May 29, 2019

Texas legislative session ends, makes several changes to electric industry laws

by Wendell Bell
Source – Grid Monitor
Posted 05/28/2019

The 86th Texas Legislature concluded its 140-day regular session on Memorial Day.  While focused on budget and tax matters, lawmakers addressed a wide variety of issues including a number of bills affecting the electric utility industry.  A brief summary of select industry bills that passed is listed below by topic, including notes on some related bills that did not pass.

Cybersecurity/Grid Security

Senate Bill 475 by Sen. Kelly Hancock (House sponsor Rep. Ana Hernandez) creates the Texas Electric Grid Security Council, an advisory body to coordinate the sharing and implementation of best security practices.  The three-member body includes the Chairman of the Public Utility Commission (PUC), the CEO of ERCOT, and the Governor, or their designees. The council may consult and coordinate with the Texas Division of Emergency Management, the United States Department of Energy, the United States Department of Homeland Security, the North American Electric Reliability Corporation, federal and state agencies, members of the electric industry and other grid security experts. 

SB 936 by Sen. Kelly Hancock (House sponsor Rep. Ana Hernandez) establishes a cybersecurity monitor program overseen by the PUC and ERCOT.   The monitor will meet regularly with utilities, review utility self-assessments, and research and develop best practices.

SB 64 by Sen. Jane Nelson (House sponsor Rep. Dade Phelan) updates the Texas Cybersecurity Act dealing with state agencies.  It includes a section directing the PUC to establish a cybersecurity coordination program.

Another proposal dealing with grid security that failed to make it through the legislative process was Senate Bill 76 by Sen. Bob Hall. It would have created the Grid Security Council appointed by the governor to analyze and make recommendations to the legislature about various threats to the electric grid, including geomagnetic disturbance (GMD), and electromagnetic pulse (EMP). It passed the Senate by a vote of 24 to 6 and cleared the House State Affairs Committee 9 to 3.  It did not make it onto the House calendar.

Transmission Line Certification

Senate Bill 1938 by Sen. Kelly Hancock (House sponsor Rep. Dade Phelan) provides incumbent utilities with a right of first refusal for new high-voltage transmission lines.  It applies statewide the process generally followed in ERCOT where transmission projects are assigned to the utilities that own the endpoints to be interconnected.  Also, the bill repeals statutory exceptions enacted in 2005 that allowed entities other than existing utilities to build transmission infrastructure to connect the Competitive Renewable Energy Zones in West Texas with population centers in ERCOT.

Line Safety

House Bill 4150 by Rep. Chris Paddie (Senate sponsor Sen. Bryan Hughes) requires electric utilities to ensure that lines built over 178 named lakes meet existing vertical clearance guidelines.  The bill aims to prevent accidents such as the one that resulted in the tragic deaths of three Hallsville Boy Scouts in 2017 after the mast of their sailboat hit a power line overhanging Lake O’ the Pines. It also requires utilities to file reports with the Public Utility Commission about safety procedures and line inspections.

Advanced Metering

Three bills signed into law by Governor Greg Abbott provide for deployment of advanced metering and meter information networks by investor-owned utilities in areas outside of the ERCOT region.  The nearly identical bills amend three different subchapters in the Utilities Code that apply specifically to certain utilities and prescribe methods to recover deployments costs through surcharges on customers’ bills.

House Bill 853 by Rep. Joe Moody (Senate sponsor Sen. Jose Rodriguez) applies to El Paso Electric Company. 

House Bill 986 by Rep. Four Price (Senate sponsor Sen. Charles Perry) applies to Xcel Energy in the Texas Panhandle.

House Bill 1595 by Rep. Chris Paddie (Senate sponsor Sen. Bryan Hughes) applies to Southwestern Electric Power Company (SWEPCO) in East Texas.

Non-ERCOT Generation Investment

House Bill 1397 by Rep. Dade Phelan (Senate sponsor Sen. Robert Nichols) authorizes a utility operating outside of ERCOT to file an application with the PUC for recovery of generation-related costs through a rate rider. While an application may be approved before the utility places a power plant in service, the rider may not take effect before the date the facility begins providing service to the utility’s customers. Further, if the generation investment is greater than $200 million, the utility must initiate a comprehensive base rate proceeding no later than eighteen months after the date the rider takes effect. The bill also extends the expiration date of other rate case requirements for non-ERCOT utilities from 2023 to 2031.

Power Generation Company Mergers

Senate 1211 by Sen. Kelly Hancock (House sponsor Rep. Phil King) increases the threshold for PUC review of mergers and acquisitions of power generation companies from transactions involving one percent of the “total electricity for sale” in the state to ten percent of installed capacity in a power region.  It does not alter a separate provision that prohibits any company from owning more than twenty percent of installed capacity in a power region.  Raising the trigger for review is intended to preserve the PUC’s ability to prevent transactions that might create monopoly market power while reducing the administrative burden on the commission and entities involved with smaller mergers and consolidations.

Wind Decommissioning

House Bill 2845 by Rep. Terry Canales (Senate sponsor Sen. Brandon Creighton) requires wind power development agreements to address removal of turbines and related facilities at the end of their useful lives.  Initially opposed by wind power advocates, compromise language was worked out after a hearing in the House State Affairs Committee, and it passed the House on a vote of 145-0.  It then passed unanimously on the Senate Local and Uncontested Calendar.

An analogous bill addressing solar power decommissioning, Senate Bill 1610 by Sen. Bob Hall, did not get a hearing.

Tax Abatements for Renewable Energy, Other Industries

House Bill 3143 by Rep. Jim Murphy (Senate sponsor Sen. Royce West) reauthorizes the Property Tax Redevelopment and Tax Abatement Act, which was set to expire this September.  The bill also provides additional public notice, hearing, and reporting requirements for certain tax abatement agreements. 

 The bill passed the House 146-0 and passed the Senate 30-1, but not before Sen. Bob Hall attempted to add a provision that would have prohibited tax abatements on properties involved in renewable energy projects.  The amendment, which was essentially the text of Hall’s Senate Bill 1617 that never got a committee hearing, failed by a vote of 10-20.

The Senate added one non-controversial amendment.  The House concurred with the change, preserving this important incentive mechanism for renewable energy as well as other industries.

In addition to local tax abatements, renewable energy benefits from certain federal tax breaks, including the Production Tax Credit for wind power. Two bills were introduced to study the impacts these provisions have on energy markets and identify ways to compensate.  Senate Bill 2232 by Sen. Kelly Hancock passed the Senate 25-6 but did not progress in the House beyond a hearing in the State Affairs Committee.  House Bill 2908 by Rep. Jared Patterson passed out of committee but did not make it onto the calendar.  Patterson briefly added the measure as an amendment to SB 241 dealing with state agency reporting, but it was stripped off the following day.

Utility Scale Storage

Senate Bill 1012 by Judith Zaffirini (House sponsor Justin Holland) clarifies that municipally owned utilities and electric cooperatives do not have to register as power generation companies in order to deploy storage projects.  Described as a code cleanup bill, it implements a PUC recommendation to reconcile conflicting statutory definitions.

A bill that would have made more substantive changes to statutes dealing with storage failed to pass.  Senate Bill 1941 by Sen. Kelly Hancock (R-House sponsor Rep. Justin Holland bill addressed a request from the PUC for guidance regarding the ownership and use of utility-scale batteries in the ERCOT region since the vertically integrated utilities were unbundled into generation, transmission and distribution, and retail segments.

Key provisions in the bill would allow a transmission and distribution utility (TDU), with PUC approval, to contract with a power generation company (PGC) to provide energy to meet the TDU’s reliability needs.  The TDU would have to demonstrate that the storage project would be more cost-effective than construction of traditional distribution facilities in order for the PUC to allow recovery of reasonable and necessary costs in the TDU’s rates.  

The bill passed the Senate 31-0 in mid-April.  It made its way onto the House calendar, but too far down to come up for a vote before a key procedural deadline.

PUC Representation in Regional Proceedings

House Bill 3867 by Rep. Drew Springer (Senate sponsor Sen. Charles Perry) authorizes the PUC to retain necessary assistance in a proceeding before a regional transmission organization headquartered in another state or before a court reviewing such proceedings. The Texas utility that is involved in the proceeding would pay reasonable costs for the services provided to the commission, up to $1.5 million in a 12-month period.  

Regulation of Power Brokers

Senate Bill 1497 by Sen. Judith Zaffirini (House sponsor Rep. Tan Parker) requires energy brokers to register with the PUC and comply with customer protection rules. Brokers are consultants that assist customers in selecting retail electric providers and service plans and have not been regulated in the past.

General Land Office, State Power Program

House Bill 2263 by Rep. Chris Paddie (Senate sponsor Sen. Kelly Hancock) phases out over five years the state’s energy market program managed by the General Land Office (GLO). Under the program created in 1999 as part of electric utility restructuring legislation, the GLO may sell power generated from certain oil and gas royalties taken in kind to governmental entities such as state agencies, institutions of higher education, public school districts, and cities.  The bill addresses concerns that the GLO program has outlived its purpose as a transition measure designed to ensure that public entities had purchase options in the early stages of electric deregulation.

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