By: Sibley, et al. S.B. No. 7
A BILL TO BE ENTITLED
1-1 relating to electric utility restructuring and to the powers and
1-2 duties of the Public Utility Commission of Texas.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subdivisions (1) and (16), Section 11.003,
1-5 Utilities Code, are amended to read as follows:
1-6 (1) "Affected person" means:
1-7 (A) a public utility or electric cooperative
1-8 affected by an action of a regulatory authority;
1-9 (B) a person whose utility service or rates are
1-10 affected by a proceeding before a regulatory authority; or
1-11 (C) a person who:
1-12 (i) is a competitor of a public utility
1-13 with respect to a service performed by the utility; or
1-14 (ii) wants to enter into competition with
1-15 a public utility.
1-16 (16) "Ratemaking proceeding" means[
1-17 [ (A)] a proceeding in which a rate is changed[ ;
1-19 [ (B) a proceeding initiated under Chapter 34].
1-20 SECTION 2. Section 12.005, Utilities Code, is amended to
1-21 read as follows:
1-22 Sec. 12.005. APPLICATION OF SUNSET ACT. The Public Utility
1-23 Commission of Texas is subject to Chapter 325, Government Code
1-24 (Texas Sunset Act). Unless continued in existence as provided by
2-1 that chapter, the commission is abolished and this title expires
2-2 September 1, 2005 [ 2001].
2-3 SECTION 3. Section 31.002, Utilities Code, is amended to
2-4 read as follows:
2-5 Sec. 31.002. DEFINITIONS. In this subtitle:
2-6 (1) "Affiliated power generation company" means the
2-7 power generation company that is affiliated with or the successor
2-8 in interest of an electric utility certificated to serve an area
2-9 when customer choice is introduced.
2-10 (2) "Affiliated retail electric provider" means the
2-11 retail electric provider that is affiliated with or the successor
2-12 in interest of an electric utility certificated to serve an area
2-13 when customer choice is introduced.
2-14 (3) "Customer choice" means the unrestricted freedom
2-15 of a retail customer to purchase electric services, either
2-16 individually or on an aggregated basis with other retail customers,
2-17 from the provider or providers of the customer's choice and to
2-18 choose among various fuel types, energy efficiency programs, and
2-19 renewable power suppliers.
2-20 (4) "Electric Reliability Council of Texas" or "ERCOT"
2-21 means the area in Texas served by electric utilities, municipally
2-22 owned utilities, and electric cooperatives that is not
2-23 synchronously interconnected with electric utilities outside the
2-25 (5) "Electric utility" means a person or river
2-26 authority that owns or operates for compensation in this state
3-1 equipment or facilities to produce, generate, transmit, distribute,
3-2 sell, or furnish electricity in this state. The term includes a
3-3 lessee, trustee, or receiver of an electric utility and a
3-4 recreational vehicle park owner who does not comply with Subchapter
3-5 C, Chapter 184, with regard to the metered sale of electricity at
3-6 the recreational vehicle park. The term does not include:
3-7 (A) a municipal corporation;
3-8 (B) a qualifying facility;
3-9 (C) a power generation company;
3-10 (D) an exempt wholesale generator;
3-11 (E) [ (D)] a power marketer;
3-12 (F) [ (E)] a corporation described by Section
3-13 32.053 to the extent the corporation sells electricity exclusively
3-14 at wholesale and not to the ultimate consumer; or
3-15 (G) a cooperative corporation;
3-16 (H) a retail electric provider;
3-17 (I) [ (F)] a person not otherwise an electric
3-18 utility who:
3-19 (i) furnishes an electric service or
3-20 commodity only to itself, its employees, or its tenants as an
3-21 incident of employment or tenancy, if that service or commodity is
3-22 not resold to or used by others;
3-23 (ii) owns or operates in this state
3-24 equipment or facilities to produce, generate, transmit, distribute,
3-25 sell, or furnish electric energy to an electric utility, if the
3-26 equipment or facilities are used primarily to produce and generate
4-1 electric energy for consumption by that person; or
4-2 (iii) owns or operates in this state a
4-3 recreational vehicle park that provides metered electric service in
4-4 accordance with Subchapter C, Chapter 184.
4-5 (6) [ (2)] "Exempt wholesale generator" means a person
4-6 who is engaged directly or indirectly through one or more
4-7 affiliates exclusively in the business of owning or operating all
4-8 or part of a facility for generating electric energy and selling
4-9 electric energy at wholesale and who:
4-10 (A) does not own a facility for the transmission
4-11 of electricity, other than an essential interconnecting
4-12 transmission facility necessary to effect a sale of electric energy
4-13 at wholesale; and
4-14 (B) has:
4-15 (i) applied to the Federal Energy
4-16 Regulatory Commission for a determination under 15 U.S.C. Section
4-17 79z-5a; or
4-18 (ii) registered as an exempt wholesale
4-19 generator as required by Section 35.032.
4-20 (7) "Freeze period" means the period beginning on
4-21 January 1, 1999, and ending on December 31, 2001.
4-22 (8) "Independent system operator" means an entity
4-23 supervising the collective transmission facilities of a power
4-24 region that is charged with nondiscriminatory coordination of
4-25 market transactions, systemwide transmission planning, and network
5-1 (9) "Power generation company" means a person who:
5-2 (A) generates electricity that is intended to be
5-4 (B) does not own a transmission or distribution
5-5 facility in this state other than an essential interconnecting
5-6 facility, a facility not dedicated to public use, or a facility
5-7 otherwise excluded from the definition of "electric utility" under
5-8 Subdivision (5); and
5-9 (C) does not have a certificated service area,
5-10 although its affiliated electric utility or transmission and
5-11 distribution utility may have a certificated service area.
5-12 (10) [ (3)] "Power marketer" means a person who:
5-13 (A) becomes an owner of electric energy in this
5-14 state for the purpose of selling the electric energy at wholesale;
5-15 (B) does not own generation, transmission, or
5-16 distribution facilities in this state;
5-17 (C) does not have a certificated service area;
5-19 (D) has:
5-20 (i) been granted authority by the Federal
5-21 Energy Regulatory Commission to sell electric energy at
5-22 market-based rates; or
5-23 (ii) registered as a power marketer under
5-24 Section 35.032.
5-25 (11) "Power region" means a contiguous geographical
5-26 area within the state which is in a distinct region of the North
6-1 American Electric Reliability Council.
6-2 (12) [ (4)] "Qualifying cogenerator" and "qualifying
6-3 small power producer" have the meanings assigned those terms by 16
6-4 U.S.C. Sections 796(18)(C) and 796(17)(D).
6-5 (13) [ (5)] "Qualifying facility" means a qualifying
6-6 cogenerator or qualifying small power producer.
6-7 (14) [ (6)] "Rate" includes a compensation, tariff,
6-8 charge, fare, toll, rental, or classification that is directly or
6-9 indirectly demanded, observed, charged, or collected by an electric
6-10 utility for a service, product, or commodity described in the
6-11 definition of electric utility in this section and a rule,
6-12 practice, or contract affecting the compensation, tariff, charge,
6-13 fare, toll, rental, or classification that must be approved by a
6-14 regulatory authority.
6-15 (15) "Retail customer" means the end-use customer who
6-16 purchases and ultimately consumes electricity.
6-17 (16) "Retail electric provider" means a person that
6-18 sells electric service to retail customers in this state.
6-19 (17) "Transmission and distribution utility" means a
6-20 person or river authority that owns or operates for compensation in
6-21 this state equipment or facilities to transmit or distribute
6-22 electricity in a qualifying power region certified pursuant to
6-23 Section 39.152.
6-24 (18) [ (7)] "Transmission service" includes
6-25 construction or enlargement of facilities, transmission over
6-26 distribution facilities, control area services, scheduling
7-1 resources, regulation services, reactive power support, voltage
7-2 control, provision of operating reserves, and any other associated
7-3 electrical service the commission determines appropriate.
7-4 SECTION 4. Sections 32.051 and 32.052, Utilities Code, are
7-5 amended to read as follows:
7-6 Sec. 32.051. Exemption of River Authority From Wholesale
7-7 Rate Regulation. Notwithstanding any other provision of this
7-8 title, the commission may not directly or indirectly regulate
7-9 revenue requirements, rates, fuel costs, fuel charges, or fuel
7-10 acquisitions that are related to the generation and sale of
7-11 electricity at wholesale, and not to ultimate consumers, by a river
7-12 authority operating a steam generating plant on or before
7-13 January 1, 1999.
7-14 Sec. 32.052. Ability of Certain River Authorities to
7-15 Construct Improvements. A river authority operating a steam
7-16 generating plant on or before January 1, 1999, may acquire,
7-17 finance, construct, rebuild, repower, and use new or existing power
7-18 plants, equipment, transmission lines, or other assets to sell
7-19 electricity exclusively at wholesale to:
7-20 (1) a purchaser in San Saba, Llano, Burnet, Travis,
7-21 Bastrop, Blanco, Colorado, or Fayette County; or
7-22 (2) a purchaser in an area served by the river
7-23 authority on January 1, 1975.
7-24 SECTION 5. Section 32.053, Utilities Code, is amended by
7-25 amending Subsections (b) and (f) and adding Subsection (g) to read
7-26 as follows:
8-1 (b) Notwithstanding a river authority's enabling legislation
8-2 or Chapter 245, Acts of the 67th Legislature, Regular Session, 1981
8-3 (Article 717p, Vernon's Texas Civil Statutes), a corporation may:
8-4 (1) acquire, finance, construct, rebuild, repower,
8-5 operate, or sell a facility directly related to the generation of
8-6 electricity; [ and]
8-7 (2) sell, at wholesale only, the output of the
8-8 facility to a purchaser, other than an ultimate consumer, at any
8-9 location in this state; and
8-10 (3) purchase and sell electricity, at wholesale only,
8-11 to a purchaser, other than an ultimate consumer, at any location in
8-12 this state.
8-13 (f) The proceeds from the sale of bonds or other obligations
8-14 the interest on which is exempt from taxation and that are issued
8-15 by a corporation or river authority subject to this section, other
8-16 than a bond or obligation available to an investor-owned utility or
8-17 exempt wholesale generator, may not be used by the corporation[ ,
8-18 and may not have been used,] to finance the construction or
8-19 acquisition of or the rebuilding or repowering of a facility for
8-20 the generation of electricity by the corporation.
8-21 (g) Notwithstanding any other law, the board of directors of
8-22 a river authority may sell, lease, loan, or otherwise transfer
8-23 some, all, or substantially all of the electric generation property
8-24 of the river authority to a nonprofit corporation authorized under
8-25 this section. The property transfer shall be made pursuant to
8-26 terms and conditions approved by the board of directors of the
9-1 river authority.
9-2 SECTION 6. Section 35.001, Utilities Code, is amended to
9-3 read as follows:
9-4 Sec. 35.001. Definition. In this subchapter, "electric
9-5 utility" includes a municipally owned utility and an electric
9-7 SECTION 7. Section 35.004, Utilities Code, is amended to
9-8 read as follows:
9-9 Sec. 35.004. PROVISION OF TRANSMISSION SERVICE. (a) An
9-10 electric utility or transmission and distribution utility that owns
9-11 or operates transmission facilities shall provide wholesale
9-12 transmission service at rates and terms, including terms of access,
9-13 that are comparable to the rates and terms of the utility's own use
9-14 of its system.
9-15 (b) The commission shall ensure that an electric utility or
9-16 transmission and distribution utility provides nondiscriminatory
9-17 access to wholesale transmission service for qualifying facilities,
9-18 exempt wholesale generators, power marketers, power generation
9-19 companies, retail electric providers, and other electric utilities
9-20 or transmission and distribution utilities.
9-21 (c) When an electric utility or transmission and
9-22 distribution utility provides wholesale transmission service at the
9-23 request of a third party, the commission shall ensure that the
9-24 utility recovers the utility's reasonable costs in providing
9-25 wholesale transmission services necessary for the transaction from
9-26 the entity for which the transmission is provided so that the
10-1 utility's other customers do not bear the costs of the service.
10-2 (d) The commission may price wholesale transmission services
10-3 based in whole or in part on the postage stamp method of pricing
10-4 under which a transmission-owning utility's rate is based on the
10-5 utility's annual costs of transmission divided by the total demand
10-6 placed on the combined transmission systems of all such
10-7 transmission-owning utilities within a power region.
10-8 (e) The commission shall ensure that ancillary services
10-9 necessary to facilitate the transmission of electric energy are
10-10 available at reasonable prices with terms and conditions that are
10-11 not unreasonably preferential, prejudicial, discriminatory,
10-12 predatory, or anticompetitive. In this subsection, "ancillary
10-13 services" means services necessary to facilitate the transmission
10-14 of electric energy including but not limited to load following,
10-15 standby power, backup power, reactive power, and such other
10-16 services as the commission may determine by rule.
10-17 SECTION 8. Subsection (b), Section 35.005, Utilities Code,
10-18 is amended to read as follows:
10-19 (b) The commission may require transmission service at
10-20 wholesale, including the construction or enlargement of a
10-21 facility[ , in a proceeding not related to approval of an integrated
10-22 resource plan].
10-23 SECTION 9. Section 35.033, Utilities Code, is amended to
10-24 read as follows:
10-25 Sec. 35.033. Affiliate Wholesale Provider. An affiliate of
10-26 an electric utility may be an exempt wholesale generator or power
11-1 marketer and may sell electric energy to its affiliated electric
11-2 utility in accordance with [ Chapter 34 and other] laws governing
11-3 wholesale sales of electric energy.
11-4 SECTION 10. Section 35.034, Utilities Code, is amended by
11-5 adding Subsection (c) to read as follows:
11-6 (c) For purposes of this section, "electric utility" does
11-7 not include a river authority.
11-8 SECTION 11. Section 35.035, Utilities Code, is amended by
11-9 adding Subsection (d) to read as follows:
11-10 (d) For purposes of this section, "electric utility" does
11-11 not include a river authority.
11-12 SECTION 12. Section 36.008, Utilities Code, is amended to
11-13 read as follows:
11-14 Sec. 36.008. STATE TRANSMISSION SYSTEM. In establishing
11-15 rates for an electric utility [ not required to file an integrated
11-16 resource plan], the commission may review the state's transmission
11-17 system and make recommendations to the utility on the need to build
11-18 new power lines, upgrade power lines, and make other necessary
11-19 improvements and additions.
11-20 SECTION 13. Section 36.052, Utilities Code, is amended to
11-21 read as follows:
11-22 Sec. 36.052. ESTABLISHING REASONABLE RETURN. In
11-23 establishing a reasonable return on invested capital, the
11-24 regulatory authority shall consider applicable factors, including:
11-25 (1) [ the efforts of the electric utility to comply
11-26 with its most recently approved integrated resource plan;]
12-1 [ (2)] the efforts and achievements of the utility in
12-2 conserving resources;
12-3 (2) [ (3)] the quality of the utility's services;
12-4 (3) [ (4)] the efficiency of the utility's operations;
12-6 (4) [ (5)] the quality of the utility's management.
12-7 SECTION 14. Subsection (d), Section 36.058, is amended to
12-8 read as follows:
12-9 (d) In making a finding regarding an affiliate transaction[ ,
12-10 including an affiliate transaction subject to Chapter 34,] the
12-11 regulatory authority shall:
12-12 (1) determine the extent to which the conditions and
12-13 circumstances of that transaction are reasonably comparable
12-14 relative to quantity, terms, date of contract, and place of
12-15 delivery; and
12-16 (2) allow for appropriate differences based on that
12-18 SECTION 15. Section 36.201, Utilities Code, is amended to
12-19 read as follows:
12-20 Sec. 36.201. AUTOMATIC ADJUSTMENT FOR CHANGES IN COSTS.
12-21 Except as permitted by [ Chapter 34 or] Section 36.204, the
12-22 commission may not establish a rate or tariff that authorizes an
12-23 electric utility to automatically adjust and pass through to the
12-24 utility's customers a change in the utility's fuel or other costs.
12-25 SECTION 16. Section 36.204, Utilities Code, is amended to
12-26 read as follows:
13-1 Sec. 36.204. COST RECOVERY AND INCENTIVES. In establishing
13-2 rates for an electric utility [ not required to file an integrated
13-3 resource plan], the commission may:
13-4 (1) allow timely recovery of the reasonable costs of
13-5 conservation, load management, and purchased power, notwithstanding
13-6 Section 36.201; and
13-7 (2) authorize additional incentives for conservation,
13-8 load management, purchased power, and renewable resources.
13-9 SECTION 17. Section 36.207, Utilities Code, is amended to
13-10 read as follows:
13-11 Sec. 36.207. USE OF MARK-UPS. Any mark-ups approved under
13-12 [ Chapter 34 or] Section 36.206 are an exceptional form of rate
13-13 relief that the electric utility may recover from ratepayers only
13-14 on a finding by the commission that the relief is necessary to
13-15 maintain the utility's financial integrity.
13-16 SECTION 18. Section 37.001, Utilities Code, is amended to
13-17 read as follows:
13-18 Sec. 37.001. DEFINITIONS. In this chapter:
13-19 (1) "Certificate" means a certificate of convenience
13-20 and necessity.
13-21 (2) "Electric utility" includes an electric
13-23 (3) "Retail electric utility" means a person,
13-24 political subdivision, or agency that operates, maintains, or
13-25 controls in this state a facility to provide retail electric
13-26 utility service. The term does not include a corporation described
14-1 by Section 32.053 to the extent that the corporation sells
14-2 electricity exclusively at wholesale and not to the ultimate
14-3 consumer. A qualifying cogenerator that sells electric energy at
14-4 retail to the sole purchaser of the cogenerator's thermal output
14-5 under Sections 35.061 and 36.007 is not for that reason considered
14-6 to be a retail electric utility.
14-7 SECTION 19. Subchapter B, Chapter 37, is amended by adding
14-8 Section 37.060 to read as follows:
14-9 Sec. 37.060. DIVISION OF MULTIPLY CERTIFICATED SERVICE
14-10 AREAS. (a) If requested by a retail electric utility that is
14-11 providing customer choice to all of its retail customers, the
14-12 commission shall examine all areas within the retail electric
14-13 utility's service area that are also certificated to one or more
14-14 other retail electric utilities and, after notice and hearing,
14-15 shall amend the electric utilities' certificates so that only one
14-16 retail electric utility is certificated to provide distribution
14-17 services in any area. Only retail electric utilities certificated
14-18 to serve an area on June 1, 1999, may continue to serve the area or
14-19 portion of the area under an amended certificate of convenience and
14-21 (b) This section shall not apply in any area in which a
14-22 municipally owned utility is certificated to provide retail
14-23 electric utility service if the municipally owned utility serving
14-24 the area files with the commission by February 1, 2000, a request
14-25 that areas within the certificated service area of the municipally
14-26 owned utility remain as presently certificated.
15-1 (c) The commission shall enter its order dividing multiply
15-2 certificated areas within one year of the date a request is
15-4 (d) In amending certificates under this section, the
15-5 commission shall take into consideration the factors set out in
15-6 Section 37.056.
15-7 (e) Notwithstanding Section 37.059, the commission shall
15-8 revoke certificates to the extent necessary to achieve the division
15-9 of retail electric service areas as provided by this section.
15-10 (f) Unless otherwise agreed by the affected retail electric
15-11 utilities, each retail electric utility shall be allowed to
15-12 continue to provide service to the location of
15-13 electricity-consuming facilities it is serving on the date an
15-14 application for division of the affected multiply certificated
15-15 service areas is filed. No customer shall be permitted to switch
15-16 from one retail electric utility to another while an application
15-17 for division of the affected multiply certificated service areas is
15-19 (g) If on June 1, 1999, retail service is being provided in
15-20 an area by another retail electric utility with the written consent
15-21 of the retail electric utility certificated to serve the area, such
15-22 consent shall be filed with the commission. Upon notification of
15-23 such consent and a request by the affected retail electric
15-24 utilities to amend the relevant certificates, the commission may
15-25 grant an exception or amend a retail electric utility's
16-1 (h) The commission shall not grant a retail electric utility
16-2 certificate to serve an area if the effect of the grant would cause
16-3 the area to be multiply certificated.
16-4 SECTION 20. Section 38.001, Utilities Code, is amended to
16-5 read as follows:
16-6 Sec. 38.001. GENERAL STANDARD. An electric utility and an
16-7 electric cooperative shall furnish service, instrumentalities, and
16-8 facilities that are safe, adequate, efficient, and reasonable.
16-9 SECTION 21. Section 38.004, Utilities Code, is amended to
16-10 read as follows:
16-11 Sec. 38.004. MINIMUM CLEARANCE STANDARD. Notwithstanding
16-12 any other law, a transmission or distribution line owned by an
16-13 electric utility or an electric cooperative must be constructed,
16-14 operated, and maintained, as to clearances, in the manner described
16-15 by the National Electrical Safety Code Standard ANSI (c)(2), as
16-16 adopted by the American National Safety Institute and in effect at
16-17 the time of construction.
16-18 SECTION 22. Subchapter A, Chapter 38, Utilities Code, is
16-19 amended by adding Section 38.005 to read as follows:
16-20 Sec. 38.005. ELECTRIC SERVICE RELIABILITY MEASURES.
16-21 (a) The commission shall implement service quality and reliability
16-22 standards relating to the delivery of electricity to retail
16-23 customers by electric utilities and transmission and distribution
16-24 utilities. The commission by rule shall develop reliability
16-25 standards including but not limited to the following:
16-26 (1) the system-average interruption frequency index;
17-1 (2) the system-average interruption duration index;
17-2 (3) achievement of average response time for customer
17-3 service requests or inquiries; or
17-4 (4) other standards that the commission finds
17-5 reasonable and appropriate.
17-6 (b) The standards implemented under Subsection (a) shall
17-7 require each electric utility and transmission and distribution
17-8 utility subject to this section to maintain adequately trained and
17-9 experienced personnel throughout the utility's service area so that
17-10 the utility is able to fully and adequately comply with the
17-11 appropriate service quality and reliability standards.
17-12 (c) The standards shall ensure that electric utilities do
17-13 not neglect any geographic area, including communities of less than
17-14 1,000 persons and low-income areas, with regard to system
17-16 (d) The commission may require each electric utility and
17-17 transmission and distribution utility to supply data to assist the
17-18 commission in developing the reliability standards.
17-19 (e) All generation providers shall be obligated to comply
17-20 with any operational criteria duly established by the independent
17-21 system operator or adopted by the commission.
17-22 SECTION 23. Section 38.071, Utilities Code, is amended to
17-23 read as follows:
17-24 Sec. 38.071. Improvements in Service; Interconnecting
17-25 Service. The commission, after notice and hearing, may:
17-26 (1) order an electric utility to provide specified
18-1 improvements in its service in a specified area if:
18-2 (A) service in the area is inadequate or
18-3 substantially inferior to service in a comparable area; and
18-4 (B) requiring the company to provide the
18-5 improved service is reasonable; or
18-6 (2) order two or more electric utilities or electric
18-7 cooperatives to establish specified facilities for interconnecting
18-9 SECTION 24. Subtitle B, Title 2, Utilities Code, is amended
18-10 by adding Chapters 39, 40, and 41 to read as follows:
18-11 CHAPTER 39. RESTRUCTURING OF ELECTRIC UTILITY INDUSTRY
18-12 SUBCHAPTER A. GENERAL PROVISIONS
18-13 Sec. 39.001. LEGISLATIVE POLICY AND PURPOSE. (a) This
18-14 chapter is enacted to protect the public interest during the
18-15 transition to and in the establishment of a fully competitive
18-16 electric power industry.
18-17 (b) The legislature finds that it is in the public interest
18-19 (1) implement on January 1, 2002, a competitive retail
18-20 electric market that allows each retail customer to choose the
18-21 customer's provider of electricity and that encourages full and
18-22 fair competition among all providers of electricity;
18-23 (2) allow utilities with uneconomic generation-related
18-24 assets and purchased power contracts to recover the reasonable
18-25 excess costs over market of such assets and purchased power
18-26 contracts; and
19-1 (3) educate utility customers about anticipated
19-2 changes in the provision of retail electric service to ensure that
19-3 the benefits of the competitive market reach all customers.
19-4 Sec. 39.002. APPLICABILITY. This chapter, other than
19-5 Sections 39.155, 39.157(d), and 39.203, does not apply to a
19-6 municipally owned utility or an electric cooperative corporation.
19-7 If there is a conflict between the specific provisions of this
19-8 chapter and any other provisions of this title, except for Chapters
19-9 40 and 41, the provisions of this chapter control.
19-10 SUBCHAPTER B. TRANSITION TO COMPETITIVE RETAIL
19-11 ELECTRIC MARKET
19-12 Sec. 39.051. UNBUNDLING. (a) On or before September 1,
19-13 2000, each electric utility shall unbundle its costs and rates into
19-14 generation, transmission, distribution, and retail energy services
19-15 and a system benefit fund charge and expected competition
19-16 transition charge.
19-17 (b) Not later than January 1, 2002, each electric utility
19-18 shall separate its business activities from one another into the
19-19 following units:
19-20 (1) a power generation company;
19-21 (2) a retail electric provider; and
19-22 (3) a transmission and distribution utility.
19-23 (c) An electric utility may accomplish the separation
19-24 required by Subsection (b) either through the creation of separate
19-25 nonaffiliated companies or separate affiliated companies owned by a
19-26 common holding company or through the sale of assets to a third
20-2 (d) Each electric utility shall unbundle under this section
20-3 in a manner that provides for a separation of personnel,
20-4 information flow, functions, and operations.
20-5 (e) If the commission determines that a power region will
20-6 not qualify for customer choice under Section 39.152 by January 1,
20-7 2002, it may adjust the filing and implementation dates in this
20-8 section for utilities in that region.
20-9 Sec. 39.052. FREEZE ON EXISTING RETAIL BASE RATE TARIFFS.
20-10 (a) Until January 1, 2002, an electric utility shall provide
20-11 retail electric service within its certificated service area in
20-12 accordance with the electric utility's retail base rate tariffs in
20-13 effect on September 1, 1999, including its purchased power cost
20-14 recovery factor.
20-15 (b) During the freeze period an electric utility may not
20-16 increase its retail base rates above the rates provided by this
20-17 section except for losses caused by force majeure as provided by
20-18 Section 39.055.
20-19 (c) Notwithstanding any other provision of this title,
20-20 during the freeze period the regulatory authority may not reduce
20-21 the retail base rates of an electric utility.
20-22 (d) During the freeze period the retail base rates, overall
20-23 revenues, return on invested capital, and net income of an electric
20-24 utility are not subject to complaint, hearing, or determination as
20-25 to reasonableness.
20-26 (e) An electric utility that has a rate proceeding pending
21-1 before the commission as of January 2, 1999, shall provide service
21-2 in accordance with the tariffs approved in that proceeding from the
21-3 date of approval until the end of the freeze period.
21-4 (f) Nothing in this section affects the authority of the
21-5 commission to fulfill its obligations under Section 39.262.
21-6 Sec. 39.053. COST RECOVERY ADJUSTMENTS. This subchapter
21-7 does not limit or alter the ability of an electric utility during
21-8 the freeze period to revise its fuel factor or to reconcile fuel
21-9 expenses and to either refund fuel overcollections or surcharge
21-10 fuel undercollections to customers, as authorized by its tariffs
21-11 and Sections 36.203 and 36.205.
21-12 Sec. 39.054. RETAIL ELECTRIC SERVICE DURING THE FREEZE
21-13 PERIOD. (a) An electric utility shall provide retail electric
21-14 service during the freeze period in accordance with any contract
21-15 terms applicable to a particular retail customer approved by the
21-16 regulatory authority and in effect on December 31, 1998.
21-17 (b) Nothing in Sections 39.052(c) and (d) shall be construed
21-18 to restrict any customer's right to complain during the freeze
21-19 period to the regulatory authority regarding the quality of retail
21-20 electric service provided by the electric utility or the
21-21 applicability of an electric utility's particular tariff to the
21-23 (c) Nothing in this title shall be construed to restrict an
21-24 electric utility, voluntarily and at its sole discretion, from
21-25 offering new services or new tariff options to its customers during
21-26 the freeze period.
22-1 (d) Any offering of new services or tariff options under
22-2 this section shall be equal to or greater than an electric
22-3 utility's long-run marginal cost and not be unreasonably
22-4 preferential, prejudicial, discriminatory, predatory, or
22-6 (e) Revenue from any new offering under this section shall
22-7 be accounted for in a manner consistent with Section 36.007.
22-8 Sec. 39.055. FORCE MAJEURE. (a) An electric utility may
22-9 recover losses resulting from force majeure through an increase in
22-10 its retail base rates during the freeze period.
22-11 (b) Notwithstanding Subchapter C, Chapter 36, the regulatory
22-12 authority, after a hearing to determine the electric utility's
22-13 losses from force majeure, shall permit the utility to fully
22-14 collect any approved force majeure increase through an appropriate
22-15 customer surcharge mechanism.
22-16 (c) For purposes of this section, "force majeure" means a
22-17 major event or combination of major events, including new or
22-18 expanded state or federal statutory or regulatory requirements;
22-19 hurricanes, tornadoes, ice storms, or other natural disasters; or
22-20 acts of war, terrorism, or civil disturbance, beyond the control of
22-21 an electric utility that the regulatory authority finds increases
22-22 the utility's total nonfuel costs or decreases the utility's total
22-23 nonfuel revenues related to the generation and delivery of
22-24 electricity by more than 10 percent for any calendar year during
22-25 the freeze period. The term does not include any changes in
22-26 general economic conditions such as inflation, interest rates, or
23-1 other factors of general application.
23-2 SUBCHAPTER C. RETAIL COMPETITION
23-3 Sec. 39.101. CUSTOMER SAFEGUARDS. (a) Before retail
23-4 competition begins on January 1, 2002, the commission shall ensure
23-5 that retail customer protections are established that entitle a
23-7 (1) to safe, reliable, and reasonably priced
23-8 electricity, including protection against service disconnections in
23-9 extreme weather or in cases of medical emergency or nonpayment for
23-10 unrelated services;
23-11 (2) to privacy of customer consumption and credit
23-13 (3) to bills presented in a clear format and in
23-14 language readily understandable by customers;
23-15 (4) to the option to have all electric services on a
23-16 single bill, except in those instances where multiple bills are
23-17 allowed under Chapters 40 and 41;
23-18 (5) to protection from discrimination on the basis of
23-19 race, color, sex, nationality, religion, or marital status;
23-20 (6) to accuracy of metering and billing;
23-21 (7) to information in English and Spanish and any
23-22 other language as necessary concerning rates, key terms and
23-23 conditions, and the environmental impact of certain production
23-25 (8) to information in English and Spanish and any
23-26 other language as necessary concerning low-income assistance
24-1 programs and deferred payment plans; and
24-2 (9) to other information or protections necessary to
24-3 ensure high-quality service to customers.
24-4 (b) A customer is entitled:
24-5 (1) to be informed about rights and opportunities in
24-6 the transition to a competitive electric industry;
24-7 (2) to choose the customer's retail electric provider
24-8 consistent with this chapter, to have that choice honored, and to
24-9 assume that the customer's chosen provider will not be changed
24-10 without the customer's informed consent;
24-11 (3) to have access to providers of energy efficiency
24-12 services and to providers of energy generated by renewable energy
24-14 (4) to be served by a provider of last resort that
24-15 offers a commission-approved standard service package;
24-16 (5) to receive sufficient information to make an
24-17 informed choice of service provider;
24-18 (6) to be protected from unfair, misleading, or
24-19 deceptive practices, including protection from being billed for
24-20 services that were not authorized or provided; and
24-21 (7) to have an impartial and prompt resolution of
24-22 disputes with its chosen retail electric provider and transmission
24-23 and distribution utility.
24-24 (c) The commission shall adopt and enforce such rules as may
24-25 be necessary or appropriate to carry out Subsections (a) and (b),
24-26 including but not limited to rules for minimum service standards
25-1 for a retail electric provider relating to customer deposits and
25-2 the extension of credit, switching fees, levelized billing
25-3 programs, termination of service, and quality of service. The
25-4 commission has jurisdiction over all providers of electric service
25-5 in enforcing Subsections (a) and (b) and may assess civil and
25-6 administrative penalties under Section 15.023 and seek civil
25-7 penalties under Section 15.028.
25-8 (d) On or before December 31, 2001, the commission shall
25-9 modify its current rules regarding customer protections to ensure
25-10 that at least the same level of customer protection against
25-11 potential abuses and the same quality of service that exists on
25-12 December 31, 1999, is maintained in a restructured electric
25-14 Sec. 39.102. RETAIL CUSTOMER CHOICE. (a) Each retail
25-15 customer in the state, except retail customers in power regions
25-16 that are not certified as qualifying for competition by the
25-17 commission and retail customers of electric cooperative
25-18 corporations and municipally owned utilities that have not opted
25-19 for customer choice, shall have customer choice on and after
25-20 January 1, 2002.
25-21 (b) The affiliated retail electric provider of the electric
25-22 utility serving a retail customer on December 31, 2001, may
25-23 continue to serve that customer until the customer chooses service
25-24 from a different retail electric provider.
25-25 (c) An electric utility that has in effect on January 1,
25-26 1999, and extending beyond January 1, 2002, a systemwide rate
26-1 freeze for residential and commercial retail customers in this
26-2 state that has been found by the regulatory authority to be in the
26-3 public interest is exempt from the provisions of Sections 39.153,
26-4 39.154, 39.156, and 39.157 and Subchapters E and F unless
26-5 application of the provisions is permitted by a federal court
26-6 having jurisdiction and by the regulatory authority. If such
26-7 provisions are not permitted to be applied to such a utility by a
26-8 federal court having jurisdiction or by the regulatory authority,
26-9 the utility shall offer retail customer choice at the later of
26-10 either the end of its prior-approved rate freeze period or when the
26-11 region in which the utility serves is determined to be a qualifying
26-12 power region under Section 39.152 and shall have no claim for
26-13 stranded cost recovery under this chapter.
26-14 (d) A request for a determination under Subsection (c) as to
26-15 whether an electric utility should be exempt may be made by any
26-16 ratepayer of the utility. In making its determination under
26-17 Subsection (c), the regulatory authority shall consider:
26-18 (1) the total economic cost to customers as compared
26-19 to the systemwide rate freeze referenced in Subsection (c);
26-20 (2) the impact on the utility's financial integrity;
26-22 (3) whether the exemption is in the public interest.
26-23 Sec. 39.103. COMMISSION AUTHORITY TO DELAY COMPETITION AND
26-24 SET NEW RATES. If the commission determines under Section 39.104
26-25 that a power region is unable to offer fair competition and
26-26 reliable service to all retail customer classes on January 1, 2002,
27-1 or that the power region fails to meet the requirements of Section
27-2 39.152, the commission shall delay customer choice for the power
27-3 region and may on or after January 1, 2002, establish new rates for
27-4 all electric utilities in the power region as provided by Chapter
27-6 Sec. 39.104. CUSTOMER CHOICE PILOT PROJECTS. (a) Customer
27-7 choice pilot projects may be used to allow the commission to
27-8 evaluate the ability of each power region and electric utility to
27-9 implement customer choice.
27-10 (b) The commission shall require each electric utility
27-11 operating in ERCOT to offer customer choice in its service area
27-12 amounting to five percent of the utility's combined load of all
27-13 customer classes beginning on January 1, 2001.
27-14 (c) The commission may require an electric utility operating
27-15 outside of ERCOT to offer customer choice in its service area
27-16 amounting to five percent of the utility's combined load of all
27-17 customer classes beginning on January 1, 2001.
27-18 (d) The load designated for customer choice under this
27-19 section shall be distributed among all customer classes of a
27-20 utility consistent with the purpose of this section and subject to
27-21 commission approval.
27-22 (e) Each utility operating a pilot project under this
27-23 section shall charge residential and small commercial customers in
27-24 accordance with Section 39.052.
27-25 (f) The commission may prescribe reporting requirements it
27-26 considers necessary to evaluate a pilot project consistent with the
28-1 purpose of this section.
28-2 (g) Customers having customer choice under this section
28-3 shall be billed as provided by Section 39.107.
28-4 (h) The commission may prescribe terms and conditions it
28-5 considers necessary to prohibit anticompetitive practices and to
28-6 encourage customer choice offered under this section.
28-7 Sec. 39.105. LIMITATION ON SALE OF ELECTRICITY. After
28-8 January 1, 2002, in areas in which customer choice has been
28-9 introduced, a transmission and distribution utility may not sell
28-10 electricity or otherwise participate in the market for electricity.
28-11 Sec. 39.106. PROVIDER OF LAST RESORT. (a) The commission
28-12 shall designate retail electric providers in areas of the state in
28-13 which customer choice is in effect to serve as providers of last
28-15 (b) A provider of last resort shall offer a standard retail
28-16 service package for each class of customers designated by the
28-17 commission at a fixed, nondiscountable rate approved by the
28-19 (c) A provider of last resort shall provide the standard
28-20 retail service package to any requesting customer in the territory
28-21 for which it is the provider of last resort.
28-22 (d) For all areas of the state for which the commission has
28-23 determined that customer choice is to be introduced on January 1,
28-24 2002, the commission shall designate the provider or providers of
28-25 last resort no later than June 1, 2001. For areas of the state for
28-26 which customer choice is not to be introduced on January 1, 2002,
29-1 the commission shall designate the provider or providers of last
29-2 resort at the earliest feasible date after determining that
29-3 conditions for permitting customer choice in that area have been
29-4 met but no later than 180 days before customer choice is to begin.
29-5 (e) The commission shall determine the procedures and
29-6 criteria, which may include the solicitation of bids, for
29-7 designating a provider or providers of last resort. The commission
29-8 may redesignate the provider of last resort according to a schedule
29-9 it considers appropriate.
29-10 (f) In the event that no retail electric provider applies to
29-11 be the provider of last resort for a given area of the state on
29-12 reasonable terms and conditions, the commission may require a
29-13 retail electric provider to become the provider of last resort as a
29-14 condition of receiving or maintaining a certificate pursuant to
29-15 Section 39.352.
29-16 (g) In the event that a retail electric provider fails to
29-17 serve any or all of its customers, the provider of last resort
29-18 shall offer each such customer the standard retail service package
29-19 for that customer class with no interruption of service to any
29-21 Sec. 39.107. METERING AND BILLING SERVICES. (a) On
29-22 introduction of customer choice in a service area, metering
29-23 services for the area shall continue to be provided by the
29-24 transmission and distribution utility of the unbundled electric
29-25 utility that was serving the area prior to the introduction of
29-26 customer choice. Metering services shall be provided on a
30-1 competitive basis beginning:
30-2 (1) January 1, 2004, in areas in which customer choice
30-3 is introduced January 1, 2002; and
30-4 (2) in areas in which customer choice begins at a
30-5 later date, two years after the date that customer choice is
30-6 introduced in the area.
30-7 (b) On introduction of customer choice in a service area,
30-8 tenants of leased or rented property that is separately metered
30-9 shall have the right to choose a retail electric provider, and the
30-10 owner of the property must grant access to transmission and
30-11 distribution utilities or retail electric providers for metering
30-13 (c) Beginning on the date of introduction of customer choice
30-14 in a service area, a transmission and distribution utility shall
30-15 bill a customer's retail electric provider for transmission and
30-16 distribution services.
30-17 (d) A transmission and distribution utility may bill retail
30-18 customers at the request of a retail electric provider. A
30-19 transmission and distribution utility that provides billing service
30-20 at the request of an affiliated retail electric provider shall
30-21 offer billing service on comparable terms and conditions to any
30-22 other requesting retail electric provider of a customer served by
30-23 the transmission and distribution utility.
30-24 (e) Beginning on the date of introduction of customer choice
30-25 in a service area, any charges for metering and billing services
30-26 shall comply with rules adopted by the commission relating to
31-1 nondiscriminatory rates of service.
31-2 Sec. 39.108. CONTRACTUAL OBLIGATIONS. This chapter shall
31-4 (1) interfere with or abrogate the rights or
31-5 obligations of any party, including a retail or wholesale customer,
31-6 to a contract with an investor-owned electric utility, river
31-7 authority, municipally owned utility, or electric cooperative
31-8 corporation; or
31-9 (2) interfere with or abrogate the rights or
31-10 obligations of a party under a contract or agreement concerning
31-11 certificated utility service areas.
31-12 SUBCHAPTER D. MARKET STRUCTURE
31-13 Sec. 39.151. ESSENTIAL ORGANIZATIONS. (a) Before obtaining
31-14 commission certification as a qualifying power region, a power
31-15 region must establish one or more independent organizations to
31-16 perform the following functions:
31-17 (1) ensure access to the transmission and distribution
31-18 systems for all buyers and sellers of electricity on
31-19 nondiscriminatory terms;
31-20 (2) ensure the reliability of the regional electrical
31-22 (3) ensure that information relating to a customer's
31-23 choice of retail electric provider is conveyed in a timely manner
31-24 to the persons who need such information; and
31-25 (4) ensure that electricity production and delivery
31-26 are accurately accounted for among the generators and wholesale
32-1 buyers and sellers in the region.
32-2 (b) For the purpose of this chapter, "independent
32-3 organization" means an independent system operator or other person
32-4 that is sufficiently independent of any producer or seller of
32-5 electricity that its decisions will not be unduly influenced by any
32-6 producer or seller. An entity will be deemed to be independent if
32-7 it is governed by a board that has equal representation of all
32-8 segments of the electric market, including at least one
32-9 residential, one commercial, and one industrial retail customer.
32-10 (c) The commission shall certify an independent organization
32-11 or organizations to perform the functions set out in this section.
32-12 (d) An independent organization certified by the commission
32-13 for a power region shall establish and enforce procedures,
32-14 consistent with this title and the commission's rules, relating to
32-15 the reliability of the regional electrical network and accounting
32-16 for the production and delivery of electricity among generators and
32-17 all other market participants. The procedures shall be subject to
32-18 commission oversight and review.
32-19 (e) The commission may authorize an independent organization
32-20 that is certified under this section to charge a reasonable rate to
32-21 wholesale buyers and sellers to cover the independent
32-22 organization's costs.
32-23 (f) In implementing this section, the commission may
32-24 cooperate with the utility regulatory commission of another state
32-25 or the federal government and may hold a joint hearing or make a
32-26 joint investigation with that commission.
33-1 (g) If it amends its governance rules to allow
33-2 representation reflecting the makeup of the retail market on its
33-3 governing board in accordance with Subsection (b), the existing
33-4 independent system operator in ERCOT will meet the criteria
33-5 provided by Subsection (a) with respect to access to the
33-6 transmission systems for all buyers and sellers of electricity in
33-7 the ERCOT region and ensuring the reliability of the regional
33-8 electrical network. The ERCOT independent system operator may meet
33-9 the criteria relating to the other functions of an independent
33-10 organization provided by Subsection (a) by adopting procedures and
33-11 acquiring the resources needed to carry out those functions. The
33-12 commission shall determine whether the ERCOT independent system
33-13 operator may be certified as meeting the criteria relating to
33-14 Subsections (a) and (b).
33-15 (h) The commission may delegate authority to the existing
33-16 independent system operator in ERCOT to enforce operating standards
33-17 within the regional electrical network and to establish and oversee
33-18 transaction settlement procedures. After the introduction of
33-19 customer choice in ERCOT, the commission may establish the terms
33-20 and conditions for the ERCOT independent system operator's
33-21 authority to oversee utility dispatch functions.
33-22 (i) A retail electric provider, transmission and
33-23 distribution utility, or power generation company shall observe all
33-24 scheduling, operating, and settlement protocols established by the
33-25 independent system operator in ERCOT. Failure to comply with this
33-26 subsection may result in the revocation, suspension, or amendment
34-1 of a certificate as provided by Section 39.356 or in the imposition
34-2 of an administrative penalty as provided by Section 39.357.
34-3 (j) To the extent the commission has authority over an
34-4 independent organization outside of ERCOT, the commission may
34-5 delegate authority to the independent organization consistent with
34-6 Subsection (h).
34-7 Sec. 39.152. QUALIFYING POWER REGIONS. The commission shall
34-8 certify a power region as qualifying for customer choice if:
34-9 (1) a sufficient number of interconnected utilities in
34-10 the power region fall under the operational control of an
34-11 independent organization as described by Section 39.151;
34-12 (2) the power region has a generally applicable tariff
34-13 that guarantees open and nondiscriminatory access for all users as
34-14 provided by Section 39.203; and
34-15 (3) no person owns, operates, or controls more than 20
34-16 percent of the installed generation capacity located in or capable
34-17 of delivering electricity to a power region. In determining
34-18 whether a power region meets the requirements of this section, the
34-19 commission shall consider the extent to which the available
34-20 transmission facilities limit the delivery of electricity from
34-21 generators located outside of the power region.
34-22 Sec. 39.153. CAPACITY AUCTION. (a) Each electric utility
34-23 subject to this section shall sell at auction, conducted at least
34-24 60 days before the date set for customer choice to begin in the
34-25 power region in which the utility serves, entitlements to at least
34-26 15 percent of the electric utility's installed generation capacity.
35-1 For the purposes of this section, the term "electric utility"
35-2 includes the power generation company that is unbundled from the
35-3 electric utility in accordance with Section 39.051.
35-4 (b) The obligation to auction the entitlements shall
35-5 continue until the earlier of 60 months after the date customer
35-6 choice is introduced in the power region or the date the commission
35-7 determines that 40 percent or more of the electric power consumed
35-8 by residential and small commercial customers within the affiliated
35-9 transmission and distribution utility's certificated service area
35-10 before the onset of customer choice is provided by nonaffiliated
35-11 retail electric providers.
35-12 (c) A retail electric provider affiliated with an electric
35-13 utility selling entitlements in the auction shall not be allowed to
35-14 purchase entitlements from the affiliated electric utility at the
35-15 auction required by this section.
35-16 (d) The commission shall adopt rules by December 31, 2000,
35-17 that define the scope of the capacity entitlements to be auctioned.
35-18 Entitlements may be auctioned in blocks of less than 15 percent.
35-19 The rules shall state the minimum amount of capacity that can be
35-20 sold at auction as an entitlement. At a minimum, the rules shall
35-21 provide that the entitlements:
35-22 (1) may be sold and purchased in periods of no less
35-23 than one month nor longer than four years;
35-24 (2) may be resold to any lawful purchaser, except for
35-25 a retail electric provider affiliated with the electric utility
35-26 that originally auctioned the entitlement;
36-1 (3) include no possessory interest in the unit from
36-2 which the power is produced;
36-3 (4) include no obligations of a possessory owner of an
36-4 interest in the unit from which the power is produced; and
36-5 (5) give the purchaser the right to designate the
36-6 dispatch of the entitlement, subject to planned outages, outages
36-7 beyond the control of the utility operating the unit, and other
36-8 considerations subject to the oversight of the applicable
36-9 independent organization.
36-10 (e) The commission shall adopt rules by December 31, 2000,
36-11 that prescribe the procedure for the auction of the entitlement.
36-12 Such rules shall include:
36-13 (1) a process for conducting the auction or auctions,
36-14 including who shall conduct it, how often it shall be conducted,
36-15 and how winning bidders shall be determined;
36-16 (2) a process for the electric utility to designate
36-17 which generation units or combination of units are offered for
36-19 (3) a provision for the utility to establish an
36-20 opening bid price based upon the electric utility's expected cost,
36-21 with the commission prescribing the means for determining the
36-22 opening bid price, which shall not include return on equity; and
36-23 (4) a provision that allows a bidder to specify the
36-24 magnitude and term of the entitlement, subject to the conditions
36-25 established in Subsection (d).
36-26 (f) In adopting the process under Subsection (e)(2), the
37-1 commission shall consider the furtherance of the development of the
37-2 competitive market, the cost of transmission, physical constraints
37-3 of the transmission system, the proximity of the generation to
37-4 load, economic efficiency, and such other factors that the
37-5 commission finds relevant. The process may provide for commission
37-6 approval of the designation prior to auction. The commission may
37-7 consult with the applicable independent organization to develop the
37-9 Sec. 39.154. LIMITATION OF OWNERSHIP OF INSTALLED CAPACITY.
37-10 (a) Beginning on the date of introduction of customer choice, no
37-11 power generation company may own and operate more than 20 percent
37-12 of the installed generation capacity located in, or capable of
37-13 delivering electricity to, a qualifying power region, which
37-14 capacity is available for sale to others.
37-15 (b) In a power region not entirely within the state, the
37-16 commission may waive or modify the requirement in Subsection (a)
37-17 upon a finding of good cause.
37-18 (c) In determining the percentage shares of installed
37-19 generation capacity under this section, the commission shall
37-20 combine capacity owned and controlled by a power generation company
37-21 and any entity that is affiliated with that power generation
37-23 Sec. 39.155. COMMISSION ASSESSMENT OF MARKET POWER.
37-24 (a) Each person, municipally owned utility, electric cooperative
37-25 corporation, and river authority that owns generation facilities
37-26 and offers electricity for sale in this state shall report to the
38-1 commission its installed generation capacity, the total amount of
38-2 capacity available for sale to others, the total amount of capacity
38-3 under contract to others, the total amount of capacity dedicated to
38-4 its own use, its annual wholesale power sales in the state, its
38-5 annual retail power sales in the state, and any other information
38-6 necessary for the commission to assess market power or the
38-7 development of a competitive retail market in Texas. The
38-8 commission shall by rule prescribe the nature and detail of such
38-9 reporting requirements.
38-10 (b) The ERCOT independent system operator shall submit an
38-11 annual report to the commission identifying existing and potential
38-12 transmission and distribution constraints and system needs,
38-13 alternatives for meeting system needs, and recommendations for
38-14 meeting system needs. The first report shall be submitted on or
38-15 before October 1, 1999. Subsequent reports shall be submitted by
38-16 January 15 of each year or as determined necessary by the
38-18 (c) Before the date of introduction of customer choice in a
38-19 power region other than ERCOT, each electric utility owning
38-20 transmission and distribution facilities in that region shall
38-21 submit an annual report to the commission identifying existing and
38-22 potential transmission and distribution constraints and system
38-23 needs, alternatives for meeting system needs, and recommendations
38-24 for meeting system needs as directed by the commission.
38-25 (d) After the introduction of customer choice in a
38-26 qualifying power region, the reports required by this section shall
39-1 be submitted by the independent organization or organizations
39-2 having authority over the power region or discrete areas thereof.
39-3 Sec. 39.156. MARKET POWER MITIGATION PLAN. (a) In this
39-4 section, "market power mitigation plan" or "plan" means a written
39-5 proposal by an electric utility or a power generation company for
39-6 reducing its ownership and control of installed generation capacity
39-7 as required by Section 39.154.
39-8 (b) An electric utility or power generation company owning
39-9 and controlling more than 20 percent of the generation capacity
39-10 located in, or capable of delivering electricity to, a power region
39-11 shall file a market power mitigation plan with the commission no
39-12 later than December 31, 2000.
39-13 (c) The plan may provide for:
39-14 (1) an independent sale of generation plants;
39-15 (2) a sale of generation capacity at an auction
39-16 subject to commission approval; or
39-17 (3) any reasonable method of mitigation.
39-18 (d) For the purposes of this section, generation capacity
39-19 shall be net of the generation capacity subject to an auction under
39-20 Section 39.153.
39-21 (e) The plan shall be in a form prescribed by the commission
39-22 and shall provide any information the commission considers
39-23 necessary to evaluate the plan.
39-24 (f) The commission shall approve, modify, or reject a plan
39-25 within 180 days after the date of a filing under Subsection (b).
39-26 (g) In reaching its determination under Subsection (f), the
40-1 commission shall consider:
40-2 (1) the degree to which the electric utility's or
40-3 power generation company's stranded costs, if any, are minimized;
40-4 (2) whether on disposition of the generation assets
40-5 the reasonable value is likely to be received;
40-6 (3) the effect of the plan on the electric utility's
40-7 or power generation company's federal income taxes;
40-8 (4) the effect of the plan on the environment;
40-9 (5) the effect of the plan on current and potential
40-10 competitors in the generation market; and
40-11 (6) whether the plan is consistent with the public
40-13 (h) If an electric utility's or a power generation company's
40-14 market power mitigation plan is not approved before January 1,
40-15 2002, the commission may order the utility or company to conduct
40-16 capacity auctions according to Section 39.153, subject to
40-17 commission approval, of any capacity exceeding the maximum
40-18 allowable capacity described by Section 39.154.
40-19 (i) An auction under Subsection (h) shall be held no later
40-20 than July 1, 2002.
40-21 Sec. 39.157. COMMISSION AUTHORITY TO ADDRESS MARKET POWER.
40-22 (a) The commission shall monitor market power associated with the
40-23 generation, transmission, distribution, and sale of electricity in
40-24 this state. On a finding, after notice and opportunity for
40-25 hearing, that undue market power abuses are occurring, the
40-26 commission shall require reasonable mitigation of the market power
41-1 by ordering the construction of additional transmission or
41-2 distribution facilities, by requiring a reduction of generation
41-3 capacity at auction or by some other form of disposition, by
41-4 instituting price cap regulation, by setting appropriate
41-5 restrictions on sales of electricity, by establishing limitations
41-6 on the use of generation, transmission, or distribution facilities,
41-7 or by any other reasonable remedy.
41-8 (b) Beginning on the date of introduction of customer
41-9 choice, no person that owns generation facilities may own
41-10 transmission or distribution facilities in this state except for
41-11 those facilities necessary to interconnect a generation facility
41-12 with the transmission or distribution network. However, nothing in
41-13 this chapter shall prohibit a power generation company affiliated
41-14 with a transmission and distribution utility from owning generation
41-16 (c) In order to avoid potential market power abuses and
41-17 cross-subsidizations between regulated and unregulated activities,
41-18 the commission shall adopt rules to govern transactions or
41-19 activities between a transmission and distribution utility and its
41-21 (d) The commission shall by rule establish a code of conduct
41-22 that must be observed by all market participants and their
41-23 affiliates to protect against anticompetitive practices.
41-24 Sec. 39.158. MERGERS AND CONSOLIDATIONS. (a) An owner of
41-25 electric generation facilities that offers electricity for sale in
41-26 the state and proposes to merge, consolidate, or otherwise become
42-1 affiliated with another owner of electric generation facilities
42-2 that offers electricity for sale in this state shall obtain the
42-3 approval of the commission prior to closing. Such approval shall
42-4 be requested at least 120 days prior to the proposed closing. The
42-5 commission shall approve the transaction unless the commission
42-6 finds that the transaction is inconsistent with the public interest
42-7 or state or federal antitrust laws. If the commission finds that
42-8 the transaction as proposed is inconsistent with the public
42-9 interest, the commission may condition approval of the transaction
42-10 on adoption of reasonable modifications to the transaction as
42-11 prescribed by the commission to mitigate potential market power
42-13 (b) A retail electric provider that proposes to merge,
42-14 consolidate, or otherwise become affiliated with another retail
42-15 electric provider in the state shall obtain the approval of the
42-16 commission prior to closing. Such approval shall be requested at
42-17 least 120 days prior to the proposed closing. The commission shall
42-18 approve the transaction unless the commission finds that the
42-19 transaction is inconsistent with the public interest or state or
42-20 federal antitrust laws or finds that the merged entity has failed
42-21 to satisfy the requirements of Section 39.352. If the commission
42-22 finds that the transaction as proposed is inconsistent with the
42-23 public interest, the commission may condition approval of the
42-24 transaction on adoption of reasonable modifications to the
42-25 transaction as prescribed by the commission to mitigate potential
42-26 market power abuses.
43-1 (c) Owners of electric generation facilities and retail
43-2 electric providers shall obtain commission approval as provided by
43-3 this section as a condition of doing business in the state.
43-4 (d) Nothing in this section shall be construed to confer
43-5 immunity from state or federal antitrust laws. This section is
43-6 intended to complement other state and federal antitrust
43-7 provisions. Therefore, antitrust remedies may also be sought in
43-8 state or federal court to remedy anticompetitive activities.
43-9 SUBCHAPTER E. PRICE REGULATION AFTER COMPETITION
43-10 Sec. 39.201. COST OF SERVICE TARIFFS AND CHARGES. (a) Each
43-11 electric utility shall, on or before September 1, 2000, file
43-12 proposed tariffs for its proposed transmission and distribution
43-14 (b) The filing under this section shall include supporting
43-15 cost data for determination of nonbypassable delivery charges,
43-16 which shall be the sum of:
43-17 (1) transmission and distribution utility charges by
43-18 customer class based on a forecasted 2002 test year;
43-19 (2) a system benefit fund charge; and
43-20 (3) an expected competition transition charge, if any.
43-21 (c) Each electric utility shall also identify the unbundled
43-22 generation and retail energy service costs by customer class.
43-23 (d) On or before July 1, 2001, and in accordance with a
43-24 schedule and procedures it establishes, the commission shall hold a
43-25 hearing and approve or modify and make effective as of January 1,
43-26 2002, the transmission and distribution utility's proposed tariffs
44-1 for transmission and distribution services, the system benefit fund
44-2 charge, and the expected competition transition charge, if any.
44-3 (e) The system benefit fund charge shall be that established
44-4 by the commission pursuant to Section 39.603.
44-5 (f) The expected competition transition charge shall be that
44-6 as determined under Subsections (g) and (h) and as implemented
44-7 under Subsections (i)-(l).
44-8 (g) The expected competition transition charge approved by
44-9 the commission shall be calculated from the amount of stranded
44-10 costs as defined in Subchapter F which are reasonably projected to
44-11 exist on the last day of the freeze period modified to reflect any
44-12 adjustments determined appropriate by the commission pursuant to
44-13 Section 39.261(c).
44-14 (h) The electric utility shall use the ECOM administrative
44-15 model referenced in Section 39.262(h) to determine estimated
44-16 stranded costs. The model must include updated company-specific
44-17 inputs, and updated natural gas price forecasts, as determined by
44-18 the commission.
44-19 (i) An electric utility may, on commission approval:
44-20 (1) securitize no more than 75 percent of its
44-21 estimated stranded costs and recover such charges through a
44-22 qualified intangible charge, pursuant to a qualified rate order
44-23 issued by the commission pursuant to Section 39.303;
44-24 (2) implement, under bond, a nonbypassable charge of
44-25 up to 100 percent of its estimated stranded costs; or
44-26 (3) use a combination of the two methods under
45-1 Subdivisions (1) and (2).
45-2 (j) Any competition transition charge shall be allocated
45-3 among retail customer classes based on the relevant customer class
45-4 characteristics as of May 1, 1999, in accordance with the
45-5 methodology used to allocate the costs of the underlying assets in
45-6 the electric utility's most recent rate order.
45-7 (k) In determining the length of time over which costs under
45-8 Subsection (h) may be recovered, the commission shall consider:
45-9 (1) the electric utility's rates as of the end of the
45-10 freeze period;
45-11 (2) the sum of the transmission, distribution, and
45-12 system benefit fund charges;
45-13 (3) the proportion of estimated stranded costs to the
45-14 invested capital of the electric utility; and
45-15 (4) any other factor consistent with the public
45-16 interest as expressed in this chapter.
45-17 (l) Two years after customer choice is introduced in the
45-18 electric utility's power region, the stranded cost estimate under
45-19 this section shall be reviewed and, if necessary, adjusted to
45-20 reflect a final, actual valuation in the true-up proceeding under
45-21 Section 39.262. If, based on that proceeding, the competition
45-22 transition charge is not sufficient, the commission may extend the
45-23 collection period for the charge or, if necessary, increase the
45-24 charge. Alternatively, if it is found in the true-up proceeding
45-25 that the competition transition charge is larger than is needed to
45-26 recover any remaining stranded costs, the commission may:
46-1 (1) reduce the competition transition charge, to the
46-2 extent it has not been securitized;
46-3 (2) reverse, in whole or in part, the depreciation
46-4 expense which has been redirected pursuant to Section 39.256;
46-5 (3) reduce the transmission and distribution utility's
46-6 rates; or
46-7 (4) implement a combination of the elements in
46-8 Subdivisions (1)-(3).
46-9 (m) If the commission determines that a power region will
46-10 not qualify for customer choice under Section 39.152 by January 1,
46-11 2002, it may adjust the filing and implementation dates in this
46-12 section for utilities in that region.
46-13 Sec. 39.202. PRICE TO BEAT. (a) On and after January 1,
46-14 2002, in areas in which customer choice has been introduced, an
46-15 affiliated retail electric provider shall charge residential and
46-16 small commercial customers of its affiliated transmission and
46-17 distribution utility rates which, on a bundled basis, are five
46-18 percent less than the affiliated electric utility's corresponding
46-19 average residential and small commercial rates, on a bundled basis,
46-20 that were in effect on September 1, 1999, adjusted to reflect the
46-21 fuel factor determined as provided by Subsection (b). These rates
46-22 on a bundled basis shall be known as the "price to beat" for
46-23 residential and small commercial customers.
46-24 (b) For an area where customer choice is to be introduced on
46-25 January 1, 2002, the commission shall determine the fuel factor for
46-26 each electric utility in the area as of December 31, 2001. For an
47-1 area where customer choice is to be introduced subsequent to
47-2 January 1, 2002, the commission shall determine the fuel factor for
47-3 each electric utility in the area on the day prior to the day
47-4 customer choice is introduced.
47-5 (c) Subsequent to the introduction of customer choice, each
47-6 power generation company shall file a final fuel reconciliation for
47-7 the period ending the day prior to the day customer choice is
47-8 introduced. The final fuel balance from that reconciliation shall
47-9 be included in the true-up proceeding pursuant to Section 39.262.
47-10 (d) An affiliated retail electric provider shall make public
47-11 its price to beat in a manner that provides adequate disclosure as
47-12 determined by the commission.
47-13 (e) The affiliated retail electric provider may not charge
47-14 rates that are different from the price to beat until the earlier
47-15 of 60 months after the date customer choice is introduced in the
47-16 power region or the date the commission determines that 40 percent
47-17 or more of the electric power consumed by residential and small
47-18 commercial customers within the affiliated transmission and
47-19 distribution utility's certificated service area before the onset
47-20 of customer choice is provided by nonaffiliated retail electric
47-22 (f) The commission shall establish procedures and reporting
47-23 requirements as necessary to monitor residential and small
47-24 commercial consumption in the transmission and distribution
47-25 utility's certificated service area for the purpose of determining
47-26 the duration of the continuation of the price to beat.
48-1 (g) The commission shall notify an affiliated retail
48-2 electric provider at such time as the commission determines that
48-3 the price to beat no longer applies to the retail electric
48-5 (h) Following the true-up proceedings conducted pursuant to
48-6 Section 39.262, the commission may adjust the price to beat
48-7 consistent with the results of that proceeding.
48-8 (i) In this section, "small commercial customer" means a
48-9 commercial customer having a peak demand of 1,000 kilowatts or
48-11 Sec. 39.203. TRANSMISSION AND DISTRIBUTION SERVICE.
48-12 (a) All transmission and distribution utilities shall provide
48-13 transmission service at wholesale under Subchapter A, Chapter 35.
48-14 In addition, on and after January 1, 2002, the commission by rule
48-15 shall require a transmission and distribution utility to provide
48-16 transmission or distribution service, or both, at retail to an
48-17 electric utility, a power generation company, a retail electric
48-18 provider, a qualifying facility, an exempt wholesale generator, a
48-19 power marketer, a municipally owned utility, an electric
48-20 cooperative corporation, or an end-use customer at rates, terms of
48-21 access, and conditions that are comparable to those that apply to
48-22 the transmission and distribution utility and its affiliates.
48-23 (b) An electric utility, an electric cooperative corporation
48-24 that has not opted for customer choice, or a municipally owned
48-25 utility that has not opted for customer choice shall provide
48-26 distribution service at wholesale.
49-1 (c) On or before January 1, 2002, the commission shall
49-2 establish reasonable and comparable terms of access, conditions,
49-3 and rates for open access on distribution facilities.
49-4 (d) The terms of access, conditions, and rates established
49-5 under Subsection (c) shall be comparable to the terms of access,
49-6 conditions, and rates that the utility applies to itself or its
49-7 affiliates. The rules shall also provide that all ancillary
49-8 services provided by the utility to itself and its affiliates are
49-9 also provided to third parties on request.
49-10 (e) The commission may require an electric utility or a
49-11 transmission and distribution utility to construct or enlarge
49-12 facilities to ensure safe and reliable service for the state's
49-13 electric markets.
49-14 (f) The commission's rules must be consistent with the
49-15 standards of this title and may not be contrary to an applicable
49-16 decision, rule, or policy statement of a federal regulatory agency
49-17 having jurisdiction.
49-18 (g) Each qualifying power region shall have a generally
49-19 applicable tariff approved by the commission that guarantees open
49-20 and nondiscriminatory access as required by Section 39.152.
49-21 Sec. 39.204. TARIFFS FOR OPEN ACCESS. All transmission and
49-22 distribution utilities shall file tariffs implementing the open
49-23 access rules with the commission or federal regulatory authority
49-24 having jurisdiction over the transmission and distribution service
49-25 of the utility not later than the 90th day before the date customer
49-26 choice is offered.
50-1 Sec. 39.205. REGULATION OF COSTS FOLLOWING THE FREEZE
50-2 PERIOD. At the conclusion of the freeze period, any remaining
50-3 costs associated with nuclear decommissioning obligations continue
50-4 to be subject to cost of service rate regulation and shall be
50-5 included as a nonbypassable charge to retail customers.
50-6 SUBCHAPTER F. RECOVERY OF STRANDED COSTS
50-7 Sec. 39.251. DEFINITIONS. In this subchapter:
50-8 (1) "Above market purchased power costs" means
50-9 wholesale demand and energy costs that a utility is obligated to
50-10 pay under an existing purchased power contract to the extent the
50-11 costs are greater than the purchased power market value.
50-12 (2) "Below market cost" means the excess of the market
50-13 value of generation assets over the net book value of the assets.
50-14 (3) "Existing purchased power contract" means a
50-15 purchased power contract in effect on January 1, 1999.
50-16 (4) "Generation assets" includes generation plants and
50-17 generation-related regulatory assets.
50-18 (5) "Market value" means, for nonnuclear assets and
50-19 certain nuclear assets, the value the assets would have if bought
50-20 and sold in a bona fide third-party transaction or transactions on
50-21 the open market under Section 39.262(g) or, for certain nuclear
50-22 assets, as described by Section 39.262(h), the value determined
50-23 under the method provided by that subsection.
50-24 (6) "Purchased power market value" means the value of
50-25 demand and energy bought and sold in a bona fide third-party
50-26 transaction or transactions on the open market and determined by
51-1 using the weighted average costs of the highest three offers from
51-2 the market for purchase of the demand and energy available under
51-3 the existing purchased power contracts.
51-4 (7) "Regulatory assets" means costs that have been
51-5 deferred for future recovery as a result of the practice of
51-6 regulatory authorities, or by order of regulatory authorities, as
51-7 offset by the applicable portion of investment tax credits
51-8 permitted under the Internal Revenue Code, including:
51-9 (A) unrecovered deferred income taxes recorded
51-10 under Statement of Financial Accounting Standard No. 109
51-11 ("Accounting for Income Taxes");
51-12 (B) plant accounting deferrals, including mirror
51-13 construction work in progress; and
51-14 (C) costs associated with reacquisition of
51-15 securities, canceled plants, litigation and settlement costs, and
51-16 voluntary retirement and severance programs.
51-17 (8) "Retail stranded costs" means that part of net
51-18 stranded cost, taking into account below market costs, associated
51-19 with the provision of retail service.
51-20 (9) "Stranded cost" means the excess of the net book
51-21 value of generation assets over the market value of the assets and
51-22 any above market purchased power costs.
51-23 Sec. 39.252. RIGHT TO RECOVER STRANDED COSTS. (a) An
51-24 electric utility is allowed to recover all of its net, verifiable,
51-25 nonmitigable stranded costs incurred in purchasing power and
51-26 providing electric generation service.
52-1 (b) Recovery of retail stranded costs by an electric utility
52-2 shall be from all existing or future retail customers, including
52-3 the facilities, premises, and loads of such retail customers,
52-4 within the utility's geographical certificated service area as it
52-5 existed on May 1, 1999.
52-6 (c) In multiply certificated areas, a retail customer may
52-7 not avoid stranded costs recovery charges by switching to another
52-8 electric utility or a municipally owned utility. A customer in a
52-9 multiply certificated service area that was not taking service from
52-10 a particular electric utility on May 1, 1999, and does not do so
52-11 after that date is not responsible for paying retail stranded costs
52-12 of that utility.
52-13 Sec. 39.253. ALLOCATION OF STRANDED COSTS. Stranded costs
52-14 and below market costs shall be allocated among retail customer
52-15 classes, based on the relevant customer class characteristics as of
52-16 May 1, 1999, in accordance with the methodology used to allocate
52-17 the costs of the underlying assets in the electric utility's most
52-18 recent rate order.
52-19 Sec. 39.254. USE OF REVENUES FOR UTILITIES WITH STRANDED
52-20 COSTS. This subchapter provides a number of tools to an electric
52-21 utility to mitigate stranded costs. Each electric utility that was
52-22 reported by the commission to have positive "excess costs over
52-23 market" (ECOM), denoted as the "base case" for the amount of
52-24 stranded costs before full retail competition in 2001 with respect
52-25 to its Texas jurisdiction, in the April 1998 Report to the Texas
52-26 Senate Interim Committee on Electric Utility Restructuring entitled
53-1 "Potentially Strandable Investment (ECOM) Report: 1998 Update,"
53-2 must use these tools to reduce the net book value of, otherwise
53-3 referred to as "accelerate" the cost recovery of, its stranded
53-4 costs each year. Any positive difference under the report required
53-5 by Section 39.257(b) shall be applied to the net book value of
53-6 generation assets.
53-7 Sec. 39.255. USE OF REVENUES FOR UTILITIES WITH NO STRANDED
53-8 COSTS. Electric utilities that do not have stranded costs
53-9 described by Section 39.254 shall flow any positive difference
53-10 under the report required by Section 39.257(b) back to its Texas
53-11 jurisdictional customers through the power cost recovery factor.
53-12 Sec. 39.256. OPTION TO REDIRECT DEPRECIATION. (a) During
53-13 the freeze period, an electric utility described in Section 39.254
53-14 may redirect all or a part of the depreciation expense relating to
53-15 transmission and distribution assets to its net generation plant
53-17 (b) The electric utility shall report a decision under
53-18 Subsection (a) to the commission and any other applicable
53-19 regulatory authority.
53-20 (c) Any adjustments made to the book value of transmission
53-21 and distribution assets or the creation of any related regulatory
53-22 assets resulting from the redirection under this section shall be
53-23 accepted and applied by the commission for establishing net
53-24 invested capital and transmission and distribution rates for retail
53-25 customers in any proceeding occurring after the freeze period.
53-26 (d) Notwithstanding the provisions of Subsection (c), the
54-1 design of post-freeze-period retail rates may not:
54-2 (1) shift the allocation of responsibility for
54-3 stranded costs;
54-4 (2) include the adjusted costs in wholesale
54-5 transmission and distribution rates; or
54-6 (3) apply the adjustments for the purpose of
54-7 establishing net invested capital and transmission and distribution
54-8 rates for wholesale customers.
54-9 Sec. 39.257. ANNUAL REPORT. (a) Beginning with the 1999
54-10 calendar year, each electric utility shall file a report with the
54-11 commission at the end of each year during the freeze period under a
54-12 schedule and a format determined by the commission.
54-13 (b) The report shall identify any positive difference
54-14 between annual revenues, reduced by the amount of annual revenues
54-15 under Section 36.205 and the revenues received under the
54-16 interutility billing process as adopted by the commission to
54-17 implement Sections 35.004, 35.006, and 35.007, and annual costs.
54-18 Sec. 39.258. ANNUAL REPORT: DETERMINATION OF ANNUAL COSTS.
54-19 For the purposes of determining the annual costs in each annual
54-20 report, the following amounts shall be used:
54-21 (1) the Texas jurisdictional operation and maintenance
54-22 expense reflected in each utility's 1996 Federal Energy Regulatory
54-23 Commission Form 1, adjusted for costs under Sections 36.062,
54-24 36.203, and 36.205, and not indexed for inflation or load growth;
54-25 (2) the amount of nuclear decommissioning expense
54-26 approved in the electric utility's last rate proceeding before the
55-1 commission, as may be required to be adjusted to comply with
55-2 applicable federal regulatory requirements;
55-3 (3) the depreciation rates approved in the electric
55-4 utility's last rate proceeding before the commission;
55-5 (4) the amortization expense approved in the electric
55-6 utility's last rate proceeding before the commission, except that
55-7 if the items are fully amortized during the freeze period, the
55-8 expense shall be adjusted accordingly;
55-9 (5) taxes and fees, including municipal franchise fees
55-10 to the extent not included in Subdivision (1), other than federal
55-11 income taxes, and assessments incurred that year;
55-12 (6) federal income tax expense, computed according to
55-13 the stand-alone methodology; and
55-14 (7) return on invested capital, computed by
55-15 multiplying invested capital as of December 31 of the report year,
55-16 determined as provided by Section 39.259, by the cost of capital
55-17 approved in the electric utility's most recent rate proceeding in
55-18 which the cost of capital was specifically adopted, or, in the case
55-19 of a range, the midpoint of the range, if the final rate order for
55-20 the proceeding was issued on or after January 1, 1992. If such an
55-21 order does not exist, a cost of capital of 9.6 percent shall be
55-23 Sec. 39.259. ANNUAL REPORT: DETERMINATION OF INVESTED
55-24 CAPITAL. (a) For the purposes of determining invested capital in
55-25 each annual report, the net plant in service, regulatory assets,
55-26 and deferred federal income taxes shall be updated each year.
56-1 (b) Capital additions to a plant in an amount less than
56-2 1-1/2 percent of the electric utility's net plant in service on
56-3 December 31, 1998, less plant items previously excluded by the
56-4 commission, for each of the years 1999 through 2001 are presumed
56-6 (c) All other items in invested capital shall be as approved
56-7 in the electric utility's last rate proceeding before the
56-9 Sec. 39.260. USE OF GENERALLY ACCEPTED ACCOUNTING
56-10 PRINCIPLES. (a) The definition and identification of invested
56-11 capital and other terms used in this subchapter that affect the net
56-12 book value of generation assets and the treatment of transactions
56-13 performed under Section 35.035 and other transactions authorized by
56-14 this title or approved by the regulatory authority that affect the
56-15 net book value of generation assets during the freeze period shall
56-16 be treated in accordance with generally accepted accounting
56-17 principles as modified by regulatory accounting rules generally
56-18 applicable to utilities.
56-19 (b) The principles and criteria described by Subsection (a),
56-20 including the criteria for applicability of Statement of Financial
56-21 Accounting Standards No. 71, shall be applied for purposes of this
56-22 subchapter as they existed on January 1, 1999.
56-23 Sec. 39.261. REVIEW OF ANNUAL REPORT. (a) The annual
56-24 report filed under this subchapter is a public document and shall
56-25 be reviewed by the staff of the commission and the office of public
56-26 utility counsel. Both staffs may review work papers and supporting
57-1 documents and engage in discussions with the utility about the data
57-2 underlying the reports.
57-3 (b) The staff of the commission and the office of public
57-4 utility counsel shall communicate in writing to an electric utility
57-5 not later than the 180th day after the date the report is filed if
57-6 they have any disagreements with the data or computations.
57-7 (c) The commission shall finalize and resolve any
57-8 disagreements related to the annual reports as follows:
57-9 (1) for each calendar year, the commission shall
57-10 finalize the annual reports prior to establishing the competition
57-11 transition charge pursuant to Section 39.201; and
57-12 (2) for each calendar year, the commission shall
57-13 finalize the annual report and reflect the result as part of the
57-14 true-up proceeding pursuant to Section 39.262.
57-15 Sec. 39.262. TRUE-UP PROCEEDING. (a) An electric utility,
57-16 together with its affiliated retail electric provider and its
57-17 affiliated transmission and distribution utility, may not be
57-18 permitted to overrecover stranded costs through the procedures
57-19 established by this section or through the application of the
57-20 measures provided by the other sections of this subchapter.
57-21 (b) After the freeze period, an electric utility located in
57-22 a power region not subject to competition pursuant to Section
57-23 39.152 shall continue to file annual reports pursuant to Sections
57-24 39.257, 39.258, and 39.259 as if the freeze period remained in
57-25 effect, until such time as the power region qualifies for
57-26 competition under Section 39.152. In addition, the commission
58-1 staff and office of public utility counsel shall continue to review
58-2 the annual reports as provided by Section 39.261.
58-3 (c) After January 1, 2004, or after two years following the
58-4 beginning of competition in a power region, whichever is later, at
58-5 a schedule and under procedures to be determined by the commission,
58-6 each transmission and distribution utility, its affiliated retail
58-7 electric provider, and its affiliated power generation company
58-8 shall jointly file to finalize stranded costs pursuant to
58-9 Subsections (g) and (h) and reconcile those costs with the
58-10 estimated stranded costs used to develop the competition transition
58-11 charge in the proceeding held under Section 39.201. Any resulting
58-12 difference shall be applied to the nonbypassable delivery rates of
58-13 the transmission and distribution utility.
58-14 (d) The affiliated power generation company shall reconcile,
58-15 and either credit or bill to the transmission and distribution
58-16 utility, the net sum of:
58-17 (1) the former electric utility's final fuel balance
58-18 determined pursuant to Section 39.202(c); and
58-19 (2) any difference between the price of power obtained
58-20 through the capacity auctions under Sections 39.153 and 39.156 and
58-21 the power cost projections which were employed for the same time
58-22 period in the ECOM model to estimate stranded costs in the
58-23 proceeding under Section 39.201.
58-24 (e) The affiliated retail electric provider shall reconcile,
58-25 and either credit or bill to the transmission and distribution
58-26 utility, any difference between the price to beat established under
59-1 Section 39.202, reduced by the nonbypassable delivery charge
59-2 established under Section 39.201, and the prevailing market price
59-3 of electricity during the same time period.
59-4 (f) Based on the credits or bills received from its
59-5 affiliates pursuant to Subsections (d) and (e), the transmission
59-6 and distribution utility shall make necessary adjustments to the
59-7 nonbypassable delivery rates it charges to retail electric
59-8 providers. If the commission determines that the nonbypassable
59-9 delivery rates are not sufficient, the commission may extend the
59-10 original collection period for the charge or, if necessary,
59-11 increase the charge. Alternatively, if the commission determines
59-12 that the nonbypassable delivery rates are larger than are needed to
59-13 recover the transmission and distribution utility's costs, the
59-14 commission shall correspondingly reduce:
59-15 (1) the competition transition charge, to the extent
59-16 it has not been securitized;
59-17 (2) depreciation expense which has been redirected
59-18 pursuant to Section 39.256;
59-19 (3) the transmission and distribution utility's rates;
59-21 (4) a combination of the elements in Subdivisions
59-23 (g) For the purpose of finalizing the stranded cost estimate
59-24 used to establish the competition transition charge under Section
59-25 39.201, and, except as provided in Subsection (h), the affiliated
59-26 power generation company shall quantify its stranded costs using
60-1 one or more of the following methods:
60-2 (1) Sale of Assets. If, at any time after December
60-3 31, 1999, an electric utility or its affiliated power generation
60-4 company has sold some or all of its generation assets, including,
60-5 at the election of the electric utility or power generation
60-6 company, any fuel and fuel transportation contracts related to
60-7 those assets, in a bona fide third-party transaction under a
60-8 competitive offering, the total net value realized from the sale
60-9 establishes the market value of the generation assets sold. If not
60-10 all assets are sold, the market value of the remaining generation
60-11 assets shall be established by one or more of the other methods in
60-12 this section.
60-13 (2) Stock Valuation Method. If, at any time after
60-14 December 31, 1999, an electric utility or its affiliated power
60-15 generation company has sold some or all of its generation assets,
60-16 including, at the election of the electric utility or power
60-17 generation company, any fuel and fuel transportation contracts
60-18 related to those assets, to a separate affiliated or nonaffiliated
60-19 corporation, not less than 51 percent of the common stock of the
60-20 corporation is spun off and sold to public investors through a
60-21 national stock exchange, and the common stock has been traded for
60-22 not less than one year, the resulting average daily closing price
60-23 of the common stock over 30 consecutive trading days chosen by the
60-24 commission out of the last 180 consecutive trading days before the
60-25 filing required under Subsection (c) establishes the market value
60-26 of the common stock equity in the transferee corporation. The book
61-1 value of the transferee corporation's debt and preferred stock
61-2 securities shall be added to the market value of its assets. The
61-3 market value of the transferee corporation's assets shall be
61-4 reduced by the corresponding net book value of the assets acquired
61-5 by the transferee corporation from any entity other than the
61-6 affiliated electric utility or power generation company. The
61-7 resulting market value of the assets establishes the market value
61-8 of the generation assets transferred by the electric utility or
61-9 power generation company to the separate corporation. If not all
61-10 assets are disposed of in this manner, the market value of the
61-11 remaining assets shall be established by one or more of the other
61-12 methods in this section.
61-13 (3) Partial Stock Valuation Method. If, at any time
61-14 after December 31, 1999, an electric utility or its affiliated
61-15 power generation company has sold some or all of its generation
61-16 assets, including, at the election of the electric utility or power
61-17 generation company, any fuel and fuel transportation contracts
61-18 related to those assets, to a separate affiliated or nonaffiliated
61-19 corporation, at least 19 percent, but less than 51 percent, of the
61-20 common stock of the corporation is spun off and sold to public
61-21 investors through a national stock exchange, and the common stock
61-22 has been traded for not less than one year, the resulting average
61-23 daily closing price of the common stock over 30 consecutive trading
61-24 days chosen by the commission out of the last 180 consecutive
61-25 trading days before the filing required under Subsection (c) shall
61-26 be presumed to establish the market value of the common stock
62-1 equity in the transferee corporation. The commission may accept
62-2 the market valuation to conclusively establish the value of the
62-3 common stock equity in the transferee corporation or convene a
62-4 valuation panel of three independent financial experts to determine
62-5 whether the percentage of common stock sold is fairly
62-6 representative of the total common stock equity or whether a
62-7 control premium exists for the retained interest. The valuation
62-8 panel must consist of financial experts chosen from proposals
62-9 submitted in response to commission requests from the top 10
62-10 nationally recognized investment banks with demonstrated experience
62-11 in the United States electric industry as indicated by the dollar
62-12 amount of public offerings of long-term debt and equity of United
62-13 States investor-owned electric companies over the immediately
62-14 preceding three years as ranked by the publications "Securities
62-15 Data" or "Institutional Investor." If the panel determines that a
62-16 control premium exists for the retained interest, the panel shall
62-17 determine the amount of the control premium, and the commission
62-18 shall adopt the determination but may not increase the market value
62-19 by a control premium greater than 20 percent. The costs and
62-20 expenses of the panel, as approved by the commission, shall be paid
62-21 by the transferee corporation. The determination of the commission
62-22 based on the finding of the panel conclusively establishes the
62-23 value of the common stock of the transferee corporation. The book
62-24 value of the transferee corporation's debt and preferred stock
62-25 securities shall be added to the market value of its assets. The
62-26 market value of the transferee corporation's assets shall be
63-1 reduced by the corresponding net book value of the assets acquired
63-2 by the transferee corporation from any entity other than the
63-3 affiliated electric utility or power generation company. The
63-4 resulting market value of the assets establishes the market value
63-5 of the generation assets transferred by the electric utility or
63-6 power generation company to the separate corporation.
63-7 (h) Unless an electric utility or power generation company
63-8 combines all of its generation assets into a transferee corporation
63-9 as described in Subsections (g)(2) and (g)(3), the electric utility
63-10 shall quantify its stranded costs for nuclear assets using the ECOM
63-11 method. The ECOM method is the estimation model prepared for and
63-12 described by the commission's April 1998 Report to the Texas Senate
63-13 Interim Committee on Electric Restructuring entitled "Potentially
63-14 Strandable Investment (ECOM) Report: 1998 Update." The
63-15 methodology used in the model must be the same as that used in the
63-16 1998 report to determine the "base case." At the time of the
63-17 proceeding under this section, the ECOM model shall be rerun using
63-18 updated company-specific inputs required by the model, updating the
63-19 market price of electricity, and using updated natural gas price
63-20 forecasts and the capacity cost based on the long-run marginal cost
63-21 of the most economic new generation technology then available.
63-22 Natural gas price projections used in the model must be based on
63-23 the most credible publicly available market-based data. The
63-24 commission by rule shall establish, before June 1, 2000, the
63-25 precise methodology to be used by the commission in updating
63-26 natural gas forecasts.
64-1 (i) The commission shall conduct the hearing in this case as
64-2 a contested case.
64-3 (j) The commission shall issue a final order not later than
64-4 the 150th day after the date of the filing under this section by
64-5 the transmission and distribution utility, its affiliated retail
64-6 electric provider, and its affiliated power generation company, and
64-7 the resulting order shall be subject to judicial review under
64-8 Chapter 2001, Government Code.
64-9 (k) Notwithstanding Section 39.252, to the extent that a
64-10 customer's actual load has been lawfully served by a fully
64-11 operational qualifying facility before September 1, 2001, any
64-12 charge for recovery of stranded costs under this section or
64-13 Subchapter G assessed on that customer after the facility becomes
64-14 fully operational shall be included only in those tariffs or
64-15 charges associated with the services actually provided by the
64-16 transmission and distribution utility, if any, to the customer
64-17 after the qualifying facility became fully operational and may not
64-18 include any costs associated with the service provided to the
64-19 customer by the electric utility or its affiliated transmission and
64-20 distribution utility under their tariffs before the operation of
64-21 that qualifying facility. To qualify under this subsection, a
64-22 qualifying facility must have made substantially complete filings
64-23 on or before December 31, 1998, for all necessary site specific
64-24 environmental permits under the rules of the Texas Natural Resource
64-25 Conservation Commission in effect at the time of filing.
64-26 Sec. 39.263. STRANDED COST RECOVERY OF ENVIRONMENTAL CLEANUP
65-1 COSTS. (a) Subject to the provisions of Subsection (c), capital
65-2 costs incurred by an electric utility to improve air quality prior
65-3 to January 1, 2002, are eligible for inclusion as net invested
65-4 capital under Section 39.259, notwithstanding the limitations
65-5 imposed under Sections 39.259(b) and (c).
65-6 (b) Subject to the provisions of Subsection (c), capital
65-7 costs incurred by an electric utility to improve air quality
65-8 subsequent to January 1, 2002, and prior to May 1, 2003, are
65-9 eligible for inclusion in the determination of invested capital in
65-10 the true-up proceeding under Section 39.262.
65-11 (c) Costs incurred under Subsections (a) and (b) shall be
65-12 included as invested capital and considered in an electric
65-13 utility's stranded cost determination only to the extent that:
65-14 (1) the cost is applied to reduce the emission of
65-15 airborne pollutants from an electric generating facility for which
65-16 air quality authorization pursuant to 30 T.A.C. Chapter 116 has not
65-17 been obtained as of January 1, 1999;
65-18 (2) the retrofit decision is most cost-effective on
65-19 consideration of alternative measures, including but not limited to
65-20 the retirement of the generating facility; and
65-21 (3) the electric utility conveys 100 percent of any
65-22 resulting emissions credits to the state.
65-23 (d) If the retirement of a generating facility is the most
65-24 cost-effective alternative, the net book value, including
65-25 retirement costs and offsetting salvage value, of the affected
65-26 facility shall be included in the electric utility's stranded cost
66-1 determination if the electric utility complies with Subsection
66-2 (c)(3), notwithstanding the provisions of Section 39.259(c).
66-3 Sec. 39.264. RIGHTS NOT AFFECTED. This chapter is not
66-4 intended to alter any rights of utilities to recover stranded costs
66-5 from wholesale customers.
66-6 SUBCHAPTER G. SECURITIZATION
66-7 Sec. 39.301. PURPOSE. The primary purpose of this
66-8 subchapter is to enable electric utilities to engage in financing
66-9 transactions for the recovery of stranded costs that lower carrying
66-10 costs to be recovered over the life of the asset, as the cost of
66-11 this type of debt would be less than the cost that would be
66-12 incurred using conventional utility financing methods.
66-13 Sec. 39.302. DEFINITION. "Securitized financing
66-14 transaction" means the issuance of bonds, notes, or other forms of
66-15 indebtedness with a term of 15 years or less from the date of
66-16 issuance with the lowest interest cost reasonably attainable. This
66-17 indebtedness shall be secured by revenues collected pursuant to a
66-18 qualified rate order.
66-19 Sec. 39.303. QUALIFIED RATE ORDER. The commission may issue
66-20 a qualified rate order for a utility in the proceeding under
66-21 Section 39.201. Such qualified rate order shall authorize a
66-22 securitized financing transaction for recovery of no more than 75
66-23 percent of expected stranded costs and shall contain, at a minimum,
66-24 the following provisions:
66-25 (1) quantification of the amount that may be recovered
66-26 through a securitized financing transaction as determined under
67-1 Section 39.201;
67-2 (2) authorization for the electric utility or its
67-3 assignee to impose upon and collect from all retail electric
67-4 providers a separate nonbypassable charge to recover the principal,
67-5 interest, and all reasonable expenses associated with issuing,
67-6 servicing, refinancing, and retiring the bonds issued in a
67-7 securitized financing transaction that are providing recovery for
67-8 the amount determined under Subdivision (1);
67-9 (3) the period, not to exceed 15 years, over which the
67-10 nonbypassable charge shall be collected;
67-11 (4) a mechanism for adjusting the nonbypassable charge
67-12 periodically to assure that the principal, interest, and reasonable
67-13 expenses may be paid in accordance with the terms of the bonds;
67-14 (5) a finding that the revenues received through the
67-15 nonbypassable charge set out in the qualified rate order represent
67-16 property rights that can be transferred to others, who may transfer
67-17 and pledge such property rights to third parties in order to
67-18 provide security for the bonds issued pursuant to the qualified
67-19 rate order;
67-20 (6) a finding that the total amount of revenues to be
67-21 collected pursuant to the qualified rate order is less than the
67-22 revenue requirement that would be required over the remaining life
67-23 of the expected stranded costs using conventional financing
67-25 (7) a finding that issuance of the qualified rate
67-26 order is in the public interest; and
68-1 (8) a finding that the qualified rate order is
68-2 irrevocable and shall not be subject to reversal or amendment by
68-3 the commission in a way that would reduce or impair the collection
68-4 of the nonbypassable charge authorized by a qualified rate order so
68-5 long as the securities supported by the qualified rate order are
68-7 Sec. 39.304. EFFECT OF RATE ORDER. A qualified rate order
68-8 remains in full force and effect notwithstanding any bankruptcy,
68-9 reorganization, or other insolvency proceeding with respect to the
68-10 electric utility or assignee.
68-11 Sec. 39.305. PLEDGE OF STATE. The bonds issued in the
68-12 securitized financing transaction are not backed by the credit of
68-13 the state. The state, however, pledges not to limit, alter, or in
68-14 any way impair or reduce the collection of the nonbypassable charge
68-15 authorized by a qualified rate order so long as the securities
68-16 supported by the qualified rate order are outstanding.
68-17 Sec. 39.306. CHARACTERIZATION OF NONBYPASSABLE CHARGE. The
68-18 property right created by this subchapter is not an account or
68-19 general intangible under Section 9.106, Business & Commerce Code.
68-20 SUBCHAPTER H. CERTIFICATION AND REGISTRATION; PENALTIES
68-21 Sec. 39.351. CERTIFICATION OF POWER GENERATION COMPANIES.
68-22 (a) A person may not generate electricity for resale unless the
68-23 person is certified by the commission as a power generation company
68-24 in accordance with this section. A person may apply for
68-25 certification as a power generation company by filing the following
68-26 information with the commission:
69-1 (1) a description of the location of any facility used
69-2 to generate electricity;
69-3 (2) a description of the type of services provided;
69-4 (3) a copy of any information filed with the Federal
69-5 Energy Regulatory Commission in connection with registration with
69-6 that commission; and
69-7 (4) any other information required by commission rule.
69-8 (b) A power generation company shall comply with the
69-9 reliability standards adopted by an independent organization
69-10 certified by the commission to ensure the reliability of the
69-11 regional electrical network for a power region in which the power
69-12 generation company is generating or selling electricity.
69-13 Sec. 39.352. CERTIFICATION OF RETAIL ELECTRIC PROVIDERS.
69-14 (a) In areas where customer choice has been introduced, no person,
69-15 including an affiliate of an electric utility, may provide retail
69-16 electric service in this state unless the person is certified by
69-17 the commission as a retail electric provider, in accordance with
69-18 this section.
69-19 (b) The commission shall issue a certificate to provide
69-20 retail electric service to a person applying for certification who
69-22 (1) the financial and technical resources to provide
69-23 continuous and reliable electric service to customers in the area
69-24 for which the certification is sought; and
69-25 (2) the organization, personnel, and other resources
69-26 needed to meet the customer protection requirements of this title.
70-1 (c) A person applying for certification under this section
70-2 shall comply with all customer protection provisions, all
70-3 disclosure requirements, and all marketing guidelines established
70-4 by the commission and by this subtitle.
70-5 Sec. 39.353. CERTIFICATION OF AGGREGATORS. (a) A person
70-6 may not provide aggregation services in the state unless the person
70-7 is certified by the commission as an aggregator.
70-8 (b) In this subchapter, "aggregator" means a person joining
70-9 two or more customers, other than municipalities, into a single
70-10 purchasing unit to negotiate the purchase of electricity from
70-11 retail electric providers.
70-12 (c) A person applying for certification under this section
70-13 shall comply with all customer protection provisions, all
70-14 disclosure requirements, and all marketing guidelines established
70-15 by the commission and by this subtitle.
70-16 (d) The commission may establish terms and conditions it
70-17 determines necessary to regulate the reliability and integrity of
70-18 aggregation services in the state.
70-19 Sec. 39.354. REGISTRATION OF MUNICIPAL AGGREGATORS. (a) A
70-20 municipal aggregator may not provide aggregation services in the
70-21 state unless the municipal aggregator registers with the
70-23 (b) In this section, "municipal aggregator" means a person
70-24 authorized by two or more municipal governing bodies to join the
70-25 bodies into a single purchasing unit to negotiate the purchase of
70-26 electricity from retail electric providers.
71-1 Sec. 39.355. REGISTRATION OF POWER MARKETERS. A person may
71-2 not sell electric energy at wholesale as a power marketer unless
71-3 the person registers with the commission.
71-4 Sec. 39.356. REVOCATION OF CERTIFICATION. (a) The
71-5 commission may suspend, revoke, or amend a retail electric
71-6 provider's certificate for significant violations of this title or
71-7 the rules adopted pursuant to this title or of any reliability
71-8 standard adopted by an independent organization certified by the
71-9 commission to ensure the reliability of a power region's electrical
71-10 network, including the failure to observe any scheduling,
71-11 operating, or settlement protocols established by the independent
71-12 organization. The commission may also suspend or revoke a retail
71-13 electric provider's certificate if the provider no longer has the
71-14 financial or technical capability to provide continuous and
71-15 reliable electric service.
71-16 (b) The commission may suspend or revoke a power generation
71-17 company's certificate for significant violations of this title or
71-18 the rules adopted pursuant to this title or of the reliability
71-19 standards adopted by an independent organization certified by the
71-20 commission to ensure the reliability of a power region's electrical
71-21 network, including the failure to observe any scheduling,
71-22 operating, or settlement protocols established by the independent
71-24 (c) The commission may suspend, revoke, or amend an
71-25 aggregator's certificate for significant violations of this title
71-26 or of the rules adopted pursuant to this title.
72-1 Sec. 39.357. ADMINISTRATIVE PENALTY. In addition to the
72-2 suspension, revocation, or amendment of a certification, the
72-3 commission may impose an administrative penalty, as provided by
72-4 Section 15.023, for violations described by Section 39.356.
72-5 SUBCHAPTER I. MISCELLANEOUS PROVISIONS
72-6 Sec. 39.601. SCHOOL FUNDING LOSS MECHANISM. (a) Not later
72-7 than March 1 each year, the comptroller shall certify to the Texas
72-8 Education Agency any property wealth reductions, determined by
72-9 taking the difference between current year and prior year appraisal
72-10 values in the property value study conducted under Subchapter M,
72-11 Chapter 403, Government Code, attributable to electric utility
72-13 (b) The Texas Education Agency shall determine the reduction
72-14 of the amount of property taxes recaptured by the state from school
72-15 districts subject to wealth equalization under Chapter 41,
72-16 Education Code, as a result of the property wealth reductions
72-17 certified under Subsection (a) and shall notify the commission of
72-18 the amount necessary to compensate the state for the reduction.
72-19 (c) Not later than May 1 of each year, the commission shall
72-20 transfer from the system benefit fund to the foundation school fund
72-21 the amount necessary to compensate the state for the reduction
72-22 specified by Subsection (b).
72-23 Sec. 39.602. CUSTOMER EDUCATION. Before January 1, 2002,
72-24 the commission shall develop and implement an educational program
72-25 to inform customers of changes in the provision of electric
72-26 services resulting from the opening of the retail electric market
73-1 under this chapter. The educational program shall provide
73-2 customers with the information necessary to make informed decisions
73-3 relating to the source and type of electric service purchased and
73-4 other information the commission considers necessary.
73-5 Sec. 39.603. SYSTEM BENEFIT FUND. (a) The commission shall
73-6 establish the system benefit fund.
73-7 (b) The system benefit fund is financed by a nonbypassable
73-8 charge set by the commission in an amount not to exceed 30 cents
73-9 per MWh.
73-10 (c) The system benefit fund shall provide funding for:
73-11 (1) customer education programs;
73-12 (2) programs to assist low-income electric customers;
73-14 (3) the property tax replacement mechanism provided by
73-15 Section 39.601.
73-16 (d) For the purposes of this section, a "low-income electric
73-17 customer," is an electric customer who is a qualifying low-income
73-18 consumer as defined by the commission.
73-19 Sec. 39.604. GOAL FOR RENEWABLE CAPACITY. (a) It is the
73-20 intent of the legislature that by January 1, 2007, renewable energy
73-21 technologies shall constitute not less than five percent of the
73-22 installed electric generation capacity that is physically located
73-23 in the state and available to sell power at wholesale or retail.
73-24 (b) The introduction of competition and retail customer
73-25 choice is expected to create opportunities that will stimulate the
73-26 economic development of renewable energy technologies in the state
74-1 to a level that achieves the goal of Subsection (a) through
74-2 reliance on market forces alone.
74-3 (c) Beginning on January 1, 2004, each retail electric
74-4 provider operating in the state shall include a minimum of one
74-5 percent of capacity from renewable energy technologies in its
74-6 supply portfolio.
74-7 (d) The commission shall establish a renewable energy
74-8 credits trading program. Any retail electric provider that does
74-9 not satisfy the requirement of Subsection (c) shall purchase
74-10 sufficient renewable energy credits to satisfy the requirement by
74-11 holding renewable energy credits in lieu of capacity from renewable
74-12 energy technologies.
74-13 (e) In this section, "renewable energy technology" means any
74-14 technology that exclusively relies on an energy source that is
74-15 naturally regenerated over a short time and derived directly from
74-16 the sun, indirectly from the sun, or from other natural movements
74-17 and mechanisms of the environment. A renewable energy technology
74-18 does not rely on energy resources derived from fossil fuels, waste
74-19 products from fossil fuels, or waste products from inorganic
74-21 Sec. 39.605. EFFECT OF SUNSET PROVISION. (a) If the
74-22 commission is abolished and the other provisions of this title
74-23 expire as provided by Chapter 325, Government Code (Texas Sunset
74-24 Act), this subchapter, including the provisions of this title
74-25 referred to in this subchapter, continues in full force and effect
74-26 and does not expire.
75-1 (b) The authorities, duties, and functions of the commission
75-2 under this chapter shall be performed and carried out by a
75-3 successor agency to be designated by the legislature before
75-4 abolishment of the commission or, if the legislature does not
75-5 designate the successor, by the secretary of state.
75-6 CHAPTER 40. COMPETITION FOR MUNICIPALLY OWNED UTILITIES
75-7 AND RIVER AUTHORITIES
75-8 SUBCHAPTER A. GENERAL PROVISIONS
75-9 Sec. 40.001. APPLICABLE LAW. Notwithstanding any other
75-10 provision of law, this chapter governs the transition to and the
75-11 establishment of a fully competitive electric power industry for
75-12 municipally owned utilities. This chapter controls over any other
75-13 provision of this title, except Sections 39.155, 39.157(d), and
75-15 Sec. 40.002. DEFINITION. For purposes of this chapter,
75-16 "body vested with the power to manage and operate a municipally
75-17 owned utility" shall mean that body created in accordance with
75-18 Article 1115 or 1115a, Revised Statutes.
75-19 Sec. 40.003. SECURITIZATION. (a) Municipally owned
75-20 utilities and river authorities may adopt and use securitization
75-21 provisions having the effect of the provisions set out in
75-22 Subchapter G, Chapter 39, to recover through rates stranded costs,
75-23 at a recovery level deemed appropriate by the municipally owned
75-24 utility or river authority up to 100 percent, under rules and
75-25 procedures that shall be established:
75-26 (1) in the case of a municipally owned utility, by the
76-1 municipal governing body or a body vested with the power to operate
76-2 and manage the municipally owned utility, including procedures
76-3 providing for rate orders of such body having the effect of
76-4 qualified rate orders, providing for a separate nonbypassable
76-5 charge to be collected from all retail electric customers of the
76-6 municipally owned utility to fund the recovery of the stranded
76-7 investment and all reasonable related expenses, and providing for
76-8 the issuance of bonds necessary to recover the amount deemed
76-9 appropriate by the municipally owned utility through a securitized
76-10 financing transaction; and
76-11 (2) in the case of a river authority, by the
76-13 (b) The rules and procedures for securitization established
76-14 by the commission under Subsection (a)(2) shall include procedures
76-15 for the recovery of stranded costs pursuant to the terms of a rate
76-16 order adopted by the governing body of the river authority, which
76-17 rate order shall have the effect of a qualified rate order.
76-18 (c) The rules and procedures for securitization established
76-19 by the commission under Subsection (a)(2) shall include rules and
76-20 procedures for the issuance of bonds issued in a securitized
76-21 financing transaction. The issuance of any bonds issued in a
76-22 securitized financing transaction by a river authority is hereby
76-23 expressly authorized and shall be governed by the laws governing
76-24 the issuance of bonds or other obligations by the river authority.
76-25 Findings made by the governing body of a river authority in a
76-26 qualified rate order issued pursuant to the rules and procedures
77-1 described in this subsection shall be conclusive, and any
77-2 nonbypassable charge incorporated in such rate order to recover the
77-3 principal, interest, and all reasonable expenses associated with
77-4 any securitized financing transaction shall constitute property
77-5 rights, as described in Subchapter G, Chapter 39, and otherwise
77-6 conform in all material respects to the nonbypassable charges set
77-7 forth in Subchapter G, Chapter 39.
77-8 (d) The rules and procedures established under this section
77-9 shall be consistent with other law applicable to municipally owned
77-10 utilities and river authorities and with the terms of any
77-11 resolutions, orders, or ordinances authorizing outstanding bonds or
77-12 other indebtedness of the municipalities or river authorities.
77-13 SUBCHAPTER B. MUNICIPALLY OWNED UTILITY CHOICE
77-14 Sec. 40.051. GOVERNING BODY DECISION. (a) The municipal
77-15 governing body or a body vested with the power to operate and
77-16 manage a municipally owned utility has the discretion to decide
77-17 when or if the municipally owned utility will provide customer
77-19 (b) Municipally owned utilities that choose to participate
77-20 in customer choice may do so at any time on or after January 1,
77-21 2002, by adoption of an appropriate resolution of the municipal
77-22 governing body or a body vested with power to manage and operate
77-23 the municipally owned utility. The decision to participate in
77-24 customer choice by the adoption of a resolution is irrevocable.
77-25 (c) After a decision to offer customer choice has been made,
77-26 Subchapters C, D, and E, Chapter 33, do not apply to any action
78-1 taken under this chapter.
78-2 Sec. 40.052. UTILITY NOT OFFERING CUSTOMER CHOICE. (a) A
78-3 municipally owned utility that chooses not to participate in
78-4 customer choice may not offer electric energy at unregulated prices
78-5 directly to retail customers outside its certificated retail
78-6 service area.
78-7 (b) A municipally owned utility under Subsection (a) retains
78-8 the right to offer and provide a full range of customer service and
78-9 pricing programs to the customers within its certificated area and
78-10 to purchase and sell electric energy at wholesale without
78-11 geographic restriction.
78-12 Sec. 40.053. RETAIL CUSTOMER'S RIGHT OF CHOICE. (a) If a
78-13 municipally owned utility chooses to participate in customer
78-14 choice, after that choice all retail customers served by the
78-15 municipally owned utility within the certificated retail service
78-16 area of the municipally owned utility shall have the right of
78-17 customer choice, and the municipally owned utility shall provide
78-18 open access for retail service.
78-19 (b) Notwithstanding Section 39.107, the metering function
78-20 shall not be deemed a competitive service for customers of the
78-21 municipally owned utility within such service area and may, at the
78-22 option of the municipally owned utility, continue to be offered by
78-23 the municipally owned utility as sole provider.
78-24 (c) Upon its initiation of customer choice, a municipally
78-25 owned utility shall designate itself or another entity as the
78-26 provider of last resort for customers within the municipally owned
79-1 utility's certificated service area as that area existed on the
79-2 date of the utility's initiation of customer choice. The
79-3 municipally owned utility shall fulfill the role of default
79-4 provider of last resort in the event no other entity is available
79-5 to act in that capacity.
79-6 (d) If a customer is unable to obtain service from a retail
79-7 electric provider, upon request by the customer, the provider of
79-8 last resort shall offer the customer the standard retail service
79-9 package for the appropriate customer class, with no interruption of
79-10 service, at a fixed, nondiscountable rate approved by the governing
79-11 body of the municipally owned utility which has the authority to
79-12 set rates.
79-13 (e) The governing body of a municipally owned utility may
79-14 establish the procedures and criteria for designating the provider
79-15 of last resort and may redesignate the provider of last resort
79-16 according to a schedule it considers appropriate.
79-17 Sec. 40.054. SERVICE OUTSIDE AREA. (a) A municipally owned
79-18 utility participating in customer choice shall have the right to
79-19 offer electric energy and related services at unregulated prices
79-20 directly to retail customers without regard to geographic location.
79-21 (b) In providing service under Subsection (a) to retail
79-22 customers outside its certificated retail service area as that area
79-23 exists on the date of adoption of customer choice, a municipally
79-24 owned utility is subject to the commission's rules establishing a
79-25 code of conduct regulating anticompetitive practices.
79-26 (c) For municipally owned utilities participating in
80-1 customer choice, the commission shall have jurisdiction to
80-2 establish terms and conditions, but not rates, for access by other
80-3 retail electric providers to the municipally owned utility's
80-4 distribution facilities.
80-5 (d) Notwithstanding Subsections (b) and (c), accommodation
80-6 shall be made in the code of conduct for specific legal
80-7 requirements imposed by state or federal law applicable to
80-8 municipally owned utilities.
80-9 (e) The commission does not have jurisdiction to require
80-10 unbundling of services or functions of, or to regulate the recovery
80-11 of stranded investment of, a municipally owned utility or, except
80-12 as provided by this section, jurisdiction with respect to the
80-13 rates, terms, and conditions of service for retail customers of a
80-14 municipally owned utility within the utility's certificated service
80-16 (f) A municipally owned utility shall maintain separate
80-17 books and records of its operations from those of the operations of
80-18 any affiliate.
80-19 Sec. 40.055. JURISDICTION OF MUNICIPAL GOVERNING BODY. The
80-20 municipal governing body or a body vested with the power to manage
80-21 and operate a municipally owned utility has exclusive jurisdiction
80-23 (1) set all terms of access, conditions, and rates
80-24 applicable to services provided by the municipally owned utility,
80-25 except as provided by Sections 40.054 and 40.056, including
80-26 nondiscriminatory and comparable terms of access, conditions, and
81-1 rates for distribution but excluding wholesale transmission rates,
81-2 terms of access, and conditions for wholesale transmission service
81-3 set by the commission under this subtitle, provided that the rates
81-4 for distribution access established by the municipal governing body
81-5 shall be comparable to the distribution access rates that apply to
81-6 the municipally owned utility and the municipally owned utility's
81-8 (2) determine whether to unbundle any energy-related
81-9 activities, and if the municipally owned utility chooses to
81-10 unbundle, whether to do so structurally or functionally;
81-11 (3) reasonably determine the amount of the municipally
81-12 owned utility's stranded investment;
81-13 (4) establish nondiscriminatory transition charges
81-14 reasonably designed to recover the stranded investment over an
81-15 appropriate period of time;
81-16 (5) determine the extent to which the municipally
81-17 owned utility will provide various customer services at the
81-18 distribution level or accept the services from other providers;
81-19 (6) manage and operate the municipality's electric
81-20 utility systems, including exercise of control over resource
81-21 acquisition and any related expansion programs;
81-22 (7) establish and enforce service quality standards
81-23 and consumer safeguards designed to protect retail electric
81-25 (8) determine whether a base rate reduction is
81-26 appropriate for the municipally owned utility;
82-1 (9) determine any other utility matters that the
82-2 municipal governing body or body vested with power to manage and
82-3 operate the municipally owned utility believes should be included;
82-5 (10) make any other decisions affecting the
82-6 municipally owned utility's participation in customer choice that
82-7 are not inconsistent with the provisions of this chapter.
82-8 Sec. 40.056. ANTICOMPETITIVE ACTIONS. (a) If, upon
82-9 complaint by a retail electric provider, the commission finds that
82-10 a municipal rule, action, or order relating to customer choice is
82-11 anticompetitive or does not provide other retail electric providers
82-12 with nondiscriminatory terms and conditions of access to
82-13 distribution facilities or customers within the municipally owned
82-14 utility's certificated retail service area that are comparable to
82-15 the municipally owned utility's and its affiliates' terms and
82-16 conditions of access to distribution facilities or customers, the
82-17 commission shall notify the municipally owned utility.
82-18 (b) The municipally owned utility shall have three months to
82-19 cure the anticompetitive or noncompliant behavior described in
82-20 Subsection (a), following opportunity for hearing on the complaint.
82-21 If the rule, action, or order is not fully remedied within that
82-22 time, the commission may prohibit the municipally owned utility or
82-23 affiliate from providing retail service outside its certificated
82-24 retail service area until the rule, action, or order is remedied.
82-25 Sec. 40.057. BILLING. (a) A municipally owned utility that
82-26 opts for customer choice may continue to bill directly electric
83-1 customers located in its certificated retail service area, as that
83-2 area exists on the date of adoption of customer choice, for all
83-3 transmission and distribution services. The municipally owned
83-4 utility may also bill directly for generation services and customer
83-5 services provided by the municipally owned utility to those
83-7 (b) A municipally owned utility that opts for customer
83-8 choice shall not adopt anticompetitive billing practices that would
83-9 discourage customers in its service area from choosing a retail
83-10 electric provider.
83-11 (c) A customer served by a municipally owned utility for
83-12 distribution service and by a retail electric provider for retail
83-13 service has the option of being billed directly by each service
83-14 provider or to receive a single bill for distribution,
83-15 transmission, and generation services from the municipally owned
83-17 Sec. 40.058. TARIFFS FOR OPEN ACCESS. A municipally owned
83-18 utility that owns or operates transmission and distribution
83-19 facilities shall file tariffs implementing the open access rules
83-20 established by the commission under Section 39.203 with the
83-21 appropriate regulatory authority having jurisdiction over the
83-22 transmission and distribution service of the municipally owned
83-23 utility before the 90th day preceding the date the utility offers
83-24 customer choice. The commission has no authority to determine the
83-25 rates for distribution access service for a municipally owned
84-1 Sec. 40.059. MUNICIPAL POWER AGENCY; RECOVERY OF STRANDED
84-2 COSTS. (a) In this section, "member city" means a municipality
84-3 that participated in the creation of a municipal power agency
84-4 formed pursuant to Chapter 163 by the adoption of a concurrent
84-5 resolution by the municipality on or before August 1, 1975.
84-6 (b) After a member city adopts a resolution choosing to
84-7 participate in customer choice under Section 40.051(b), a member
84-8 city may include stranded costs described in Subsection (c) in its
84-9 distribution costs and may recover such costs through a
84-10 nonbypassable charge. The nonbypassable charge shall be as
84-11 determined by the member city's governing body and may be spread
84-12 over 16 years.
84-13 (c) The stranded costs that may be recovered under this
84-14 section are those costs that were determined by the commission and
84-15 set forth in the commission's April 1998 Report to the Texas Senate
84-16 Interim Committee on Electric Utility Restructuring entitled
84-17 "Potentially Strandable Investment (ECOM) Report: 1998 Update" and
84-18 specifically set forth in the report at Appendix A (ECOM Estimates
84-19 Including the Effects of Transition Plans) under the commission
84-20 base case benchmark price for the year 2002.
84-21 (d) The stranded cost amounts described in this section
84-22 shall not be included in the generation costs used in setting rates
84-23 by the member city's governing body.
84-24 Sec. 40.060. NO POWER TO AMEND CERTIFICATES. Nothing in
84-25 this chapter empowers a municipal governing body or a body vested
84-26 with the power to manage and operate a municipally owned utility to
85-1 issue, amend, or rescind a certificate of public convenience and
85-2 necessity granted by the commission. This subsection does not
85-3 affect the ability of a municipal governing body or a body vested
85-4 with the power to manage and operate the municipally owned utility
85-5 to pass a resolution under Section 40.051(b).
85-6 SUBCHAPTER C. RIGHTS NOT AFFECTED
85-7 Sec. 40.101. INTERFERENCE WITH CONTRACT. (a) This subtitle
85-8 shall not interfere with or abrogate the rights or obligations of
85-9 parties, including a retail or wholesale customer, to a contract
85-10 with a municipally owned utility or river authority.
85-11 (b) This subtitle shall not interfere with or abrogate the
85-12 rights or obligations of a party under a contract or agreement
85-13 concerning certificated utility service areas.
85-14 Sec. 40.102. ACCESS TO WHOLESALE MARKET. Nothing in this
85-15 subtitle shall limit the access of municipally owned utilities to
85-16 the wholesale electric market.
85-17 Sec. 40.103. PROTECTION OF BONDHOLDERS. Nothing in this
85-18 subtitle or any rule adopted under this subtitle shall impair
85-19 contracts, covenants, or obligations between this state, river
85-20 authorities, municipalities, and the bondholders of revenue bonds
85-21 issued by the river authorities or municipalities.
85-22 Sec. 40.104. TAX-EXEMPT STATUS. Nothing in this subtitle
85-23 may impair the tax-exempt status of municipalities, electric
85-24 cooperatives, or river authorities, nor shall anything in this
85-25 subtitle compel any municipality, electric cooperative, or river
85-26 authority to use its facilities in a manner which violates any
86-1 contractual provisions, bond covenants, or other restrictions
86-2 applicable to facilities financed by tax-exempt debt.
86-3 Notwithstanding any other provision of law, the decision to
86-4 participate in customer choice by the adoption of a resolution in
86-5 accordance with Section 40.051(b) is irrevocable.
86-6 CHAPTER 41. ELECTRIC COOPERATIVES AND COMPETITION
86-7 SUBCHAPTER A. GENERAL PROVISIONS
86-8 Sec. 41.001. APPLICABLE LAW. Notwithstanding any other
86-9 provision of law, except Sections 39.155, 39.157(d), and 39.203,
86-10 this chapter governs the transition to and the establishment of a
86-11 fully competitive electric power industry for electric
86-12 cooperatives. Regarding the regulation of electric cooperatives,
86-13 this chapter shall control over any other provision of this title,
86-14 except for sections in which the term "electric cooperative" is
86-15 specifically used.
86-16 Sec. 41.002. DEFINITION. In this chapter, "board of
86-17 directors" means the board of directors of an electric cooperative
86-18 as described in Section 161.071.
86-19 Sec. 41.003. SECURITIZATION. (a) Electric cooperatives may
86-20 use securitization provisions generally consistent with Subchapter
86-21 G, Chapter 39, to recover through rates stranded costs under rules
86-22 and procedures that shall be established by the board of directors.
86-23 (b) The rules and procedures for securitization established
86-24 under Subsection (a) shall include rules and procedures for the
86-25 issuance of bonds.
86-26 (c) The rules and procedures established as provided by
87-1 Subsection (b) shall be consistent with other law and with the
87-2 terms of any resolutions or orders authorizing outstanding bonds or
87-3 other indebtedness of the electric cooperative.
87-4 Sec. 41.004. JURISDICTION OF THE COMMISSION. Except as
87-5 specifically provided otherwise in this chapter, the commission has
87-6 jurisdiction over electric cooperatives only as follows:
87-7 (1) to regulate wholesale transmission rates and
87-8 service including terms of access, to the extent provided in
87-9 Subchapter A, Chapter 35;
87-10 (2) to regulate certification of service areas to the
87-11 extent provided in Chapter 37; and
87-12 (3) to require reports of electric cooperative
87-13 operations only to the extent necessary to:
87-14 (A) ensure the public safety;
87-15 (B) enable the commission to satisfy its
87-16 responsibilities relating to electric cooperatives under this
87-18 (C) enable the commission to determine the
87-19 aggregate electric load and energy requirements in the state and
87-20 the resources available to serve that load; or
87-21 (D) enable the commission to determine
87-22 information relating to market power under Chapter 39.
87-23 Sec. 41.005. LIMITATION ON MUNICIPAL AUTHORITY.
87-24 Notwithstanding any other provision of this title, a municipality
87-25 may not directly or indirectly regulate the rates, operations, and
87-26 services of an electric cooperative.
88-1 SUBCHAPTER B. ELECTRIC COOPERATIVE UTILITY CHOICE
88-2 Sec. 41.051. BOARD DECISION. (a) The board of directors
88-3 has the discretion to decide when or if the electric cooperative
88-4 will provide customer choice.
88-5 (b) Electric cooperatives that choose to participate in
88-6 customer choice may do so at any time on or after January 1, 2002,
88-7 by adoption of an appropriate resolution of the board of directors.
88-8 The decision to participate in customer choice by the adoption of
88-9 such a resolution may be revoked only if no customer has opted for
88-10 choice within four years of the resolution's adoption.
88-11 Sec. 41.052. ELECTRIC COOPERATIVES NOT OFFERING CUSTOMER
88-12 CHOICE. (a) An electric cooperative that chooses not to
88-13 participate in customer choice may not offer electric energy at
88-14 unregulated prices directly to retail customers outside its
88-15 certificated retail service area.
88-16 (b) An electric cooperative under Subsection (a) retains the
88-17 right to offer and provide a full range of customer service and
88-18 pricing programs to the customers within its certificated retail
88-19 service area and to purchase and sell electric energy at wholesale
88-20 without geographic restriction.
88-21 (c) A generation and transmission electric cooperative may
88-22 offer electric energy at unregulated prices directly to retail
88-23 customers outside of its parent electric cooperatives' certificated
88-24 service areas only if a majority of the parent electric
88-25 cooperatives of the generation and transmission electric
88-26 cooperative have chosen to offer customer choice.
89-1 Sec. 41.053. RETAIL CUSTOMER RIGHT OF CHOICE. (a) If an
89-2 electric cooperative chooses to participate in customer choice,
89-3 after that choice, all retail customers within the certificated
89-4 service area of the electric cooperative shall have the right of
89-5 customer choice, and the electric cooperative shall provide
89-6 nondiscriminatory open access for retail service.
89-7 (b) Upon its initiation of customer choice, an electric
89-8 cooperative shall designate itself or another entity as the
89-9 provider of last resort for retail customers within the electric
89-10 cooperative's certificated service area and shall fulfill the role
89-11 of default provider of last resort in the event no other entity is
89-12 available to act in that capacity.
89-13 (c) If a retail electric provider fails to serve a customer
89-14 described in Subsection (b), upon request by the customer, the
89-15 provider of last resort shall offer the customer the standard
89-16 retail service package for the appropriate customer class, with no
89-17 interruption of service, at a fixed, nondiscountable rate approved
89-18 by the board of directors.
89-19 (d) The board of directors may establish the procedures and
89-20 criteria for designating the provider of last resort and may
89-21 redesignate the provider of last resort according to a schedule it
89-22 considers appropriate.
89-23 Sec. 41.054. SERVICE OUTSIDE CERTIFICATED AREA. (a) An
89-24 electric cooperative participating in customer choice shall have
89-25 the right to offer electric energy and related services at
89-26 unregulated prices directly to retail customers without regard to
90-1 geographic location.
90-2 (b) In providing service under Subsection (a) to retail
90-3 customers outside its certificated service area as that area exists
90-4 on the date of adoption of customer choice, an electric cooperative
90-5 becomes subject to commission jurisdiction as to the commission's
90-6 rules establishing a code of conduct regulating anticompetitive
90-7 practices under Section 39.157(d), except to the extent such rules
90-8 conflict with this chapter.
90-9 (c) For electric cooperatives participating in customer
90-10 choice, the commission shall have jurisdiction to establish terms
90-11 and conditions, but not rates, for access by other electric
90-12 providers to the electric cooperative's distribution facilities.
90-13 (d) Notwithstanding Subsections (b) and (c), the commission
90-14 shall make accommodation in the code of conduct for specific legal
90-15 requirements imposed by state or federal law applicable to electric
90-16 cooperatives. The commission shall accommodate the organizational
90-17 structures of electric cooperatives and shall not prohibit an
90-18 electric cooperative and any related entity from sharing officers,
90-19 directors, or employees.
90-20 (e) The commission does not have jurisdiction to require
90-21 unbundling of services or functions of, or to regulate the recovery
90-22 of stranded investment of, an electric cooperative or, except as
90-23 provided by this section, jurisdiction with respect to the rates,
90-24 terms, and conditions of service for retail customers of an
90-25 electric cooperative within the electric cooperative's certificated
90-26 service area.
91-1 (f) An electric cooperative shall maintain separate books
91-2 and records of its operations and the operations of any subsidiary
91-3 and shall ensure that the rates charged for provision of electric
91-4 service do not include any costs of its subsidiary or any other
91-5 costs not related to the provision of electric service.
91-6 Sec. 41.055. JURISDICTION OF BOARD OF DIRECTORS. A board of
91-7 directors has exclusive jurisdiction to:
91-8 (1) set all terms of access, conditions, and rates
91-9 applicable to services provided by the electric cooperative, except
91-10 as provided by Sections 41.054 and 41.056, including
91-11 nondiscriminatory and comparable terms of access, conditions, and
91-12 rates for distribution but excluding wholesale transmission rates,
91-13 terms of access, and conditions for wholesale transmission service
91-14 set by the commission under Subchapter A, Chapter 35, provided that
91-15 the rates for distribution established by the electric cooperative
91-16 shall be comparable to the distribution rates that apply to the
91-17 electric cooperative and its subsidiaries;
91-18 (2) determine whether to unbundle any energy-related
91-19 activities, and if the board of directors chooses to unbundle,
91-20 whether to do so structurally or functionally;
91-21 (3) reasonably determine the amount of the electric
91-22 cooperative's stranded investment;
91-23 (4) establish nondiscriminatory transition charges
91-24 reasonably designed to recover the stranded investment over an
91-25 appropriate period of time;
91-26 (5) determine the extent to which the electric
92-1 cooperative will provide various customer services, including
92-2 nonelectric services, or accept the services from other providers;
92-3 (6) manage and operate the electric cooperative's
92-4 utility systems, including exercise of control over resource
92-5 acquisition and any related expansion programs;
92-6 (7) establish and enforce service quality standards
92-7 and consumer safeguards designed to protect retail electric
92-9 (8) determine whether a base rate reduction is
92-10 appropriate for the electric cooperative;
92-11 (9) determine any other utility matters that the board
92-12 of directors believes should be included; and
92-13 (10) make any other decisions affecting the electric
92-14 cooperative's participation in customer choice that are not
92-15 inconsistent with the provisions of this chapter.
92-16 Sec. 41.056. ANTICOMPETITIVE ACTIONS. (a) If, after notice
92-17 and hearing, the commission finds that an electric cooperative
92-18 providing customer choice has engaged in anticompetitive behavior
92-19 by not providing other retail electric providers with
92-20 nondiscriminatory terms and conditions of access to distribution
92-21 facilities or customers within the electric cooperative's
92-22 certificated service area that are comparable to the electric
92-23 cooperative's and its subsidiaries' terms and conditions of access
92-24 to distribution facilities or customers, the commission shall
92-25 notify the electric cooperative.
92-26 (b) The electric cooperative shall have three months to cure
93-1 the anticompetitive or noncompliant behavior described in
93-2 Subsection (a). If the behavior is not fully remedied within that
93-3 time, the commission may prohibit the electric cooperative or its
93-4 subsidiary from providing retail service outside its certificated
93-5 retail service area until the behavior is remedied.
93-6 Sec. 41.057. BILLING. (a) An electric cooperative that
93-7 opts for customer choice may continue to bill directly electric
93-8 customers located in its certificated service area for all
93-9 transmission and distribution services. The electric cooperative
93-10 may also bill directly for generation and customer services
93-11 provided by the electric cooperative or its subsidiaries to those
93-13 (b) A customer served by an electric cooperative for
93-14 transmission and distribution services and by a retail electric
93-15 provider for retail service has the option of being billed directly
93-16 by each service provider or receiving a single bill for
93-17 distribution, transmission, and generation services from the
93-18 electric cooperative.
93-19 Sec. 41.058. TARIFFS FOR OPEN ACCESS. An electric
93-20 cooperative that opts for customer choice and that owns or operates
93-21 transmission and distribution facilities shall file with the
93-22 commission, before the 90th day preceding the date the electric
93-23 cooperative offers customer choice, tariffs implementing the open
93-24 access rules established by the commission. This filing shall be
93-25 for informational purposes only.
93-26 Sec. 41.059. NO POWER TO AMEND CERTIFICATES. Nothing in
94-1 this chapter empowers a board of directors to issue, amend, or
94-2 rescind a certificate of public convenience and necessity granted
94-3 by the commission.
94-4 Sec. 41.060. CUSTOMER SERVICE INFORMATION. (a) The
94-5 commission shall keep information submitted by customers and retail
94-6 electric providers pertaining to the provision of electric service
94-7 by electric cooperatives.
94-8 (b) The commission shall notify the appropriate electric
94-9 cooperative of information submitted by a customer or retail
94-10 electric provider and the electric cooperative shall respond to the
94-11 customer or retail electric provider. The electric cooperative
94-12 shall notify the commission of its response.
94-13 (c) The commission shall prepare a report for the Sunset
94-14 Advisory Commission that includes information submitted and
94-15 responses by electric cooperatives pursuant to the Sunset Advisory
94-16 Commission's schedule for reviewing the commission.
94-17 SUBCHAPTER C. RIGHTS NOT AFFECTED
94-18 Sec. 41.101. INTERFERENCE WITH CONTRACT. (a) This subtitle
94-19 shall not interfere with or abrogate the rights or obligations of
94-20 parties, including a retail or wholesale customer, to a contract
94-21 with an electric cooperative or its subsidiary.
94-22 (b) No provision of this subtitle may interfere with or be
94-23 deemed to abrogate the rights or obligations of a party under a
94-24 contract or an agreement concerning certificated service areas.
94-25 Sec. 41.102. ACCESS TO WHOLESALE MARKET. Nothing in this
94-26 subtitle shall limit the access of an electric cooperative or its
95-1 subsidiary, either on its own behalf or on behalf of its customers,
95-2 to the wholesale electric market.
95-3 Sec. 41.103. PROTECTION OF BONDHOLDERS. Nothing in this
95-4 subtitle or any rule adopted under this subtitle shall impair
95-5 contracts, covenants, or obligations between electric cooperatives,
95-6 a lender, and the holders of bonds issued on behalf of or by one or
95-7 more electric cooperatives.
95-8 Sec. 41.104. TAX-EXEMPT STATUS. Nothing in this subtitle
95-9 may impair the tax-exempt status of electric cooperatives, nor
95-10 shall anything in this subtitle compel any electric cooperative to
95-11 use its facilities in a manner which violates any contractual
95-12 provisions, bond covenants, or other restrictions applicable to
95-13 facilities financed by tax-exempt debt.
95-14 SECTION 25. Section 252.022, Local Government Code, is
95-15 amended by adding Subsection (c) to read as follows:
95-16 (c) This chapter does not apply to expenditures by a
95-17 municipally owned electric or gas utility or unbundled divisions of
95-18 a municipally owned electric or gas utility in connection with any
95-19 purchases by the municipally owned utility or divisions of a
95-20 municipally owned utility made in accordance with procurement
95-21 procedures adopted by the body vested with authority for management
95-22 and operation of the municipally owned utility or its divisions.
95-23 For purposes of this subsection, "municipally owned utility"
95-24 includes a river authority engaged in the generation, transmission,
95-25 or distribution of electric energy to the public.
95-26 SECTION 26. Section 272.001, Local Government Code, is
96-1 amended by adding Subsection (j) to read as follows:
96-2 (j) This section does not apply to sales or exchanges of
96-3 land owned by a municipality operating a municipally owned electric
96-4 or gas utility if the land is held or managed by the municipally
96-5 owned utility, or by a division of the municipally owned electric
96-6 or gas utility that constitutes the unbundled electric or gas
96-7 operations of the utility. For purposes of this subsection,
96-8 "municipally owned utility" includes a river authority engaged in
96-9 the generation, transmission, or distribution of electric energy to
96-10 the public, and "unbundled" operations are those operations of the
96-11 utility that have, in the discretion of the utility's governing
96-12 body, been functionally separated.
96-13 SECTION 27. Subsection (c), Section 402.002, Local
96-14 Government Code, is amended to read as follows:
96-15 (c) The municipality may manufacture its own electricity,
96-16 gas, or anything else needed or used by the public. It may
96-17 purchase, and make contracts for the purchase of, gas, electricity,
96-18 oil, or any other commodity or article used by the public and may
96-19 sell it to the public on terms as provided by the municipal charter
96-20 or by ordinance.
96-21 SECTION 28. Subdivision (3), Section 551.001, Government
96-22 Code, is amended to read as follows:
96-23 (3) "Governmental body":
96-24 (A) means:
96-25 (i) [ (A)] a board, commission, department,
96-26 committee, or agency within the executive or legislative branch of
97-1 state government that is directed by one or more elected or
97-2 appointed members;
97-3 (ii) [ (B)] a county commissioners court in
97-4 the state;
97-5 (iii) [ (C)] a municipal governing body in
97-6 the state;
97-7 (iv) [ (D)] a deliberative body that has
97-8 rulemaking or quasi-judicial power and that is classified as a
97-9 department, agency, or political subdivision of a county or
97-11 (v) [ (E)] a school district board of
97-13 (vi) [ (F)] a county board of school
97-15 (vii) [ (G)] a county board of education;
97-16 (viii) [ (H)] the governing board of a
97-17 special district created by law; and
97-18 (ix) [ (I)] a nonprofit corporation
97-19 organized under Chapter 76, Acts of the 43rd Legislature, 1st
97-20 Called Session, 1933 (Article 1434a, Vernon's Texas Civil
97-21 Statutes), that provides a water supply or wastewater service, or
97-22 both, and is exempt from ad valorem taxation under Section 11.30,
97-23 Tax Code;
97-24 (B) does not include the governing board of a
97-25 special district created by law, or the governing board of a
97-26 special district's affiliate corporation, with respect to
98-1 deliberations relating to competitive activity, including trade
98-2 secrets or privileged or confidential commercial or financial
98-3 information, if disclosure of the information, as determined in the
98-4 discretion of the governing board of the district or the district's
98-5 affiliate, could give advantage to competitors and if those
98-6 deliberations relate to electric utility operations; and
98-7 (C) does not include the governing body of a
98-8 municipally owned electric or gas utility or unbundled division of
98-9 a municipally owned electric or gas utility, or a separate
98-10 policy-making body of a municipality or its affiliate the sole
98-11 function of which is management and operation of the unbundled
98-12 divisions of a municipally owned electric or gas utility, with
98-13 respect to deliberations relating to competitive activity,
98-14 including but not limited to trade secrets or privileged or
98-15 confidential commercial or financial information, if disclosure of
98-16 the information, as determined in the discretion of the governing
98-17 body in question, could give advantage to competitors. In this
98-18 paragraph, "unbundled divisions" are those that have been
98-19 functionally separated as provided by the entity's governing body.
98-20 SECTION 29. Subdivision (1), Section 552.003, Government
98-21 Code, is amended to read as follows:
98-22 (1) "Governmental body":
98-23 (A) means:
98-24 (i) a board, commission, department,
98-25 committee, institution, agency, or office that is within or is
98-26 created by the executive or legislative branch of state government
99-1 and that is directed by one or more elected or appointed members;
99-2 (ii) a county commissioners court in the
99-4 (iii) a municipal governing body in the
99-6 (iv) a deliberative body that has
99-7 rulemaking or quasi-judicial power and that is classified as a
99-8 department, agency, or political subdivision of a county or
99-10 (v) a school district board of trustees;
99-11 (vi) a county board of school trustees;
99-12 (vii) a county board of education;
99-13 (viii) the governing board of a special
99-15 (ix) the governing body of a nonprofit
99-16 corporation organized under Chapter 76, Acts of the 43rd
99-17 Legislature, 1st Called Session, 1933 (Article 1434a, Vernon's
99-18 Texas Civil Statutes), that provides a water supply or wastewater
99-19 service, or both, and is exempt from ad valorem taxation under
99-20 Section 11.30, Tax Code; and
99-21 (x) the part, section, or portion of an
99-22 organization, corporation, commission, committee, institution, or
99-23 agency that spends or that is supported in whole or in part by
99-24 public funds; [ and]
99-25 (B) does not include the judiciary;
99-26 (C) does not include the governing board of a
100-1 special district, or the governing board of a special district's
100-2 affiliate corporation, with respect to records relating to
100-3 competitive activity, including trade secrets or privileged or
100-4 confidential commercial or financial information, if disclosure of
100-5 the information, as determined in the discretion of the governing
100-6 board of the district or the district's affiliate, could give
100-7 advantage to competitors and if the records relate to electric
100-8 utility operations; and
100-9 (D) does not include a governing body of any
100-10 entity listed in Paragraph (A) vested with the power to manage and
100-11 operate electric or gas utility activities, whether bundled or
100-12 unbundled, of the entity, or by a separate policy-making body of
100-13 the entity or its affiliate the sole function of which is
100-14 management and operation of the unbundled generating and marketing
100-15 divisions for electric or gas services, with respect to records
100-16 held by or on behalf of the governing body relating to competitive
100-17 activity, including trade secrets or privileged or confidential
100-18 commercial or financial information, if disclosure of the
100-19 information, as determined in the discretion of the governing body
100-20 of the entity in question, could give advantage to competitors. In
100-21 this paragraph, "unbundled" activities or divisions are those that
100-22 have been functionally separated as provided by the entity's
100-23 governing body.
100-24 SECTION 30. Subsection (d), Section 791.011, Government
100-25 Code, is amended to read as follows:
100-26 (d) An interlocal contract must:
101-1 (1) be authorized by the governing body of each party
101-2 to the contract; however, if a party to the contract is a
101-3 municipally owned electric utility, authorization by the governing
101-4 body of each party is required only for contracts that exceed
101-6 (2) state the purpose, terms, rights, and duties of
101-7 the contracting parties; and
101-8 (3) specify that each party paying for the performance
101-9 of governmental functions or services must make those payments from
101-10 current revenues available to the paying party.
101-11 SECTION 31. Subchapter A, Chapter 2256, Government Code, is
101-12 amended by adding Section 2256.0201 to read as follows:
101-13 Sec. 2256.0201. AUTHORIZED INVESTMENTS; MUNICIPAL UTILITY.
101-14 (a) A municipality that owns a municipal electric utility that is
101-15 engaged in the distribution and sale of electric energy or natural
101-16 gas to the public may enter into a hedging contract and related
101-17 security and insurance agreements in relation to fuel oil, natural
101-18 gas, and electric energy to protect against loss due to price
101-19 fluctuations. A hedging transaction must comply with the
101-20 regulations of the Commodity Futures Trading Commission and the
101-21 Securities and Exchange Commission. If there is a conflict between
101-22 the municipal charter of the municipality and this chapter, this
101-23 chapter prevails.
101-24 (b) A payment by a municipally owned electric or gas utility
101-25 under a hedging contract or related agreement in relation to fuel
101-26 supplies or fuel reserves is a fuel expense, and the utility may
102-1 credit any amounts it receives under the contract or agreement
102-2 against fuel expenses.
102-3 (c) The body vested with power to manage and operate the
102-4 municipally owned electric or gas utility may set policy regarding
102-5 hedging transactions.
102-6 (d) In this section, "hedging" means the buying and selling
102-7 of fuel oil, natural gas, and electric energy futures or options or
102-8 similar contracts on those commodity futures as a protection
102-9 against loss due to price fluctuation.
102-10 SECTION 32. Chapter 245, Acts of the 67th Legislature,
102-11 Regular Session, 1981 (Article 717p, Vernon's Texas Civil
102-12 Statutes), is amended by adding Section 4C to read as follows:
102-13 Sec. 4C. (a) This section applies only to a river authority
102-14 that is engaged in the distribution and sale of electric energy to
102-15 the public.
102-16 (b) Notwithstanding any other law, a river authority may:
102-17 (1) provide transmission services, as defined by the
102-18 Utilities Code or the Public Utility Commission of Texas, on a
102-19 regional basis to any eligible transmission customer at any
102-20 location within or outside the boundaries of the river authority;
102-22 (2) acquire, including by lease-purchase; lease from
102-23 or to any person; finance; construct; rebuild; operate; or sell
102-24 electric transmission facilities at any location within or outside
102-25 the boundaries of the river authority; provided, however, that
102-26 nothing in this section shall allow a river authority to construct
103-1 transmission facilities to an ultimate consumer of electricity to
103-2 enable an ultimate consumer to bypass the transmission or
103-3 distribution facilities of its existing provider.
103-4 (c) For purposes of this section, "electric transmission
103-5 facilities" includes telecommunications systems that are attached
103-6 or incidental to facilities used to transmit electric energy;
103-7 provided, however, that this section does not authorize a river
103-8 authority to serve as a common carrier of telecommunications
103-10 SECTION 33. Sections 1 and 2, Article 1115a, Revised
103-11 Statutes, are amended to read as follows:
103-12 Sec. 1. This article applies only to a home-rule
103-13 municipality that owns an electric utility system, that by
103-14 ordinance or charter elects to have the management and control of
103-15 the system governed by this article, and that:
103-16 (1) has outstanding obligations payable in whole or
103-17 part [ solely] from and secured by a lien on and pledge of net
103-18 revenues of the system; or
103-19 (2) issues obligations that are payable in whole or
103-20 part [ solely] from and secured by a lien on and pledge of the net
103-21 revenues of the system and that are approved by the attorney
103-23 Sec. 2. A municipality by ordinance may transfer management
103-24 and control of the electric utility system to a [ five-member] board
103-25 of trustees appointed by the municipality's governing body. The
103-26 municipality by ordinance shall determine [ set] the qualifications
104-1 for appointment to the board and the number of members. The
104-2 municipality may by ordinance vest the power to establish rates and
104-3 related terms and conditions for its municipally owned electric
104-4 utility in the board of trustees appointed under this section,
104-5 notwithstanding any charter provision to the contrary.
104-6 SECTION 34. The following provisions are repealed:
104-7 (1) Chapter 34, Utilities Code;
104-8 (2) Subchapters F and G, Chapter 36, Utilities Code; and
104-9 (3) Section 37.058, Utilities Code.
104-10 SECTION 35. (a) Nothing in this Act shall restrict or limit
104-11 a municipality's historical right to control and receive reasonable
104-12 compensation for use of public streets, alleys, rights-of-way, or
104-13 other public property to convey or provide electricity.
104-14 (b) Nothing in this Act shall affect a retail public
104-15 utility's right to provide electric service pursuant to a
104-16 certificate of public convenience and necessity.
104-17 SECTION 36. The Public Utility Commission of Texas shall
104-18 study and make recommendations by December 15, 2000, to the 77th
104-19 Legislature for additional legislation that would move to and
104-20 establish a competitive electric market on January 1, 2002, in
104-21 accordance with the changes in law made by this Act.
104-22 SECTION 37. No later than 180 days after the effective date
104-23 of this Act, the Public Utility Commission of Texas shall establish
104-24 rules and procedures for the securitization of stranded costs for
104-25 river authorities, as provided by Subdivision (2), Subsection (a),
104-26 Section 40.003, Utilities Code, as added by this Act.
105-1 SECTION 38. This Act takes effect September 1, 1999.
105-2 SECTION 39. The importance of this legislation and the
105-3 crowded condition of the calendars in both houses create an
105-4 emergency and an imperative public necessity that the
105-5 constitutional rule requiring bills to be read on three several
105-6 days in each house be suspended, and this rule is hereby suspended.