CONSIDERATION OF PAYMENT TO AFFILIATE.

(a) Except as provided by Subsection (b), the commission may not allow as capital cost or as expense a payment to an affiliate for:

(1) cost of a service, property, right, or other item; or

(2) interest expense.

(b) The commission may allow a payment described by Subsection (a) only to the extent that the commission finds the payment is reasonable and necessary for each item or class of items as determined by the commission.

(c) A finding under Subsection (b) must include:

(1) a specific finding of the reasonableness and necessity of each item or class of items allowed; and

(2) except as provided by Subsection (d), a finding that the price to the utility is not higher than the prices charged by the supplying affiliate to:

(A) its other affiliates or divisions for the same item or class of items; or

(B) a nonaffiliated person within the same market area or having the same market conditions.

(d) A finding under this section is not required as to the prices charged by the supplying affiliate to its other affiliates or divisions if the supplying affiliate computed its charges to the utility in a manner consistent with Federal Communications Commission rules.

(e) If the commission finds that the affiliate expense for the test period is unreasonable, the commission shall:

(1) determine the reasonable level of the expense; and

(2) include that expense in determining the utility's cost of service.