Don’t miss Chris Reeder’s annual report on the regulatory activities during 2018 at the Public Utility Commission of Texas.

Chris will speak during the Gulf Coast Power Association’s Annual Meeting & Luncheon on Thursday, January 17, 11:00am in Houston, Texas at the Downtown Club at the Houston Center.

 

For more information or to register visit GCPA’s Houston Luncheon event site.

 

The Public Utility Commission of Texas has finalized the recommendations it will include in its upcoming 2019 Report on the Scope of Competition in Electric Markets in Texas to the 86th Texas Legislature, which goes into session January 8, 2019. The Commission voted on the recommendations at its December 20, 2018 meeting; the most significant inclusions involve a recommendation to increase the threshold for the review of mergers and acquisitions of power generation companies from 1% to 10% of installed generation capacity, and a request that the Legislature provide clarity on which entities may own and operate battery storage devices.

Review of Power Generation Mergers and Acquisitions
Under Texas Utilities Code § 39.158, the Commission is required to review mergers and acquisitions of entities if the newly merged companies will offer for sale more than 1% of the total electricity for sale in the state. The Commission is required to approve the merger or acquisition unless the new company exceeds a 20% installed generation capacity limit set by § 39.154. The Commission recommends increasing the threshold for the review of mergers and acquisitions of power generation companies from 1% of installed generation capacity to 10% of installed generation capacity. The Commission did not recommend changing the limit that prevents one company from owning more than 20% of installed generation capacity. Additionally, the Commission requested the Legislature clarify the meaning of the phrase “total electricity for sale,” which denotes the total regional capacity used in this calculation, and clarifying that the review under § 39.158 applies only in a power region open to customer choice.

The Commission reasoned that the current 1% threshold unnecessarily delays numerous transactions that have a negligible likelihood of breaching the 20% limit, noting the number of applications for review of these mergers and acquisitions has increased from five applications in 2015 to 26 in 2018, most of which came at the end of the year. Changing the threshold for review would avoid undue delays, and in effect avoid the regulatory uncertainty and impediments to business that current regulations cause.

Use of Battery Storage in ERCOT
Under Texas Utilities Code § 35.152, electric energy storage that is intended to be used to sell energy or ancillary services at wholesale are classified as generation assets, and the owner or operator is classified as a power generation company. Section 31.002(10) defines power generation company as a person that generates electricity that is intended to be sold at wholesale, does not own a transmission and distribution facility, and does not have a certificated service area. Section 39.105 states a transmission and distribution utility (TDU) may not sell electricity or otherwise participate in the market for electricity except for the purpose of buying electricity to serve its own needs.

These rules surrounding battery storage have been an issue since AEP Texas, a TDU operating in ERCOT, requested to install two utility-scale batteries to address reliability issues in its distribution system. The docket was dismissed by the Commission on grounds there was insufficient information for a decision to be made; the Commission subsequently opened a Project to further evaluate the possibility of an electric utility owning and operating an energy storage device. The argument made by AEP was that a TDU owning and operating a storage device on its system, that does not intend to sell power at wholesale or participate in the electric market, but only intends to support reliability, does not violate existing rules. Opponents argued TDUs are not able to own and operate storage devices, because they would be participating in the wholesale energy market through the charging and discharging process. The comments received in the Project have highlighted these two arguments, and are sharply contrasting.

The Commission is asking the Legislature for clarity on how these rules apply to battery storage, noting many options exist for TDUs, such as: prohibiting a TDU’s involvement with an energy storage device other than to provide transmission and distribution service to it; allowing a TDU to contract with a power generation company for reliability service from an energy storage device; and limiting a TDU’s ownership and operation of an energy storage device in circumstances where the TDU’s ownership and operation of the device would provide the lowest-cost transmission and distribution service.

The Commission is also requesting that the Legislature provide clarity regarding whether electric cooperatives and municipally owned utilities, known as non opt-in entities, may own or operate batteries without registering as a power generation company. Sections 35.151 and 35.152 of the Texas Utilities Code requires an owner or operator of electric energy storage equipment (i.e. batteries) to register as a power generation company; however, electric cooperatives and municipally owned utilities cannot qualify as a power generation company, therefore it could be inferred they are not permitted to own or operate a battery. The Commission believes this would leave opt-in entities “in a precarious position,” and thus requested legislative guidance.

 

Other Recommendations

Registration of Retail Electric Brokers
The Commission is recommending the Legislature require retail electric brokers to register with the Commission in a manner similar to retail electric aggregators to ensure customers who use such brokers have adequate consumer protections. Retail electric brokers connect buyers with sellers of electricity, and many non-residential electric customers use brokers as an alternative to developing in-house expertise to negotiate retail electric contracts. Residential customers also use brokers, authorizing these brokers to make electricity contract decisions on the customer’s behalf. Whether a broker represents the customer or retail seller can vary from deal to deal, risking customer confusion and blurring the parties’ responsibilities. The Commission already regulates many market participants and has customer protection rules in place, including requirements that participants demonstrate industry expertise and financial stability. Electric aggregators perform many of the same functions as retail electric brokers and are required to register with the Commission under Texas Utilities Code § 29.353 of the Texas Utilities Code; the Commission believes brokers should be regulated as well to protect customers.

Electric Industry Security
The Commission is recommending the Legislature establish a collaborative cybersecurity outreach program to ensure the safety and reliability of electric service. The Commission envisions this program including regular meetings with utilities to identify best practices and emerging threats, coordination of workforce training and security exercises, and related research. Members introduced bills addressing these issues during the 2017 legislative session, but none were enacted.

Default Violations
Under Texas Utilities Code § 15.024(d), if a person that the Commission issues a Notice of Violation against does not respond within 20 days, the Commission considers the person to be in default, and § 15.024(f) requires the Executive Director of the Commission to set a hearing at the State Office of Administrative Hearings; after the hearing the violation is decided by the Commission. The Commission recommends § 15.024(f) be amended to remove the hearing requirement to allow default violations to move more quickly.

Please contact Chris Reeder, Chris Hughes, Maria Faconti or Jessica Morgan if you have any questions.

Husch Blackwell partners with the Texas Renewable Energy Industries Alliance (TREIA) once again to present a five-part webinar series focused on the Texas renewable energy industry. The final installment in the New Directions webinar series will discuss the upcoming 2019 regular session of the Texas Legislature and what’s in store for renewable energy.

 

Register for the Texas Legislative Preview webinar to be held on Monday, December 17, 2018 at 12:00pm – 1:00pm CST.

Presenters include:
Jeffrey Clark, President, The Wind Coalition
Mark Vane, Principal, Husch Blackwell Strategies
Chris Reeder, Partner, Husch Blackwell (moderator)

If you missed the previous installments of the New Directions webinar series, the recording for each installment can be found here or you can download the podcast.

May: ERCOT Renewable Energy Market Outlook (Download podcast)

June: Financing Renewable Energy Development (Download podcast)

August: Storage, New Technologies, and Demand Response: Regulatory Outlook and Integration (Download podcast)

October: ERCOT Market Performance: Summer 2018 (Download podcast)

The Texas Commission on Environmental Quality (TCEQ) is in the process of renewing its General Permit to Discharge under the Texas Pollutant Discharge Elimination System Permit, Permit No. TXR150000, issued on February 19, 2013 and effective on March 5, 2013, which authorizes discharges from construction sites into surface water in the state.  The new permit will go into effect March 5, 2018 and will expire five years from the effective date.

Developers and other parties that currently hold an authorization to discharge stormwater under the existing permit will want to take note of the provisions in the new permit for obtaining renewed authorization to discharge; for large construction activities: Continue Reading Texas Developers, Mark Your Calendars for March: Changes Coming for Texas Stormwater Permit

As you are all aware, hurricane Harvey had a major impact on Texas and has left many residents without power.  On August 28th, in order to facilitate the monitoring of the effects of the hurricane, the PUCT opened PUC Project 47552 – Issues Related to the Disaster Resulting From Hurricane Harvey.  At today’s open meeting, PUC commissioners discussed this project as well as impacts the hurricane has had on central and southeast Texas.  During this discussion, Commissioner Anderson noted that he would like more detailed information from every entity affected by the hurricane.  Because of this statement, we urge you to maintain detailed information as to how the hurricane might have affected you and your provision of service.  Also, be prepared to answer questions from the commission and possibly ERCOT/TRE detailing any storm related damages or outages as well as how you have handled any damages.

Contract our Texas regulatory attorneys, Chris Reeder or Maria Faconti, if you have any questions.  We sincerely hope you have not been affected by the hurricane.

While the Texas 85th legislative session began with the filing of several bills on a diverse range of energy issues, few had made it into law when the session ended on May 29, 2017. The House and Senate passed legislation that impacts wind generation facilities, electric utility rate-setting and the General Land Office’s retail electricity program. Bills that failed to gain traction concerned grid security, energy efficiency programs, and research and development.

Our Texas energy group issued a client alert detailing several of the bills.

Oncor_logoDuring the Public Utility Commission of Texas (PUCT) open meeting today, the commissioners unanimously approved, with no substantive discussion, a proposed order finding that the sale of Oncor Electric to NextEra Energy is not in the public interest.

On October 31, 2016, NextEra and Oncor had filed a Joint Report and Application with the PUCT seeking the regulatory approvals required for NextEra to acquire Oncor.  NextEra was hoping to acquire both the approximately 80% interest in Oncor indirectly held by Energy Future Holdings Corp. (EFH), which is currently in bankruptcy, and the 19.75% interest indirectly held by Texas Transmission Holdings Corporation.  In addition, Continue Reading NextEra Bid to Acquire Oncor Rejected by PUCT

2000px-Texas_flag_map.svgAt the start of today’s Public Utility Commission of Texas (PUCT) open meeting, Chairman Donna Nelson announced that May 15, 2017 will be her final day at the commission.  This is a month before she was speculated to be leaving the commission.  In order to fill her vacant space, the Governor must appoint a replacement.

While the Texas Legislature is in session, the governor’s appointment must be approved by the legislature. However, the governor can choose to wait and appoint a replacement once the legislative session ends on May 29th in order to avoid confirmation of the appointment during the 2017 session.

This will likely mean that the PUCT will be presided over by two members in the interim, with the potential for the commission to reach split decisions in contested cases.

President-elect Trump made an array of energy-related campaign promises, and elevated several of those promises to priorities for his First 100 Days in office.  Many of the energy related priorities will require action by multiple Federal agencies, including the Department of Energy (DOE).  The Trump transition team has nominated Rick Perry for secretary of the DOE.  Among the energy-related priorities found in Trump’s First 100 Days agenda, two key policy items may fall within the purview of a DOE led by Perry, including: Continue Reading Rick Perry Nomination and Trump’s Energy Priorities

Part 4:  Lessons from Existing Storage Applications

2000px-Texas_flag_map.svgParts I, II and III of our examination of the Texas energy storage market review various operating technologies in the state, including compressed air energy storage, battery storage, thermal storage, and flywheels. Perhaps, more importantly, is the diverse range of applications of electric storage technology being illustrated at the utility, microgrid and community levels.

Texas has become a leading example of the economic value of storage through innovative applications such as Continue Reading The Texas Energy Storage Market: A Four-Part Examination