Texas 2015 - 84th Regular

Texas House Bill HB3457 Compare Versions

Only one version of the bill is available at this time.

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1	1	By: Flynn H.B. No. 3457
2	2
3	3
4	4	A BILL TO BE ENTITLED
5	5	AN ACT
6	6	relating to the methods of recovery of stranded environmental
7	7	compliance costs by certain non-ERCOT electric utilities.
8	8	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
9	9	SECTION 1. Chapter 36, Utilities Code, is amended by adding
10	10	Subchapter J to read as follows:
11	11	SUBCHAPTER J. RECOVERY OF STRANDED ENVIRONMENTAL COMPLIANCE COSTS
12	12	Sec. 36.501. APPLICABILITY. This subchapter applies only
13	13	to an electric utility described by Section 39.501.
14	14	Sec. 36.502. SECURITIZATION FOR RECOVERY OF STRANDED
15	15	ENVIRONMENTAL COMPLIANCE COSTS; PURPOSE. (a) The purpose of this
16	16	subchapter is to enable an electric utility to use securitization
17	17	financing to recover stranded environmental compliance costs,
18	18	because that type of debt will lower the carrying costs associated
19	19	with the recovery of these costs, relative to the costs that would
20	20	be incurred using conventional financing methods. The proceeds of
21	21	the transition bonds may be used only for the purposes of reducing
22	22	the amount of stranded environmental compliance costs, as
23	23	determined by the commission in accordance with this subchapter,
24	24	including the refinancing or retirement of utility debt or equity.
25	25	(b) It is the intent of the legislature that:
26	26	(1) securitization of stranded environmental
27	27	compliance costs will be accomplished using the same procedures,
28	28	standards, and protections for securitization authorized under
29	29	Subchapter G, Chapter 39, as in effect on September 1, 2015, except
30	30	as provided by this subchapter; and
31	31	(2) the commission will ensure that securitization of
32	32	stranded environmental compliance costs provides greater tangible
33	33	and quantifiable benefits to ratepayers than would have been
34	34	achieved without the issuance of transition bonds.
35	35	Sec. 36.503. RECOVERY OF STRANDED ENVIRONMENTAL COMPLIANCE
36	36	COSTS. (a) In this subchapter, "stranded environmental compliance
37	37	costs" means costs described in this section that the commission
38	38	determines have been incurred in connection with any portion of a
39	39	generating unit or facility or any of its associated components or
40	40	capital additions that are subsequently retired, idled, or
41	41	otherwise not considered to be used and useful as a result of
42	42	federal or state environmental laws or regulations. The term is
43	43	limited to the following items:
44	44	(1) capital expenditures, including both plant in
45	45	service and construction work in progress, incurred by the electric
46	46	utility to achieve or maintain compliance with the Mercury and Air
47	47	Toxics Standards Rule enacted under the authority of sections 111
48	48	and 112 of the federal Clean Air Act (42 U.S.C. sections 7411 and
49	49	7412) and set out in volume 40 of the Code of Federal Regulations,
50	50	parts 60 and 63;
51	51	(2) the remaining unrecovered portion of the total
52	52	capital investment, including both plant in service and
53	53	construction work in progress, in a generating unit or facility
54	54	that is retired, idled, or otherwise considered not used and
55	55	useful; and
56	56	(3) for the portion of the stranded environmental
57	57	compliance costs not included in rates, carrying costs at the
58	58	utility's cost of debt reported in its most recent earnings
59	59	monitoring report, from the time at which the generating unit or
60	60	facility, or associated component or capital addition, is retired,
61	61	idled, or otherwise not considered to be used and useful, until the
62	62	effective date of rates providing for recovery of the stranded
63	63	environmental compliance costs.
64	64	(b) An electric utility is entitled to recover its
65	65	reasonable and necessary stranded environmental compliance costs
66	66	incurred before or after September 1, 2015. The stranded
67	67	environmental compliance costs are recoverable regardless of
68	68	whether those costs relate to property that is no longer used and
69	69	useful in providing service. The commission shall adopt rate
70	70	setting adjustments as necessary to ensure that the recovery of
71	71	stranded environmental compliance costs under the provisions of
72	72	this section does not result in over-recovery of such costs to the
73	73	extent they are reflected in base rates.
74	74	(c) No earlier than the date upon which a state or federal
75	75	implementation plan is established that requires a generating unit
76	76	or facility owned by the electric utility, or any of its associated
77	77	components or capital additions, to be retired, idled, or otherwise
78	78	considered not used and useful, the electric utility may file an
79	79	application with the commission seeking a determination of the
80	80	amount of stranded environmental compliance costs eligible for
81	81	recovery and securitization consistent with the requirements and
82	82	standards of this section. The commission shall issue an order
83	83	determining the amount of stranded environmental compliance costs
84	84	eligible for recovery and securitization not later than the 150th
85	85	day after the date the electric utility files the application. If
86	86	the commission has not made a determination before the 151st day
87	87	after that date, the application is considered to be approved. A
88	88	rate proceeding under Subchapter C or D is not required to determine
89	89	the amount of recoverable stranded environmental compliance costs
90	90	under this section, including for a rider mechanism authorized by
91	91	Subsection 6(d).
92	92	(d) If recovery through securitization under Sections
93	93	36.504-36.507 is not available, the electric utility is entitled to
94	94	recover all or any portion of its stranded environmental compliance
95	95	costs through inclusion in base rates or through a rate rider
96	96	mechanism. If the final implementation of rates resulting from the
97	97	issuance of an order in a rate proceeding under Subchapter C or D
98	98	provides for the recovery of all remaining stranded environmental
99	99	compliance costs, a rider mechanism adopted under this subsection
100	100	shall expire. Whether recovered through base rates or a rate rider
101	101	mechanism, the utility is entitled to recover carrying costs on the
102	102	stranded environmental compliance costs, at the utility's cost of
103	103	debt reported in its most recent earnings monitoring report, over a
104	104	recovery period of not more than 15 years.
105	105	Sec. 36.504. STANDARDS AND PROCEDURES GOVERNING
106	106	SECURITIZATION OF STRANDED ENVIRONMENTAL COMPLIANCE COSTS. (a) The
107	107	procedures and standards of this subchapter and the provisions of
108	108	Subchapter G, Chapter 39, govern an electric utility's application
109	109	for, and the commission's issuance of, a financing order to provide
110	110	for the securitization of stranded environmental compliance costs,
111	111	or to otherwise provide for the recovery of stranded environmental
112	112	compliance costs. An electric utility may recover stranded
113	113	environmental compliance costs through securitization only if the
114	114	electric utility's Texas retail jurisdictional amount of stranded
115	115	environmental compliance costs to be recovered through
116	116	securitization is at least $75 million.
117	117	(b) Subject to the standards, procedures, and tests
118	118	contained in this subchapter and Subchapter G, Chapter 39, the
119	119	commission shall adopt a financing order on the application of the
120	120	electric utility to recover its stranded environmental compliance
121	121	costs. On the commission's issuance of a financing order allowing
122	122	for recovery and securitization of stranded compliance costs, the
123	123	provisions of this subchapter and Subchapter G, Chapter 39,
124	124	continue to govern the financing order and the rights and interests
125	125	established in the order, and this subchapter and Subchapter G,
126	126	Chapter 39, continue to govern any transition bonds issued pursuant
127	127	to the financing order. To the extent any conflict exists between
128	128	the provisions of this subchapter and Subchapter G, Chapter 39, in
129	129	cases involving the securitization of stranded environmental
130	130	compliance costs, the provisions of this subchapter control.
131	131	(c) For purposes of this subchapter, "financing order" as
132	132	defined by Section 39.302 and as used in Subchapter G, Chapter 39,
133	133	includes a financing order authorizing the securitization of
134	134	stranded environmental compliance costs.
135	135	(d) For purposes of this subchapter, "qualified costs" as
136	136	defined by Section 39.302 and as used in Subchapter G, Chapter 39,
137	137	includes 100 percent of the electric utility's stranded
138	138	environmental compliance costs, together with the costs of issuing,
139	139	supporting, and servicing transition bonds and any costs of
140	140	retiring and refunding existing debt and equity securities of an
141	141	electric utility in connection with the issuance of transition
142	142	bonds. For purposes of this subchapter, the term includes:
143	143	(1) costs to the commission of acquiring professional
144	144	services for the purpose of evaluating proposed transactions under
145	145	this subchapter; and
146	146	(2) costs associated with ancillary agreements such as
147	147	any bond insurance policy, letter of credit, reserve account,
148	148	surety bond, swap arrangement, hedging arrangement, liquidity or
149	149	credit support arrangement, or other financial arrangement entered
150	150	into in connection with the issuance or payment of transition
151	151	bonds.
152	152	(e) For purposes of this subchapter, "transition bonds" as
153	153	defined by Section 39.302 and as used in Subchapter G, Chapter 39,
154	154	includes transition bonds issued in association with the recovery
155	155	of stranded environmental compliance costs. Transition bonds
156	156	issued to securitize stranded environmental compliance costs may be
157	157	called "environmental compliance bonds" or may be called by any
158	158	other name acceptable to the issuer and the underwriters of the
159	159	transition bonds.
160	160	(f) For purposes of this subchapter, "transition charges"
161	161	as defined by Section 39.302 and as used in Subchapter G, Chapter
162	162	39, includes nonbypassable amounts to be charged for the use of
163	163	electric services, approved by the commission under a financing
164	164	order to recover stranded environmental compliance costs, that
165	165	shall be collected by an electric utility, its successors, an
166	166	assignee, or other collection agents as provided by the financing
167	167	order. Transition charges approved by the commission under a
168	168	financing order to recover stranded environmental compliance costs
169	169	may be called "environmental compliance charges" or may be called
170	170	by any other name acceptable to the issuer and the underwriters of
171	171	the transition bonds.
172	172	(g) Notwithstanding Section 39.303(c), stranded
173	173	environmental compliance costs shall be functionalized and
174	174	allocated to customers in the same manner as the costs of the
175	175	stranded or similar facilities are functionalized and allocated in
176	176	the electric utility's most recently approved base rates.
177	177	(h) The amount of any accumulated deferred federal income
178	178	taxes offset, used to determine the securitization total, may not
179	179	be considered in future rate proceedings. Any tax obligation of the
180	180	electric utility arising from its receipt of securitization bond
181	181	proceeds, or from the collection and remittance of transition
182	182	charges, shall be recovered by the electric utility through the
183	183	commission's implementation of this subchapter.
184	184	(i) Notwithstanding a rate freeze or limitations on an
185	185	electric utility's ability to change rates authorized or imposed by
186	186	any other provision of this title or by a regulatory authority, an
187	187	electric utility is entitled to recover stranded environmental
188	188	compliance costs consistent with the provisions of this subchapter.
189	189	(j) If in the course of a proceeding to adopt a financing
190	190	order the commission determines that the recovery of all or any
191	191	portion of an electric utility's stranded environmental compliance
192	192	costs, using securitization, is not beneficial to ratepayers of the
193	193	electric utility under one or more of the tests applied to determine
194	194	those benefits, the commission shall nonetheless use the proceeding
195	195	to issue an order permitting the electric utility to recover the
196	196	remainder of its stranded environmental compliance costs,
197	197	consistent with the provisions of Section 36.503.
198	198	Sec. 36.505. NONBYPASSABLE CHARGES. The commission shall
199	199	include terms in the financing order to ensure that the imposition
200	200	and collection of transition charges associated with the recovery
201	201	of stranded environmental compliance costs are nonbypassable by
202	202	imposing restrictions on bypassability, as the commission
203	203	considers appropriate, consistent with the purposes of
204	204	securitization.
205	205	Sec. 36.506. FINANCING ORDER PROCEEDING. (a) An electric
206	206	utility may file an application for a financing order before the
207	207	expiration of the 150-day period provided by Section 36.503(c). The
208	208	commission shall issue a financing order not later than the 90th day
209	209	after the date the utility files its request for a financing order,
210	210	except that the commission is not required to issue the financing
211	211	order until it has determined the amount of stranded environmental
212	212	compliance costs eligible for recovery and securitization.
213	213	(b) A rate proceeding under Subchapter C or D is not
214	214	required for the issuance of a financing order.
215	215	(c) A commission order approving securitization financing
216	216	under this subchapter is not subject to rehearing. A commission
217	217	order may be reviewed by appeal only to a Travis County district
218	218	court by a party to the proceeding filed within 15 days after the
219	219	order is signed by the commission. The judgment of the district
220	220	court may be reviewed only by direct appeal to the Supreme Court of
221	221	Texas filed within 15 days after entry of judgment. All appeals
222	222	shall be heard and determined by the district court and the Supreme
223	223	Court of Texas as expeditiously as possible with lawful precedence
224	224	over other matters. Review on appeal shall be based solely on the
225	225	record before the commission and briefs to the court and shall be
226	226	limited to whether the order conforms to the constitution and laws
227	227	of this state and the United States and is within the authority of
228	228	the commission under this chapter.
229	229	Sec. 36.507. SEVERABILITY. Effective on the date the first
230	230	utility transition bonds associated with stranded environmental
231	231	compliance costs are issued under this subchapter, if any provision
232	232	in this title or portion of this title is held to be invalid or is
233	233	invalidated, superseded, replaced, repealed, or expires for any
234	234	reason, that occurrence does not affect the validity or
235	235	continuation of this subchapter, or Subchapter G, Chapter 39, as it
236	236	applies to this subchapter, or any part of those provisions, or any
237	237	other provision of this title that is relevant to the issuance,
238	238	administration, payment, retirement, or refunding of transition
239	239	bonds or to any actions of the electric utility, its successors, an
240	240	assignee, a collection agent, or a financing party, and those
241	241	provisions shall remain in full force and effect.
242	242	SECTION 2. This Act takes effect September 1, 2015.