate or proposed or approved tariff

changes in the 12 months preceding the effective date of the

proposed change, increases the company's total regulated

intrastate gross annual revenues by not more than five percent.

(b) With regard to a change to a basic local access line rate, a

"minor change" does not include a change that, together with any

other change to the basic local access line rate that took effect

during the 12 months preceding the effective date of the proposed

change, results in an increase of more than 10 percent.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.302. APPLICABILITY. This subchapter does not apply to

an incumbent local exchange company that is a cooperative

corporation partially deregulated under Subchapter H.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.303. PROVISIONS NOT EXCLUSIVE. This subchapter does not

prohibit:

(1) an incumbent local exchange company from filing for a new

service or rate change under another section of this title; or

(2) the commission from conducting a review under Subchapter D.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.304. PROCEDURE TO OFFER CERTAIN SERVICES OR MAKE MINOR

CHANGES. (a) An incumbent local exchange company may offer an

extended local calling service or a new service on an optional

basis or make a minor change in its rates or tariffs if the

company:

(1) is a cooperative corporation or has, together with all

affiliated incumbent local exchange companies, fewer than 31,000

access lines in service in this state;

(2) files with the commission and the office a statement of

intent, as prescribed by Subsection (b), not later than the 91st

day before the effective date of the proposed change;

(3) provides notice as prescribed by Section 53.305; and

(4) files with the commission affidavits verifying that notice

as prescribed by Section 53.305 was provided.

(b) The statement of intent must include:

(1) a copy of a resolution adopted by the incumbent local

exchange company's board of directors approving the proposed

change;

(2) a description of the services affected by the proposed

change;

(3) a copy of the proposed tariff for the affected service;

(4) a copy of the customer notice required by Subsection (a)(3);

(5) the number of access lines the company and each affiliate

have in service in this state; and

(6) the amount by which the company's total regulated intrastate

gross annual revenues will increase or decrease as a result of

the proposed change.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.305. NOTICE TO AFFECTED CUSTOMERS. (a) A company shall

provide notice of a proposed change to affected customers in the

manner prescribed by the commission.

(b) Notice must:

(1) be provided not later than the 61st day before the effective

date of the proposed change; and

(2) include:

(A) a description of the services affected by the proposed

change;

(B) the effective date of the proposed change;

commission for a review under Section 53.306, including the

number of persons required to petition before a commission review

will occur;

(D) an explanation of the customer's right to information

concerning how to obtain a copy of the proposed tariff from the

company;

(E) the amount by which the company's total regulated intrastate

gross annual revenues will increase or decrease as a result of

the proposed change; and

(F) a list of rates that are affected by the proposed rate

change.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.306. COMMISSION REVIEW OF PROPOSED CHANGE. (a) The

commission shall review a proposed change filed under this

subchapter if:

(1) the commission receives complaints relating to the proposed

change signed by a number of affected local service customers

equal at least to the lesser of 1,500 or five percent of those

customers;

(2) the commission receives a complaint relating to the proposed

change from an affected intrastate access customer, or a group of

affected intrastate access customers, that in the preceding 12

months accounted for more than 10 percent of the company's total

intrastate gross access revenues;

(3) the proposed change is not a minor change;

(4) the company does not comply with the procedural requirements

of this subchapter; or

(5) the proposed change is inconsistent with the commission's

substantive policies as expressed in its rules.

(b) The commission may suspend a tariff proposed under this

subchapter during the review.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.307. COMPLIANCE WITH PRINCIPLES; REDUCED RATES. A rate

established under this subchapter must be in accordance with the

rate-setting principles of this chapter, except that a company

may provide to its board members, officers, employees, or agents

free or reduced rates for services.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.308. FEES AND ASSESSMENTS. The commission may prescribe

and collect a fee or assessment from incumbent local exchange

companies necessary to recover the cost to the commission and to

the office of activities carried out and services provided under:

(1) this subchapter;

(2) Section 53.112;

(3) Subchapter H; and

(4) Section 55.004.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER H. PARTIAL DEREGULATION AVAILABLE TO CERTAIN

COOPERATIVE CORPORATIONS

Sec. 53.351. PROVISIONS NOT EXCLUSIVE. (a) This subchapter

does not:

(1) prohibit a cooperative from filing for a new service or a

rate change under another applicable provision of this title; or

(2) affect the application of a provision of this title not

directly related to:

(A) establishing rates; or

(B) the authority of the commission to require a cooperative to

file a report required under this title or the commission's

rules.

(b) Notwithstanding any other provision of this subchapter, the

commission may conduct a review under Subchapter D.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.352. PARTIAL DEREGULATION BY BALLOT. (a) An incumbent

local exchange company that is a cooperative corporation may vote

to partially deregulate the cooperative by sending a ballot to

each cooperative member. The incumbent local exchange company may

include the ballot in a bill or send the ballot separately. The

ballot shall be printed to permit voting for or against the

proposition: "Authorizing the partial deregulation of the (name

of the cooperative)."

(b) The cooperative is partially deregulated if a majority of

the ballots returned to the cooperative not later than the 45th

day after the date the ballots are mailed favor deregulation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.353. VOTING PROCEDURES. The commission by rule shall

prescribe the voting procedures a cooperative must use under this

subchapter.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.354. PROCEDURE TO OFFER CERTAIN SERVICES OR MAKE CERTAIN

CHANGES. After the initial balloting, a cooperative may offer

extended local calling services, offer new services on an

optional basis, or make changes in its rates or tariffs if the

cooperative:

(1) files a statement of intent under Section 53.355;

(2) provides notice of the proposed action to each customer and

municipality as prescribed by Section 53.356; and

(3) files with the commission affidavits verifying that notice

was provided as prescribed by Section 53.357.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.355. STATEMENT OF INTENT. (a) A cooperative must file

a statement of intent to use this subchapter with the commission

and the office not later than the 61st day before the effective

date of the proposed change.

(b) The statement must include:

(1) a copy of a resolution, signed by a majority of the members

of the cooperative's board of directors, approving the proposed

action and authorizing the filing of the statement of intent;

(2) a description of the services affected by the proposed

action;

(3) a copy of the proposed tariff for the affected service; and

(4) a copy of the customer notice required by Section 53.356.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.356. NOTICE TO AFFECTED PERSONS. (a) The cooperative

shall provide to each affected customer or party, including a

municipality, at least two notices of the proposed action by bill

insert or by individual notice.

(b) The cooperative shall provide:

(1) the first notice not later than the 61st day before the

effective date of the proposed action; and

(2) the last notice not later than the 31st day before the

effective date of the proposed action.

(1) a description of the services affected by the proposed

action;

(2) the effective date of the proposed action;

(3) an explanation of the customer's right to:

(A) obtain a copy of the proposed tariff from the cooperative;

and

(B) petition the commission for a review under Section 53.358;

(4) a statement of the amount by which the cooperative's total

gross annual revenues will increase or decrease and a statement

explaining the effect on the cooperative revenues as a result of

the proposed action; and

(5) a list of rates that are affected by the proposed rate

action, showing the effect of the proposed action on each of

those rates.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.357. FILING OF AFFIDAVITS VERIFYING NOTICE. Not later

than the 15th day before the effective date of a proposed action,

the cooperative shall file with the commission affidavits that

verify that the cooperative provided each notice required by

Section 53.356.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.358. COMMISSION REVIEW OF PROPOSED ACTION. (a) The

commission shall review a proposed action filed under this

subchapter if:

(1) the commission receives, not later than the 45th day after

the date the first notice is provided under Section 53.356,

complaints relating to the proposed action:

(A) signed by at least five percent of the affected local

service customers; or

(B) from an affected intrastate access customer, or group of

affected intrastate access customers, that in the preceding 12

months accounted for more than 10 percent of the cooperative's

total intrastate access revenues;

(2) the cooperative does not comply with the procedural

requirements of this subchapter; or

(3) the proposed action is inconsistent with the commission's

substantive policies as expressed in its rules.

(b) If the commission conducts a review of the proposed action

under this section before the action's effective date, the

commission may suspend the proposed action during the review.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 53.359. REVERSAL OF DEREGULATION BY BALLOT. (a) A

cooperative that is partially deregulated under this subchapter

may vote to reverse the deregulation by sending a ballot to each

cooperative member.

(b) The cooperative's board of directors may order reballoting

on its own motion. If the board receives a written request for

that action from at least 10 percent of its members, the board

shall reballot not later than the 60th day after the date the

board receives that request.

ballot separately. The ballot shall be printed to permit voting

for or against the proposition: "Reversing the partial

deregulation of the (name of the cooperative)."

(d) The partial deregulation is reversed if a majority of the

ballots returned to the cooperative not later than the 45th day

after the date the ballots are mailed favor reversal.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.