By the time the March 8, 2019 bill filing deadline for the 86th Texas Legislature passed, many bills concerning the electric industry had been filed. Storage, cybersecurity of the electric grid, and capital project tax abatements are among the energy issues Texas lawmakers are considering. This reviews the major filed bills before the current Texas Legislature.

Cybersecurity

Grid Security Councils/Commissions: In its Scope of Competition Report to the Legislature, the Public Utility Commission of Texas (PUC) recommended strengthening the cybersecurity of the electric grid. Several bills propose creating a council or commission to coordinate grid security and monitor developments. These include SB 475 (reported favorably as substituted in the Senate Business and Commerce Committee, which has issued a report and recommended the bill for the local and uncontested calendar), and its companion bill HB 3378 (reported favorably as substituted in the House State Affairs Committee); HB 400 (considered in a public hearing by the House State Affairs Committee, and still pending), and SB 1003 (referred to the Senate Natural Resources and Economic Development Committee). Additionally, SB 936 (reported favorably without amendments in the Senate Business and Commerce Committee, which has issued a report and recommended the bill for the local and uncontested calendar) aims to develop a framework for collaboration between the PUCT, Texas electric utilities, and ERCOT regarding strategies to secure electric infrastructure against cyber attacks.

Vendor Lists and Monitors: SB 64, referred to the Senate Business and Commerce Committee, would require the PUC to create a Cybersecurity Vendor List, a list of approved vendors that utilities would be permitted to contract with to further these initiatives. This bill proposes to add to the Utilities Code a definition of “utility” in the cybersecurity section that includes retail electric providers and power marketers, in addition to transmission and distribution utilities (TDUs), electric utilities and electric cooperatives. HB 2591, referred to the House State Affairs Committee, and HB 3377, reported favorably without amendments in the House State Affairs Committee, would implement a cybersecurity monitor authority to manage a cybersecurity outreach program for monitored utilities, meet with utilities to discuss emerging threats and training, and report to the PUC on monitored utility cybersecurity preparedness.

Storage

Ownership: The PUC also requested the Legislature provide guidance on rules for storage, particularly regarding how to classify storage from a regulatory perspective and the classification of market entities authorized to own and operate storage facilities. SB 1941, referred to the Senate Business and Commerce Committee, would allow a TDU to enter into an agreement with a power generation company (PGC) to provide electricity from an energy storage facility, with prior approval by the PUC; this would be limited to instances where construction of traditional distribution facilities would not be cost-effective compared to the use of a storage facility. The TDU would not be considered a PGC as a result of such an arrangement. SB 1012 would amend the Utilities Code to provide that a municipally owned utility or an electric cooperative that owns or operates electric energy storage equipment or facilities need not register as a PGC. This bill was reported favorably without amendments in the Senate Business and Commerce Committee, which has issued a report and recommended the bill for the local and uncontested calendar.

Residential and Small Commercial Customers: Both HB 2860 (considered in public hearing and still pending in the House State Affairs Committee) and companion bill SB 2066 (referred to the Senate Business and Commerce Committee) would entitle a residential or small commercial customer to have access to on-site distributed generation and energy storage resources to generate and export electricity to the grid, consume electricity from the grid, and reduce the customer’s use of electricity from the grid. They would also entitle those customers to store energy at the location of their connection to the grid.

Tax-Related Issues

Generally: HB 2438 would extend the expiration date of ad valorem tax incentives for economic development under Chapters 312 and 313 of the Tax Code until December 31, 2032. The bill has been considered in a public hearing by the House Ways and Means Committee and remains pending.

Renewables: HB 4180, referred to the House Ways and Means Committee, aims to narrow the reach of SB 277, passed during the 85th legislative session to disqualify wind farm owners from tax incentives if a “wind-powered energy device” was placed within 25 nautical miles of a military facility. HB 4180 would specify this restriction only applies to parcels of land with wind devices installed on or after September 1, 2017 that are within 25 nautical miles of a military aviation facility where fixed-wing aviation operations or training is conducted, and to parcels with devices installed on or after September 1, 2019 that are within that range of a military aviation facility in Texas at which only rotary-wing aviation operations or training is conducted. Additionally, SB 1610, referred to the Senate Business and Commerce Committee, would amend Chapter 312 of the Tax Code to prevent the governing body of a taxing unit from entering into an agreement to exempt from taxation any portion of the value of real property on which a solar facility is located, unless the owner of the property executed an agreement under a proposed new Sec. 35.202 of the Utilities Code, which would require a landowner to enter into an agreement requiring the landowner to bear responsibility for solar facility removal, and providing the county with financial assurance of removal.

Electricity Sales: Both HB 1581 and HB 2263 would prohibit the General Land Office from selling or conveying power to a public retail customer unless by public bid in response to a request for a proposal in which bids are solicited from multiple power providers. The bills would also exempt a public school district customer from the gross receipts tax on electricity; HB 2011 would likewise exempt public retail customers. HB 2263 has been reported favorably without amendments, and HB 2011 has been considered in public hearings and remains pending.

Markets

Wholesale Market Rules: HB 2908 would effectively eliminate the recent Operating Reserve Demand Curve pricing provisions in ERCOT by requiring the PUC and ERCOT to eliminate rules, protocols, or procedures that attempt to adjust electricity prices to reflect the value of reserves at different levels based on the reserves falling below the minimum contingency level and the value of lost load. It would also target renewable energy production by requiring those entities to adopt rules, operating procedures, and protocols to eliminate or compensate for any distortion in electricity pricing in the ERCOT market allegedly caused by the federal production tax credit, and to ensure costs imposed on the system by the sale of such electricity to be paid by the parties that impose the costs. HB 2908 has been considered in public hearings in the House State Affairs Committee and remains pending.

Mergers: SB 1211 and companion bill HB 2553 would increase the threshold for an official PUC review of mergers and acquisition of power generation companies under Sec. 39.158 of the Utilities Code from 1% to 10% of total electricity for sale, addressing one of the recommendations the PUC made in its report to the Legislature. SB 1211 has been recommended for the local and uncontested calendar by the Senate Business and Commerce Committee, which has distributed a report on the bill, while the House State Affairs Committee has reported a committee substitute of HB 2553 as favorable.

Registration: HB 212, referred to the House State Affairs Committee, would require residential customer choice consultants to register with the PUC. SB 1497 and companion bill HB 3645 would require entities providing brokerage services to register with the PUC in a manner similar to retail electric aggregators, to ensure adequate customer protections for customers using a broker. The PUC recommended this change be implemented in its report to the Legislature. SB 1497 has been recommended for the local and uncontested calendar and has been placed on the intent calendar by the Senate Business and Commerce Committee, while HB 3645 remains pending in the House State Affairs Committee.

Utility Rates and Regulations

Metering: HB 1595 and HB 853, which propose identical language to different provisions of the Utilities Code (Chapter 39, Subchapters K and L), allows an electric utility that deploys advanced metering and meter information networks to recover costs incurred in deploying those networks. Both bills have been reported favorably without amendments in the House State Affairs Committee, which has distributed reports on the bills.

Rates: HB 1766, HB 1767, and HB 1768, identical in language but proposing to revise different sections of the Utilities Code, would require the PUC and Railroad Commission to presume employee compensation and benefits expenses are reasonable and necessary when establishing an electric or gas utility’s rates, if the expenses are consistent with recent market compensation studies. All of these bills have been referred to the House State Affairs Committee; HB 1767 has been reported favorably without amendments, and a Committee report has been issued. HB 2829 would permit a retail customer or group of customers to file a petition for PUC review of current or proposed rates of a municipally owned utility; it has been referred to the House State Affairs Committee.

CCNs: HB 3995 (referred to House State Affairs Committee) and companion bill SB 1938 (referred to the Senate Business and Commerce Committee) would provide that a certificate of convenience and necessity (CCN) for a new transmission facility that directly interconnects with an existing electric utility facility may only be granted to the owner of the existing facility. This would effectively prevent new entities from becoming transmission service providers, and also prohibit competition among transmission utilities to build new projects. The bills would also allow an electric utility to sell, assign or lease a CCN or a right obtained under it if the purchaser, assignee, or lessee was previously certificated by the PUC to provide electric service within the same electric power region, coordinating council, independent system operator, or power pool.

Renewables

Renewable Energy Goal: HB 2148, referred to the House State Affairs Committee, would require the PUC to conduct a study on the feasibility of expanding the renewable energy goal under Sec. 39.904 of the Utilities Code to establish a goal that 50% of the generating capacity installed in Texas comes from renewable sources by 2030, and 100% by 2050.

Facility Removal: HB 2845 would require a wind power facility lease agreement to provide that the grantee is responsible for removing wind power facilities from the landowner’s property, and include detailed removal procedures and a removal bond provision within the lease. This bill has been given a hearing by the State Affairs Committee and remains pending. Additionally, SB 1372, referred to the Senate Business and Commerce Committee, would create a wind generation decommissioning fund to be used by the PUC to conduct a site investigation or environmental assessment of a wind-powered generation facility for which a certificate has been issued, and would require a certificate holder to maintain and decommission the facility in a way that protects the environment and the interests of the owner of the property, and to maintain a bond, letter of credit, or cash deposit with the PUC that is sufficient for decommissioning the facility.

Additional Bills to Note:

  • HB 1408 would require the termination of the listing of retail electric offers on the state’s Power to Choose website; it has been referred to the House State Affairs Committee.
  • HB 2224, referred to the House State Affairs Committee, would require the PUC, Texas Division of Emergency Management, and the Railroad Commission of Texas to promote public awareness of bill payment assistance available during a disaster for electric, gas, telecommunications, water and wastewater services, and to provide the public with information about billing practices during a disaster.
  • HB 2226, referred to the House State Affairs Committee, would allow the PUC to impose an administrative penalty without a hearing if a person fails to timely respond to the penalty. This was one of the recommendations the PUC made in its report to the Legislature.
  • HB 765, referred to the House Judiciary and Civil Jurisprudence Committee, would require the PUC and Comptroller to provide grants to projects to reduce emissions through improvements in energy production efficiency using supercritical carbon dioxide.

For more information on Texas energy legislation or the Texas legislative session in general, please contact Chris Reeder at 512.479.1154, Mark Vane at 512.703.5741, Lauren Cabral at 512.479.1155, Jessica L. Morgan 512.703.5720 or Maria C. Faconti at 512.370.3467.