Sec. 33.122. REVIEW OF CERTAIN RATE DECISIONS. (a) Except as provided by Subsections (b)-(f), for a period of 10 years beginning on the later of August 28, 1989, or the effective date of the rate ordinance that is the subject of the commission's final order invoking the application of this section, the commission has appellate jurisdiction over the rates charged by the municipally owned utility, both inside and outside the municipality, in the same manner and subject to the same commission powers and authority provided by this subtitle for an electric utility.

(b) The commission has jurisdiction to review the cost allocation and rate design methodologies adopted by the governing body of a municipally owned utility subject to this section. If the commission finds that the cost-of-service methodologies result in rates that are unjust, unreasonable, or unreasonably discriminatory, or unduly preferential to a customer class, the commission may order the implementation of ratesetting methodologies the commission finds reasonable.

(c) The commission shall ensure that a customer class, other than a class in which the municipality is the customer of the municipally owned utility, does not pay rates that result in a relative rate of return of more than 115 percent under the cost-of-service methodology found reasonable by the commission. A customer class may not experience a percentage base rate increase that is greater than 1-1/2 times the system average base increase. In moving an above-cost class toward cost-of-service levels, each class farthest above cost shall be moved sequentially toward cost so that no above-cost class moves toward cost until no other class is further removed from cost.

(d) A municipality subject to this section may design residential rates, as a matter of intra-class rate design, to accomplish reasonable energy conservation goals, notwithstanding any other provision of this title.

(e) The commission's jurisdiction under this section may be invoked by any party to a local rate proceeding required by this section in the same manner as an appeal of the rates of an electric utility under Section 33.051.

(f) The commission's jurisdiction under this section does not extend to a municipally owned utility's:

(1) revenue requirements, whether base rate or fuel revenues;

(2) invested capital;

(3) return on invested capital;

(4) debt service coverage ratio; or

(5) level of transfer of revenues from the utility to the municipality's general fund.

(g) The governing body of a municipally owned utility subject to this section shall establish procedures similar to the procedures of a municipality that retains original jurisdiction under Section 33.001 to regulate an electric utility operating in the municipality. The procedures must include a public hearing process in which an affected ratepayer is granted party status on request and is grouped for purposes of participation in accordance with common or divergent interests, including the particular interests of all-electric residential ratepayers and residential ratepayers outside the municipality.

(h) This section does not require the governing body of a municipality or the governing board of a municipally owned utility subject to this section to adopt procedures that require the use of the Texas Rules of Evidence, the Texas Rules of Civil Procedure, or the presentation of sworn testimony or any other form of sworn evidence.

(i) The governing body of a municipally owned utility subject to this section shall appoint a consumer advocate to represent the interests of residential and small commercial ratepayers in the municipality's local rate proceedings. The consumer advocate's reasonable costs of participating in a proceeding, including the reasonable costs of ratemaking consultants and expert witnesses, shall be funded by and recovered from residential and small commercial ratepayers.

(j) The commission shall adopt rules applicable to a party to an appeal under Subchapter D that provide for the public disclosure of financial and in-kind contributions and expenditures related to preparing and filing an appeal petition and preparing expert testimony or legal representation for an appeal. A party or customer who is a member of a party who makes a financial contribution or in-kind contribution to assist in an appeal by another party or customer class under Subchapter D shall be required, on a finding of the commission to that effect, to pay the municipally owned utility a penalty equivalent in amount to two times the amount of the contribution.

(k) This section does not limit the right of a party or customer to spend money to represent its own interests following the filing of a petition with the commission under Subchapter D.

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