Texas 2015 - 84th Regular

Texas Senate Bill SB365 Compare Versions

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

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1	1	84R2984 JXC-F
2	2	By: Eltife S.B. No. 365
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the methods of recovery of stranded environmental
8	8	compliance costs by certain non-ERCOT electric utilities.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Chapter 36, Utilities Code, is amended by adding
11	11	Subchapter J to read as follows:
12	12	SUBCHAPTER J. RECOVERY OF STRANDED ENVIRONMENTAL
13	13	COMPLIANCE COSTS
14	14	Sec. 36.501. APPLICABILITY. This subchapter applies only
15	15	to an electric utility described by Section 39.501.
16	16	Sec. 36.502. SECURITIZATION FOR RECOVERY OF STRANDED
17	17	ENVIRONMENTAL COMPLIANCE COSTS; PURPOSE. (a) The purpose of this
18	18	subchapter is to enable an electric utility to use securitization
19	19	financing to recover stranded environmental compliance costs,
20	20	because that type of debt will lower the carrying costs associated
21	21	with the recovery of these costs, relative to the costs that would
22	22	be incurred using conventional financing methods. The proceeds of
23	23	the transition bonds may be used only for the purposes of reducing
24	24	the amount of stranded environmental compliance costs, as
25	25	determined by the commission in accordance with this subchapter,
26	26	including the refinancing or retirement of utility debt or equity.
27	27	(b) It is the intent of the legislature that:
28	28	(1) securitization of stranded environmental
29	29	compliance costs will be accomplished using the same procedures,
30	30	standards, and protections for securitization authorized under
31	31	Subchapter G, Chapter 39, as in effect on September 1, 2015, except
32	32	as provided by this subchapter; and
33	33	(2) the commission will ensure that securitization of
34	34	stranded environmental compliance costs provides greater tangible
35	35	and quantifiable benefits to ratepayers than would have been
36	36	achieved without the issuance of transition bonds.
37	37	Sec. 36.503. RECOVERY OF STRANDED ENVIRONMENTAL COMPLIANCE
38	38	COSTS. (a) In this subchapter, "stranded environmental compliance
39	39	costs" means costs incurred in connection with any portion of a
40	40	generating unit or facility or any of its associated components or
41	41	capital additions that are subsequently retired, idled, or
42	42	otherwise not considered to be used and useful as a result of
43	43	existing or anticipated developments in federal or state
44	44	environmental laws or regulations. The term includes:
45	45	(1) capital expenditures, including both plant in
46	46	service and construction work in progress, incurred by the electric
47	47	utility to achieve or maintain compliance with federal or state
48	48	environmental requirements;
49	49	(2) the remaining unrecovered portion of the total
50	50	capital investment, including both plant in service and
51	51	construction work in progress, in a generating unit or facility
52	52	that is retired, idled, or otherwise considered not used and
53	53	useful; and
54	54	(3) for the portion of the stranded environmental
55	55	compliance costs not included in rates, carrying costs at the
56	56	utility's cost of debt reported in its most recent earnings
57	57	monitoring report, from the time at which the generating unit or
58	58	facility, or associated component or capital addition, is retired,
59	59	idled, or otherwise not considered to be used and useful, until the
60	60	effective date of rates providing for recovery of the stranded
61	61	environmental compliance costs.
62	62	(b) An electric utility is entitled to recover its stranded
63	63	environmental compliance costs incurred before or after September
64	64	1, 2015. Subject to compliance with this subsection, those costs
65	65	are considered prudent for purposes of cost recovery. The stranded
66	66	environmental compliance costs are recoverable regardless of
67	67	whether those costs relate to property that is no longer used and
68	68	useful in providing service. The electric utility is not required
69	69	to demonstrate to the commission the prudence of the decision to
70	70	incur the costs before the costs became stranded, but instead is
71	71	required only to demonstrate that the level of the stranded
72	72	environmental compliance costs described by Subsection (a)(1) was
73	73	reasonable and necessary to comply with federal or state
74	74	environmental requirements, if the generating unit or facility or
75	75	associated component or capital addition in question had become or
76	76	remained used and useful.
77	77	(c) An electric utility may file an application with the
78	78	commission seeking a determination of the amount of stranded
79	79	environmental compliance costs eligible for recovery and
80	80	securitization. The commission shall issue an order determining
81	81	the amount of stranded environmental compliance costs eligible for
82	82	recovery and securitization not later than the 150th day after the
83	83	date the electric utility files the application. If the commission
84	84	has not made a determination before the 151st day after that date,
85	85	the application is considered to be approved. A rate proceeding
86	86	under Subchapter C or D is not required to determine the amount of
87	87	recoverable stranded environmental compliance costs under this
88	88	section, including for a rider mechanism authorized by Subsection
89	89	(d).
90	90	(d) If recovery through securitization under Sections
91	91	36.504-36.507 is not available, the electric utility is entitled to
92	92	recover all or any portion of its stranded environmental compliance
93	93	costs through inclusion in base rates or through a rate rider
94	94	mechanism. If the final implementation of rates resulting from the
95	95	issuance of an order in a rate proceeding under Subchapter C or D
96	96	provides for the recovery of all remaining stranded environmental
97	97	compliance costs, a rider mechanism adopted under this subsection
98	98	shall expire. Whether recovered through base rates or a rate rider
99	99	mechanism, the utility is entitled to recover carrying costs on the
100	100	stranded environmental compliance costs, at the utility's cost of
101	101	debt reported in its most recent earnings monitoring report, over a
102	102	recovery period of not more than 15 years.
103	103	Sec. 36.504. STANDARDS AND PROCEDURES GOVERNING
104	104	SECURITIZATION OF STRANDED ENVIRONMENTAL COMPLIANCE COSTS. (a)
105	105	The procedures and standards of this subchapter and the provisions
106	106	of Subchapter G, Chapter 39, govern an electric utility's
107	107	application for, and the commission's issuance of, a financing
108	108	order to provide for the securitization of stranded environmental
109	109	compliance costs, or to otherwise provide for the recovery of
110	110	stranded environmental compliance costs. An electric utility may
111	111	recover stranded environmental compliance costs through
112	112	securitization only if the electric utility's Texas retail
113	113	jurisdictional amount of stranded environmental compliance costs
114	114	to be recovered through securitization is at least $75 million.
115	115	(b) Subject to the standards, procedures, and tests
116	116	contained in this subchapter and Subchapter G, Chapter 39, the
117	117	commission shall adopt a financing order on the application of the
118	118	electric utility to recover its stranded environmental compliance
119	119	costs. On the commission's issuance of a financing order allowing
120	120	for recovery and securitization of stranded environmental
121	121	compliance costs, the provisions of this subchapter and Subchapter
122	122	G, Chapter 39, continue to govern the financing order and the rights
123	123	and interests established in the order, and this subchapter and
124	124	Subchapter G, Chapter 39, continue to govern any transition bonds
125	125	issued pursuant to the financing order. To the extent any conflict
126	126	exists between the provisions of this subchapter and Subchapter G,
127	127	Chapter 39, in cases involving the securitization of stranded
128	128	environmental compliance costs, the provisions of this subchapter
129	129	control.
130	130	(c) For purposes of this subchapter, "financing order" as
131	131	defined by Section 39.302 and as used in Subchapter G, Chapter 39,
132	132	includes a financing order authorizing the securitization of
133	133	stranded environmental compliance costs.
134	134	(d) For purposes of this subchapter, "qualified costs" as
135	135	defined by Section 39.302 and as used in Subchapter G, Chapter 39,
136	136	includes 100 percent of the electric utility's stranded
137	137	environmental compliance costs, together with the costs of issuing,
138	138	supporting, and servicing transition bonds and any costs of
139	139	retiring and refunding existing debt and equity securities of an
140	140	electric utility in connection with the issuance of transition
141	141	bonds. For purposes of this subchapter, the term includes:
142	142	(1) costs to the commission of acquiring professional
143	143	services for the purpose of evaluating proposed transactions under
144	144	this subchapter; and
145	145	(2) costs associated with ancillary agreements such as
146	146	any bond insurance policy, letter of credit, reserve account,
147	147	surety bond, swap arrangement, hedging arrangement, liquidity or
148	148	credit support arrangement, or other financial arrangement entered
149	149	into in connection with the issuance or payment of transition
150	150	bonds.
151	151	(e) For purposes of this subchapter, "transition bonds" as
152	152	defined by Section 39.302 and as used in Subchapter G, Chapter 39,
153	153	includes transition bonds issued in association with the recovery
154	154	of stranded environmental compliance costs. Transition bonds
155	155	issued to securitize stranded environmental compliance costs may be
156	156	called "environmental compliance bonds" or may be called by any
157	157	other name acceptable to the issuer and the underwriters of the
158	158	transition bonds.
159	159	(f) For purposes of this subchapter, "transition charges"
160	160	as defined by Section 39.302 and as used in Subchapter G, Chapter
161	161	39, includes nonbypassable amounts to be charged for the use of
162	162	electric services, approved by the commission under a financing
163	163	order to recover stranded environmental compliance costs, that
164	164	shall be collected by an electric utility, its successors, an
165	165	assignee, or other collection agents as provided by the financing
166	166	order. Transition charges approved by the commission under a
167	167	financing order to recover stranded environmental compliance costs
168	168	may be called "environmental compliance charges" or may be called
169	169	by any other name acceptable to the issuer and the underwriters of
170	170	the transition bonds.
171	171	(g) Notwithstanding Section 39.303(c), stranded
172	172	environmental compliance costs shall be functionalized and
173	173	allocated to customers in the same manner as the costs of the
174	174	stranded or similar facilities are functionalized and allocated in
175	175	the electric utility's most recently approved base rates.
176	176	(h) The amount of any accumulated deferred federal income
177	177	taxes offset, used to determine the securitization total, may not
178	178	be considered in future rate proceedings. Any tax obligation of the
179	179	electric utility arising from its receipt of securitization bond
180	180	proceeds, or from the collection and remittance of transition
181	181	charges, shall be recovered by the electric utility through the
182	182	commission's implementation of this subchapter.
183	183	(i) Notwithstanding a rate freeze or limitations on an
184	184	electric utility's ability to change rates authorized or imposed by
185	185	any other provision of this title or by a regulatory authority, an
186	186	electric utility is entitled to recover stranded environmental
187	187	compliance costs consistent with the provisions of this subchapter.
188	188	(j) If in the course of a proceeding to adopt a financing
189	189	order the commission determines that the recovery of all or any
190	190	portion of an electric utility's stranded environmental compliance
191	191	costs, using securitization, is not beneficial to ratepayers of the
192	192	electric utility under one or more of the tests applied to determine
193	193	those benefits, the commission shall nonetheless use the proceeding
194	194	to issue an order permitting the electric utility to recover the
195	195	remainder of its stranded environmental compliance costs,
196	196	consistent with the provisions of Section 36.503.
197	197	Sec. 36.505. NONBYPASSABLE CHARGES. The commission shall
198	198	include terms in the financing order to ensure that the imposition
199	199	and collection of transition charges associated with the recovery
200	200	of stranded environmental compliance costs are nonbypassable by
201	201	imposing restrictions on bypassability, as the commission
202	202	considers appropriate, consistent with the purposes of
203	203	securitization.
204	204	Sec. 36.506. FINANCING ORDER PROCEEDING. (a) An electric
205	205	utility may file an application for a financing order before the
206	206	expiration of the 150-day period provided by Section 36.503(c).
207	207	The commission shall issue a financing order not later than the 90th
208	208	day after the date the utility files its request for a financing
209	209	order, except that the commission is not required to issue the
210	210	financing order until it has determined the amount of stranded
211	211	environmental compliance costs eligible for recovery and
212	212	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.