By: Fraser S.B. No. 15
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to state energy policy and the planning of energy
  development and utilization and to certain related electric power
  generation issues.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
  ARTICLE 1
         SECTION 1.01.  This article may be cited as the Energy Policy
  Act.
         SECTION 1.02.  The Utilities Code is amended by adding Title
  6 to read as follows:
  TITLE 6.  ENERGY POLICY ACT
  CHAPTER 300.  STRATEGIC ENERGY PLANNING
  SUBCHAPTER A.  GENERAL PROVISIONS
         Sec. 300.001.  PURPOSE AND FINDINGS.  (a)  This title is
  enacted to promote, in accordance with the public interest, the
  strategic planning of energy development, production, delivery,
  commercialization, and utilization in this state.
         (b)  The purpose of this title is to establish a statewide
  energy policy planning entity and process that recognizes:
               (1)  public health and general welfare as a critical
  concern in the development of energy policies;
               (2)  energy as a valuable and vital commodity in the
  state's economy;
               (3)  protection of the environment as a major
  consideration in the production of energy and utilization of
  natural resources;
               (4)  cost-effective, market-based solutions as a
  preferred policy for energy planning;
               (5)  utilization of Texas-based resources to help
  provide energy security, stability, and reliability; and
               (6)  the importance of portfolio diversity in promoting
  energy system flexibility, affordability, and efficiency.
         Sec. 300.002.  DEFINITIONS.  In this title:
               (1)  "Commission" means the Public Utility Commission
  of Texas.
               (2)  "Council" means the Texas Energy Policy Council.
               (3)  "Plan" means the statewide energy policy plan.
         Sec. 300.003.  TEXAS ENERGY POLICY COUNCIL.  (a)  The Texas
  Energy Policy Council is created to develop and present a statewide
  energy policy plan to the legislature.  The plan must include a
  20-year planning horizon and be updated to reflect changing
  conditions and should be considered a living document.
         (b)  The council is composed of 13 members as follows:
               (1)  the chairman of the Public Utility Commission of
  Texas;
               (2)  the chairman of the Railroad Commission of Texas;
               (3)  the chairman of the Texas Commission on
  Environmental Quality;
               (4)  the president and chief executive officer of the
  Electric Reliability Council of Texas;
               (5)  the commissioner of the General Land Office;
               (6)  two members of the senate appointed by the
  lieutenant governor;
               (7)  two members of the house of representatives
  appointed by the speaker of the house of representatives;
               (8)  one member of the academic community with
  expertise in energy appointed by the governor;
               (9)  one member of the academic community with
  expertise in environmental issues related to energy appointed by
  the governor;
               (10)  the director of the State Energy Conservation
  Office; and
               (11)  one member of the public with expertise in
  low-income energy issues, including the needs of low-income and
  vulnerable ratepayers, appointed by the governor.
         (c)  The governor shall designate the presiding officer from
  among the members of the council.
         (d)  An appointed member of the council serves for a full
  planning cycle and may be reappointed at the pleasure of the
  appointing official.
         (e)  The council shall meet at least quarterly in
  even-numbered years while developing a plan for submission to the
  legislature.  The council may meet annually in odd-numbered years
  after submitting plans to the legislature.
         (f)  The council shall develop and implement policies and
  procedures that provide the public with reasonable opportunity to
  appear before the council and to speak on issues under the
  jurisdiction of the council.
         (g)  The commission is designated as the state agency
  responsible for administering the council.  Staff from the
  commission shall be tasked, as necessary, with assisting the
  council in carrying out its duties.
         Sec. 300.004.  POWERS, DUTIES, AND RESPONSIBILITIES OF
  COUNCIL.  (a)  In developing the plan, the council shall:
               (1)  encourage cooperation and coordination between
  public and private entities regarding energy usage, planning,
  research and development, and commercialization;
               (2)  seek policies that promote a diverse portfolio of
  clean, reliable, and competitively priced energy sources;
               (3)  promote research, pilot projects, and
  market-based incentives to explore and expand long-term energy
  options;
               (4)  develop policies to prevent supply interruptions
  and infrastructure failure;
               (5)  examine the impact on the environment of energy
  exploration, production, and use;
               (6)  take into account the statewide and regional water
  planning process;
               (7)  make recommendations for increasing public
  knowledge of energy use issues and public awareness of the
  importance of more efficient consumption of energy; and
               (8)  take into account the needs of low-income and
  vulnerable Texans.
         (b)  The council shall submit to the legislature the initial
  plan by December 1, 2012.  Thereafter, the council shall report to
  the legislature by December 1 of each even-numbered year the status
  of the plan's implementation and make any recommendations for
  legislative action as necessary to implement or revise the plan.  
  The council may update the plan as necessary to reflect evolving
  conditions.
         Sec. 300.005.  FUELS AND TECHNOLOGIES. (a)  The council
  shall consider the following fuel sources, types of generation, and
  innovative technologies associated with these fuels and types of
  generation when creating the plan.  These fuels, types of
  generation, and technologies include:
               (1)  oil and natural gas;
               (2)  coal and lignite;
               (3)  nuclear;
               (4)  renewable energy technologies;
               (5)  geothermal;
               (6)  methane;
               (7)  distributed generation;
               (8)  fuel cells and storage;
               (9)  water conservation technologies that could be
  utilized in the exploration, production, and generation of energy
  resources; and
               (10)  any other fuels and technologies as defined in
  Section 39.904(d), including solar and wind technologies.
         (b)  The council shall develop policies that ensure fuel
  resources available to the state are utilized in a balanced and
  efficient manner.  The council shall consider the economic
  viability, price stability and volatility, and environmental
  impact of types of fuel and technology when making its
  recommendations.  The council shall also consider all types of
  generation technology to identify in its recommendations current or
  potential operational or administrative advantages or
  disadvantages of each type of technology to which a protocol of the
  Electric Reliability Council of Texas applies.
         Sec. 300.006.  ENERGY EFFICIENT TECHNOLOGY. (a)  In order
  to reduce the energy demand of customers in this state, the council
  shall consider energy-efficient technologies when formulating the
  plan and include them in its recommendations.  Energy-efficient
  technologies shall be considered for the following:
               (1)  residential, commercial, industrial, and state
  and local energy users; and
               (2)  any other user group or application the council
  deems appropriate.
         (b)  The council shall consider the economic viability and
  competitiveness of new technologies when making its
  recommendations.
         (c)  The council shall consider the ability of
  energy-efficient technologies to reduce the demand for energy and
  the need for additional transmission capacity in the state and
  shall consider opportunities for reducing transmission constraints
  by using these technologies.
         Sec. 300.007.  TRANSMISSION.  (a)  The council shall
  consider and recommend strategies to ensure that customers in this
  state have access to reliable energy.
         (b)  The council shall consider transmission constraints,
  and make recommendations in the plan to alleviate or prevent those
  constraints, for the following sources of energy:
               (1)  oil and natural gas;
               (2)  coal and lignite;
               (3)  wind and solar; and
               (4)  electricity.
         Sec. 300.008.  ALTERNATIVE FUEL VEHICLES.  (a)  The council
  shall consider and make recommendations on strategies and
  incentives that promote the use of alternative fuel vehicles such
  as natural gas vehicles and plug-in electric vehicles.
         (b)  The council shall consider the economic feasibility of
  alternative fuel vehicles and infrastructure constraints and may
  make recommendations on incentives to incorporate and promote these
  vehicles as a component of the plan.
         Sec. 300.009.  ENVIRONMENT. (a)  The council, when creating
  the plan or in formulating recommendations, shall consider the
  effects of energy exploration, production, and consumption on the
  environment.
         (b)  The council shall recommend strategies that protect and
  preserve the environment of the state and allow for access to and
  the production of safe, economically viable, and reliable sources
  of energy.  The council shall consider:
               (1)  air quality;
               (2)  water quality;
               (3)  water supply; and
               (4)  waste disposal.
  ARTICLE 2
         SECTION 2.01.  Chapter 39, Utilities Code, is amended by
  adding Subchapter L to read as follows:
  SUBCHAPTER L.  REPORT ON RESERVES AND VOLUNTARY EMISSIONS
  REDUCTIONS PLAN
         Sec. 39.551.  STATEMENT OF INTENT. It is not the intent of
  this subchapter to:
               (1)  transfer environmental regulation from the
  Railroad Commission of Texas or the Texas Commission on
  Environmental Quality to the commission; or
               (2)  reduce the competitiveness of the existing energy
  market in Texas by re-regulating the market or requiring the
  decommissioning of any lawfully operating generating plant.
         Sec. 39.552.  REPORT ON RESERVES. (a)  Not later than
  December 1, 2011, the Railroad Commission of Texas shall prepare
  and submit to the commission a report on coal and gas reserves in
  this state that includes information relating to:
               (1)  natural gas reserves in this state proven and
  probable on November 1, 2011;
               (2)  estimates of the proven and probable natural gas
  reserves in this state for each of the next 15 years;
               (3)  estimates of natural gas prices and potential
  price volatility for each of the next 15 years;
               (4)  coal reserves in this state proven and probable on
  November 1, 2011;
               (5)  estimates of the proven and probable coal reserves
  in this state for each of the next 15 years; and
               (6)  estimates of coal prices and potential price
  volatility for each of the next 15 years.
         (b)  The Railroad Commission of Texas may request financial
  information and forecasts from the comptroller to assist the
  Railroad Commission of Texas in carrying out its duties under this
  section. The comptroller shall provide that information and those
  forecasts to the Railroad Commission of Texas as quickly as
  possible after receiving such request.
         Sec. 39.553.  REPORT AND PLAN. (a)  The commission shall
  prepare a report on electric energy generation in this state. The
  report must include an analysis of and policy recommendations for
  how to most cost-effectively comply with environmental regulation.
         (b)  In preparing the report, the commission shall:
               (1)  analyze information from the reports submitted
  under this subchapter by electric generating facilities and the
  Railroad Commission of Texas; and
               (2)  use information already in the possession of
  existing regulators by consulting with the Railroad Commission of
  Texas, the Texas Commission on Environmental Quality, the Electric
  Reliability Council of Texas, the Southwest Power Pool, the
  Southeastern Electric Reliability Council, and the Western
  Electricity Coordinating Council.
         (c)  The report must evaluate and consider measures that
  will:
               (1)  maintain electric grid reliability;
               (2)  ensure the availability of electric energy at
  reasonable rates;
               (3)  reduce air pollution, as defined by Section
  382.003, Health and Safety Code;
               (4)  increase the state's ability to comply with state
  and federal clean air standards in nonattainment and
  near-nonattainment areas; and
               (5)  reduce the use of water for electricity generation
  in this state.
         (d)  The report must identify the 10 percent of electric
  generation capacity that will be most impacted by compliance with
  environmental regulation.
         (e)  The report must identify combinations of market
  factors, plant operating characteristics, federal and state
  environmental regulations promulgated after January 1, 2011, and
  other conditions that might make it more economically attractive
  for the electric generation capacity identified in the report to be
  retired rather than comply with the regulations.  The market
  factors considered in the analysis must include:
               (1)  long-term prices and price volatility for fuel
  sources used to generate electricity in this state;
               (2)  price projections for the cost of electricity
  going forward and factors that are relevant to determining the
  market price of electricity; and
               (3)  the potential impact of the voluntary
  decommissioning of existing units of electric generation capacity
  from facilities in this state.
         (f)  The report must consider plant operating
  characteristics including variable and fixed operating costs of
  electric generation facilities identified in the report. The
  analysis must also incorporate a range of costs projected by
  credible sources for complying with the specified federal and state
  air pollution regulations. In conducting this analysis, the
  commission shall consider electric generation facilities in this
  state of various vintages, sizes, fuel types, conversion
  efficiencies, and emission characteristics. The analysis must:
               (1)  estimate the amount of electric generation
  capacity that is likely to voluntarily be retired rather than incur
  the additional expense of complying with the federal and state air
  pollution regulations;
               (2)  provide an analysis of the cost and the impact on
  electric rates, and provide price projections, associated with
  voluntarily retiring electric generation facilities included in
  the report;
               (3)  identify any additional barriers to the retirement
  of the types of electric generation capacity identified and provide
  recommendations on how to most cost-effectively and voluntarily
  reduce air pollution, including recommendations to accelerate the
  permitting process for certain types of low-polluting generation;
  and
               (4)  identify the types, costs, and effects of
  incentives to promote the goals of this section.
         (g)  Not later than October 1, 2012, the commission shall
  make a draft of the report available for public review and comment
  for a period of not less than 30 days.
         (h)  Not later than December 1, 2012, the commission shall
  finalize and publish the report.
         (i)  Implementation of the requirements of this section
  shall be contingent upon receiving gifts, grants, or donations
  sufficient to cover the expenses incurred by the commission.
         SECTION 2.02.  Section 31.002, Utilities Code, is amended by
  adding Subdivision (4-a) and amending Subdivision (10) to read as
  follows:
               (4-a) "Distributed natural gas generation facility"
  means a facility installed on the customer's side of the meter that
  uses natural gas to generate not more than 2,000 kilowatts of
  electricity.
               (10)  "Power generation company" means a person,
  including a person who owns or operates a distributed natural gas
  generation facility, that:
                     (A)  generates electricity that is intended to be
  sold at wholesale;
                     (B)  does not own a transmission or distribution
  facility in this state other than an essential interconnecting
  facility, a facility not dedicated to public use, or a facility
  otherwise excluded from the definition of "electric utility" under
  this section; and
                     (C)  does not have a certificated service area,
  although its affiliated electric utility or transmission and
  distribution utility may have a certificated service area.
         SECTION 2.03.  The heading to Subchapter B, Chapter 35,
  Utilities Code, is amended to read as follows:
  SUBCHAPTER B.  EXEMPT WHOLESALE GENERATORS, DISTRIBUTED NATURAL
  GAS GENERATION FACILITIES, AND POWER MARKETERS
         SECTION 2.04.  Subchapter B, Chapter 35, Utilities Code, is
  amended by adding Section 35.036 to read as follows:
         Sec. 35.036.  DISTRIBUTED NATURAL GAS GENERATION
  FACILITIES. (a)  A person who owns or operates a distributed
  natural gas generation facility may sell electric power generated
  by the facility. The electric utility, electric cooperative, or
  retail electric provider that provides retail electricity service
  to the facility may purchase electric power tendered to it by the
  owner or operator of the facility at a value agreed to by the
  electric utility, electric cooperative, or retail electric
  provider and the owner or operator of the facility. The value of
  the electric power may be based wholly or partly on the clearing
  price of energy at the time of day and at the location at which the
  electric power is made available to the electric grid.
         (b)  At the request of the owner or operator of the
  distributed natural gas generation facility, the electric utility
  or electric cooperative shall allow the owner or operator of the
  facility to use transmission and distribution facilities to
  transmit the electric power to another entity that is acceptable to
  the owner or operator in accordance with commission rules or a
  tariff approved by the Federal Energy Regulatory Commission.
         (c)  Subject to Subsections (e) and (f), if the owner or
  operator of a distributed natural gas generation facility requests
  to be interconnected to an electric utility or electric cooperative
  that does not have a transmission tariff approved by the Federal
  Energy Regulatory Commission, the electric utility or electric
  cooperative may recover from the owner or operator of the facility
  the reasonable costs of interconnecting the facility with the
  electric utility or electric cooperative that are necessary for and
  directly attributable to the interconnection of the facility.
         (d)  Subject to Subsections (e) and (f), an electric utility
  or electric cooperative may recover from the owner or operator of a
  distributed natural gas generation facility the reasonable costs of
  electric facility upgrades and improvements if:
               (1)  the rated capacity of the distributed natural gas
  generation facility is greater than the rated capacity of the
  electric utility or electric cooperative; and
               (2)  the costs are necessary for and directly
  attributable to accommodating the distributed natural gas
  generation facility's capacity.
         (e)  An electric utility or electric cooperative may recover
  costs under Subsection (c) or (d) only if:
               (1)  the electric utility or electric cooperative
  provides a written good-faith cost estimate to the owner or
  operator of the distributed natural gas generation facility; and
               (2)  the owner or operator of the distributed natural
  gas generation facility agrees in writing to pay the reasonable and
  necessary costs of interconnection or capacity accommodation
  requested by the owner or operator and described in the estimate
  before the electric utility or electric cooperative incurs the
  costs.
         (f)  If an electric utility or electric cooperative seeks to
  recover from the owner or operator of a distributed natural gas
  generation facility an amount that exceeds the amount in the
  estimate provided under Subsection (e) by more than five percent,
  the commission shall resolve the dispute at the request of the owner
  or operator of the facility.
         (g)  A distributed natural gas generation facility must
  comply with emissions limitations established by the Texas
  Commission on Environmental Quality for a standard emissions permit
  for an electric generation facility unit installed after January 1,
  1995.
         (h)  This section does not require an electric cooperative to
  transmit electricity to a retail point of delivery in the
  certificated service area of the electric cooperative if the
  electric cooperative has not adopted customer choice.
         SECTION 2.05.  Subsection (c), Section 39.351, Utilities
  Code, is amended to read as follows:
         (c)  The commission may establish simplified filing
  requirements for distributed natural gas generation facilities [A
  power generation company may register any time after September 1,
  2000].
         SECTION 2.06.  Section 39.904, Utilities Code, is amended by
  adding Subsection (p) to read as follows:
         (p)  This section is intended to increase the amount of
  renewable generating capacity as provided by Subsection (a) and is
  not intended, unless specifically stated otherwise in this section,
  to provide operational or competitive advantages through Electric
  Reliability Council of Texas protocols to renewable energy
  generators to the detriment of other generation resources.
  ARTICLE 3
         SECTION 3.01.  As soon as practicable after the effective
  date of this Act, the designated appointing officials shall appoint
  the members to the Texas Energy Policy Council established under
  Chapter 300, Utilities Code, as added by this Act.
         SECTION 3.02.  This Act takes effect September 1, 2011.