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Overcharge in Texas Austin Here are some facts gleaned from Overcharge \(New York: David McKay utilities companies by Sen. Lee Metcalf and Vic Reinemer: “Texas Power & Light advertises that it is a ‘regulated industry.’ Yet the company contends before the Federal Power Commission that it is not subject to federal jurisdiction. There is no Texas regulatory commission with authority over power companies. An archaic Texas law providing for municipal regulation of utilities is neither used or useful. The Texas electric consumer has Some of Texas’ investor-owned utilities are among the highest utility profitmakers in the United States. Many of them keep more than 20 cents of every dollar paid by electric consumers. In 1964 Houston Lighting and Power topped the list of power companies in return on invested capital with 14.9%. Ranked fifth with 11.7% return was Central & Southwest, a Delaware holding company which controls Central Power & Light in Corpus Christi and West Texas Utilities. Seventh with an In 1965, Houston Lighting & Power, which is known affectionately by many Houstonians as “Houston Looting and return on invested capital; Central & Southwest, 14.3%; Texas Utilities, Eleven of the 44 electric companies with a 15%-plus earnings on common stock equity in 1964 were Texas the tactics of the State AFL-CIO in support of the bill. It is understood in some quarters that these two senators, perhaps others, were “almost told” by organized labor to vote for the comp bill which the three lobby groups had worked out. Hall, in moving that the maximum be $56, saying that would put the state near the national average in comp, referred to the lobbys’ agreement, saying he didn’t believe the Legislature needed to be bound to that agreement. “I’ve just been waiting for this statement this morning,” Schwartz said. “Has anyone consulted with you about this agreement?” he asked Hall. “No,” Hall said. “Wasn’t this a compromise struck by two or three lobbying organiza tions?” Schwartz asked. “Yes, senator, and the people are not necessarily represented in such instances . . . I believe we’ll sleep better tonight if we pass this bill with a $56 maximum.” Schwartz then said, “Do you think any lobbying organization would have the guts to kill it if we put in the national average? Nobody’s going to tell me in my district I have to vote for some agreement a lobbying organization worked out.” Schwartz afterwards told the Observer he had resented labor’s position that the compromise must be supported without amendment by legislators. “We were never consulted on this compromise. After having carried labor’s water all these years, I think I should have been consulted,” Schwartz said. “I told Roy Evans [the State AFL-CIO secretary-treasurer] a couple of months ago in Galveston that the first I heard of the compromise was from a mailing I received from the TMA. . . . The Establishment is always saying labor tells people like me what to do, I have to fight that claim all the time, and then labor leaders come to my district and act like they themselves believe that’s the way things actually are.. . . Not every worker in Texas who is covered by workmen’s comp is a member of the State AFL-CIO, so, really, they don’t have the right to settle for $49 a week when I think we could have won $56,” Schwartz said. G.O. Another Go at the Utilities Austin Texas is the only state in the union which does not regulate telephone service. It is one of three states which do not regulate the rates of privately owned electric light and power companies, and one of four states which do not regulate water rates or manufactured gas. Only Texas and four other states do not regulate telegraph rates. State Sen. Charles Wilson of Lufkin is holding press conferences throughout the state to drum up public interest in utilities regulation, but he is not optimistic about the chances of establishing a regulatory commission this year. “It would be a miracle if my bill passes the Senate and an act of God if it passes the House,” he tells the Observer. “Nonetheless, I intend to generate what public support I can.” 10 The Texas Observer Chances seem equally slim for an alternative regulatory bill being drafted by Rep. Rex Braun of Houston. Braun’s bill will be an updated version of a measure introduced almost a decade ago by Rep. Bill Kilgarlin. Still, both Wilson and Braun are adamant about the need for utility regulation in Texas. In this state, Wilson says, “the average household is being overcharged more on telephone and electric bills than any other item in the family budget. .. . The telephone rates are the highest and the service the sorriest. In some cases it costs three times as much to call a neighbor town in Texas as it does to call a neighbor town of the same distance in Louisiana. This is because the Federal Communications Commission regulates interstate calls but Texas does not do the same for intrastate calls.” Wilson’s bill would establish a nine-man board responsible for regulating rates and standards of service for all utilities including electricity, telephone, gas, water, and cable television. The members would be appointed by the governor for six-year terms. “I want to avoid the clubby atmosphere on this board as now exists on the Railroad Commission,” he said, explaining his reason for wanting a nine-member board. “You are more likely to have a meaningful debate with nine rather than with three members.” Funds for the commission would be taken from general revenue rather than by taxing the utilities companies themselves because Wilson believes that requiring licensing fees from the companies to pay for their own regulation might give them undue power over the commission. Braun’s bill will call for a three-man board appointed by the governor. He would charge utilities one-fourth of 1% of their gross receipts each quarter to finance the commission. The most important difference between the two bills concerns the basis on which rates are set. Most regulatory commissions set 6% of a company’s capital investment as a fair rate of profit. Under Wilson’s bill, the rate base is determined under the “fair value” method, which assesses a company’s investment according to what its facilities are considered by the state board to be worth today. Braun’s bill would set rates on the basis of the original cost of facilities less depreciation. \(Thus, if a utilities commission sets 6% as a fair rate of return, and the company’s investment is determined on the fair value basis ‘at $300 million, the company is entitled to make $300 million times .06, or $18 million. If, however, the investment is determined to be worth $250 million according to the original cost method, the company is entitled to make $250 companies prefer a third method, by which rates are set according to the amount it would cost to replace equipment. Wilson argues that fair value is the best basis on which to set rates, that it is a