For expiration of Subsections (a), (c), (d), and (e)–(m), see Subsection (n).
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), 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.
(d-1)  In addition to the report required by Subsection (d), a small provider that submits a request under Subsection (c) shall file with the commission annually a report that includes the following information regarding the provider's operations that are regulated by the commission:
(1)  total operating revenues;
(2)  total operating expenses;
(3)  total operating tax expense;
(4)  rate of return;
(5)  total invested capital; and
(6)  network access revenue.
(d-2)  A small provider shall file the report required by Subsection (d-1) using the commission's public filing system. Subsection (k) does not apply to information in a report filed under Subsection (d-1).
(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 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, 2033.
Added by Acts 2011, 82nd Leg., R.S., Ch. 535 (H.B. 2603), Sec. 2, eff. September 1, 2011.
Amended by: 
Acts 2013, 83rd Leg., R.S., Ch. 751 (S.B. 583), Sec. 5, eff. June 14, 2013.
Acts 2017, 85th Leg., R.S., Ch. 1116 (S.B. 586), Sec. 1, eff. September 1, 2017.
Acts 2023, 88th Leg., R.S., Ch. 57 (S.B. 1425), Sec. 1, eff. May 19, 2023.