HBA-ALS S.B. 7 76(R)BILL ANALYSIS
Office of House Bill AnalysisS.B. 7
By: Sibley
State Affairs
4/8/1999
Engrossed
BACKGROUND AND PURPOSE
Currently, the Public Utility Regulatory Act of 1995 (Act) authorizes the
Public Utility Commission (PUC) to regulate the electricity market and
ensure that only one electric energy provider serves each area of the
state. S.B. 7 amends the Act by deregulating the electricity generation
market and permitting providers to compete for customers who choose their
electricity supplier in competitive areas. This bill restructures electric
utility service. It also authorizes the PUC to develop and promulgate
customer protection rules during and after a transition to a competitive
market.
RULEMAKING AUTHORITY
It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the Public Utility Commission in
SECTION 35 (Sections 39.101, 39.153, 39.153, 39.155, 39.157, 39.157,
39.262, 39.601, 39.603, 39.603, 40.003, 41.003, Utilities Code); to the
commissioner of education in SECTION 35 (Section 39.601(g), Utilities
Code); and to the comptroller of public accounts in SECTION 35 (Sec.
39.601(g), Utilities Code) of this bill. Rulemaking authority previously
delegated to the Public Utility Commission is modified in SECTION 35
(Section 39.101, Utilities Code) of this bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 11.003, Utilities Code, as follows:
Sec. 11.003. DEFINITIONS. Defines "electric cooperative," and redefines
"affected persons," "cooperative corporation," "person," "ratemaking
proceeding," and "service." Redesignates Subdivisions (10)-(20) to
Subdivisions (11)-(21), respectively. Makes nonsubstantive changes.
SECTION 2. Amends Section 12.005, Utilities Code, to provide that the
Public Utility Commission of Texas (PUC) is subject to Chapter 325,
Government Code (Texas Sunset Act). Provides that unless PUC is continued
in existence as provided by that chapter or by Chapter 39, PUC is abolished
and this title expires September 1, 2005, rather than September 1, 2001.
SECTION 3. Amends Section 12.101, Utilities Code, to delete language
requiring PUC to employ a general counsel. Redesignates Subdivision (3) to
Subdivision (2). Makes nonsubstantive changes.
SECTION 4. Amends Sections 12.151 and 12.152, Utilities Code, to delete
language prohibiting a person who is required to register as a lobbyist
under Chapter 305 (Registration of Lobbyists), Government Code, because of
the person's activities for compensation on behalf of a profession related
to the operation of PUC, from acting as general counsel to PUC. Makes
conforming changes.
SECTION 5. Amends Section 13.002, Utilities Code, to provide that the
Office of Public Utility Counsel (office) is subject to Chapter 325,
Government Code (Texas Sunset Act). Provides that unless continued in
existence as provided by that chapter, the office is abolished and this
chapter expires September 1, 2005, rather than September 1, 2001.
SECTION 6. Amends Section 13.024, Utilities Code, as follows:
Sec. 13.024. PROHIBITED ACTS. (a) Prohibits a consellor from having
direct or indirect interest in a utility company regulated under this
title, its parent, or its subsidiary companies, corporations, or
cooperatives or a utility competitor, utility supplier, or other entity
affected in a manner other than by the setting of rates for that class of
customer. Deletes language prohibiting the counsellor from providing legal
services directly or indirectly to or being employed in any capacity by a
utility company regulated under this title.
(b) Deletes language providing that the prohibition under Subsection (a)
applies until the second anniversary of the date the counselor ceases to
serve as counselor.
(c) Deletes language providing that this section does not prohibit a person
from engaging in the private practice of law after the person ceases to
serve as counselor.
SECTION 7. Amends Section 13.043, Utilities Code, as follows:
Sec. 13.043. PROHIBITION ON EMPLOYMENT OR REPRESENTATION. (a) Prohibits a
former counsel from communicating to or appearing before PUC or one of its
officers or employees before the second anniversary of the date the person
ceases to serve as counsel if the communication or appearance is made on
behalf of person in connection with any matter on which the person seeks
official action or with the intent to influence PUC.
(b) Prohibits a former counsel from representing person or receiving
compensation for services rendered on behalf of a person regarding a matter
before PUC before the second anniversary of the date the person ceases to
serve as counsel.
(c) Provides that a person commits a Class A misdemeanor if the person
violates this section.
(d) Makes conforming and nonsubstantive changes.
(e) Redesignated from existing Subsection (b). Makes conforming and
nonsubstantive changes.
(f) Redesignated from existing Subsection (c). Makes conforming and
nonsubstantive changes.
SECTION 8. Amends Subsection (d), Section 14.101, Utilities Code, to
provide that this section does not apply to transactions that facilitate
unbundling, asset valuation, minimization of ownership or control of
generation assets, or other purposes consistent with Chapter 39.
SECTION 9. Amends Subsections (a) and (b), Section 16.001, Utilities Code,
to provide that in order to defray expenses incurred in the administration
of this title, an assessment is imposed on each retail electric provider
and electric cooperative, in addition to each public utility, within the
jurisdiction of PUC that serves the ultimate consumer. Makes conforming
changes.
SECTION 10. Amends Section 31.002, Utilities Code, as follows:
Sec. 31.002. DEFINITIONS. Defines "affiliated power generation company,"
"affiliated retail electric provider," "aggregation," "customer choice,"
"Electric Reliability Council of Texas," or "ERCOT," "freeze period,"
"independent system operator," "power generation company," "power region,"
"retail customer," "retail electric provider," "separately metered," and
"transmission and distribution utility." Redefines "electric utility,"
"qualifying cogenerator," and "qualifying small power producer."
Redesignates existing Subsections (1) and (2) to Subsections (6) and (7),
respectively, and redesignates existing Subsection (3) to Subsection (11).
Redesignates existing Subsections (4)-(6) to Subsections (13)-(15),
respectively. Redesignates existing Subsection (7) to Subsection (20).
SECTION 11. Amends Subchapter A, Chapter 32, Utilities Code, by adding
Section 32.0015, as follows:
Sec. 32.0015. REGULATION OF SUCCESSOR ELECTRIC UTILITY OR ELECTRIC
COOPERATIVE. Requires PUC, if an electric utility purchases, acquires,
merges, or consolidates with or acquires 50 percent or more of the stock of
an electric utility or electric cooperative, to regulate the successor
electric utility or electric cooperative in the same manner that it would
regulate the entity that was subject to the stricter regulation before the
purchase, acquisition, merger, or consolidation.
SECTION 12. Amends Sections 32.051 and 32.052, Utilities Code, to prohibit
PUC from regulating revenue requirements, rates, fuel costs, fuel charges,
or fuel acquisitions related to the generation and sale of electricity at
wholesale by a river authority operating a steam generating plant on or
before January 1, 1999, notwithstanding another provision of this title.
Provides that a river authority operating a steam generating plant on or
before that date may construct improvements.
SECTION 13. Amends Section 32.053, Utilities Code, by amending Subsections
(b) and (f) and adding Subsections (g) and (h), as follows:
(b) Authorizes a corporation to purchase and sell electricity, at wholesale
only, to a purchaser, other than an ultimate consumer, at any location in
this state, notwithstanding other statutory provisions. Makes a
nonsubstantive change.
(f) Makes nonsubstantive changes.
(g) Authorizes the board of directors of a river authority to sell, lease,
loan, or transfer some or all of the electric generation property of the
river authority to a nonprofit corporation authorized under this section or
Article 717p, Chapter 245, Acts of the 67th Legislature, Regular Session,
1981, V.T.C.S. (River Authorities Engaged in Distribution and Sale of
Electrical Energy), notwithstanding any other law. Requires the property
transfer to be made pursuant to terms and conditions approved by the board
of directors of the river authority.
(h) Provides that Subsections (a)-(f) do not apply to a corporation
created pursuant to Article 717p, Chapter 245, Acts of the 67th
Legislature, Regular Session, 1981, V.T.C.S., to serve an area described in
Section 32.052.
SECTION 14. Amends Section 35.001, Utilities Code, to redefine "electric
utility."
SECTION 15. Amends Section 35.004, Utilities Code, as follows:
Sec. 35.004. PROVISION OF TRANSMISSION SERVICE. (a) Requires a
transmission and distribution utility that owns or operates transmission
facilities to provide wholesale transmission service at rates and terms,
including terms of access, that are comparable to the rates and terms of
the utility's own use of its system.
(b) Requires PUC to ensure that an electric utility or transmission and
distribution utility provides nondiscriminatory access to wholesale
transmission service for qualifying facilities, exempt wholesale
generators, power marketers, power generation companies, retail electric
providers, and other electric utilities or transmission and distribution
utilities.
(c) Requires PUC, when an electric utility, electric cooperative, or
transmission and distribution utility provides wholesale transmission
service within the Electric Reliability Council of Texas (ERCOT) at the
request of a third party, to ensure that the utility recovers the utility's
reasonable costs in providing wholesale transmission services necessary for
the transaction from the entity for which the transmission is provided so
that the utility's other customers do not bear the costs of the service.
(d) Specifies the formula that PUC is required to use in pricing wholesale
transmission services within ERCOT. Authorizes an electric utility subject
to the freeze period imposed by Section 39.052 to treat transmission costs
in excess of transmission revenues during the freeze period as an expense
for purposes of determining annual costs in the annual report filed
pursuant to Section 39.257. Authorizes PUC to approve rates that may be
periodically adjusted to ensure timely recovery of transmission investment,
notwithstanding Section 36.201.
(e) Requires PUC to ensure that ancillary services necessary to facilitate
the transmission of electric energy are available at reasonable prices with
terms and conditions that are not unreasonably preferential, prejudicial,
discriminatory, predatory, or anticompetitive. Defines "ancillary
services."
SECTION 16. Amends Subsection (b), Section 35.005, Utilities Code, to
authorize PUC to require transmission service at wholesale, including the
construction or enlargement of a facility. Deletes language authorizing PUC
to require transmission service at wholesale, including the construction or
enlargement of a facility, in a proceeding not related to approval of an
integrated resource plan.
SECTION 17. Amends Section 35.033, Utilities Code, to authorize an
affiliate of an electric utility to be an exempt wholesale generator or
power marketer and to sell electric energy to its affiliated electric
utility in accordance with laws governing wholesale sales of electric
energy, rather than in accordance with Chapter 34 and other laws governing
wholesale sales of electric energy.
SECTION 18. Amends Section 35.034, Utilities Code, by adding Subsection
(c), to provide that for purposes of this section, "electric utility" does
not include a river authority.
SECTION 19. Amends Section 35.035, Utilities Code, by adding Subsection
(d), to provide that for purposes of this section, "electric utility" does
not include a river authority.
SECTION 20. Amends Chapter 35, Utilities Code, by adding Subchapter D, as
follows:
SUBCHAPTER D. STATE AUTHORITY TO SELL OR CONVEY POWER
Sec. 35.101. DEFINITIONS. Defines "commissioner" and "public retail
customer."
Sec. 35.102. STATE AUTHORITY TO SELL OR CONVEY POWER. Authorizes the
Commissioner of the General Land Office (commissioner), acting on behalf of
the state, to sell or convey power directly to a public retail customer
regardless of whether the public retail customer is also classified as a
wholesale customer.
Sec. 35.103. ACCESS TO TRANSMISSION AND DISTRIBUTION SYSTEMS; RATES. (a)
Entitles the state to have access to all transmission and distribution
systems of all electric utilities, transmission and distribution utilities,
municipally owned utilities, and electric cooperatives that serve public
retail customers, except as provided in Section 35.104.
(b) Requires an entity described by Subsection (a) to provide any utility
service, including transmission, distribution, and other services, to the
state at the lowest applicable rate.
Sec. 35.104. LIMIT IN CERTAIN AREAS. Provides that Sections 35.102,
35.103, and 35.105 do not apply to the rates, retail service area,
facilities, or public retail customers of a municipally owned electric
utility or electric cooperative that has not adopted customer choice.
Prohibits the state from engaging in retail transactions that exceed 2.5
percent of a retail electric utility's total retail load in a certificated
service area of an electric utility in which customer choice has not been
introduced.
Sec. 35.105. COSTS OF SERVING STATE AGENCY. Prohibits an electric utility
from recovering from any customer class the assigned and allocated costs of
serving a state agency, institution of higher education, public school
district, or political subdivision. Requires the rates of a municipally
owned utility or an electric cooperative to be set in accordance with the
provisions of Chapters 40 and 41, respectively.
Sec. 35.106. WHOLESALE CUSTOMERS. Provides that this subchapter does not
prevent the commissioner, acting on behalf of this state, from registering
as a power marketer.
SECTION 21. Amends Section 36.008, Utilities Code, to authorize PUC, in
establishing rates for an electric utility, rather than in establishing
rates for an electric utility not required to file an integrated resource
plan, to review the state's transmission system and make recommendations to
the utility regarding building new power lines, upgrading power lines, and
making necessary improvements.
SECTION 22. Amends Section 36.052, Utilities Code, as follows:
Sec. 36.052. ESTABLISHING REASONABLE RETURN. Deletes language requiring
the regulatory authority, in establishing a reasonable return on invested
capital, to consider the efforts of the electric utility to comply with its
most recently approved integrated resource plan. Redesignates existing
Subsections (2)-(5) to Subsections (1)-(4).
SECTION 23. Amends Section 36.058(d), Utilities Code, to delete language
requiring the regulatory authority, in making a finding regarding an
affiliate transaction subject to Chapter 34, to determine the extent to
which the conditions and circumstances of that transaction are reasonably
comparable relative to quantity, terms, date of contract, and place of
delivery and allow for appropriate differences based on that determination.
SECTION 24. Amends Section 36.201, Utilities Code, to delete the exception
under in Chapter 34 from the provision prohibiting PUC from establishing a
rate or tariff that authorizes an electric utility to automatically adjust
and pass through to the utility's customers a change in the utility's fuel
or other costs.
SECTION 25. Amends Section 36.204, Utilities Code, to delete language
authorizing PUC, in establishing rates for an electric utility that is not
required to file an integrated resource plan, to allow timely recovery of
the reasonable costs of conservation, load management, and purchased power,
notwithstanding Section 36.201 and authorize additional incentives for
conservation, load management, purchased power, and renewable resources.
SECTION 26. Amends Section 36.207, Utilities Code, to delete language
providing that any mark-ups approved under Chapter 34 are an exceptional
form of rate relief that the electric utility may recover from ratepayers
only on a finding by PUC that the relief is necessary to maintain the
utility's financial integrity.
SECTION 27. Amends Section 37.001, Utilities Code, to define "electric
utility," and redesignate existing Subsection (2) to newly created
Subsection (3).
SECTION 28. Amends Section 37.051, Utilities Code, by adding Subsection
(c), to provide that an electric cooperative is not required to obtain a
certificate of public convenience and necessity for the construction,
installation, operation, or extension of any generating facilities or
necessary interconnection facilities, notwithstanding any other provision
of this chapter
SECTION 29. Amends Subchapter B, Chapter 37, Utilities Code, by adding
Sections 37.060 and 37.061, as follows:
Sec. 37.060. DIVISION OF MULTIPLY CERTIFICATED SERVICE AREAS. (a)
Requires that this subsection and Subsections (b)-(g) only be applied to
areas in which each retail electric utility that is authorized to provide
retail electric utility service to the area is providing customer choice.
Provides that, for purposes of this subsection, an electric cooperative or
a municipally owned electric utility is deemed to be providing customer
choice if it has approved a resolution adopting customer choice that is
effective at a specified time. Provides that other retail electric
utilities are deemed to be providing customer choice if customer choice
will be allowed upon certification of the applicable power region pursuant
to Section 39.152. Requires PUC, in areas in which each certificated
retail electric utility is providing customer choice, if requested by a
retail electric utility, to examine the service area of the retail electric
utility making the request that are also certificated to one or more other
retail electric utilities. Requires PUC, after notice and hearing, to
amend the retail electric utilities' certificates so that only one retail
electric utility is certificated to provide distribution services in any
such area. Authorizes a retail electric utility certificated to serve an
area on June 1, 1999, to continue to serve the area or portion of the area
under an amended certificate.
(b) Prohibits this section from being applied in an area in which a
municipally owned utility is certificated to provide retail electric
utility service, if the municipally owned utility serving the area files
with PUC, by February 1, 2000, a request that areas within the certificated
service area of the municipally owned utility remain as presently
certificated.
(c) Requires PUC to enter its order dividing multiply certificated areas
within one year of the date a request is received.
(d) Requires PUC, in amending certificates under this section, to take into
consideration the factors set out in Section 37.056.
(e) Requires PUC to revoke certificates to the extent necessary to achieve
the division of retail electric service areas as provided by this section,
notwithstanding Section 37.059.
(f) Requires that each retail electric utility be allowed to continue to
provide service to the location of electricity-consuming facilities it is
serving on the date an application for division is filed, unless otherwise
agreed by the affected retail electric utilities. Prohibits a customer
located within an affected multiply certificated service area from
switching from one retail electric utility to another while an application
for division is pending.
(g) Requires that if on June 1, 1999, retail service is being provided in
an area by another retail electric utility with the written consent of the
retail electric utility certificated to serve the area, such consent be
filed with PUC. Authorizes PUC, upon notification of such consent and a
request by an affected retail electric utility to amend the relevant
certificates, to grant an exception or amend a retail electric utility's
certificate.
(h) Prohibits PUC from granting an additional retail electric utility
certificate to serve an area if it would cause the area to be multiply
certificated, unless PUC finds that the certificate holders are not
providing service to any part of the area for which a certificate is sought
and are not capable of providing adequate service to the area. Provides
that neither this subsection nor the deadline of June 1, 1999, provided by
Subsection (a) apply to any application for multiple certification filed
with PUC on or before February 1, 1999, and authorizes such applications to
be processed on the date the application was filed. Prohibits applications
for multiple certification filed with PUC on or before February 1, 1999,
from being amended to expand the area for which a certificate is sought,
except for contiguous areas within municipalities that provide consent
under Section 37.053(b), no later than June 1, 1999.
(i) Requires PUC, notwithstanding any other provision of this section and
if requested by a municipally owned utility, to examine areas within the
municipally owned utility's service area that are also certificated to one
or more other retail electric utilities. Authorizes PUC, after notice and
hearing, to amend the retail electric utilities' certificates so that only
one retail electric utility is certificated to provide distribution
services in the area, provided that certain conditions are met by PUC and
the municipality.
Sec. 37.061. EXISTING SERVICE AREA AGREEMENTS. (a) Requires PUC to allow a
municipally owned utility to amend the service area boundaries of its
certificate if:
(1) the municipally owned utility was the holder of a certificate as of
January 1, 1999;
(2) the municipally owned utility has an agreement existing prior to
January 1, 1999, with a public utility serving the area that it would not
contest an application to amend the certificate to add municipal territory;
and
(3) the area for which a certificate is requested is not certificated to a
retail electric utility that is not a party to the agreement and that has
not consented in writing to certification of the area to the municipality.
(b) Prohibits PUC from amending the certificate of the public utility
serving the affected area based upon the granting of a certificate to the
municipally owned utility.
SECTION 30. Amends Section 37.101(a), Utilities Code, to provide that if
an area is or will be included within a municipality as the result of
annexation, incorporation, or another reason, each electric cooperative,
in addition to each electric utility, that holds or is entitled to hold a
certificate to provide service or operate a facility in the area before the
inclusion has the right to continue to provide the service or operate the
facility and extend service within the utility's certificated area in the
annexed or incorporated area.
SECTION 31. Amends Section 38.001, Utilities Code, to require an electric
cooperative to furnish service, instrumentalities, and facilities that are
safe, adequate, efficient, and reasonable.
SECTION 32. Amends Section 38.004, Utilities Code, to provide that a
transmission or distribution line owned by an electric utility or an
electric cooperative must be constructed, operated, and maintained, as to
clearances, in the manner described by the National Electrical Safety Code
Standard ANSI (c)(2), as adopted by the American National Safety Institute
and in effect at the time of construction.
SECTION 33. Amends Subchapter A, Chapter 38, Utilities Code, by adding
Section 38.005, as follows:
Sec. 38.005. ELECTRIC SERVICE RELIABILITY MEASURES. (a) Requires PUC to
implement service quality and reliability standards relating to the
delivery of electricity to retail customers by electric utilities and
transmission and distribution utilities. Requires PUC, by rule, to develop
reliability standards including but not limited to the system-average
interruption frequency index; the system-average interruption duration
index; achievement of average response time for customer service requests
or inquiries; or other reasonable and appropriate standards.
(b) Requires the standards implemented under Subsection (a) to require each
electric utility and transmission and distribution utility subject to this
section to maintain adequately trained and experienced personnel throughout
the utility's service area so that the utility is able to fully and
adequately comply with the appropriate service quality and reliability
standards.
(c) Requires the standards to ensure that electric utilities do not neglect
any local neighborhood or geographic area, including rural areas,
communities of less than 1,000 persons, and low-income areas, with regard
to system reliability.
(d) Authorizes PUC to require each electric utility and transmission and
distribution utility to supply data to assist PUC in developing the
reliability standards.
(e) Obligates each electric utility, transmission and distribution utility,
and generation provider to comply with any operational criteria duly
established by the independent organization as defined by Section 39.151 or
adopted by PUC.
SECTION 34. Amends Section 38.071, Utilities Code, to authorize PUC, after
notice and hearing, to:
(1) order an electric utility to provide specified improvements in its
service in a specified area if service in the area is inadequate or
substantially inferior to service in a comparable area and requiring the
company to provide the improved service is reasonable, or
(2) order two or more electric utilities or electric cooperatives to
establish specified facilities for interconnecting service.
SECTION 35. Amends Subtitle B, Title 2, Utilities Code, by adding Chapters
39, 40, and 41 to read as follows:
CHAPTER 39. RESTRUCTURING OF ELECTRIC UTILITY INDUSTRY
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 39.001. LEGISLATIVE POLICY AND PURPOSE. Sets forth legislative
findings, policy, and purpose. Prohibits regulatory authorities from
making rules or issuing orders regulating competitive electric services,
prices, or competitors, or restricting or conditioning competition except
as authorized in this title and from discriminating against any participant
or type of participant during the transition to a competitive market and in
the competitive market.
Sec. 39.002. APPLICABILITY. Provides that this chapter, other than
Sections 39.155, 39.157, 39.203, 39.603, and 39.604, does not apply to a
municipally owned utility or an electric cooperative. Provides that
Sections 39.157, 39.203, and 39.604 apply only to a municipally owned
utility or an electric cooperative that is offering customer choice.
Provides that if there is a conflict between the specific provisions of
this chapter and any other provisions of this title other than Chapters 40
and 41, the provisions of this chapter control.
Sec. 39.003. OPERATIONS IN MULTIPLE POWER REGIONS. Provides that a retail
electric utility whose certificated service area includes areas that are
located in a qualifying power region and areas that are located in a power
region that is not a qualifying power region are considered a retail
electric utility in a qualifying power region for that part of its
certificated service area that is located in a qualifying power region and
are considered a retail electric utility not in a qualifying power region
for that part of its certificated service area that is located in a power
region that is not a qualifying power region.
SUBCHAPTER B. TRANSITION TO COMPETITIVE RETAIL
ELECTRIC MARKET
Sec. 39.051. UNBUNDLING. (a) Requires each electric utility to unbundle
its costs and rates into generation, transmission, distribution, and retail
energy services and a system benefit fund charge and expected competition
transition charge, on or before September 1, 2000.
(b) Requires each electric utility to separate its business activities from
one another into a power generation company, a retail electric provider,
and a transmission and distribution utility, not later than January 1,
2002.
(c) Authorizes an electric utility to accomplish the separation required by
Subsection (b) either through the creation of separate nonaffiliated
companies or separate affiliated companies owned by a common holding
company or through the sale of assets to a third party.
(d) Requires each electric utility to unbundle in a manner that provides
for a separation of personnel, information flow, functions, and operations.
(e) Requires each electric utility to file with PUC a plan to implement
this section by January 1, 2000.
(f) Requires PUC, to adopt a utility's plan for business separation, adopt
the plan with changes, or reject the plan and require the utility to file a
new plan within 120 days of the date of the filing of the plan.
(g) Authorizes PUC, if it determines that a power region will not qualify
for customer choice under Section 39.152 by January 1, 2002, to adjust the
filing and implementation dates in this section for utilities in that
region.
(h) Provides that transactions by electric utilities involving sales,
transfers, or other disposition of assets to accomplish the purposes of
this section are not subject to Section 14.101, 35.034, or 35.035.
Sec. 39.052. FREEZE ON EXISTING RETAIL BASE RATE TARIFFS. (a) Requires
an electric utility to provide retail electric service until January 1,
2002, within its certificated service area in accordance with the electric
utility's retail base rate tariffs in effect on September 1, 1999,
including its purchased power cost recovery factor.
(b) Prohibits an electric utility from increasing its retail base rates
above the rates provided by this section during the freeze period, except
for losses caused by force majeure as provided by Section 39.055.
(c) Prohibits the regulatory authority from reducing the retail base rates
of an electric utility during the freeze period, except as may be ordered
as stipulated to by an electric utility in a proceeding for which a final
order had not been issued by January 1, 1999.
(d) Provides that during the freeze period the retail base rates, overall
revenues, return on invested capital, and net income of an electric utility
are not subject to complaint, hearing, or determination as to
reasonableness.
(e) Requires an electric utility that has a rate proceeding pending before
PUC as of January 2, 1999, to provide service in accordance with the
tariffs approved in that proceeding from the date of approval until the end
of the freeze period.
(f) Provides that this section does not affect the authority of PUC to
fulfill its obligations under Section 39.262.
(g) Provides that this section does not deny a utility its right to have
PUC conduct proceedings and issue a final order pertaining to any matter
that may be remanded to PUC by a court having jurisdiction, except that the
final order is prohibited from affecting the rates charged to customers
during the freeze period but shall be taken into account during the
utility's true-up proceeding under Section 39.262.
(h) Prohibits this title from being construed to prevent an electric
utility or a transmission and distribution utility from filing, and PUC
from approving, a change in wholesale transmission service rates during the
freeze period.
Sec. 39.053. COST RECOVERY ADJUSTMENTS. Provides that this subchapter
does not limit or alter the ability of an electric utility during the
freeze period to revise its fuel factor or to reconcile fuel expenses and
to either refund fuel overcollections or surcharge fuel undercollections to
customers, as authorized by its tariffs and Sections 36.203 and 36.205.
Sec. 39.054. RETAIL ELECTRIC SERVICE DURING THE FREEZE PERIOD. (a)
Requires an electric utility to provide retail electric service during the
freeze period in accordance with any contract terms applicable to a
particular retail customer approved by the regulatory authority and in
effect on December 31, 1998.
(b) Prohibits Sections 39.052(c) and (d) from being construed to restrict
any customer's right to complain during the freeze period to the regulatory
authority regarding the quality of retail electric service provided by the
electric utility or the applicability of an electric utility's particular
tariff to the customer.
(c) Prohibits this title from being construed to restrict an electric
utility, voluntarily and at its sole discretion, from offering new services
or new tariff options to its customers during the freeze period.
(d) Requires an offering of new services or tariff options under this
section to be equal to or greater than an electric utility's long-run
marginal cost and not be unreasonably preferential, prejudicial,
discriminatory, predatory, or anticompetitive.
(e) Requires revenue from any new offering under this section to be
accounted for in a manner consistent with Section 36.007.
Sec. 39.055. FORCE MAJEURE. (a) Authorizes an electric utility to
recover losses resulting from force majeure through an increase in its
retail base rates during the freeze period.
(b) Requires the regulatory authority, after a hearing to determine the
electric utility's losses from force majeure, to permit the utility to
fully collect any approved force majeure increase through an appropriate
customer surcharge mechanism, notwithstanding Subchapter C, Chapter 36.
(c) Defines "force majeure" as a major event or combination of major
events, including new or expanded state or federal statutory or regulatory
requirements, natural disasters, acts of war, terrorism, or civil
disturbance, beyond the control of an electric utility that the regulatory
authority finds increases the utility's total reasonable and necessary
nonfuel costs or decreases the utility's total nonfuel revenues related to
the generation and delivery of electricity by more than 10 percent for any
calendar year during the freeze period. Provides that the term does not
include any changes in general economic conditions such as inflation,
interest rates, or other factors of general application.
SUBCHAPTER C. RETAIL COMPETITION
Sec. 39.101. CUSTOMER SAFEGUARDS. (a) Requires PUC, before retail
competition begins on January 1, 2002, to ensure that retail customer
protections are established that entitle a customer to specified
protections relating to reasonably priced electricity, privacy, clear
billing formats, billing options, discrimination, billing accuracy, and
access to certain information.
(b) Entitles a customer to specified items relating to access to certain
information, choices in selecting an electric provider, access to energy
efficient services, protection from unfair and deceptive practices, and
impartial and prompt resolution of disputes.
(c) Prohibits a retail electric provider, power generation company,
aggregator, or other entity that provides retail electric service from
discriminating in the provision of electric service to any customer because
of race, creed, color, national origin, ancestry, sex, marital status,
lawful source of income, disability, or familial status. Prohibits a retail
electric provider, power generation company, aggregator, or other entity
that provides retail electric service from refusing to provide service to a
customer because the customer is located in an economically distressed
geographic area or qualifies for low-income affordability or energy
efficiency services. Requires PUC to require a provider to comply with
this subsection as a condition of certification or registration.
(d) Requires a retail electric provider, power generation company,
aggregator, or other entity that provides retail electric service to submit
reports to PUC and the office annually and on request relating to the
person's compliance with this section. Requires PUC, by rule, to specify
the form in which a report must be submitted. Provides that a report must
include information regarding the extent of the person's coverage;
information regarding the service provided, compiled by zip code and census
tract; and any other information PUC or the office considers relevant to
determine compliance.
(e) Authorizes PUC to adopt and enforce such rules as necessary or
appropriate to carry out Subsections (a)-(d). Provides that PUC has
jurisdiction over all providers of electric service in enforcing
Subsections (a)-(d) and is authorized to assess civil and administrative
penalties under Section 15.023 and seek civil penalties under Section
15.028.
(f) Requires PUC, on or before December 31, 2001, to modify its current
rules regarding customer protections to ensure that at least the same level
of customer protection against potential abuses and the same quality of
service that exists on December 31, 1999, is maintained in a restructured
electric industry.
Sec. 39.102. RETAIL CUSTOMER CHOICE. (a) Requires that each retail
customer in the state have customer choice on and after January 1, 2002,
except retail customers in power regions that are not certified as
qualifying for competition by PUC and retail customers of electric
cooperatives and municipally owned utilities that have not opted for
customer choice.
(b) Authorizes the affiliated retail electric provider of the electric
utility serving a retail customer on December 31, 2001, to continue to
serve that customer until the customer chooses a different retail electric
provider, an electric cooperative offering customer choice, or a
municipally owned utility offering customer choice.
(c) Provides that an electric utility that has a systemwide freeze for
residential and commercial customers in effect that extends beyond December
31, 2001, and has been found by a regulatory authority to be in the public
interest is not be subject to this chapter. Provides that the utility is
subject to the provisions of this chapter at the expiration of the
utility's freeze period, and, at that time, has no claim for stranded cost
recovery
Sec. 39.103. COMMISSION AUTHORITY TO DELAY COMPETITION AND SET NEW RATES.
Requires PUC, upon its determination that a power region is unable to offer
fair competition and reliable service to all retail customer classes on
January 1, 2002, or that the power region fails to meet the requirements of
Section 39.152, to delay customer choice for the power region and
authorizes PUC, on or after January 1, 2002, to establish new rates for all
electric utilities in the power region as provided by Chapter 36.
Sec. 39.104. CUSTOMER CHOICE PILOT PROJECTS. (a) Authorizes the use of
customer choice pilot projects to allow PUC to evaluate the ability of each
power region and electric utility to implement customer choice.
(b) Requires PUC to require each electric utility operating in ERCOT to
offer customer choice in its service area amounting to five percent of the
utility's combined load of all customer classes beginning on June 1, 2001.
(c) Authorizes PUC to require an electric utility operating outside of
ERCOT to offer customer choice in its service area within the state
amounting to five percent of the utility's combined load within the state
of all customer classes beginning on June 1, 2001.
(d) Requires distribution of the load designated for customer choice under
this section to all customer classes of a utility consistent with the
purpose of this section and subject to commission approval.
(e) Authorizes customers participating in a pilot project to buy electric
energy from any retail electric provider certified by PUC under Section
39.352, including an affiliated retail electric provider. Prohibits a
retail electric provider from participating in a pilot project in the
certificated service area served by the electric utility with which it is
affiliated.
(f) Requires each utility operating a pilot project to charge residential
and small commercial customers in accordance with Section 39.052.
(g) Authorizes PUC to prescribe reporting requirements it considers
necessary to evaluate a pilot project consistent with the purpose of this
section.
(h) Requires customers having customer choice under this section to be
billed as provided by Section 39.107.
(i) Authorizes PUC to prescribe terms and conditions it considers
necessary to prohibit anticompetitive practices and to encourage customer
choice offered under this section.
(j) Provides that a retail electric provider participating in a pilot
project under this section is not an electric utility or a retail electric
utility, notwithstanding any other provision of this title.
Sec. 39.105. LIMITATION ON SALE OF ELECTRICITY. (a) Prohibits a
transmission and distribution utility, after January 1, 2002, from selling
electricity or participating in the market for electricity in areas in
which customer choice has been introduced, except to buy electricity to
serve its own needs.
(b) Prohibits a person or retail electric utility from providing,
furnishing, or making available electric service at retail within the
certificated service area of an electric cooperative that has not adopted
customer choice or a municipally owned utility that has not adopted
customer choice. Provides that this subsection does not prohibit the
provision of electric service in multiply certificated service areas to
customers of any other retail electric utility.
Sec. 39.106. PROVIDER OF LAST RESORT. (a) Requires PUC to designate
retail electric providers in areas of the state in which customer choice is
in effect to serve as providers of last resort.
(b) Requires a provider of last resort to offer a standard retail service
package for each class of customers designated by PUC at a fixed,
nondiscountable rate approved by PUC.
(c) Requires a provider of last resort to provide the standard retail
service package to any requesting customer in the territory for which it is
the provider of last resort.
(d) Requires PUC, no later than June 1, 2001, to designate the provider or
providers of last resort for all areas of the state for which PUC has
determined that customer choice is to be introduced on January 1, 2002.
Requires PUC, for areas of the state for which customer choice is not to be
introduced on January 1, 2002, except as provided in Sections 40.053(c) and
41.053(c), to designate the provider or providers of last resort at the
earliest feasible date after determining that conditions for permitting
customer choice in that area have been met but no later than 180 days
before customer choice is to begin.
(e) Requires PUC to determine the procedures and criteria, which may
include the solicitation of bids, for designating a provider or providers
of last resort. Authorizes PUC to redesignate the provider of last resort
according to a schedule it considers appropriate.
(f) Authorizes PUC, in the event that no retail electric provider applies
to be the provider of last resort for a given area of the state on
reasonable terms and conditions, to require a retail electric provider to
become the provider of last resort as a condition of receiving or
maintaining a certificate pursuant to Section 39.352.
(g) Requires the provider of last resort, in the event that a retail
electric provider fails to serve any or all of its customers, to offer each
such customer the standard retail service package for that customer class
with no interruption of service to any customer.
Sec. 39.107. METERING AND BILLING SERVICES. (a) Requires metering
services, on the introduction of customer choice in a service area, to
continue to be provided by the transmission and distribution utility
affiliate of the electric utility that was serving the area prior to the
introduction of customer choice. Requires that metering services be
provided on a competitive basis beginning on January 1, 2004, in areas in
which customer choice is introduced January 1, 2002, and in areas in which
customer choice begins at a later date, two years after the date that
customer choice is introduced in the area.
(b) Requires that on introduction of customer choice in a service area,
tenants of leased or rented property that is separately metered have the
right to choose a retail electric provider, and provides that the owner of
the property must grant reasonable and nondiscriminatory access to
transmission and distribution utilities or retail electric providers for
metering purposes.
(c) Requires a transmission and distribution utility to bill a customer's
retail electric provider for nonbypassable delivery charges as determined
under Section 39.201, beginning on the date of introduction of customer
choice in a service area. Provides that the retail electric provider must
pay these charges.
(d) Authorizes a transmission and distribution utility to bill retail
customers at the request of a retail electric provider. Requires a
transmission and distribution utility that provides billing service at the
request of an affiliated retail electric provider to offer billing service
on comparable terms and conditions to any other requesting retail electric
provider of a customer served by the transmission and distribution utility.
(e) Requires charges for metering and billing services to comply with
rules adopted by PUC relating to nondiscriminatory rates of service,
beginning on the date of introduction of customer choice in a service area.
Sec. 39.108. CONTRACTUAL OBLIGATIONS. Prohibits this chapter from:
(1) interfering with or abrogating the rights or obligations of any party,
including a retail or wholesale customer, to a contract with an
investor-owned electric utility, river authority, municipally owned
utility, or electric cooperative;
(2) interfering with or abrogating the rights or obligations of a party
under a contract or agreement concerning certificated utility service
areas; or
(3) resulting in a change in wholesale power costs to wholesale customers
in Texas purchasing electricity under wholesale power contracts the pricing
provisions of which are based on formulary rates, fuel adjustments, or
average system costs.
SUBCHAPTER D. MARKET STRUCTURE
Sec. 39.151. ESSENTIAL ORGANIZATIONS. (a) Provides that a power region
must, before obtaining certification as a qualifying power region,
establish one or more independent organizations to perform specified
functions.
(b) Defines "independent organization" as an independent system operator
or other person that is sufficiently independent of any producer or seller
of electricity that its decisions will not be unduly influenced by any
producer or seller. Provides that an entity is deemed to be independent if
it is governed by a board that has three representatives from each segment
of the electric market, with the consumer segment being represented by one
residential customer, one commercial customer, and one industrial retail
customer.
(c) Requires PUC to certify an independent organization or organizations to
perform the functions set out in this section.
(d) Requires an independent organization certified by PUC for a power
region to establish and enforce procedures, consistent with this title and
PUC's rules, relating to the reliability of the regional electrical network
and accounting for the production and delivery of electricity among
generators and all other market participants. Provides that the procedures
are subject to commission oversight and review.
(e) Authorizes PUC to authorize an independent organization that is
certified under this section to charge a reasonable and competitively
neutral rate to wholesale buyers and sellers to cover the independent
organization's costs.
(f) Authorizes PUC, in implementing this section, to cooperate with the
utility regulatory commission of another state or the federal government
and to hold a joint hearing or make a joint investigation with that
commission.
(g) Provides that if it amends its governance rules to allow
representation reflecting the makeup of the retail market on its governing
board in accordance with Subsection (b), the existing independent system
operator in ERCOT will meet the criteria provided by Subsection (a) with
respect to ensuring access to the transmission systems for all buyers and
sellers of electricity in the ERCOT region and ensuring the reliability of
the regional electrical network. Authorizes the ERCOT independent system
operator to meet the criteria relating to the other functions of an
independent organization provided by Subsection (a) by adopting procedures
and acquiring resources needed to carry out those functions.
(h) Authorizes PUC to delegate authority to the existing independent
system operator in ERCOT to enforce operating standards within the ERCOT
regional electrical network and to establish and oversee transaction
settlement procedures. Authorizes PUC to establish the terms and
conditions for the ERCOT independent system operator's authority to oversee
utility dispatch functions after the introduction of customer choice.
(i) Requires a retail electric provider, municipally owned utility,
electric cooperative, power marketer, transmission and distribution
utility, or power generation company to observe all scheduling, operating,
and settlement policies, rules, guidelines, and procedures established by
the independent system operator in ERCOT. Provides that a failure to
comply with this subsection may result in the revocation, suspension, or
amendment of a certificate or the imposition of an administrative penalty.
(j) Authorizes PUC to delegate authority to the independent organization
consistent with Subsection (h) to the extent it has authority over an
independent organization outside of ERCOT.
(k) Prohibits operational criteria, protocols, or requirements established
by an independent organization, including the ERCOT independent system
operator, from adversely affecting or impeding any manufacturing or other
internal process operation associated with an industrial generation
facility, except to the minimum extent necessary to assure reliability of
the transmission network.
Sec. 39.152. QUALIFYING POWER REGIONS. (a) Requires PUC to certify a
power region as qualifying for customer choice if a sufficient number of
interconnected utilities in the power region fall under the operational
control of an independent organization as described by Section 39.151; the
power region has a generally applicable tariff that guarantees open and
nondiscriminatory access for all users to transmission and distribution
facilities in the power region as provided by Section 39.203; and no person
owns and controls more than 20 percent of the installed generation capacity
located in or capable of delivering electricity to a power region when
customer choice is introduced.
(b) Requires PUC, in determining whether a power region not entirely
within the state meets the requirements of this section, to consider the
extent to which the available transmission facilities limit the delivery of
electricity from generators located outside the state to areas of the power
region within the state.
Sec. 39.153. CAPACITY AUCTION. (a) Requires each electric utility subject
to this section to sell at auction entitlements to at least 15 percent of
the electric utility's installed generation capacity at least 60 days
before the date set for customer choice to begin. Provides that the term
"electric utility" includes any affiliated power generation company that is
unbundled from the electric utility in accordance with Section 39.051, and
does not include any entity owning less than 400 megawatts of installed
generation capacity.
(b) Requires the obligation to auction the entitlements to continue until
the earlier of 60 months after the date customer choice is introduced in
the power region or the date PUC determines that 40 percent or more of the
electric power consumed by residential and small commercial customers
within the affiliated transmission and distribution utility's certificated
service area before the onset of customer choice is provided by
nonaffiliated retail electric providers.
(c) Prohibits an affiliate of the electric utility selling entitlements in
the auction purchasing entitlements from the affiliated electric utility at
the auction. Authorizes the purchase of entitlements only by entities
lawfully able to sell electricity in Texas.
(d) Authorizes an electric utility to choose to auction additional
entitlements beyond those required by Subsection (a) or continue to auction
entitlements after the period required by Subsection (b) in order to comply
with Section 39.154.
(e) Requires PUC to adopt rules by December 31, 2000, that define the
scope of the capacity entitlements to be auctioned. Authorizes the auction
of entitlements in blocks of less than 15 percent. Requires the rules to
state the minimum amount of capacity that can be sold at auction as an
entitlement. Requires the rules to provide that the entitlements:
(1) may be sold and purchased in periods of no less than one month nor
more than four years;
(2) may be resold to any lawful purchaser, except for a retail electric
provider affiliated with the electric utility that originally auctioned the
entitlement;
(3) include no possessory interest in the unit from which the power is
produced;
(4) include no obligations of a possessory owner of an interest in the
unit from which the power is produced; and
(5) give the purchaser the right to designate the dispatch of the
entitlement, subject to planned outages, outages beyond the control of the
utility operating the unit, and other considerations subject to the
oversight of the applicable independent organization.
(f) Requires PUC to adopt rules by December 31, 2000, that prescribe the
procedure for the auction of the entitlements. Requires the rules to
include:
(1) a process for conducting the auction or auctions, including who shall
conduct it, how often it shall be conducted, and how winning bidders shall
be determined;
(2) a process for the electric utility to designate which generation units
or combination of units are offered for auction;
(3) a provision for the utility to establish an opening bid price based
upon the electric utility's expected cost, with PUC prescribing the means
for determining the opening bid price, which shall not include return on
equity; and
(4) a provision that allows a bidder to specify the magnitude and term of
the entitlement, subject to the conditions established in Subsection (e).
(g) Requires PUC, in adopting the process under Subsection (f)(2), to
consider the furtherance of the development of the competitive market, the
cost of transmission, physical constraints of the transmission system, the
proximity of the generation to load, economic efficiency, and such other
factors as PUC finds relevant. Authorizes the process to provide for
commission approval of the designation prior to auction. Authorizes PUC to
consult with the applicable independent organization to develop the
process.
Sec. 39.154. LIMITATION OF OWNERSHIP OF INSTALLED CAPACITY. (a)
Prohibits a power generation company from owning and controlling more than
20 percent of the installed generation capacity located in, or capable of
delivering electricity to, a qualifying power region, beginning on the date
of introduction of customer choice.
(b) Authorizes PUC to waive or modify the requirement in Subsection (a) in
a power region not entirely within the state upon a finding of good cause.
(c) Requires PUC, in determining the percentage shares of installed
generation capacity under this section, to combine capacity owned and
controlled by a power generation company and any entity that is affiliated
with that power generation company within the power region, reduced by the
installed generation capacity of those facilities that are made subject to
capacity entitlements auctions under Sections 39.153.
(d) Defines "installed generation capacity."
Sec. 39.155. COMMISSION ASSESSMENT OF MARKET POWER. (a) Requires each
person, municipally owned utility, electric cooperative, and river
authority that owns generation facilities and offers electricity for sale
in this state to report to PUC its installed generation capacity, the total
amount of capacity available for sale to others, the total amount of
capacity under contract to others, the total amount of capacity dedicated
to its own use, its annual wholesale power sales in the state, its annual
retail power sales in the state, and information necessary for PUC to
assess market power or the development of a competitive retail market in
the state. Requires PUC, by rule, to prescribe the nature and detail of
such reporting requirements and to administer those reporting requirements
in a manner that ensures the confidentiality of competitively sensitive
information.
(b) Requires ERCOT independent system operator to submit an annual report
to PUC identifying existing and potential transmission and distribution
constraints and system needs within ERCOT, alternatives for meeting system
needs, and recommendations for meeting system needs. Requires submission
of the first report on or before October 1, 1999. Requires submission of
subsequent reports by January 15 of each year or as determined necessary by
PUC.
(c) Requires each electric utility owning transmission and distribution
facilities in that region, before the date of introduction of customer
choice in a power region other than ERCOT, to submit an annual report to
PUC identifying existing and potential transmission and distribution
constraints and system needs in the power region, alternatives for meeting
system needs, and recommendations for meeting system needs as directed by
PUC.
(d) Requires, after the introduction of customer choice in a qualifying
power region, the submission of required reports by the independent
organization or organizations having authority over the power region or
discrete areas thereof.
Sec. 39.156. MARKET POWER MITIGATION PLAN. (a) Provides that "market
power mitigation plan" or "plan" means a written proposal by an electric
utility or a power generation company for reducing its ownership and
control of installed generation capacity as required by Section 39.154.
(b) Requires an electric utility or power generation company owning and
controlling more than 20 percent of the generation capacity located in, or
capable of delivering electricity to, a power region to file a market power
mitigation plan with PUC no later than December 31, 2000.
(c) Authorizes the plan to provide for the sale or exchange of generation
assets to or with an unaffiliated person; the auctioning of generation
capacity entitlements subject to commission approval; or any reasonable
method of mitigation.
(d) Provides that for the purposes of this section, generation capacity is
the net of the generation capacity subject to an auction under Section
39.153.
(e) Requires the plan to be in a form prescribed by PUC and to provide
information PUC finds reasonably necessary to evaluate the plan.
(f) Requires PUC to approve, modify, or reject a plan within 180 days
after the date of a filing under Subsection (b). Prohibits PUC from
modifying a plan to require divestiture by the electric utility or the
power generation company.
(g) Requires PUC, in reaching its determination under Subsection (f), to
consider the degree to which the electric utility's or power generation
company's stranded costs, if any, are minimized; whether on disposition of
the generation assets the reasonable value is likely to be received; the
effect of the plan on the electric utility's or power generation company's
federal income taxes; the effect of the plan on current and potential
competitors in the generation market; and whether the plan is consistent
with the public interest.
(h) Authorizes an electric utility or power generation company with an
approved mitigation plan to request to amend or repeal its plan. Requires
PUC to modify or repeal an electric utility's or power generation company's
mitigation plan, upon a showing of good cause.
(i) Authorizes PUC, if an electric utility's or a power generation
company's market power mitigation plan is not approved before January 1 of
the year it is to take effect, to order the electric utility or power
generation company to auction generation capacity entitlements of any
capacity exceeding the maximum allowable capacity prescribed by Section
39.154, subject to PUC approval, and until such time a mitigation plan is
approved.
(j) Requires an auction to be held no later than 60 days after the order
is entered.
Sec. 39.157. COMMISSION AUTHORITY TO ADDRESS MARKET POWER. (a) Requires
PUC to monitor market power associated with the generation, transmission,
distribution, and sale of electricity in this state. Requires PUC, if it
finds after notice and opportunity for hearing that market power abuses are
occurring, to require reasonable mitigation of the market power by ordering
the construction of additional transmission or distribution facilities, by
requiring a reduction of generation capacity through the auction of
generation capacity entitlements, by instituting price cap regulation, by
setting appropriate restrictions on sales of electricity, by establishing
limitations on the use of generation, transmission, or distribution
facilities, or by any other reasonable remedy.
(b) Prohibits a person that owns generation facilities, beginning on the
date of introduction of customer choice, from owning transmission or
distribution facilities in this state except for those facilities necessary
to interconnect a generation facility with the transmission or distribution
network, a facility not dedicated to public use, or a facility otherwise
excluded from the definition of electric utility under Section 31.002(6).
Provides that this chapter does not prohibit a power generation company
affiliated with a transmission and distribution utility from owning
generation facilities.
(c) Requires PUC to monitor market shares of installed capacity to ensure
that the limitations in Section 39.154 are not exceeded. Requires PUC, if
it finds after notice and opportunity for hearing that a person has
violated a limitation in Section 39.154, to order the person to file a
market power mitigation plan within 60 days of the date of the order.
(d) Requires PUC, in order to avoid potential market power abuses and
cross-subsidizations between regulated and unregulated activities, to adopt
rules governing transactions or activities between a transmission and
distribution utility and its affiliates.
(e) Requires PUC to establish, by rule, a code of conduct that must be
observed by all market participants and their affiliates to protect against
anticompetitive practices.
(f) Authorizes PUC to impose administrative penalties or take another
action under Subchapter B, Chapter 15, if it finds after notice and
opportunity for hearing, that a power generation company has engaged in
predatory pricing. Requires PUC, in determining whether a power generation
company has engaged in predatory pricing, to apply the elements for a
finding of predatory pricing under specified sections of the Business &
Commerce Code, as applied by the courts of this state.
(g) Requires PUC, beginning on the date of introduction of customer choice
and following review of the annual report submitted to it, to determine
whether specific transmission or distribution constraints or bottlenecks
within this state give rise to market power in specific geographic markets
in the state. Authorizes PUC, on a finding that specific transmission or
distribution constraints or bottlenecks within this state give rise to
market power, to order reasonable mitigation of that potential market power
by ordering one or more electric utilities or transmission and distribution
utilities to construct additional transmission or distribution capacity, or
both, subject to the certification provisions of this title.
Sec. 39.158. MERGERS AND CONSOLIDATIONS. (a) Requires an owner of
electric generation facilities that offers electricity for sale in the
state and proposes to merge, consolidate, or otherwise become affiliated
with another owner of electric generation facilities that offers
electricity for sale in this state to obtain PUC approval prior to closing.
Requires the request of such approval at least 120 days prior to the
proposed closing. Requires PUC to approve the transaction unless it finds
that the transaction results in a violation of Section 39.154, in which
case PUC is authorized to condition approval on adoption of reasonable
modifications to the transaction as prescribed by PUC to mitigate potential
market power abuses.
(b) Prohibits this chapter from being construed to confer immunity from
state or federal antitrust laws. Establishes that this chapter is intended
to complement other state and federal antitrust provisions and authorizes
the utilization of antitrust remedies in state or federal court to remedy
anticompetitive activities.
(c) Prohibits this section from being deemed to authorize commission
review or approval of transactions entered into between or among
municipally owned utilities, river authorities, special districts created
by law, or other political subdivisions, whether or not such transactions
are characterized as mergers, consolidations, or other affiliations, when
the transaction is authorized or structured pursuant to state law.
SUBCHAPTER E. PRICE REGULATION AFTER COMPETITION
Sec. 39.201. COST OF SERVICE TARIFFS AND CHARGES. (a) Requires each
electric utility to file proposed tariffs for its proposed transmission and
distribution utility on or before April 1, 2000.
(b) Requires the filing to include supporting cost data for determination
of nonbypassable delivery charges and specifies the formula to determine
that sum.
(c) Requires each electric utility to identify the unbundled generation
and retail energy service costs by customer class.
(d) Requires PUC, on or before October 1, 2000, and in accordance with a
schedule and procedures it establishes, to hold a hearing and approve or
modify and make effective as of January 1, 2002, the transmission and
distribution utility's proposed tariffs for transmission and distribution
services, the system benefit fund charge, and the expected competition
transition charge.
(e) Requires the system benefit fund charge to be that which is
established by PUC pursuant to Section 39.603.
(f) Requires the expected competition transition charge to be determined
under Subsections (g) and (h) and implemented under Subsections (i)-(l).
(g) Specifies the formula required to calculate the expected competition
transition charge.
(h) Requires the electric utility to use the ECOM administrative model to
estimate stranded costs. Provides that the model must include updated
company-specific inputs and updated natural gas price forecasts as
determined by PUC.
(i) Authorizes an electric utility to:
(1) at any time after the start of the freeze period, securitize 100
percent of its regulatory assets as defined by Section 39.251(6) and up to
75 percent of its remaining estimated stranded costs as defined by this
section and recover such charges through a transition charge, pursuant to a
financing order issued by PUC under Section 39.303;
(2) implement, under bond, a nonbypassable charge of up to 100 percent of
its estimated stranded costs; or
(3) use a combination of the two methods under Subdivisions (1) and (2).
(j) Specifies the basis for determining a competition transition charge to
be allocated among retail customer classes.
(k) Specifies the factors that PUC is required to consider in determining
the length of time over which costs under Subsection (h) may be recovered.
(l) Requires the review of the stranded cost estimate and an adjustment to
reflect a final, actual valuation in the true-up proceeding two years after
customer choice is introduced in the region. Authorizes PUC, if it
determines the competition transition charge is not sufficient based on
that proceeding, to extend the collection period for the charge or, if
necessary, increase the charge. Authorizes PUC, alternatively, if it is
found in the true-up proceeding that the competition transition charge is
larger than is needed to recover any remaining stranded costs, to reduce
the competition transition charge, to the extent it has not been
securitized; reverse, in whole or in part, the depreciation expense which
has been redirected pursuant to Section 39.256; reduce the transmission and
distribution utility's rates; or implement a combination of these elements.
(m) Authorizes PUC, if it determines that a power region will not qualify
for customer choice by January 1, 2002, to adjust the filing and
implementation dates in this section for utilities in that region.
Sec. 39.202. PRICE TO BEAT. (a) Requires an affiliated retail electric
provider, on and after January 1, 2002, in areas in which customer choice
has been introduced, to charge specified residential and small commercial
customers of its affiliated transmission and distribution utility specified
adjusted rates that were in effect on January 1, 1999. Requires that these
rates on a bundled basis be known as the "price to beat" for residential
and small commercial customers.
(b) Requires PUC, for an area where customer choice is to be introduced on
January 1, 2002, to determine the fuel factor for each electric utility in
the area as of December 31, 2001. Requires PUC, for an area where customer
choice is to be introduced subsequent to January 1, 2002, to determine the
fuel factor for each electric utility in the area on the day prior to the
day customer choice is introduced.
(c) Requires each affiliated power generation company, subsequent to the
introduction of customer choice, to file a final fuel reconciliation for
the period ending the day prior to the day customer choice is introduced.
Requires the final fuel balance from that reconciliation to be included in
the true-up proceeding pursuant to Section 39.262.
(d) Requires an affiliated retail electric provider to make public its
price to beat in a manner that provides adequate disclosure as determined
by PUC.
(e) Prohibits an affiliated retail electric provider from charging rates
that are different from the price to beat until a specified time.
(f) Specifies the standards to be used for measuring electric power
consumption during the period prior to the onset of customer choice.
(g) Requires an electric utility or a transmission and distribution
utility, upon determining that its affiliated retail electric provider has
met the requirements of Subsection (e), to make a filing with PUC attesting
to the fact that those requirements have been met and that the restrictions
of this section are no longer applicable. Requires PUC to accept or reject
such filing within 30 days.
(h) Authorizes PUC to adjust the price to beat consistent with the results
of that proceeding following the true-up proceedings conducted pursuant to
Section 39.262.
(i) Authorizes an affiliated retail electric provider to request that PUC
adjust the fuel factor established under Subsection (b) up to twice a year
if the affiliated retail electric provider demonstrates that the existing
fuel factor does not adequately reflect significant changes in the market
price of natural gas and purchased energy used to serve retail customers.
(j) Provides that in this section, "small commercial customer" means a
commercial customer having a peak demand of 1,000 kilowatts or less.
(k) Requires PUC, upon finding that a retail electric provider will be
unable to maintain its financial integrity if it complies with Subsection
(a), to set the retail electric provider's price to beat at the minimum
level that will allow the retail electric provider to maintain its
financial integrity. Prohibits the price to beat from exceeding the level
of rates, on a bundled basis, charged by the affiliated electric utility on
September 1, 1999, adjusted for fuel.
Sec. 39.203. TRANSMISSION AND DISTRIBUTION SERVICE. (a) Requires
transmission and distribution utilities to provide transmission service at
wholesale under Subchapter A, Chapter 35. Requires a transmission and
distribution utility on and after January 1, 2002, to provide transmission
or distribution service, or both, at retail to an electric utility, a
retail electric provider, a municipally owned utility, an electric
cooperative, or an end-use customer at rates, terms of access, and
conditions that are comparable to those that apply to the transmission and
distribution utility and its affiliates. Requires a municipally owned
utility offering customer choice or an electric cooperative offering
customer choice to provide transmission or distribution service, or both,
at retail to all such entities pursuant to PUC's rules applicable to terms
and conditions of access and at rates adopted in accordance with Sections
40.055(a)(1) and 41.055(1), respectively.
(b) Requires an electric cooperative that has not opted for customer
choice, or a municipally owned utility that has not opted for customer
choice, to provide wholesale transmission service at distribution voltage
when necessary to serve a wholesale customer an electric utility.
(c) Requires PUC, on or before January 1, 2002, to establish for all
retail electric utilities offering customer choice reasonable and
comparable terms and conditions under Section 39.201, that comply with
Subsection (a) for open access on distribution facilities and to establish,
for all retail electric utilities offering customer choice other than
municipally owned utilities and electric cooperatives, reasonable and
comparable rates for open access on distribution facilities.
(d) Requires the terms of access, conditions, and rates established under
Subsection (c) to be comparable to the terms of access, conditions, and
rates that the electric utility applies to itself or its affiliates.
Requires the rules to provide that all ancillary services provided by the
utility to itself or its affiliates are also available to third parties on
request on a nondiscriminatory basis.
(e) Authorizes PUC to require an electric utility or a transmission and
distribution utility to construct or enlarge facilities to ensure safe and
reliable service for the state's electric markets. Provides that in any
proceeding brought pursuant to Chapter 37, an electric utility or
transmission and distribution utility ordered to construct or enlarge
facilities pursuant to this subchapter does not need to prove that the
construction ordered is necessary for the service, accommodation,
convenience, or safety of the public or address the factors listed in
Section 37.056(c)(1)-(3) and (4)(E).
(f) Provides that PUC's rules must be consistent with the standards of
this title and may not be contrary to an applicable decision, rule, or
policy statement of a federal regulatory agency having jurisdiction.
(g) Requires each qualifying power region to have generally applicable
tariffs approved by PUC or a federal regulatory agency having jurisdiction
that guarantees open and nondiscriminatory access as required by Section
39.152. Prohibits this subsection from being deemed to vest in PUC power
to set or approve distribution access rates of a municipally owned utility
or an electric cooperative that has adopted customer choice.
Sec. 39.204. TARIFFS FOR OPEN ACCESS. Requires each transmission and
distribution utility to file a tariff implementing the open access rules
with PUC or the federal regulatory authority having jurisdiction over the
transmission and distribution service of the utility, no later than the
90th day before the date customer choice is offered by that utility.
Sec. 39.205. REGULATION OF COSTS FOLLOWING THE FREEZE PERIOD. Provides
that at the conclusion of the freeze period, any remaining costs associated
with nuclear decommissioning obligations continue to be subject to cost of
service rate regulation and are required to be included as a nonbypassable
charge to retail customers.
SUBCHAPTER F. RECOVERY OF STRANDED COSTS
Sec. 39.251. DEFINITIONS. Defines "above market purchased power costs,"
"existing purchased power contract," "generation assets," "market value,"
"purchased power market value," "regulatory assets," "retail stranded
costs," and "stranded cost."
Sec. 39.252. RIGHT TO RECOVER STRANDED COSTS. (a) Provides that an
electric utility is allowed to recover all of its net, verifiable,
nonmitigable stranded costs incurred in purchasing power and providing
electric generation service.
(b) Requires recovery of retail stranded costs by an electric utility to
be from all existing or future retail customers, including the facilities,
premises, and loads of such retail customers, within the utility's
geographical certificated service area as it existed on May 1, 1999.
(c) Provides that in multiply certificated areas, a retail customer may
not avoid stranded cost recovery charges by switching to another electric
utility, electric cooperative, or municipally owned utility after May 1,
1999. A customer in a multiply certificated service area that requested to
switch providers on or before May 1, 1999, or was not taking service from
an electric utility on May 1, 1999, and does not do so after that date is
not responsible for paying retail stranded costs of that utility.
Sec. 39.253. ALLOCATION OF STRANDED COSTS. Specifies the basis for
allocating retail stranded costs among retail customer classes.
Sec. 39.254. USE OF REVENUES FOR UTILITIES WITH STRANDED COSTS. Provides
that this subchapter provides a number of tools to an electric utility to
mitigate stranded costs. Provides that each electric utility that was
reported by PUC to have positive "excess costs over market" (ECOM), denoted
as the "base case" for the amount of stranded costs before full retail
competition in 2001 with respect to its Texas jurisdiction, in the April
1998 Report to the Texas Senate Interim Committee on Electric Utility
Restructuring entitled "Potentially Strandable Investment (ECOM) Report:
1998 Update," must use these tools to reduce the net book value of,
otherwise referred to as "accelerate" the cost recovery of, its stranded
costs each year. Requires that any positive difference under the report
required by Section 39.257(b) be applied to the net book value of
generation assets.
Sec. 39.255. USE OF REVENUES FOR UTILITIES WITH NO STRANDED COSTS. (a)
Requires an electric utility that does not have stranded costs described by
Section 39.254 to be permitted to use any positive difference under the
report required by Section 39.257(b) on capital expenditures to improve or
expand transmission or distribution facilities, or on capital expenditures
to improve air quality, as approved by PUC. Requires that any such capital
expenditures be made in the calendar year immediately following the year
for which the report required by Section 39.257 is calculated. Requires
that such capital expenditures be reflected in any future proceeding under
this chapter to set transmission or distribution rates as a reduction to
the utility's transmission and distribution invested capital, as approved
by PUC.
(b) Requires amounts, to the extent that positive differences under the
report required by Section 39.257(b) are not used for such capital
expenditures, to be flowed back to the electric utility's Texas
jurisdictional customers through the power cost recovery factor.
(c) Provides that this section applies only to the use of positive
differences under the report required by Section 39.257(b) for each year
during the freeze period.
Sec. 39.256. OPTION TO REDIRECT DEPRECIATION. (a) Authorizes an electric
utility described in Section 39.254, during the freeze period, to redirect
all or a part of the depreciation expense relating to transmission and
distribution assets to its net generation plant assets.
(b) Requires the electric utility to report a decision under Subsection
(a) to PUC and any other applicable regulatory authority.
(c) Requires an adjustment made to the book value of transmission and
distribution assets or the creation of any related regulatory assets
resulting from the redirection under this section to be accepted and
applied by PUC for establishing net invested capital and transmission and
distribution rates for retail customers in all future proceedings.
(d) Prohibits the design of post-freeze-period retail rates from shifting
the allocation of responsibility for stranded costs, including the adjusted
costs in wholesale transmission and distribution rates, or applying the
adjustments for the purpose of establishing net invested capital and
transmission and distribution rates for wholesale customers,
notwithstanding the provisions of Subsection (c).
Sec. 39.257. ANNUAL REPORT. (a) Requires each electric utility,
beginning with the 1999 calendar year, to file a report with PUC no later
than 90 days after the end of each year during the freeze period under a
schedule and a format determined by PUC.
(b) Requires the report to identify any positive difference between annual
revenues, reduced by the amount of annual revenues under Sections 36.203
and 36.205, the revenues received under the interutility billing process as
adopted by PUC to implement Sections 35.004, 35.006, and 35.007, revenues
associated with transition charges as defined by Section 39.302, and annual
costs.
Sec. 39.258. ANNUAL REPORT: DETERMINATION OF ANNUAL COSTS. Specifies the
amounts to be used for the purposes of determining the annual costs in each
annual report.
Sec. 39.259. ANNUAL REPORT: DETERMINATION OF INVESTED CAPITAL. (a)
Requires, for the purposes of determining invested capital in each annual
report, the net plant in service, regulatory assets, and deferred federal
income taxes to be updated each year, and requires generation-related
invested capital to be reduced by the amount of securitization to the
extent otherwise included in invested capital.
(b) Provides that capital additions to a plant in an amount less than
1-1/2 percent of the electric utility's net plant in service on December
31, 1998, less plant items previously excluded by PUC, for each of the
years 1999 through 2001 are presumed prudent.
(c) Requires all other items in invested capital to be as approved in the
electric utility's last rate proceeding before PUC.
Sec. 39.260. USE OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. (a) Requires
the definition and identification of invested capital and other terms used
in this subchapter that affect the net book value of generation assets and
the treatment of specified transactions performed and authorized under this
title or approved by the regulatory authority that affect the net book
value of generation assets during the freeze period to be treated in
accordance with generally accepted accounting principles as modified by
regulatory accounting rules generally applicable to utilities.
(b) Requires the principles and criteria described by Subsection (a),
including the criteria for applicability of Statement of Financial
Accounting Standards No. 71 ("Accounting for the Effects of Certain Types
of Regulation"), to be applied as they existed on January 1, 1999.
Sec. 39.261. REVIEW OF ANNUAL REPORT. (a) Provides that the annual
report filed under this subchapter is a public document and is required to
be reviewed by the staff of PUC and the office of public utility counsel.
Authorizes both staffs to review work papers and supporting documents and
engage in discussions with the utility about the data underlying the
reports.
(b) Requires the staff of PUC and the office of public utility counsel to
communicate in writing to an electric utility if they have any
disagreements with the data or computations, no later than the 180th day
after the date the report is filed.
(c) Requires PUC to finalize and resolve any disagreements related to the
annual report as follows:
(1) for each calendar year, PUC is required to finalize the annual report
prior to establishing the competition transition charge pursuant to Section
39.201; and
(2) for each calendar year, PUC is required to finalize the annual report
and reflect the result as part of the true-up proceeding.
Sec. 39.262. TRUE-UP PROCEEDING. (a) Prohibits an electric utility,
together with its affiliated retail electric provider and its affiliated
transmission and distribution utility, from being permitted to overrecover
stranded costs through the procedures established by this section or
through the application of the measures provided by the other sections of
this chapter.
(b) Requires an electric utility located in a power region not subject to
competition under Section 39.152, after the freeze period, to continue to
file annual reports as if the freeze period remained in effect, until the
power region qualifies for competition under Section 39.152. Requires PUC
staff and the office of public utility counsel to continue to review the
annual reports as provided by Section 39.261.
(c) Requires each transmission and distribution utility, its affiliated
retail electric provider, and its affiliated power generation company,
after a specified time period and at a schedule and under procedures
determined by PUC, to jointly file to finalize stranded costs and reconcile
those costs with the estimated stranded costs used to develop the
competition transition charge in the proceeding held under Section 39.201.
Requires any resulting difference to be applied to the nonbypassable
delivery rates of the transmission and distribution utility, except that at
the utility's option, any or all of the remaining stranded costs may be
securitized pursuant to Subchapter G.
(d) Requires the affiliated power generation company to reconcile, and
either credit or bill to the transmission and distribution utility, the net
sum of the former electric utility's final fuel balance determined pursuant
to Section 39.202(c) and any difference between the price of power obtained
through the capacity auctions and the power cost projections which were
employed for the same time period in the ECOM model to estimate stranded
costs in the proceeding under Section 39.201.
(e) Requires an affiliated retail electric provider, to the extent that
the price to beat exceeded the market price of electricity, to reconcile
and credit to the affiliated transmission and distribution utility any
positive difference between the price to beat established, reduced by the
nonbypassable delivery charge, and the prevailing market price of
electricity during the same time period. Provides that a reconciliation is
not required under this subsection of any affiliated retail electric
provider that satisfies the requirements of Section 39.202(e) prior to the
expiration of two years from the introduction of customer choice in the
applicable power region. Prohibits the amount credited from exceeding 50
percent of the net income reported by the affiliated retail electric
provider in its annual report to the Securities and Exchange Commission on
Form 10-K.
(f) Requires the transmission and distribution utility to make necessary
adjustments to the nonbypassable delivery rates it charges to retail
electric providers based on the credits or bills received from its
affiliates pursuant to Subsections (d) and (e). Authorizes PUC, if it
determines that the nonbypassable delivery rates are not sufficient, to
extend the original collection period for the charge or, if necessary,
increase the charge. Requires PUC, if it determines that the nonbypassable
delivery rates are larger than are needed to recover the transmission and
distribution utility's costs, to correspondingly reduce the competition
transition charge, to the extent it has not been securitized; the
depreciation expense which has been redirected pursuant to Section 39.256;
the transmission and distribution utility's rates; or a combination of
these elements.
(g) Specifies the methods by which the affiliated power generation company
is required to quantify its stranded costs for the purpose of finalizing
the stranded cost estimate used to establish the competition transition
charge under Section 39.201, except as provided in Subsection (h).
(h) Requires the electric utility to quantify its stranded costs for
nuclear assets using the ECOM method, unless an electric utility or its
affiliated power generation company combines all of its generation assets
into one or more transferee corporations. Provides that the ECOM method
is the estimation model prepared for and described by PUC's April 1998
Report to the Texas Senate Interim Committee on Electric Restructuring
entitled "Potentially Strandable Investment (ECOM) Report: 1998 Update."
Provides that the methodology used in the model must be the same as that
used in the 1998 report to determine the "base case." Requires the ECOM
model, at the time of the proceeding under this section, to be rerun using
updated company-specific inputs required by the model, updating the market
price of electricity, and using updated natural gas price forecasts and the
capacity cost based on the long-run marginal cost of the most economic new
generation technology then available. Provides that natural gas price
projections used in the model must be based on the most credible publicly
available market-based data. Requires PUC, by rule, to establish, before
June 1, 2000, the precise methodology to be used by PUC in updating natural
gas forecasts.
(i) Requires PUC to conduct the hearing in this case as a contested case.
(j) Requires PUC to issue a final order no later than the 150th day after
the date of the filing under this section by the transmission and
distribution utility, its affiliated retail electric provider, and its
affiliated power generation company, and requires the resulting order to be
subject to judicial review under Chapter 2001, Government Code.
(k) Requires a charge for recovery of stranded costs under this section
or Subchapter G assessed on a customer after the facility becomes fully
operational, to the extent that a customer's actual load has been lawfully
served by a fully operational qualifying facility before September 1, 2001,
or by an on-site power production facility with a rated capacity of 10
megawatts or less, to be included only in those tariffs or charges
associated with the services actually provided by the transmission and
distribution utility to the customer after the facility became fully
operational, notwithstanding Section 39.252. Prohibits such a charge for
recover from including any costs associated with the service provided to
the customer by the electric utility or its affiliated transmission and
distribution utility under their tariffs before the operation of that
qualifying facility, notwithstanding Section 39.252. Provides that to
qualify under this subsection, a qualifying facility must have made
substantially complete filings on or before December 31, 1999, for all
necessary site-specific environmental permits under the rules of the Texas
Natural Resource Conservation Commission (TNRCC) in effect at the time of
filing.
Sec. 39.263. STRANDED COST RECOVERY OF ENVIRONMENTAL CLEANUP COSTS. (a)
Provides that, subject to the provisions of Subsection (c), capital costs
incurred by an electric utility to improve air quality prior to January 1,
2002, are eligible for inclusion as net invested capital, notwithstanding
the limitations imposed under specified sections.
(b) Provides that subject to the provisions of Subsection (c), capital
costs incurred by an electric utility to improve air quality subsequent to
January 1, 2002, and prior to May 1, 2003, are eligible for inclusion in
the determination of invested capital in the true-up proceeding.
(c) Requires costs incurred under Subsections (a) and (b) to be included
as invested capital and considered in an electric utility's stranded cost
determination only to the extent that:
(1) the cost is applied to offset or reduce the emission of airborne
contaminants from an electric generating facility, where the reduction or
offset is determined by TNRCC to be an essential component in achieving
compliance with a national ambient air quality standard or the reduction or
offset is necessary in order for an unpermitted electric generating
facility to obtain a permit;
(2) the retrofit decision is determined to be the most cost-effective
after consideration of alternative measures, including the retirement of
the generating facility;
(3) the amount and location of resulting emission reductions is consistent
with the air quality goals and policies of TNRCC; and
(4) resulting emission reduction credits are conveyed to the state for
inclusion in the state implementation plan.
(d) Requires, if the retirement of a generating facility is the most
cost-effective alternative, the net book value, including retirement costs
and offsetting salvage value, of the affected facility to be included in
the electric utility's stranded cost determination if the electric utility
complies with Subsection (c)(4), notwithstanding the provisions of Section
39.259(c).
(e) Requires PUC and TNRCC to submit a joint report to the governor, the
lieutenant governor, the speaker of the house of representatives, and the
electric utility restructuring legislative oversight committee, no later
than November 15, 2000. Specifies the information required to be in
report.
Sec. 39.264. RIGHTS NOT AFFECTED. Provides that this chapter is not
intended to alter any rights of utilities to recover stranded costs from
wholesale customers.
SUBCHAPTER G. SECURITIZATION
Sec. 39.301. PURPOSE. Provides that the purpose of this subchapter is to
enable utilities to use securitization financing to recover stranded costs
due to the fact this type of debt will lower the carrying costs of the
assets relative to the costs that would be incurred using conventional
utility financing methods. Requires the savings associated with
securitization to work to the benefit of ratepayers. Prohibits the amount
securitized from exceeding the present value of the revenue requirement
over the life of the proposed transition bond associated with the
regulatory assets or stranded costs sought to be securitized. Requires the
present value calculation to use a discount rate equal to the proposed
interest rate on the transition bonds.
Sec. 39.302. DEFINITIONS. Defines "assignee," "financing order,"
"financing party," "qualified costs," "transition bonds," "transition
charges," and "transition property."
Sec. 39.303. FINANCING ORDERS; TERMS. (a) Requires PUC to adopt a
financing order, on application of a utility to recover the utility's
eligible stranded costs, upon making a finding that the total amount of
revenues to be collected pursuant to the financing order is less than the
revenue requirement that would be recovered over the remaining life of the
stranded costs using conventional financing methods.
(b) Requires the financing order to detail the amount of stranded costs to
be recovered and the period over which the nonbypassable transition charges
shall be recovered, not to exceed 15 years.
(c) Requires transition charges to be collected and allocated among
customers in the same manner as competition transition charges pursuant to
Section 39.201.
(d) Requires a financing order to become effective in accordance with its
terms, and requires that the financing order, together with the transition
charges authorized in the order, to thereafter be irrevocable and not
subject to reduction, impairment, or adjustment by further action of PUC,
except as permitted by Section 39.307.
(e) Requires PUC to issue a financing order pursuant to Subsections (a)
and (g) no later than 90 days after the utility files its request for the
financing order.
(f) Prohibits a financing order from being subject to rehearing by PUC.
Authorizes a financing order to be reviewed by appeal to a Travis County
district court by a party to the proceeding if it is filed within 15 days
after the financing order is signed by PUC. Authorizes the district court
judgment to be reviewed by direct appeal to the Supreme Court of Texas if
it is filed within 15 days after entry of judgment. Requires appeals to be
heard and determined by the district court and the Supreme Court of Texas
as expeditiously as possible with lawful precedence over other matters.
Requires review on appeal to be based solely on the record before PUC and
briefs to the court and be limited to whether the financing order conforms
to the constitution and laws of this state and the United States and is
within the authority of PUC pursuant to this chapter.
(g) Authorizes PUC, at the request of an electric utility, to adopt a
financing order providing for retiring and refunding transition bonds if it
finds that the future transition charges required to service the new
transition bonds, including transaction costs, will be less than the future
transition charges required to service the transition bonds being refunded.
Requires PUC, upon the retirement of the refunded transition bonds, to
adjust the related transition charges accordingly.
Sec. 39.304. PROPERTY RIGHTS. (a) Provides that the rights and interests
of an electric utility or successor under a financing order, including the
right to impose, collect, and receive transition charges authorized in the
order, are only contract rights until they are transferred to an assignee
or pledged in connection with the issuance of transition bonds, at which
time they will become "transition property."
(b) Provides that transition property constitutes a present property right
for purposes of contracts concerning the sale or pledge of property, even
if the imposition and collection of transition charges depends on further
acts of the utility or others which have not yet occurred. Provides that
the financing order remains in effect and the property continues to exist
for the same period as the pledge of the state described in Section 39.310.
(c) Provides that all revenues and collections resulting from transition
charges constitute proceeds only of the transition property arising from
the financing order.
Sec. 39.305. NO SETOFF. Prohibits the interest of an assignee or pledgee
in transition property and in the revenues and collections arising from
that property from being subject to setoff, counterclaim, surcharge, or
defense by the electric utility or another person or in connection with the
bankruptcy of the electric utility or any other entity. Provides that a
financing order remains in effect and unabated notwithstanding the
bankruptcy of the electric utility, its successors, or assignees.
Sec. 39.306. NO BYPASS. Requires a financing order to include terms
ensuring that the imposition and collection of transition charges
authorized in the order shall be nonbypassable.
Sec. 39.307. TRUE-UP. Requires a financing order to include a mechanism
requiring that transition charges be reviewed and adjusted at least
annually, within 45 days of the anniversary date of the issuance of the
transition bonds, to correct any overcollections or undercollections of the
preceding 12 months and to ensure the expected recovery of amounts
sufficient to timely provide all payments of debt service and other
required amounts and charges in connection with the transition bonds.
Sec. 39.308. TRUE SALE. Provides that an agreement by an electric utility
or assignee to transfer transition property that expressly states that the
transfer is a sale or other absolute transfer signifies that the
transaction is a true sale and is not a secured transaction and that title,
legal and equitable, has passed to the entity to which the transition
property is transferred. Provides that this true sale applies regardless
of whether the purchaser has any recourse against the seller, or any term
of the parties' agreement.
Sec. 39.309. SECURITY INTERESTS; ASSIGNMENT; COMMINGLING; DEFAULT. (a)
Prohibits transition property from constituting an account or general
intangible under Section 9.106, Business & Commerce Code (Definitions:
""Account''; ""General Intangibles''). Provides that the creation,
granting, perfection, and enforcement of liens and security interests in
transition property are governed by this section and not by the Business &
Commerce Code.
(b) Requires that a valid and enforceable lien and security interest in
transition property be created by a financing order and the execution and
delivery of a security agreement with a financing party in connection with
the issuance of transition bonds. Provides that the lien and security
interest attaches automatically from the time that value is received for
the bonds, and is perfected by filing of notice with the secretary of
state. Provides that the lien and security interest are then continuously
perfected and all proceeds shall have priority in the order of filing and
take precedence over any subsequent judicial or other lien creditor.
Provides that if notice is filed within 10 days after value is received for
the transition bonds, the security interest is perfected retroactively to
the date value was received, or if notice is not filed within 10 days, the
security interest is perfected as of the date of filing.
(c) Provides that transfer of an interest in transition property to an
assignee is perfected against all third parties, including subsequent
judicial or lien creditors, when the financing order becomes effective,
transfer documents have been delivered to the assignee, and a notice of
that transfer has been filed in accordance with Subsection (d). Provides
that if notice of the transfer has not been filed in accordance with this
subsection within 10 days after the delivery of transfer documentation, the
transfer of the interest shall not be perfected against third parties until
the notice is filed.
(d) Requires the secretary of state to implement this section by
establishing and maintaining a separate system of records for the filing
of notices under this section and to prescribe the rules for such filings
based on Chapter 9, Business & Commerce Code (Secured Transactions; Sales
of Accounts and Chattel Paper).
(e) Provides that the priority of a lien and security interest perfected
under this section is not be impaired by any later modification of the
financing order or by the commingling of funds arising from transition
charges with other funds. Requires any other security interest that may
apply to those funds to be terminated when they are transferred to a
segregated account for the assignee or a financing party. Requires that
the proceeds of transition property, which has been transferred to an
assignee, to be held in trust for the assignee.
(f) Authorizes the financing parties or their representatives, if a
default or termination occurs under the transition bonds, to foreclose on
or enforce their lien and security interest in any transition property as
if they were secured parties under Chapter 9, Business & Commerce Code, and
authorizes PUC to order that amounts arising from transition charges be
transferred to a separate account for the financing parties' benefit, to
which their lien and security interest applies. Requires a Travis County
district court, on application by or on behalf of the financing parties, to
order the sequestration and payment to them of revenues arising from the
transition charges.
Sec. 39.310. PLEDGE OF STATE. Provides that transition bonds are not a
debt or obligation of the state and are not a charge upon its full faith
and credit or taxing power. Establishes that the state pledges, for the
benefit and protection of financing parties and the electric utility, that
it will not take or permit an action that would impair the value of
transition property, or reduce, alter, or impair the transition charges to
be imposed, collected, and remitted to financing parties, until the
principal, interest and premium, and any other charges incurred and
contracts to be performed in connection with the related transition bonds
have been paid and performed in full except as permitted by Section 39.307.
Authorizes a party issuing transition bonds to include this pledge in any
documentation relating to such bonds.
Sec. 39.311. TAX EXEMPTION. Provides that transactions involving the
transfer and ownership of transition property and the receipt of transition
charges are exempt from state and local income, sales, franchise, gross
receipts, and other taxes or similar charges.
Sec. 39.312. NO PUBLIC UTILITY. Prohibits an assignee or financing party
from being considered a public utility or person providing electric service
solely by virtue of the transactions described in this subchapter.
Sec. 39.313. SEVERABILITY. Provides that, effective upon the date the
first utility transition bonds are issued under this subchapter, a
provision in this title or portion that is held to be invalid or is
invalidated, superseded, replaced, repealed, or expires, does not affect
the validity or continuation of this subchapter, specified sections, or any
provision of this title relevant to the issuance, administration, payment,
retirement, or refunding of transition bonds or to any actions of the
electric utility, its successors, an assignee, a collection agent, or a
financing party, which remains in full force and effect.
SUBCHAPTER H. CERTIFICATION AND REGISTRATION; PENALTIES
Sec. 39.351. REGISTRATION OF POWER GENERATION COMPANIES. (a) Prohibits a
person from generating electricity without being registered with PUC as a
power generation company. Authorizes a person to register as a power
generation company by filing the specified information with PUC.
(b) Requires a power generation company to comply with the reliability
standards adopted by an independent organization certified by PUC to ensure
the reliability of the regional electrical network for a power region in
which the power generation company is generating or selling electricity.
(c) Authorizes a power generation company to register anytime after
September 1, 2000.
Sec. 39.352. CERTIFICATION OF RETAIL ELECTRIC PROVIDERS. (a) Prohibits a
person, including an affiliate of an electric utility, from providing
retail electric service section in areas where customer choice has been
introduced unless the person is certified by PUC as a retail electric
provider.
(b) Requires PUC to issue a certificate to provide retail electric service
to a person applying for certification who demonstrates specified criteria.
(c) Requires a person applying for certification under this section to
comply with all applicable customer protection provisions, disclosure
requirements, and marketing guidelines established by PUC and by this
title.
(d) Requires a retail electric provider to be certified for purposes of
serving certain customers so long as it demonstrates that it meets the
requirements of Subsection (b)(4), if the provider files with PUC a signed,
notarized affidavit from each retail customer with which it has contracted
to provide one megawatt or more of capacity which state that the customer
is satisfied that the retail electric provider meets the standards set
forth in Subsections (b)(1)-(3) and Subsection (c), notwithstanding
specified subsections.
(e) Authorizes a retail electric provider to apply for certification
anytime after September 1, 2000.
(f) Requires PUC to use any information required in this section in a
manner that ensures the confidentiality of competitively sensitive
information.
Sec. 39.353. REGISTRATION OF AGGREGATORS. (a) Prohibits a person from
providing aggregation services in the state unless the person is registered
with PUC as an aggregator.
(b) Provides that "aggregator" means a person joining two or more
customers, other than municipalities, into a single purchasing unit to
negotiate the purchase of electricity from retail electric providers.
Prohibits aggregators from selling or taking title to electricity. Provides
that retail electric providers are not aggregators.
(c) Requires a person registering under this section to comply with all
customer protection provisions, all disclosure requirements, and all
marketing guidelines established by PUC and by this title.
(d) Requires PUC to establish terms and conditions it determines necessary
to regulate the reliability and integrity of aggregators in the state by
June 1, 2000.
(e) Authorizes an aggregator to register anytime after September 1, 2000.
(f) Provides that PUC has up to 60 days to process applications for
registration filed by aggregators.
(g) Provides that registration is not required of a customer that is
aggregating loads from its own location or facilities.
Sec. 39.354. REGISTRATION OF MUNICIPAL AGGREGATORS. (a) Prohibits a
municipal aggregator from providing aggregation services in the state
unless the municipal aggregator registers with PUC.
(b) Provides that "municipal aggregator" means a person authorized by two
or more municipal governing bodies to join the bodies into a single
purchasing unit to negotiate the purchase of electricity from retail
electric providers.
(c) Authorizes a municipal aggregator to register anytime after September
1, 2000.
Sec. 39.355. REGISTRATION OF POWER MARKETERS. Prohibits a person from
selling electric energy at wholesale as a power marketer unless the person
registers with PUC.
Sec. 39.356. REVOCATION OF CERTIFICATION. (a) Authorizes PUC, after
notice and opportunity for hearing, to suspend, revoke, or amend a retail
electric provider's certificate for significant violations of this title or
the rules adopted pursuant to this title or of any reliability standard
adopted by an independent organization certified by PUC to ensure the
reliability of a power region's electrical network. Authorizes PUC to
suspend or revoke a retail electric provider's certificate if the provider
no longer has the financial or technical capability to provide continuous
and reliable electric service.
(b) Authorizes PUC to suspend or revoke a power generation company's
registration for significant violations of this title or the rules adopted
pursuant to this title or of the reliability standards adopted by an
independent organization certified by PUC to ensure the reliability of a
power region's electrical network.
(c) Authorizes PUC to suspend or revoke an aggregator's registration for
significant violations of this title or of the rules adopted pursuant to
this title.
Sec. 39.357. ADMINISTRATIVE PENALTY. Authorizes PUC to impose an
administrative penalty for violations described by Section 39.356, in
addition to the suspension, revocation, or amendment of a certification.
SUBCHAPTER I. MISCELLANEOUS PROVISIONS
Sec. 39.601. SCHOOL FUNDING LOSS MECHANISM. (a) Requires the
comptroller, no later than March 1 each year, to certify to the Texas
Education Agency any property wealth reductions, as determined by taking
the difference between current year and prior year appraisal values
attributable to electric utility restructuring.
(b) Requires the Texas Education Agency to determine the reduction of the
amount of property taxes recaptured by the state from school districts
subject to wealth equalization under Chapter 41, Education Code (Equalized
Wealth Level), as a result of the property wealth reductions certified
under Subsection (a) and to notify PUC of the amount necessary to
compensate the state for the reduction.
(c) Requires the Texas Education Agency to determine the amount necessary
to compensate school districts for lost revenue resulting from the property
wealth reductions under Subsection (a) and to notify PUC of this amount.
Specifies the amounts necessary to compensate districts.
(d) Provides that the amounts determined by the comptroller and the Texas
Education Agency under this section, for the purposes of this section, are
final and are not appealable.
(e) Requires PUC, no later than May 1 of each year, to transfer from the
system benefit fund to the foundation school fund the amounts determined by
the Texas Education Agency under Subsections (b) and (c). Provides that
the amounts transferred from the system benefit fund are appropriated for
the support of the foundation school program and are available, in addition
to any amounts allocated by the General Appropriations Act, to finance
actions under Section 41.002 (Equalized Wealth Level) or 42.252 (Equalized
Wealth Level), Education Code.
(f) Requires the Texas Education Agency, upon the transfer of funds from
the system benefit fund to the foundation school fund, to compensate school
districts for losses incurred under Subsection (c).
(g) Authorizes the commissioner of education and the comptroller to adopt
rules necessary to implement this section.
(h) Provides that this section is effective through the 2006-2007 school
year. Provides that this section expires August 31, 2007.
Sec. 39.602. CUSTOMER EDUCATION. (a) Requires PUC, on or before January
1, 2001, to develop and implement an educational program to inform
customers, including low-income and non-English-speaking customers, about
changes in the provision of electric service resulting from the opening of
the retail electric market and the customer choice pilot program under this
chapter. Requires the educational program to be neutral and nonpromotional
and to provide customers with the information necessary to make informed
decisions relating to the source and type of electric service available for
purchase and other information PUC considers necessary. Requires PUC, in
planning and implementing this program, to consult with specified agencies
and customers of and providers of retail electric service. Authorizes PUC
to enter contracts for professional services to carry out the customer
education program.
(b) Requires PUC to report on the status of the educational program,
developed and implemented, to the electric utility restructuring
legislative oversight committee on or before December 1, 2001.
(c) Requires PUC, after the opening of the retail electric market, to
conduct ongoing customer education designed to help customers make informed
choices of electric services and retail electric providers. Authorizes
PUC, as part of ongoing education, to provide customers information
concerning specific retail electric providers, including instances of
complaints against them and records relating to quality of customer
service.
Sec. 39.603. SYSTEM BENEFIT FUND. (a) Requires PUC to establish the
system benefit fund.
(b) Provides that the system benefit fund is financed by a nonbypassable
charge set by PUC in an amount not to exceed 50 cents per MWh.
(c) Requires the system benefit fund to provide funding for customer
education programs; programs to assist specified low-income electric
customers; the school funding loss mechanism; and administrative costs
incurred in implementing this chapter and Chapters 40 and 41.
(d) Requires PUC to adopt rules regarding specified programs to assist
low-income electric customers, notwithstanding Section 39.106(b).
(e) Prohibits an electric utility from reducing programs already offered
to assist low-income electric customers, until January 1, 2002, or such
time as customer choice is in effect.
(f) Requires PUC, following the introduction of customer choice, to adopt
rules to determine a reduced rate to be discounted off the standard retail
service package approved by PUC or the "price to beat," whichever is lower.
(g) Authorizes PUC to provide for a reduced rate during periods when
severe weather occurs or is likely to occur or for customers living in
all-electric dwelling units or who depend on electrically operated medical
equipment.
(h) Requires the reimbursement of a retail electric provider that is not
subject to the "price to beat" for the difference between the reduced rate
and the rate established pursuant to Section 39.106. Requires a retail
electric provider who is subject to the "price to beat" to be reimbursed
for the difference between the reduced rate and the "price to beat."
(i) Prohibits a retail electric provider from charging the customer a fee
for participation in the reduced rate program.
(j) Provides that a "low-income electric customer" is an electric customer
who is a qualifying low-income consumer as defined by PUC.
Sec. 39.604. GOAL FOR RENEWABLE ENERGY. (a) Requires each retail
electric provider, municipally owned utility, and electric cooperative
operating in the state to obtain a minimum of 1.65 percent of its annual
capacity requirements from renewable energy technologies by January 1,
2003, 2.15 percent of its annual capacity requirements from renewable
energy technologies by January 1, 2005, 2.75 percent of its annual capacity
requirements from renewable energy technologies by January 1, 2007, and 3
percent of its annual capacity requirements from renewable energy
technologies by January 1, 2009.
(b) Requires PUC to establish a renewable energy credits trading program.
Requires a retail electric provider, municipally owned utility, or electric
cooperative that does not satisfy the requirements of Subsection (a) to
purchase sufficient renewable energy credits to satisfy the requirements by
holding renewable energy credits in lieu of capacity from renewable energy
technologies.
(c) Defines "renewable energy technology."
Sec. 39.605. GOAL FOR ENERGY EFFICIENCY. Sets forth the intent of the
legislature relating to energy efficiency goals.
Sec. 39.606. DISPLACED WORKERS. Authorizes PUC to allow the recovery of
reasonable employee related transition costs in order to mitigate potential
negative impacts on utility personnel directly affected by electric
industry restructuring.
Sec. 39.607. LEGISLATIVE OVERSIGHT COMMITTEE. (a) Provides that in this
section, "committee" means the electric utility restructuring legislative
oversight committee.
(b) Provides that the committee has six members and specifies the
composition of the committee.
(c) Provides that an appointed member of the committee serves at the
pleasure of the appointing official.
(d) Provides that the committee is subject to Chapter 325, Government Code
(Texas Sunset Act) and that the committee is abolished September 1, 2005,
unless its existence is continued under that chapter.
(e) Provides that the committee must meet at least annually with PUC;
receive information about rules relating to electric utility restructuring
proposed by PUC and may submit comments to PUC on such proposed rules;
review recommendations for legislation proposed by PUC; and monitor the
effectiveness of electric utility restructuring, including the fairness of
rates, the reliability of service, and the effect of stranded costs, market
power, and regulation on the normal forces of competition.
(f) Authorizes the committee to request reports and other information from
PUC as necessary to carry out this section.
(g) Requires the committee to report to the governor, lieutenant governor,
and speaker of the house of representatives on the committee's activities,
not later than November 15 of each even-numbered year. Requires the report
to include an analysis of any problems caused by electric utility
restructuring and recommendations of any legislative action necessary to
address such problems and to further retail competition within the electric
power industry.
Sec. 39.608. EFFECT OF SUNSET PROVISION. (a) Provides that if PUC is
abolished and the other provisions of this title expire as pursuant to
Chapter 325, Government Code (Texas Sunset Act), this subchapter,
including the provisions of this title referred to in this subchapter,
continues in full force and effect and does not expire.
(b) Requires the performance of PUC's authorities, duties, and functions
under this chapter to be performed by a successor agency designated by the
legislature before abolishment of PUC or, if the legislature does not
designate the successor, by the secretary of state.
CHAPTER 40. COMPETITION FOR MUNICIPALLY OWNED UTILITIES
AND RIVER AUTHORITIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 40.001. APPLICABLE LAW. (a) Provides that this chapter governs the
transition to and the establishment of a fully competitive electric power
industry for municipally owned utilities, notwithstanding any other
provision of law. Provides that this chapter controls over any other
provision of this title, except for specified sections.
(b) Provides that the provisions of Chapter 39 do not apply to a river
authority operating a steam generating plant on or before January 1, 1999,
or a corporation authorized by Article 717p, Chapter 245, Acts of the 67th
Legislature, Regular Session, 1981, V.T.C.S. (River authorities engaged in
distribution and sale of electrical energy) or Section 32.053, except as
specifically provided in this subsection. Provides that a river authority
operating a steam generating plant on or before January 1, 1999, is subject
to specified sections of this Act.
(c) Provides that for purposes of Section 39.051, hydroelectric assets are
not deemed to be generating assets, and that the transfer of generating
assets to a corporation authorized by Article 717p, Chapter 245, Acts of
the 67th Legislature, Regular Session, 1981, V.T.C.S., satisfies the
requirements of Section 39.051.
(d) Requires accommodation to be made in the code of conduct established
under Section 39.157(e) for the provisions of Article 717p, Chapter 245,
Acts of the 67th Legislature, Regular Session, 1981, V.T.C.S., and
prohibits PUC from prohibiting a river authority and any related
corporation from sharing officers, directors, employees, equipment, and
facilities or from providing goods or services to each other at cost
without the need for a competitive bid.
Sec. 40.002. DEFINITION. Defines "body vested with the power to manage
and operate a municipally owned utility."
Sec. 40.003. SECURITIZATION. (a) Authorizes municipally owned utilities
and river authorities to adopt and use securitization provisions to recover
their stranded costs at a recovery level deemed appropriate by the
municipally owned utility or river authority up to 100 percent, under
specified rules and procedures that are required to be established.
(b) Authorizes municipalities, in order to implement securitization
financing pursuant to the rules and procedures established by and for a
municipally owned utility under Subsection (a), to issue bonds, notes, or
other obligations that are payable from and secured by a lien on and pledge
of the revenues collected under an order of the municipality's governing
body. Requires the bonds to be issued without an election or any notice of
intent to issue the bonds, by ordinance adopted by the municipality's
governing body, in such form and manner and sold on a negotiated basis or
upon receipt of bids and on such terms and conditions as shall be
determined by the governing body.
(c) Authorizes the bonds to be issued in such form and manner, with or
without credit enhancement or liquidity enhancement and using such
procedures as provided by specified laws applicable to the issuance of
bonds, as if such laws were fully restated. Provides that a municipality or
river authority has the right and authority to use other such laws to the
extent convenient or necessary to carry out any power or authority granted
under this section, in issuing of bonds in connection with securitization
financing. Provides that the provisions under this section are sufficient
authority for the issuance of bonds, notes, or other obligations, including
refunding bonds, and the performance of the other acts and procedures
authorized, without reference to any other laws or any restrictions or
limitations contained in those law. Provides that to the extent of any
conflict or inconsistency between the provisions of this authorization and
a provision of another law or home-rule charter, the authorization and
power to issue bonds conferred on municipalities or river authorities under
this section prevails.
(d) Requires the rules and procedures for securitization established by
PUC to include procedures for the recovery of qualified costs pursuant to
the terms of a financing order adopted by the governing body of the river
authority.
(e) Requires the rules and procedures for securitization to include rules
and procedures for the issuance of transition bonds. Provides that
findings made by the governing body of a river authority in a financing
order issued pursuant to the rules and procedures described in this
subsection are conclusive. Provides that any nonbypassable transition
charge incorporated in the rate order to recover the principal, interest,
and reasonable expenses associated with transition bonds constitutes
property rights, as described in Subchapter G, Chapter 39, and otherwise
conform in all material respects to the nonbypassable transition charges
set forth in Subchapter G, Chapter 39.
(f) Requires the rules and procedures established under this section to be
consistent with other law applicable to municipally owned utilities and
river authorities and with the terms of any resolutions, orders, charter
provisions, or ordinances authorizing outstanding bonds or other
indebtedness of the municipalities or river authorities.
Sec. 40.004. JURISDICTION OF THE COMMISSION. Provides that the PUC has
jurisdiction over municipally owned utilities only for specified purposes.
SUBCHAPTER B. MUNICIPALLY OWNED UTILITY CHOICE
Sec. 40.051. GOVERNING BODY DECISION. (a) Provides that the municipal
governing body or a body vested with the power to manage and operate a
municipally owned utility has the discretion to decide when or if the
municipally owned utility will provide customer choice.
(b) Authorizes municipally owned utilities to choose to participate in
customer choice at any time on or after January 1, 2002, by the adoption of
an appropriate resolution of the municipal governing body or a body vested
with power to manage and operate the municipally owned utility. Provides
that the decision to participate in customer choice by the adoption of a
resolution is irrevocable.
(c) Provides that after a decision to offer customer choice has been made,
Subchapters D and E, Chapter 33, do not apply to any action taken under
this chapter.
Sec. 40.052. UTILITY NOT OFFERING CUSTOMER CHOICE. (a) Prohibits a
municipally owned utility that has not chosen to participate in customer
choice from offering electric energy at unregulated prices directly to
retail customers outside its certificated retail service area.
(b) Provides that a municipally owned utility under Subsection (a) retains
the right to offer and provide a full range of customer service and pricing
programs to the customers within its certificated area and to purchase and
sell electric energy at wholesale without geographic restriction.
Sec. 40.053. RETAIL CUSTOMER'S RIGHT OF CHOICE. (a) Requires that, if a
municipally owned utility chooses to participate in customer choice, all
retail customers served by the municipally owned utility within the
certificated retail service area of the municipally owned utility have the
right of customer choice, and requires municipally owned utility to
provide open access for retail service.
(b) Prohibits the metering function from being deemed a competitive
service for customers of the municipally owned utility within such service
area and provides that it may continue to be offered by the utility as sole
provider, at the option of the municipally owned utility and
notwithstanding Section 39.107.
(c) Requires a municipally owned utility, upon its initiation of customer
choice, to designate itself or another entity as the provider of last
resort for customers within the municipally owned utility's certificated
service area as that area existed on the date of the utility's initiation
of customer choice. Requires the municipally owned utility to fulfill the
role of default provider of last resort in the event no other entity is
available to act in that capacity.
(d) Requires the provider of last resort, if a customer is unable to
obtain service from a retail electric provider and upon request of the
customer, to offer the customer the standard retail service package for the
appropriate customer class, with no interruption of service, at a fixed,
nondiscountable rate that is at least sufficient to cover the reasonable
costs of providing such service, as approved by the governing body of the
municipally owned utility which has the authority to set rates.
(e) Authorizes the governing body of a municipally owned utility to
establish the procedures and criteria for designating the provider of last
resort and to redesignate the provider of last resort according to a
schedule it considers appropriate.
Sec. 40.054. SERVICE OUTSIDE AREA. (a) Provides that a municipally owned
utility participating in customer choice has the right to offer electric
energy and related services at unregulated prices directly to retail
customers within qualifying power regions without regard to geographic
location.
(b) Provides that in providing service under Subsection (a) to retail
customers outside its certificated retail service area as that area exists
on the date of adoption of customer choice, a municipally owned utility is
subject to PUC's rules establishing a code of conduct regulating
anticompetitive practices.
(c) Provides that for municipally owned utilities participating in
customer choice, PUC has jurisdiction to establish terms and conditions,
but not rates, for access by other retail electric providers to the
municipally owned utility's distribution facilities.
(d) Requires accommodation to be made in PUC's terms and conditions for
access and in the code of conduct for specific legal requirements imposed
by state or federal law applicable to municipally owned utilities.
(e) Provides that PUC does not have jurisdiction to require unbundling of
services or functions of, or to regulate the recovery of stranded
investment of, a municipally owned utility or, except as provided by this
section, jurisdiction with respect to the rates, terms, and conditions of
service for retail customers of a municipally owned utility within the
utility's certificated service area.
(f) Requires a municipally owned utility to maintain separate books and
records of its operations from those of the operations of any affiliate.
Sec. 40.055. JURISDICTION OF MUNICIPAL GOVERNING BODY. (a) Provides that
the municipal governing body or a body vested with the power to manage and
operate a municipally owned utility has exclusive jurisdiction to:
(1) set all terms of access, conditions, and rates applicable to services
provided by the utility, including nondiscriminatory and comparable terms
of access, conditions, and rates for distribution but excluding wholesale
transmission rates, terms of access, and conditions for wholesale
transmission service set by PUC under this subtitle, provided that the
rates for distribution access established by the municipal governing body
are be comparable to the distribution access rates that apply to the
municipally owned utility and the municipally owned utility's affiliates;
(2) determine whether to unbundle any energy-related activities and, if
the municipally owned utility chooses to unbundle, whether to do so
structurally or functionally;
(3) reasonably determine the amount of the municipally owned utility's
stranded investment;
(4) establish nondiscriminatory transition charges designed to recover the
stranded investment over an appropriate period of time, provided that
recovery of retail stranded costs are from all existing or future retail
customers within the utility's geographical certificated service area as it
existed on May 1, 1999;
(5) determine the extent to which the municipally owned utility will
provide various customer services at the distribution level or will accept
the services from other providers;
(6) manage and operate the municipality's electric utility systems,
including exercise of control over resource acquisition and any related
expansion programs;
(7) establish and enforce service quality and reliability standards and
consumer safeguards designed to protect retail electric customers
consistent with the provisions of this chapter;
(8) determine whether a base rate reduction is appropriate for the
municipally owned utility;
(9) determine any other utility matters that the municipal governing body
or body vested with power to manage and operate the municipally owned
utility believes should be included; and
(10) make any other decisions affecting the municipally owned utility's
participation in customer choice that are not inconsistent with the
provisions of this chapter.
(b) Prohibits a retail customer, in multiply certificated areas, including
a retail customer of an electric cooperative or a municipally owned
utility, from avoiding stranded cost recovery charges by switching to
another electric utility, electric cooperative, or municipally owned
utility.
Sec. 40.056. ANTICOMPETITIVE ACTIONS. (a) Requires PUC, upon a
complaint by a retail electric provider and a finding by PUC that a
municipal rule, action, or order relating to customer choice is
anticompetitive or does not provide other retail electric providers with
nondiscriminatory terms and conditions of access to distribution facilities
or customers within the utility's certificated retail service area that
are comparable to the utility's and its affiliates' terms and conditions of
access to distribution facilities or customers.
(b) Requires the municipally owned utility be given three months to cure
the anticompetitive or noncompliant behavior described in Subsection (a),
following opportunity for hearing on the complaint. Authorizes PUC, if the
noncompliant behavior is not fully remedied within that time, to prohibit
the municipally owned utility or affiliate from providing retail service
outside its certificated retail service area until the rule, action, or
order is remedied.
Sec. 40.057. BILLING. (a) Authorizes a municipally owned utility that
opts for customer choice to continue to bill for transmission and
distribution services of electric customers located in its certificated
retail service area, as that area exists on the date of adoption of
customer choice. Authorizes the utility to bill directly for generation
services and customer services provided by the municipally owned utility to
those customers.
(b) Prohibits a municipally owned utility that opts for customer choice
from adopting anticompetitive billing practices that would discourage
customers in its service area from choosing a retail electric provider.
(c) Provides that a customer that is being provided wires service by a
municipally owned utility at distribution or transmission voltage and that
is served by a retail electric provider for retail service has the option
of being billed directly by each service provider or to receive a single
bill for distribution, transmission, and generation services from the
municipally owned utility.
Sec. 40.058. TARIFFS FOR OPEN ACCESS. Requires a municipally owned
utility that owns or operates transmission and distribution facilities to
file with PUC tariffs implementing the open access rules established by PUC
and rates for open access on distribution facilities as set by the
municipal regulatory authority, before the 90th day preceding the date the
utility offers customer choice. Provides that PUC has no authority to
determine the rates for distribution access service for a municipally owned
utility.
Sec. 40.059. MUNICIPAL POWER AGENCY; RECOVERY OF STRANDED COSTS. (a)
Defines "member city."
(b) Authorizes a member city, after its adoption of a resolution choosing
to participate in customer choice, to include stranded costs described in
Subsection (c) in its distribution costs and may recover such costs through
a nonbypassable charge. Requires the nonbypassable charge to be determined
by the member city's governing body and may be spread over 16 years.
(c) Provides that the stranded costs that may be recovered under this
section are those costs that were determined by PUC and set forth in PUC's
April 1998 Report to the Texas Senate Interim Committee on Electric Utility
Restructuring entitled "Potentially Strandable Investment (ECOM) Report:
1998 Update" and specifically set forth in the report at Appendix A (ECOM
Estimates Including the Effects of Transition Plans) under PUC base case
benchmark base market price for the year 2002.
(d) Prohibits the stranded cost amounts described in this section from
being included in the generation costs used in setting rates by the member
city's governing body.
(e) Provides that the provisions of this section are cumulative of all
other provisions of this chapter, and prohibits this section from being
construed to limit or restrict the application of any provision of this
chapter to the member cities.
(f) Requires the municipal power agency to extinguish the agency's
indebtedness by sale of the electric facility to one or more purchasers, by
way of a sale through the issuance of taxable or tax-exempt debt to the
member cities, or by any other method. Requires the agency to set as an
objective the extinguishment of the agency's debt by September 1, 2000.
Requires the agency, if this objective is not met, to provide detailed
reasons to the electric utility restructuring legislative oversight
committee by November 1, 2000, why the agency was not able to meet this
objective.
(g) Authorizes the municipal power agency or its successor in interest to
use the rate of return method for calculating its transmission cost of
service. Provides that if the rate of return method is used, the return
component for the transmission cost of service revenue requirement is
sufficient to meet the transmission function's pro rata share of levelized
debt service and debt service coverage ratio (1.50) and other annual debt
obligations. Prohibits the total levelized debt service from exceeding the
total debt service under the current payment schedule. Requires any
additional revenue generated by the methodology described in this
subsection to be applied to reduce the agency's outstanding indebtedness.
Sec. 40.060. NO POWER TO AMEND CERTIFICATES. Provides that nothing in
this chapter empowers a municipal governing body or a body vested with the
power to manage and operate a municipally owned utility to issue, amend, or
rescind a certificate of public convenience and necessity granted by PUC.
Provides that this subsection does not affect the ability of a municipal
governing body or a body vested with the power to manage and operate the
municipally owned utility to pass a resolution.
SUBCHAPTER C. RIGHTS NOT AFFECTED
Sec. 40.101. INTERFERENCE WITH CONTRACT. (a) Prohibits this subtitle
from interfering with or abrogating the rights or obligations of parties,
including a retail or wholesale customer, to a contract with a municipally
owned utility or river authority.
(b) Prohibits this subtitle from interfering with or abrogating the rights
or obligations of a party under a contract or agreement concerning
certificated utility service areas.
Sec. 40.102. ACCESS TO WHOLESALE MARKET. Prohibits this subtitle from
limiting the access of municipally owned utilities to the wholesale
electric market.
Sec. 40.103. PROTECTION OF BONDHOLDERS. Prohibits this subtitle or any
rule adopted under this subtitle from impairing contracts, covenants, or
obligations between this state, river authorities, municipalities, and the
bondholders of revenue bonds issued by the river authorities or
municipalities.
Sec. 40.104. TAX-EXEMPT STATUS. Prohibits this subtitle from impairing
the tax-exempt status of municipalities, electric cooperatives, or river
authorities, or from compelling any municipality, electric cooperative, or
river authority to use its facilities in a manner which violates any
contractual provisions, bond covenants, or other restrictions applicable to
facilities financed by tax-exempt debt. Provides that the decision to
participate in customer choice by the adoption of a resolution is
irrevocable, notwithstanding any other provision of law.
CHAPTER 41. ELECTRIC COOPERATIVES AND COMPETITION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 41.001. APPLICABLE LAW. Provides that this chapter governs the
transition to and the establishment of a fully competitive electric power
industry for electric cooperatives, except for specified sections in this
Act and notwithstanding any other provision of law. Provides that this
chapter controls over any other provision of this title regarding the
regulation of electric cooperatives, except for sections in which the term
"electric cooperative" is specifically used.
Sec. 41.002. DEFINITIONS. Defines "board of directors," "rate," and
"stranded investment."
Sec. 41.003. SECURITIZATION. (a) Authorizes an electric cooperative to
adopt and use securitization provisions having the effect of the provisions
set out in Subchapter G, Chapter 39, to recover through rates stranded
costs at a recovery level deemed appropriate by the board of directors up
to 100 percent, under rules and procedures established by PUC.
(b) Requires the rules and procedures for securitization established under
Subsection (a) to include rules and procedures for the recovery of stranded
costs pursuant to the terms of a rate order adopted by the board of
directors of the electric cooperative, which has the effect of a financing
order.
(c) Requires the rules and procedures established by PUC under Subsection
(b) to include rules and procedures for the issuance of transition bonds
issued in a securitized financing transaction. Authorizes the issuance of
any transition bonds issued in a securitized financing transaction by an
electric cooperative. Provides that the issuance of such bonds is governed
by the laws governing the issuance of bonds or other obligations by the
electric cooperative. Provides that findings made by the board of
directors of an electric cooperative in a rate order issued under the rules
and procedures described by this subsection are conclusive, and requires
any transition charges incorporated in such rate order to recover the
principal, interest, and all reasonable expenses associated with any
securitized financing transaction to constitute property rights and to
otherwise conform in all material respects to the transition charges set
forth in Subchapter G, Chapter 39.
Sec. 41.004. JURISDICTION OF THE COMMISSION. Provides that, except as
specifically provided otherwise in this chapter, PUC has jurisdiction over
electric cooperatives to:
(1) regulate wholesale transmission rates and service including terms of
access, to the extent provided in Subchapter A, Chapter 35;
(2) regulate certification of retail service areas to the extent provided
in Chapter 37;
(3) establish a code of conduct;
(4) establish terms and conditions, but not rates, for open access to
distribution facilities for electric cooperatives providing customer
choice; and
(5) require reports of electric cooperative operations only to the extent
necessary to ensure the public safety, enable PUC to satisfy its
responsibilities relating to electric cooperatives under this chapter,
enable PUC to determine the aggregate electric load and energy requirements
in the state and the resources available to serve that load, or enable PUC
to determine information relating to market power.
Sec. 41.005. LIMITATION ON MUNICIPAL AUTHORITY. Prohibits a municipality
from directly or indirectly regulating the rates, operations, and services
of an electric cooperative. Prohibits this section from prohibiting a
municipality from making a lawful charge for the use of public
rights-of-way within the municipality as provided by Section 182.025, Tax
(Code Charges by a City).
SUBCHAPTER B. ELECTRIC COOPERATIVE UTILITY CHOICE
Sec. 41.051. BOARD DECISION. (a) Provides that the board of directors
has the discretion to decide when or if the electric cooperative will
provide customer choice.
(b) Authorizes electric cooperatives that choose to participate in
customer choice to do so at any time on or after January 1, 2002, by
adoption of an appropriate resolution of the board of directors.
Authorizes the revocation of the decision to participate in customer choice
by the adoption of such a resolution if no customer has opted for choice
within four years of the resolution's adoption. Authorizes an electric
cooperative to initiate a customer choice pilot project at any time.
Sec. 41.052. ELECTRIC COOPERATIVES NOT OFFERING CUSTOMER CHOICE. (a)
Prohibits an electric cooperative that chooses not to participate in
customer choice from offering electric energy at unregulated prices
directly to retail customers outside its certificated retail service area.
(b) Provides that an electric cooperative under Subsection (a) retains the
right to offer and provide a full range of customer service and pricing
programs to the customers within its certificated retail service area and
to purchase and sell electric energy at wholesale without geographic
restriction.
(c) Authorizes a generation and transmission electric cooperative to offer
electric energy at unregulated prices directly to retail customers outside
of its parent electric cooperatives' certificated service areas only if a
majority of the parent electric cooperatives of the generation and
transmission electric cooperative have chosen to offer customer choice.
(d) Prohibits a subsidiary of an electric cooperative from providing
electric energy at unregulated prices outside of its parent electric
cooperative's certificated retail service area unless the electric
cooperative offers customer choice inside its certificated retail service
area.
Sec. 41.053. RETAIL CUSTOMER RIGHT OF CHOICE. (a) Requires, if an
electric cooperative chooses to participate in customer choice, all retail
customers within the certificated service area of the electric cooperative
to have the right of customer choice, and requires the electric cooperative
to provide nondiscriminatory open access for retail service.
(b) Prohibits the metering function from being deemed a competitive
service for customers of the electric cooperative within such service area
and provides that it may continue to be offered by the electric cooperative
as sole provider, at the option of the electric cooperative.
(c) Requires an electric cooperative, upon its initiation of customer
choice, to designate itself or another entity as the provider of last
resort for retail customers within the electric cooperative's certificated
service area and to fulfill the role of default provider of last resort in
the event no other entity is available to act in that capacity.
(d) Requires the provider of last resort, if a retail electric provider
fails to serve a customer described in Subsection (c) and upon customer
request, to offer the customer the standard retail service package for the
appropriate customer class, with no interruption of service, at a fixed,
nondiscountable rate that is at least sufficient to cover the reasonable
costs of providing such service, as approved by the board of directors.
(e) Authorizes the board of directors to establish the procedures and
criteria for designating the provider of last resort and to redesignate the
provider of last resort according to a schedule it considers appropriate.
Sec. 41.054. SERVICE OUTSIDE CERTIFICATED AREA. (a) Provides that an
electric cooperative participating in customer choice has the right to
offer electric energy and related services at unregulated prices directly
to retail customers within qualifying power regions without regard to
geographic location.
(b) Provides that an electric cooperative that provides service under
Subsection (a) to retail customers outside its certificated service area,
as that area exists on the date of adoption of customer choice, is subject
to commission jurisdiction as to PUC's rules establishing a code of conduct
regulating anticompetitive practices, except to the extent such rules
conflict with this chapter.
(c) Establishes that PUC, for electric cooperatives participating in
customer choice, has jurisdiction to establish terms and conditions, but
not rates, for access by other electric providers to the electric
cooperative's distribution facilities.
(d) Requires PUC to make accommodation in the code of conduct for specific
legal requirements imposed by state or federal law applicable to electric
cooperatives, notwithstanding Subsections (b) and (c). Requires PUC to
accommodate the organizational structures of electric cooperatives and
prohibits PUC from prohibiting an electric cooperative and any related
entity from sharing officers, directors, or employees.
(e) Provides that PUC does not have jurisdiction to require the unbundling
of services or functions of, or to regulate the recovery of stranded
investment of, an electric cooperative or, except as provided by this
section, jurisdiction with respect to the rates, terms, and conditions of
service for retail customers of an electric cooperative within the electric
cooperative's certificated service area.
(f) Requires an electric cooperative to maintain separate books and
records of its operations and the operations of any subsidiary and to
ensure that the rates charged for provision of electric service do not
include any costs of its subsidiary or any other costs not related to the
provision of electric service.
Sec. 41.055. JURISDICTION OF BOARD OF DIRECTORS. Sets forth the
exclusive jurisdiction of a board of directors.
Sec. 41.056. ANTICOMPETITIVE ACTIONS. (a) Requires PUC, if it finds
after notice and hearing that an electric cooperative providing customer
choice has engaged in anticompetitive behavior by not providing other
retail electric providers with nondiscriminatory terms and conditions of
access to distribution facilities or customers within the electric
cooperative's certificated service area that are comparable to the electric
cooperative's and its subsidiaries' terms and conditions of access to
distribution facilities or customers, to notify the electric cooperative.
(b) Requires the electric cooperative to have three months to cure the
anticompetitive or noncompliant behavior described in Subsection (a).
Authorizes PUC to prohibit the electric cooperative or its subsidiary from
providing retail service outside its certificated retail service area until
the behavior is remedied if the behavior is not fully remedied within that
time.
Sec. 41.057. BILLING. (a) Authorizes an electric cooperative that opts
for customer choice to continue to bill directly electric customers located
in its certificated service area for all transmission and distribution
services. Authorizes the electric cooperative to bill directly for
generation and customer services provided by the electric cooperative or
its subsidiaries to those customers.
(b) Entitles a customer served by an electric cooperative for transmission
and distribution services and by a retail electric provider for retail
service to the option of being billed directly by each service provider or
receiving a single bill for distribution, transmission, and generation
services from the electric cooperative.
Sec. 41.058. TARIFFS FOR OPEN ACCESS. Requires an electric cooperative
that owns or operates transmission and distribution facilities to file
tariffs implementing the open access rules established by PUC with the
appropriate regulatory authorities having jurisdiction before the 90th day
preceding the date the electric cooperative offers customer choice.
Sec. 41.059. NO POWER TO AMEND CERTIFICATES. Provides that this chapter
does not empower a board of directors to issue, amend, or rescind a
certificate of public convenience and necessity granted by PUC.
Sec. 41.060. CUSTOMER SERVICE INFORMATION. (a) Requires PUC to keep
information submitted by customers and retail electric providers pertaining
to the provision of electric service by electric cooperatives.
(b) Requires PUC to notify the appropriate electric cooperative of
information submitted by a customer or retail electric provider, and the
electric cooperative to respond to the customer or retail electric
provider. Requires the electric cooperative to notify PUC of its response.
(c) Requires PUC to prepare a report for the Sunset Advisory Commission
that includes information submitted and responses by electric cooperatives
pursuant to the Sunset Advisory Commission's schedule for reviewing PUC.
Sec. 41.061. RETAIL RATE CHANGES BY ELECTRIC COOPERATIVES. (a) Provides
that this section applies to retail rates of an electric cooperative that
has not adopted customer choice and to the retail delivery rates of an
electric cooperative that has adopted customer choice. Provides that this
section does not apply to rates for sales of electric energy by an electric
cooperative that has adopted customer choice or wholesale sales of electric
energy.
(b) Authorizes an electric cooperative to change its rates by adopting a
resolution approving the proposed change, mailing notice of the proposed
change to each affected customer whose rate would be increased by the
proposed change at least 30 days before implementation of the proposed
change, which notice may be included in a monthly billing, and holding a
meeting to discuss the proposed rate changes with affected customers, if
any change is expected to increase total system annual revenues by more
than $100,000 or one percent, whichever is greater.
(c) Authorizes an electric cooperative to implement the proposed rates
upon completion of the requirements under Subsection (b). Provides that
such rates remain in effect until changed by the electric cooperative as
provided by this section or, for rates other than retail delivery rates,
until this section is no longer applicable because the electric cooperative
adopts customer choice.
(d) Authorizes the electric cooperative to reconsider a rate change at any
time and adjust the rate by board resolution without additional notice or
meeting of customers if the rate as adjusted is within the general scope of
the notice previously provided to affected customers or is expected to
decrease the revenues of the electric cooperative.
(e) Requires retail rates set by an electric cooperative that has not
adopted customer choice and retail delivery rates set by an electric
cooperative that has adopted customer choice to be just and reasonable, not
unreasonably preferential, prejudicial, or discriminatory. Authorizes an
electric cooperative to charge market-based rates to customers who have
energy supply options.
(f) Provides that a customer of the electric cooperative who is adversely
affected by a resolution of the electric cooperative setting rates is
entitled to judicial review. Provides that a person initiates judicial
review by filing a petition in the Travis County district court no later
than the 60th day after the date the resolution is implemented.
(g) Provides that the resolution of the electric cooperative setting
rates, as it may have been amended as described in Subsection (d), is
presumed valid, and that the burden of showing that the resolution is
invalid rests upon the persons challenging the resolution. Authorizes a
court reviewing a rate change by an electric cooperative to consider any
relevant factor that may be considered by a court in reviewing a decision
of PUC including the cost of providing service.
(h) Requires the court, upon a finding that the electric cooperative's
resolution setting rates violates the standards contained in Subsection
(e), to enter an order:
(1) stating the specific basis for its determination that the rates set in
the electric cooperative's resolution violate Subsection (e); and
(2) directing the electric cooperative to set revised retail rates within
60 days and refund or credit revenues collected under the rate found to
violate the standards of Subsection (e) that exceed the revenues that would
have been collected under the revised rates. Requires the refund or credit
to be made over a period of not more than 12 months, as determined by the
electric cooperative.
(i) Prohibits a court from ordering a remedy other than a remedy under
Subsection (h). Prohibits the court from setting revised rates either for
the period the challenged resolution was in effect or prospectively.
(j) Provides that the rates of an electric cooperative are not subject to
review with regard to wholesale transmission rates, except as provided by
this section and Subchapter A, Chapter 35.
Sec. 41.062. ALLOCATION OF STRANDED INVESTMENT. Requires a competition
transition charge to be allocated among retail customer classes based on
the relevant customer class characteristics as of the end of the electric
cooperative's most recent fiscal year prior to implementation of customer
choice, in accordance with specified methodology. Prohibits a retail
customer in multiply certificated areas from avoiding stranded cost
recovery charges by switching to another electric cooperative, an electric
utility, or a municipally owned utility.
SUBCHAPTER C. RIGHTS NOT AFFECTED
Sec. 41.101. INTERFERENCE WITH CONTRACT. (a) Prohibits this subtitle
from interfering with or abrogating the rights or obligations of parties,
including a retail or wholesale customer, to a contract with an electric
cooperative or its subsidiary.
(b) Prohibits a provision of this subtitle from interfering with or being
deemed to abrogate the rights or obligations of a party under a contract or
an agreement concerning certificated service areas.
Sec. 41.102. ACCESS TO WHOLESALE MARKET. Provides that this subtitle does
not limit the access of an electric cooperative or its subsidiary, either
on its own behalf or on behalf of its customers, to the wholesale electric
market.
Sec. 41.103. PROTECTION OF BONDHOLDERS. Prohibits this subtitle or any
rule adopted under this subtitle from impairing contracts, covenants, or
obligations between an electric cooperative and its lenders and holders of
bonds issued on behalf of or by the electric cooperative.
Sec. 41.104. TAX-EXEMPT STATUS. Prohibits this subtitle from impairing
the tax-exempt status of electric cooperatives, or from compelling an
electric cooperative to use its facilities in a manner which violates any
contractual provisions, bond covenants, or other restrictions applicable to
facilities financed by tax-exempt or federally insured or guaranteed debt.
SECTION 36. Amends Section 252.022, Local Government Code, by adding
Subsection (c), to provide that this chapter does not apply to expenditures
by a municipally owned electric or gas utility or unbundled divisions of a
municipally owned electric or gas utility in connection with any purchases
by the municipally owned utility or divisions of a municipally owned
utility made in accordance with procurement procedures adopted by a
resolution of the body vested with authority for management and operation
of the municipally owned utility or its divisions that sets out the public
purpose to be achieved by such procedures. Provides that this subsection
does not exempt a municipally owned utility from any other applicable
statute, charter provision, or ordinance.
SECTION 37. Amends Section 272.001, Local Government Code, by adding
Subsection (j), to provide that this section does not apply to sales or
exchanges of land owned by a municipality operating a municipally owned
electric or gas utility if the land is held or managed by the municipally
owned utility, or by a division of the municipally owned electric or gas
utility that constitutes the unbundled electric or gas operations of the
utility, if the governing body of the municipally owned utility adopts a
resolution stating the conditions and circumstances for the sale or
exchange and the public purpose that will be achieved by the sale or
exchange. Provides that for purposes of this subsection, "municipally
owned utility" includes a river authority engaged in the generation,
transmission, or distribution of electric energy to the public, and
"unbundled" operations are those operations of the utility that have been
functionally separated.
SECTION 38. Amends Subsection (c), Section 402.002, Local Government Code,
to authorize a municipality to manufacture its own electricity, gas, or
anything else needed or used by the public. Authorizes a municipality to
purchase, and make contracts for the purchase of, gas, electricity, oil, or
any other commodity or article used by the public and may sell it to the
public on terms as provided by the municipal charter, ordinance, or
resolution of the governing body of the municipally owned utility.
SECTION 39. Amends Subchapter D, Chapter 551, Government Code, by adding
Section 551.086, as follows:
Sec. 551.086. CERTAIN PUBLIC POWER UTILITIES: COMPETITIVE MATTERS. (a)
Provides that the rules provided by this section apply to competitive
matters of a public power utility.
(b) Defines "public power utility," "public power utility governing body,"
and "competitive matter."
(c) Provides that this chapter does not require a public power utility
governing body to conduct an open meeting to deliberate, vote, or take
final action on any competitive matter. Provides that a public power
utility governing body must make a good-faith determination, by majority
vote of its members, that a matter is a competitive matter before a public
power utility governing body may deliberate, vote, or take final action on
any such competitive matter in a closed meeting. Requires the vote to be
taken during the closed meeting and be included in the certified agenda or
tape recording of the closed meeting. Prohibits a public power utility
governing body from deliberating or taking any further action on the matter
in the closed meeting if it fails to determine by such vote that the matter
satisfies the requirements of a competitive matter. Provides that this
section does not limit the right of a public power utility governing body
to hold a closed session pursuant to any other exception provided for in
this chapter.
(d) Provides that for purposes of Section 551.041, the notice of the
subject matter of an item that may be considered as a competitive matter is
required to contain no more than a general representation of the subject
matter to be considered so that the competitive activity of the public
power utility with respect to the issue in question is not compromised or
disclosed.
(e) Provides that with respect to municipally owned utilities subject to
this section, this section applies whether or not the municipally owned
utility has adopted customer choice or serves in a multiply certificated
service area under the Utilities Code.
(f) Provides that this section is not intended to preclude the application
of the enforcement and remedies provisions of Subchapter G.
SECTION 40. Amends Subchapter C, Chapter 552, Government Code, by adding
Section 552.131, as follows:
Sec. 552.131. EXCEPTION: PUBLIC POWER UTILITY COMPETITIVE MATTERS. (a)
Defines, for purposes of this section, "public power utility," "public
power utility governing body,"and "competitive matter."
(b) Provides that information or records are excepted from the
requirements of Section 552.021 if the information or records are
reasonably related to a competitive matter. Provides that such information
or records include the text of any resolution of the public power utility
governing body determining which issues, activities, or matters constitute
competitive matters. Provides that information or records of a municipally
owned utility that are reasonably related to a competitive matter are not
subject to disclosure under this chapter. Provides that this section does
not limit the right of a public power utility governing body to withhold
from disclosure information deemed to be within the scope of any other
exception provided for in this chapter, subject to the provisions of this
chapter.
(c) Requires the attorney general, in rendering a written opinion
relating to information alleged to fall under this exception, to find the
requested information to be outside the scope of this exception if the
attorney general determines, based on the information provided in the
request, that the public power utility governing body has failed to act in
good faith in making the determination that the issue, matter, or activity
in question is a competitive matter or that the information or records
sought to be withheld are not reasonably related to a competitive matter.
SECTION 41. Amends Section 791.011(d), Government Code, to set forth the
requirement of an interlocal contract.
SECTION 42. Amends Subchapter A, Chapter 2256, Government Code, by adding
Section 2256.0201, as follows:
Sec. 2256.0201. AUTHORIZED INVESTMENTS; MUNICIPAL UTILITY. (a)
Authorizes a municipality that owns a municipal electric utility that is
engaged in the distribution and sale of electric energy or natural gas to
the public to enter into a hedging contract and related security and
insurance agreements in relation to fuel oil, natural gas, and electric
energy to protect against loss due to price fluctuations. Provides that a
hedging transaction must comply with the regulations of the Commodity
Futures Trading Commission and the Securities and Exchange Commission.
Provides that if there is a conflict between the municipal charter of the
municipality and this chapter, this chapter prevails.
(b) Provides that payment by a municipally owned electric or gas utility
under a hedging contract or related agreement in relation to fuel supplies
or fuel reserves is a fuel expense. Authorizes the utility to credit any
amounts it receives under the contract or agreement against fuel expenses.
(c) Authorizes the governing body of a municipally owned electric or gas
utility or the body vested with power to manage and operate the municipally
owned electric or gas utility to set policy regarding hedging transactions.
(d) Defines "hedging" as the buying and selling of fuel oil, natural gas,
and electric energy futures or options or similar contracts on those
commodity futures as a protection against loss due to price fluctuation,
for purposes of this section.
SECTION 43. Amends Sections 52.133 (a), (c), and (d), Natural Resources
Code, as follows:
(a) Deletes language excepting the Board for Lease of University Lands
from the requirement that each oil or gas lease covering land leased by the
school land board (board), by a board for lease, or by the surface owner of
land under which the state owns the minerals under the Relinquishment Act
land, must include a provision granting the board or the owner of the land
and the Commissioner of the General Land Office (commissioner) authority to
take their royalty in kind.
(c) Authorizes the commissioner, the owner of the soil under Subchapter F,
or the commissioner acting on the behalf of and at the direction of an
owner of the soil under Subchapter F, the board, or a board for lease, or
at the direction of the Board for Lease of University Lands, to negotiate
and execute contracts or any other instruments or agreements necessary to
enhance their portion of the royalty taken in kind, including contracts for
purchase. Makes nonsubstantive changes.
(d) Authorizes the commissioner, the owner of the soil under Subchapter F,
or the commissioner acting on behalf of and at the direction of an owner of
the soil under Subchapter F, the board, or a board for lease, to negotiate
and execute contracts or any other instruments or agreements necessary to
convert that portion of the royalty taken in kind into other forms of
energy, including electricity. Deletes language providing that this
section does not apply to or have any effect on the Board for Lease of
University Lands or any lease executed on university land.
SECTION 44. Amends Section 53.026, Natural Resources Code, is amended to
read as follows:
Sec. 53.026. IN KIND ROYALTY. Authorizes the commissioner or the
commissioner acting on behalf of and at the direction of the board or a
board for lease to negotiate and execute a contract or any other instrument
or agreement necessary to convert that portion of the royalty taken in kind
to other forms of energy, including electricity. Redesignates existing
Subsection (b) to Subsection (c). Makes conforming and nonsubstantive
changes
SECTION 45. Amends Section 53.077, Natural Resources Code, is amended to
read as follows:
Sec. 53.077. IN KIND ROYALTY. Authorizes the commissioner, each owner of
the soil under this subchapter, or the commissioner acting on behalf of
and at the direction of the owner of the soil under this subchapter to
negotiate and execute a contract or any other instrument or agreement
necessary to convert that portion of the royalty taken in kind to other
forms of energy, including electricity. Redesignates existing Subsection
(b) to Subsection (c). Makes a conforming change.
SECTION 46. Amends Article 717p, Chapter 245, Acts of the 67th
Legislature, Regular Session, 1981, V.T.C.S., by adding Section 4C, as
follows:
Sec. 4C. (a) Provides that this section applies only to a river authority
that is engaged in the distribution and sale of electric energy to the
public.
(b) Authorizes a river authority, notwithstanding any other law, to
provide transmission services, as defined by the Utilities Code or PUC, on
a regional basis to any eligible transmission customer at any location
within or outside the boundaries of the river authority and to acquire,
including by lease-purchase, lease from or to any person, finance,
construct, rebuild, operate, or sell electric transmission facilities at
any location within or outside the boundaries of the river authority.
Provides that this section does not allow a river authority to construct
transmission facilities to an ultimate consumer of electricity to enable an
ultimate consumer to bypass the transmission or distribution facilities of
its existing provider or relieve a river authority from an obligation to
comply with the provisions of the Utilities Code concerning a certificate
of convenience and necessity for a transmission facility.
SECTION 47. Amends Sections 1 and 2, Article 1115a, V.T.C.S., as follows:
Sec. 1. Provides that this article applies only to a home-rule
municipality that owns an electric utility system, that by ordinance or
charter elects to have the management and control of the system governed by
a board of trustees, rather than by this article, and that:
(1) has outstanding obligations payable in whole or part, rather than
solely, from and secured by a lien on and pledge of net revenues of the
system or
(2) issues obligations that are payable in whole or part, rather than
solely, from and secured by a lien on and pledge of the net revenues of
the system and that are approved by the attorney general.
Sec. 2. Authorizes a municipality by ordinance to transfer management and
control of the electric utility system to a board, rather than a
five-member board, of trustees appointed by the municipality's governing
body. Requires the municipality by ordinance to determine the number of
members. Authorizes the municipality by ordinance to vest the power to
establish rates and related terms and conditions for its municipally owned
electric utility in the board of trustees appointed under this section,
notwithstanding any charter provision to the contrary. Makes a
nonsubstantive change.
SECTION 48. Amends Section 151.0101(a), Tax Code, to redefine "taxable
services."
SECTION 49. Amends Section 182.021(l), Tax Code, to redefine "utility
company."
SECTION 50. Amends Subchapter B, Chapter 182, Tax Code, by adding Section
182.027, as follows:
Sec. 182.027. NO EXEMPTION. Provides that this subchapter applies to a
retail electric provider that is an organizational unit of an electric
cooperative organized under Chapter 161, Utilities Code (Electric
Cooperative Corporations), that is subject to retail competition under
Chapter 41, Utilities Code, as added by this Act, notwithstanding anything
to the contrary in Chapter 161, Utilities Code.
SECTION 51. Repealer: Section 12.104, Utilities Code (Duties of General
Counsel); Chapter 34, Utilities Code (Electrical Planning); Subchapters F
(Partial Rate Deregulation Available to Certain Cooperatives) and G (Rate
Changes by Certain Electric Cooperatives), Chapter 36, Utilities Code; and
Section 37.058, Utilities Code (Certificate for Electric Generating Plant).
SECTION 52. (a) Provides that this Act does not restrict or limit a
municipality's historical right to control and receive reasonable
compensation for use of public streets, alleys, rights-of-way, or other
public property to convey or provide electricity.
(b) Provides that this Act does not affect a retail electric utility's
right to provide electric service in accordance with its certificate of
public convenience and necessity. Authorizes the revocation or
modification of a certificate of convenience and necessity, provided by
Section 37.059, Utilities Code (Revocation or Amendment of Certificate),
and Section 37.060, Utilities Code, as added by this Act.
SECTION 53. Requires PUC to study and make recommendations by December 15,
2000, to the 77th Legislature for additional legislation that would move to
and establish a competitive electric market on January 1, 2002, in
accordance with the changes in law made by this Act.
SECTION 54. Requires PUC, no later than 180 days after the effective date
of this Act, to establish rules and procedures for the securitization of
stranded costs for river authorities, as provided by Subdivision (2),
Subsection (a), Section 40.003, Utilities Code, and for electric
cooperatives under Section 41.003, Utilities Code, as added by this Act.
SECTION 55.Effective date: September 1, 1999.
SECTION 56.Emergency clause.