BILL ANALYSIS Senate Research Center S.B. 1075 88R8944 JXC-F By: King Business & Commerce 4/6/2023 As Filed AUTHOR'S / SPONSOR'S STATEMENT OF INTENT Section 39.918, Utilities Code, was passed in 2021 (H.B. 2483) in the aftermath of Winter Storm Uri to allow transmission and distribution utilities to lease temporary emergency generation to be used during load shed events or otherwise when there is a widespread power outage, such as after a storm or hurricane. Protections were included such that this temporary emergency generation did not compete with competitive generation or otherwise distort the generation market. These assets may only be used to protect public health and safety in emergencies, not to sell power into the wholesale market. And the law has a sunset of September 1, 2029. Since the passage of the 2021 law, utilities have deployed these assets multiple times for the benefit of Texans in emergencies. But the requirement that the utilities lease, not own, these assets makes them more expensive, because the utilities must pay the margin of a lessee that would not be incurred if the utilities owned the assets. There have been questions raised about when these assets can be used, how much a utility can procure to protect public health and safety, and how these costs should be reviewed for recovery by the Public Utility Commission of Texas (PUC). S.B. 1075 maintains the market safeguards from the 2021 legislation to prevent these emergency assets from competing with competitive generation or distorting that market. But it allows utility ownership of those assets so that this public health and safety tool is less expensive to utility customers. The bill modifies the statutory use cases for when the assets can be used to include outages that affect critical infrastructure, declared disasters, and as directed by certain government officials. It also addresses cost recovery issues that have arisen at the PUC, as well as the amount of assets that a utility may procure. And it eliminates the September 1, 2029, sunset provision. Electric utilities support this legislation. Generators and cities that intervene in rate cases may oppose the legislation. As proposed, S.B. 1075 amends current law relating to facilities and construction machinery used to respond to power outages. RULEMAKING AUTHORITY This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 39.918, Utilities Code, as follows: Sec. 39.918. New heading: UTILITY FACILITIES FOR RESPONDING TO SIGNIFICANT POWER OUTAGE. (a) Defines "significant power outage." Deletes existing text defining "widespread power outage." (a-1) Authorizes the Texas Division of Emergency Management, the independent organization certified under Section 39.151 (Essential Organizations) for the Electric Reliability Council of Texas (ERCOT) power region, or the executive director of the Public Utility Commission of Texas (PUC) to determine that a power outage other than an outage described by Subsection (a) is a significant power outage for the purposes of this section. (b) Authorizes a transmission and distribution utility, notwithstanding any other provision of Subtitle B (Electric Utilities), to: (1) lease or own and operate facilities that provide temporary emergency electric energy to aid in providing power to the utility's distribution customers when a significant power outage is imminent or restoring power to the utility's distribution customers during a significant power outage; and (2) makes a conforming change to this subdivision. Deletes existing text authorizing a transmission and distribution utility, notwithstanding any other provision of this subtitle, to lease and operate facilities that provide temporary emergency electric energy to aid in restoring power to the utility's distribution customers during a widespread power outage in which the independent system operator has ordered the utility to shed load or the utility's distribution facilities are not being fully served by the bulk power system under normal operations. (b-1) Makes conforming and nonsubstantive changes to this subsection. (c) Prohibits a transmission and distribution utility that operates a facility, rather than that leases and operates facilities, under Subsection (b)(1) from selling electric energy or ancillary services from the facility, rather than those facilities. (d) Makes a nonsubstantive change to this subsection. (e) Requires a transmission and distribution utility that operates a facility, rather than that leases and operates facilities, under Subsection (b)(1) to ensure, to the extent reasonably practicable, that retail customer usage during operation of the facility, rather than those facilities, is adjusted out of the usage reported for billing purposes by the retail customer's retail electric provider. (f) Requires a transmission and distribution utility, when reasonably practicable, to use a competitive bidding process to lease a facility, rather than facilities, under Subsection (b)(1). (g) Makes a conforming change to this subsection. (h) Requires the PUC to allow, rather than permit: (1) makes conforming changes to this subdivision; and (2) makes no changes to this subdivision. (i) Requires the PUC to authorize a transmission and distribution utility to defer for recovery in a future ratemaking proceeding the incremental operations and maintenance expenses and the return, not otherwise recovered in a rate proceeding, associated with the leasing, procurement, ownership, and operation, rather than the leasing or procurement, ownership, and operation, of the facilities. (j) Authorizes a transmission and distribution utility to request recovery of the reasonable and necessary costs of leasing, procuring, owning, or operating, rather than leasing or procuring, owning, and operating, facilities under this section, including any deferred expenses, through an expedited periodic rate adjustment proceeding, rather than a proceeding, under Section 36.210 (Periodic Rate Adjustments) or in another ratemaking proceeding. Authorizes the PUC to review costs recovered through a periodic rate adjustment in the following base rate proceeding and order refunds to customers if appropriate. (k) Entitles a transmission and distribution utility requesting cost recovery under Subsection (j) to select whether the costs are considered to be distribution substation equipment costs or distribution transformer costs unless the PUC has found in a previous base rate proceeding for the utility that temporary emergency electric energy costs should be categorized in a different manner. Deletes existing text providing that this section expires September 1, 2029. (l) Provides that the fact that the PUC has not previously approved a facility operated under this section or a cost of leasing, procuring, owning, or operating a facility under this section is not grounds for dismissal of the facility or the cost from a proceeding under Section 36.210 or another ratemaking proceeding. (m) Requires the PUC, if the capacity of facilities a transmission and distribution utility operates under Subsection (b)(1) is less than or equal to three percent of the utility's historical peak load, to find that the facilities are used and useful to the utility in providing service and the costs of leasing or owning and operating the facilities are prudent, reasonable, and necessary. SECTION 2. Amends Section 502.146(b), Transportation Code, as follows: (b) Provides that an owner is not required to register a vehicle that is used only temporarily on the highways if the vehicle is: (1)-(3) makes no changes to these subdivisions; (4) construction machinery, including construction machinery that is owned by a transmission and distribution utility as defined by Section 31.002 (Definitions), Utilities Code, and used to maintain or repair electrical lines or substations in response to a power outage. SECTION 3. Makes application of this Act prospective. SECTION 4. Provides that this Act, to the extent of any conflict, prevails over another Act of the 88th Legislature, Regular Session, 2023, relating to nonsubstantive additions to and corrections in enacted codes. SECTION 5. Effective date: September 1, 2023.
BILL ANALYSIS
Senate Research Center S.B. 1075
88R8944 JXC-F By: King
Business & Commerce
4/6/2023
As Filed
Senate Research Center
S.B. 1075
88R8944 JXC-F
By: King
Business & Commerce
4/6/2023
As Filed
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
Section 39.918, Utilities Code, was passed in 2021 (H.B. 2483) in the aftermath of Winter Storm Uri to allow transmission and distribution utilities to lease temporary emergency generation to be used during load shed events or otherwise when there is a widespread power outage, such as after a storm or hurricane. Protections were included such that this temporary emergency generation did not compete with competitive generation or otherwise distort the generation market. These assets may only be used to protect public health and safety in emergencies, not to sell power into the wholesale market. And the law has a sunset of September 1, 2029.
Since the passage of the 2021 law, utilities have deployed these assets multiple times for the benefit of Texans in emergencies. But the requirement that the utilities lease, not own, these assets makes them more expensive, because the utilities must pay the margin of a lessee that would not be incurred if the utilities owned the assets.
There have been questions raised about when these assets can be used, how much a utility can procure to protect public health and safety, and how these costs should be reviewed for recovery by the Public Utility Commission of Texas (PUC).
S.B. 1075 maintains the market safeguards from the 2021 legislation to prevent these emergency assets from competing with competitive generation or distorting that market. But it allows utility ownership of those assets so that this public health and safety tool is less expensive to utility customers. The bill modifies the statutory use cases for when the assets can be used to include outages that affect critical infrastructure, declared disasters, and as directed by certain government officials. It also addresses cost recovery issues that have arisen at the PUC, as well as the amount of assets that a utility may procure. And it eliminates the September 1, 2029, sunset provision.
Electric utilities support this legislation. Generators and cities that intervene in rate cases may oppose the legislation.
As proposed, S.B. 1075 amends current law relating to facilities and construction machinery used to respond to power outages.
RULEMAKING AUTHORITY
This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 39.918, Utilities Code, as follows:
Sec. 39.918. New heading: UTILITY FACILITIES FOR RESPONDING TO SIGNIFICANT POWER OUTAGE. (a) Defines "significant power outage." Deletes existing text defining "widespread power outage."
(a-1) Authorizes the Texas Division of Emergency Management, the independent organization certified under Section 39.151 (Essential Organizations) for the Electric Reliability Council of Texas (ERCOT) power region, or the executive director of the Public Utility Commission of Texas (PUC) to determine that a power outage other than an outage described by Subsection (a) is a significant power outage for the purposes of this section.
(b) Authorizes a transmission and distribution utility, notwithstanding any other provision of Subtitle B (Electric Utilities), to:
(1) lease or own and operate facilities that provide temporary emergency electric energy to aid in providing power to the utility's distribution customers when a significant power outage is imminent or restoring power to the utility's distribution customers during a significant power outage; and
(2) makes a conforming change to this subdivision.
Deletes existing text authorizing a transmission and distribution utility, notwithstanding any other provision of this subtitle, to lease and operate facilities that provide temporary emergency electric energy to aid in restoring power to the utility's distribution customers during a widespread power outage in which the independent system operator has ordered the utility to shed load or the utility's distribution facilities are not being fully served by the bulk power system under normal operations.
(b-1) Makes conforming and nonsubstantive changes to this subsection.
(c) Prohibits a transmission and distribution utility that operates a facility, rather than that leases and operates facilities, under Subsection (b)(1) from selling electric energy or ancillary services from the facility, rather than those facilities.
(d) Makes a nonsubstantive change to this subsection.
(e) Requires a transmission and distribution utility that operates a facility, rather than that leases and operates facilities, under Subsection (b)(1) to ensure, to the extent reasonably practicable, that retail customer usage during operation of the facility, rather than those facilities, is adjusted out of the usage reported for billing purposes by the retail customer's retail electric provider.
(f) Requires a transmission and distribution utility, when reasonably practicable, to use a competitive bidding process to lease a facility, rather than facilities, under Subsection (b)(1).
(g) Makes a conforming change to this subsection.
(h) Requires the PUC to allow, rather than permit:
(1) makes conforming changes to this subdivision; and
(2) makes no changes to this subdivision.
(i) Requires the PUC to authorize a transmission and distribution utility to defer for recovery in a future ratemaking proceeding the incremental operations and maintenance expenses and the return, not otherwise recovered in a rate proceeding, associated with the leasing, procurement, ownership, and operation, rather than the leasing or procurement, ownership, and operation, of the facilities.
(j) Authorizes a transmission and distribution utility to request recovery of the reasonable and necessary costs of leasing, procuring, owning, or operating, rather than leasing or procuring, owning, and operating, facilities under this section, including any deferred expenses, through an expedited periodic rate adjustment proceeding, rather than a proceeding, under Section 36.210 (Periodic Rate Adjustments) or in another ratemaking proceeding. Authorizes the PUC to review costs recovered through a periodic rate adjustment in the following base rate proceeding and order refunds to customers if appropriate.
(k) Entitles a transmission and distribution utility requesting cost recovery under Subsection (j) to select whether the costs are considered to be distribution substation equipment costs or distribution transformer costs unless the PUC has found in a previous base rate proceeding for the utility that temporary emergency electric energy costs should be categorized in a different manner. Deletes existing text providing that this section expires September 1, 2029.
(l) Provides that the fact that the PUC has not previously approved a facility operated under this section or a cost of leasing, procuring, owning, or operating a facility under this section is not grounds for dismissal of the facility or the cost from a proceeding under Section 36.210 or another ratemaking proceeding.
(m) Requires the PUC, if the capacity of facilities a transmission and distribution utility operates under Subsection (b)(1) is less than or equal to three percent of the utility's historical peak load, to find that the facilities are used and useful to the utility in providing service and the costs of leasing or owning and operating the facilities are prudent, reasonable, and necessary.
SECTION 2. Amends Section 502.146(b), Transportation Code, as follows:
(b) Provides that an owner is not required to register a vehicle that is used only temporarily on the highways if the vehicle is:
(1)-(3) makes no changes to these subdivisions;
(4) construction machinery, including construction machinery that is owned by a transmission and distribution utility as defined by Section 31.002 (Definitions), Utilities Code, and used to maintain or repair electrical lines or substations in response to a power outage.
SECTION 3. Makes application of this Act prospective.
SECTION 4. Provides that this Act, to the extent of any conflict, prevails over another Act of the 88th Legislature, Regular Session, 2023, relating to nonsubstantive additions to and corrections in enacted codes.
SECTION 5. Effective date: September 1, 2023.