By: Perry, et al. S.B. No. 586
(Geren)
A BILL TO BE ENTITLED
AN ACT
relating to the distribution of universal service funds to certain
small and rural incumbent local exchange companies.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 56.032, Utilities Code, as effective
September 1, 2017, is amended to read as follows:
Sec. 56.032. ADJUSTMENTS: SMALL AND RURAL INCUMBENT LOCAL
EXCHANGE COMPANY UNIVERSAL SERVICE PLAN. (a) In this section:
(1) "Rate of return" means the Federal Communications
Commission's prescribed rate of return as of the date of any
determination, review, or adjustment under this section, to be no
greater than 9.75 percent prior to July 1, 2021. If the commission
finds that the Federal Communications Commission no longer
prescribes a rate of return necessary to implement this section,
the commission shall initiate proceedings to determine or modify
the rate of return to be used for purposes of this section as
necessary.
(2) "Small provider" means:
(A) an incumbent local exchange company or
cooperative that, on September 1, 2013, together with all local
exchange companies affiliated with the company or cooperative on
that date, served 31,000 or fewer access lines in this state; or
(B) a company or cooperative that is a successor
to a company or cooperative described by Paragraph (A).
(b) Except as provided by Subsections (c) through (j) [(d)
and (e)], the commission may revise the monthly support amounts to
be made available from the Small and Rural Incumbent Local Exchange
Company Universal Service Plan by any mechanism, including support
reductions resulting from rate rebalancing approved by the
commission, after notice and an opportunity for hearing. In
determining appropriate monthly support amounts, the commission
shall consider the adequacy of basic rates to support universal
service.
(c) On the written request of a small provider that is not an
electing company under Chapter 58 or 59, the commission shall
determine and disburse support to the small provider in fixed
monthly amounts based on an annualized support amount the
commission determines to be sufficient, when combined with
regulated revenues, to permit the small provider the opportunity to
earn a reasonable return in accordance with Section 53.051. A small
provider that makes a request under this subsection shall continue
to receive the same level of support it was receiving on the date of
the written request until the commission makes a determination or
adjustment through the mechanism described by Subsection (d).
(d) Not later than January 1, 2018, the commission shall
initiate rulemaking proceedings to develop and implement a
mechanism to determine the annualized support amount to be
disbursed under Subsection (c). The mechanism must:
(1) require the annual filing of a report by each small
provider that submits a request under Subsection (c) for the
purpose of:
(A) establishing a continued level of support for
the provider or the eligibility of the provider for support
adjustment filings for the purposes of Subsections (f), (g), (h),
and (i); and
(B) determining whether support levels, when
combined with regulated revenues, provide the provider an
opportunity to earn a reasonable return as described by Subsection
(f);
(2) provide requirements for the annual filing, which
may include annual earnings reports filed with the commission under
16 T.A.C. Section 26.73 and any underlying data that, during the
rulemaking process, the commission determines to be reasonably
necessary for the purposes of Subdivision (1);
(3) provide requirements and procedures for
adjustment proceedings that are consistent with Subsections (h) and
(i); and
(4) provide a procedure for the commission to assess,
as necessary, whether the reported return of a small provider is
based on expenses that are not reasonable and necessary.
(e) In a proceeding to adjust support levels using the
mechanism described by Subsection (d), the commission may consider
the small provider's data for a period not to exceed three fiscal
years before the date the proceeding is initiated.
(f) For purposes of the mechanism described by Subsection
(d), a return is deemed reasonable if the return is within two
percentage points above or three percentage points below the rate
of return as defined in this section. A small provider's reported
return is subject to assessment under the procedures described in
Subsection (d)(4).
(g) The commission may not approve a support adjustment
under Subsection (h) or (i) if the commission determines that a
small provider's return for the previous fiscal year was reasonable
under Subsection (f).
(h) A small provider whose return is not reasonable under
Subsection (f) because the return is more than three percentage
points below the rate of return as defined in this section may file
an application that is eligible for administrative review or
informal disposition to adjust support or rates to a level that
would bring the small provider's return into the range that would be
deemed reasonable under Subsection (f), except that the adjustment
may not set a small provider's support level at more than 140
percent of the annualized support amount the provider received in
the 12-month period before the date of adjustment. A rate
adjustment under this subsection may not adversely affect universal
service. Except for good cause, a small provider that files an
application for adjustment under this subsection may not file a
subsequent application for adjustment before the third anniversary
of the date on which the small provider's most recent application
for adjustment is initiated.
(i) There is no presumption that the return is unreasonable
for a small provider whose return is more than two percentage points
above the rate of return as defined in this section. However, on
its own motion, the commission may initiate a proceeding to review
the small provider's support level and regulated revenues and after
notice and an opportunity for a hearing, adjust the provider's
level of support or rates, if appropriate. A rate adjustment under
this subsection may not adversely affect universal service. Except
for good cause, the commission may not initiate a subsequent
adjustment proceeding for a small provider under this subsection
before the third anniversary of the date on which the small
provider's most recent adjustment proceeding is initiated.
(j) A small provider that is eligible to have support
determined and distributed under Subsection (c) shall continue to
receive the same level of support it was receiving on August 31,
2017, until the earlier of:
(1) the date on which the commission makes a
determination or adjustment through the mechanism described by
Subsection (d); or
(2) the 61st day after the date the commission adopts
the mechanism described by Subsection (d).
(k) A report or information the commission requires a small
provider to provide under Subsection (d) is confidential and is not
subject to disclosure under Chapter 552, Government Code. In any
proceeding related to Subsection (d), a third party's access to
confidential information is subject to an appropriate protective
order.
(l) Except as provided by Subsection (m), this [This]
section does not:
(1) affect the commission's authority under Chapter 53
or this chapter; or
(2) limit the commission's authority to initiate a
review of a small provider under another provision of this title.
(m) In a proceeding for a small provider initiated under
Subchapter A, B, C, or D, Chapter 53, the commission may recalculate
the annualized support amount to be disbursed to the small provider
and to be used as the basis for adjustment in any subsequent
proceeding under Subsections (c) through (j).
(n) Subsections (a), (c), (d), (e), (f), (g), (h), (i), (j),
(k), (l), and (m) and any monthly amounts approved under those
subsections expire September 1, 2023.
[(h) Subsections (a), (c), (d), (e), and (f) and any monthly
support amount approved under those subsections expire September 1,
2017.]
SECTION 2. (a) In this section, "commission" means the
Public Utility Commission of Texas.
(b) On or after January 1, 2022, and before July 1, 2022, the
commission shall initiate a proceeding to review and evaluate
whether:
(1) Section 56.032, Utilities Code, as amended by this
Act, including any rules adopted to implement that section,
accomplishes the purposes of the establishment of the universal
service fund under Section 56.021(1)(B), Utilities Code, and allows
each small provider, as defined by Section 56.032, Utilities Code,
as amended by this Act, the opportunity to earn a reasonable return
in accordance with Section 53.051, Utilities Code, and should be
continued; or
(2) changes in law to amend or replace the mechanism
created by Section 56.032, Utilities Code, are necessary to
accomplish the purposes described in Subdivision (1) of this
subsection.
(c) The commission has all authority necessary to conduct
the review under Subsection (b) of this section.
(d) After the review conducted under Subsection (b) of this
section, and not later than September 1, 2022, the commission shall
submit to the legislature a report on:
(1) the continued appropriateness of using the Federal
Communications Commission prescribed rate of return for the
mechanism established under Section 56.032(d), Utilities Code, as
added by this Act, if the Federal Communications Commission still
prescribes a rate of return that may be used for that mechanism;
(2) the efficiency and frequency of adjustment
proceedings conducted under Section 56.032(h), Utilities Code, as
amended by this Act, and Section 56.032(i), Utilities Code, as
added by this Act;
(3) the frequency and efficiency of determinations
made on reasonable and necessary expenses under Section
56.032(d)(4), Utilities Code, as added by this Act;
(4) the effect of changes in technology on regulated
revenue and support needs or determinations made under Section
56.032, Utilities Code, as amended by this Act; and
(5) any other relevant information the commission
determines is necessary for inclusion in the report and is in the
public interest.
(e) Notwithstanding Subsection (b) of this section or
Section 56.024, Utilities Code, a party to a commission proceeding
under this section examining the universal service fund and the
effectiveness of Section 56.032, Utilities Code, as amended by this
Act, is entitled to access confidential information provided to the
commission under Section 56.024(a), Utilities Code, if a protective
order is issued in the proceeding for the confidential information.
SECTION 3. This Act takes effect September 1, 2017.