BILL ANALYSIS

Senate Research Center	S.B. 2014
	By: King; Schwertner
	Business & Commerce
	3/21/2023
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

In 1999, as part of S.B. 7 (76(R)), which deregulated the electricity market within the Electric Reliability Council of Texas (ERCOT), the legislature created a goal 2,000 MW of installed renewable generating capacity by 2009.  The goal for renewable energy was supported by a Renewable Energy Credit (REC) program, whereby load-serving entities were required to either own renewable generating capacity or purchase credits from renewable generators in support of this statewide goal. As noted in the bill history for S.B. 7, at the time wind generation was still a growing industry, and the costs of wind generation were substantially higher than the costs of fossil-fueled generating facilities.  The REC program was meant as an incentive to allow this then-young industry to grow within Texas and allow it to be competitive with traditional generation facilities. 

In 2005, through S.B. 20 (79(1)), the legislature expanded the goal for renewable energy from 2,000 by 2009 to 5,880 MW by 2015, set an "aspirational" goal of 10,000 MW of renewable generating capacity by 2025, and set a target of 500 MW of non-wind renewable generating capacity.  This expansion was driven by the preliminary success of the REC program and the Governor's Texas Energy Planning Council (TEPC).  At the time, renewable generation was still not cost-competitive as compared to traditional dispatchable generation.  The legislature also adopted a massive, costly expansion of transmission to areas of the state with strong potential for renewable generation.  This build-out, known as the "Competitive Renewable Energy Zones" initiative, ultimately cost Texas customers roughly $7 billion. 

In both 1999 and 2005, the purpose of the REC program and the statewide renewable energy goal was to support a emerging renewable generation industry.  It was meant to provide a "jump start," and was not meant to be a permanent mandate or subsidy once these technologies became cost-competitive.  However, the mandate and the REC program have never been repealed.  In the meantime, the federal government has adopted expansive tax incentives, such as the Production Tax Credit (PTC) and the Investment Tax Credit (ITC).  These incentives have been renewed and expanded over time.  Renewable generating technologies have also advanced and have become cost-competitive in their own right.  According to ERCOT's data from 2022, there are more than 30,000 MW of installed wind capacity today, and more than 14,000 MW of solar generating capacity.  The purpose of the REC program has been achieved, and it should now be phased out as consistent with the original intent. 

Bill Summary:

S.B. 2014 eliminates the goal for renewable energy under Utilities Code Section 39.904 and related statutory references, including eliminating: (A) the requirement for load-serving entities to purchase RECs, and (B) provisions requiring the competitive renewable energy zone transmission expansion under 39.904(g), which has already been completed.       

Benefits:

The bill will create a more level playing field between renewable generating technologies and dispatchable generating facilities by eliminating the renewable energy mandate and the related subsidy for renewable energy.  This mandate and related subsidy are no longer needed as renewable generation is now an established technology, and these statutory requirements contributing to the market distortions caused by excessive renewable generation in ERCOT.  S.B. 2014 will also reduce electricity costs for Texas electric consumers by eliminating the requirement for their load-serving entities to purchase RECs, which are included in the costs to serve end-use customers at retail in ERCOT. 

As proposed, S.B. 2014 amends current law relating to the legislature's goals for renewable electric generating capacity.

RULEMAKING AUTHORITY

Rulemaking authority previously granted to the Public Utility Commission of Texas is modified in SECTION 3 (Section 37.056, Utilities Code) of this bill.

Rulemaking authority is expressly granted to the Public Utility Commission of Texas in SECTION 10 (Section 39.9111, Utilities Code) of this bill.

Rulemaking authority previously granted to the Public Utility Commission of Texas is rescinded in SECTION 15 (Section 39.904, Utilities Code) of this bill.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 36.053(d), Utilities Code, as follows:

(d) Requires the Public Utility Commission of Texas (PUC), if the PUC issues a certificate of convenience and necessity or if the PUC, acting under the authority formerly provided by Section 39.203(e) (relating to authorizing the PUC to require an electric utility or a transmission and distribution utility to construct or enlarge facilities to serve the state's electric markets and requiring the PUC to require that electric utilities and other related entities construct or enlarge facilities to meet the state's goal for the generating capacity from renewable energy), ordered an electric utility or a transmission and distribution utility to construct or enlarge transmission or transmission-related facilities to facilitate meeting the goal for generating capacity from renewable energy technologies under former Section 39.904(a) (relating to the goal for renewable energy generating capacity to be reached by the year 2015), to find that the facilities are used and useful to the utility in providing service for purposes of Section 36.053 (Components of Invested Capital) and are prudent and includable in the rate base, regardless of the extent of the utility's actual use of the facilities.

SECTION 2. Amends Section 37.0541, Utilities Code, as follows:

Sec. 37.0541.� CONSOLIDATION OF CERTAIN PROCEEDINGS. Deletes existing text providing that this section does not apply to a proceeding on an application for a certificate of convenience and necessity for a transmission line to serve a competitive renewable energy zone as part of a plan developed by the PUC under Section 39.904(g)(2) (relating to requiring the PUC to develop a plan to construct transmission capacity necessary to deliver electricity produced from renewable energy technologies).

SECTION 3. Amends Sections 37.056(c) and (d), Utilities Code, as follows:

(c)  Deletes existing text requiring the PUC to grant each certificate on a nondiscriminatory basis after considering other factors, including to the extent applicable, the effect of granting the certificate on the ability of this state to meet the goal established by Section 39.904(a) of Title 2 (Public Utility Regulatory Act). Makes nonsubstantive changes.

(d) Requires the PUC by rule to establish criteria, in addition to the criteria described by Subsection (c), for granting a certificate for a transmission project that serves the Electric Reliability Council of Texas (ERCOT) power region and that is not necessary to meet state or federal reliability standards.

Deletes existing text requiring the PUC by rule to establish criteria, in addition to the criteria described by Subsection (c), for granting a certificate for a transmission project that serves the ERCOT power region and that is not necessary to meet state or federal reliability standards, and that is not included in a plan developed under Section 39.904(g) (relating to requiring the PUC to designate competitive renewable energy zones, develop a plan to bring the electricity from the renewable energy zones to customers, and consider certain financial commitments when making such designations).

SECTION 4. Reenacts Section 39.002, Utilities Code, as amended by Chapters 908 (H.B. 4492) and 950 (S.B. 1580), Acts of the 87th Legislature, Regular Session, 2021, and amends it, to delete existing text providing that Section 39.904 (Goal for Renewable Energy) is among the sections that apply to a municipally owned utility or electric cooperative, and to make conforming and nonsubstantive changes.

SECTION 5. Amends Section 39.203(e), Utilities Code, to delete existing text requiring the PUC to require an electric utility or a transmission and distribution utility to construct or enlarge transmission or transmission-related facilities for the purpose of meeting the goal for generating capacity from renewable energy technologies under Section 39.904(a).

SECTION 6. Amends Section 39.402(a), Utilities Code, to make a conforming change.

SECTION 7. Amends Section 39.452(d), Utilities Code, to make a conforming change.

SECTION 8. Amends Section 39.502(b), Utilities Code, to make a conforming change.

SECTION 9. Amends Section 39.552(b), Utilities Code, to make a conforming change.

SECTION 10. Amends Subchapter Z, Chapter 39, Utilities Code, by adding Sections 39.9111 and 39.9112, as follows:

Sec. 39.9111.  RULES RELATED TO RENEWABLE POWER FACILITIES.� Authorizes the PUC to adopt rules requiring renewable power facilities to have reactive power control capabilities or any other feasible technology designed to reduce the facilities' effects on system reliability.

Sec. 39.9112.  REPORT ON TRANSMISSION AND GENERATION CAPACITY.� Requires the PUC and the independent organization certified under Section 39.151 (Essential Organizations) for the ERCOT power region to study the need for increased transmission and generation capacity throughout this state and report to the legislature the results of the study and any recommendations for legislation. Requires the report to be filed with the legislature not later than December 31 of each even-numbered year.

SECTION 11. Amends Section 39.916(a), Utilities Code, by amending Subdivision (1) and adding Subdivision (4) to redefine "distributed renewable generation" and define "renewable energy technology."

SECTION 12. Amends Section 40.001(a), Utilities Code, to make a conforming change.

SECTION 13. Amends Section 40.004, Utilities Code, as follows:

Sec. 40.004.  JURISDICTION OF COMMISSION. Provides that the PUC, except as specifically otherwise provided in Chapter 40 (Competition for Municipally Owned Utilities and River Authorities), has jurisdiction over municipally owned utilities only for the following purposes:

(1)-(5) makes no changes to these subdivisions;

(6) to administer the natural gas energy credits program under Section 39.9044(b) (relating to requiring the PUC to establish a natural gas energy credits trading program and to the requirement for the participation of certain entities that do not meet the goal for natural gas generating capacity), rather than to administer the renewable energy credits program under Section 39.904(b) (relating to requiring the PUC to establish a renewable energy credits trading program and to the requirement for the participation of certain entities that do not satisfy the requirements for meeting the goal for renewable energy generating capacity) and the natural gas energy credits program under Section 39.9044(b), and

(7)-(8) makes no changes to these subdivisions.

SECTION 14. Amends Section 41.001, Utilities Code, to make a conforming and nonsubstantive change.

SECTION 15. Repealer: Section 39.904 (Goal for Renewable Energy), Utilities Code.

Repealer: Section 39.916(g) (relating to the ownership of renewable energy credits), Utilities Code.

SECTION 16. Provides that it is the intent of the 88th Legislature, Regular Session, 2023, that the amendments made by this Act be harmonized with another Act of the 88th Legislature, Regular Session, 2023, relating to nonsubstantive additions to and corrections in enacted codes.

SECTION 17. Effective date: September 1, 2023.