Bill Sponsors / Authors:

  Rep. Jay Dean
  R - Longview

  Sen. Phil King
  R - Weatherford

 

Supporting Documents / Links:

•   Alton Hall Oppose HB 2713
  March 23, 2023
•   CenterPoint Energy reports $1 billion profit for 2022
  February 17, 2023

House Bill - 2713 Utility Compensation Pricing

Senate Bill 1016 will direct the Public Utility Commission of Texas to presume as reasonable when establishing an electric utility's rates, the total compensation paid to the electric utility's employees as long as that pay is consistent with recent market compensation studies.

The City of Houston was against this measure because employee compensation for regulated industries with guaranteed rates of return are not comparable to free market compensation. And who would get stuck paying the higher bill? Ratepayers, that’s who.

Alton Hall testified on behalf of the City of Houston on this measure. He states:

Electric utility rates are universally determined based on the cost-causation or cost-benefit analysis. In other words, the rates are designed so that costs are assigned to and recovered from the facilities, entities, or customers responsible for causing or benefiting from the costs.

The PUC, and the regulatory authorities of nearly every other state in the country, specifically disallows incentive compensation based on financial performance or metrics for all utility employees.

The reason for this is very simple: shareholders, and not rate payers, benefit from the increased financial performance of the utility company.

Many of the market studies presented by utilities include non-regulated Fortunate 500 companies that are not comparable entities. You cannot compare the compensation of non-regulated companies to those companies making a guaranteed rate of return.

Creating a presumption of reasonableness that drives higher utility compensation from a “market study” will result with higher rates for consumers.

And it turns out the regulated utilities are doing just fine with their guaranteed rate of return:

According to a February 17th article in the Houston Chronicle, CenterPoint Energy reported a profit of $1 billion in 2022.

Having ratepayers now responsible for paying their electric utility’s employee compensation as if they don’t already have a guaranteed rate of return is both against free market principles and against the consumer’s interest.