BILL ANALYSIS

C.S.H.B. 4581

By: Guillen

State Affairs

Committee Report (Substituted)

BACKGROUND AND PURPOSE

The bill author has informed the committee that current law allows transmission and distribution utilities (TDUs) to lease mobile power generation during emergencies but lacks clear limits on capacity, leasing duration, and coordination among TDUs. The bill author has also informed the committee that there is insufficient oversight regarding lease approvals, justification of leased capacity, and the sharing of unused emergency resources across regions during outages, which may lead to inefficiencies, underutilized assets, and limited restoration capabilities during crises. C.S.H.B. 4581 seeks to address these issues and improve the state's ability to restore electric service quickly during emergencies or significant power outages by clarifying the requirements for leasing or owning mobile emergency energy facilities and by ensuring better coordination among utility providers and emergency response agencies.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the Public Utility Commission of Texas in SECTION 1 of this bill.

ANALYSIS

C.S.H.B. 4581 amends the Utilities Code to set out provisions relating to the authorization for a transmission and distribution utility (TDU) to lease and operate facilities that provide temporary emergency electric energy to aid in restoring power to the TDU's distribution customers during certain significant power outages. Specifically, the bill does the following:

· requires such a leased facility to be mobile and capable of generating electric energy within three hours after being connected to a demand source;

· removes the specification that the requirement for a TDU to use a competitive bidding process to lease those facilities applies only when reasonably practicable;

· prohibits a TDU from entering into a lease unless:

o the Public Utility Commission of Texas (PUC) first, in a rate proceeding or a separate contested case hearing, authorizes the following:

§ the total generating capacity the TDU may lease; and

§ the functions for which the TDU may lease facilities and the generation capacity the TDU may lease for each function; or

o the lease includes a provision that allows alteration of the lease based on PUC order or rule;

· authorizes the PUC to limit the period during which an authorization issued by the PUC in that rate proceeding or separate contested case hearing is valid;

· authorizes a TDU to enter into a lease without competitive bidding or prior approval by the PUC if the following conditions apply:

o the TDU lacks the leased generating capacity necessary to aid in restoring power to the TDU's customers during a significant power outage;

o the amount of leased generating capacity does not significantly exceed the amount of megawatts necessary to restore electric service to the TDU's customers during a significant power outage; and

o the term of the lease does not significantly exceed the time period that is required to restore electric service to the TDU's customers during a significant power outage; and

· requires a TDU that enters into a lease without competitive bidding or prior approval by the PUC to provide documentation to justify the amount of leased generating capacity during the first base rate proceeding after the date the lease begins.

The bill establishes that the requirement for a leased facility to be mobile and capable of generating electric energy within three hours after being connected to a demand source applies only to a temporary emergency electric energy facility leased by a TDU on or after the bill's effective date. A temporary emergency electric energy facility that was leased by a TDU before the bill's effective date is governed by the law in effect at the time the lease was executed, and the former law is continued in effect for that purpose.

C.S.H.B. 4581 requires the Texas Division of Emergency Management (TDEM), in coordination with the PUC and TDUs, to develop an annex to the state emergency management plan that addresses planning for deploying facilities leased under statutory provisions relating to TDU facilities for power restoration after a significant power outage. The bill requires the annex to include procedures for TDUs to maintain a current list of those facilities, information submitted to the PUC under the bill's provisions, and facilities available to be deployed through mutual aid agreements. The bill requires that list to be accessible, on request, to each TDU, the PUC, TDEM, and each state agency with emergency response duties. The bill requires each TDU that leases an applicable facility to notify the PUC not later than the 30th day after the date of a change in the TDU's lease of the facility.

C.S.H.B. 4581 requires the PUC by rule to require a TDU that leases an applicable facility to offer to enter into mutual aid agreements with other TDUs to facilitate the deployment of undeployed facilities on the request of another TDU. The PUC must require a TDU to which these provisions apply to make offers for mutual aid agreements before June 1, 2026.

C.S.H.B. 4581 requires the PUC by rule to require a TDU that enters into a mutual aid agreement described by the bill's provisions to do the following:

· not later than the 30th day after the date the TDU enters into the agreement, provide to the PUC information regarding the agreement; and

· not later than the 30th day after the date of any change in the required information, provide updated information to the PUC.

EFFECTIVE DATE

On passage, or, if the bill does not receive the necessary vote, September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 4581 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

While both the introduced and the substitute prohibit a TDU from entering into a lease unless certain conditions are met, the substitute revises the condition in the introduced that the PUC first approves the lease in a rate proceeding or a separate contested case hearing as follows:

· omits the specification that the PUC first approves the lease; and

· includes a specification that the PUC first, in such a proceeding or hearing, authorizes the following:

o the total generating capacity the TDU may lease; and

o the functions for which the TDU may lease facilities and the generation capacity the TDU may lease for each function.

The substitute includes an authorization absent from the introduced for the PUC to limit the period during which an authorization issued in that rate proceeding or separate contested case hearing is valid.

While both the introduced and substitute set out conditions under which a TDU may enter into a lease without competitive bidding or prior approval by the PUC, the substitute includes a condition absent from the introduced that the term of the lease does not significantly exceed the time period that is required to restore electric service to the TDU's customers during a significant power outage.

Whereas the introduced required TDEM, in coordination with the PUC, to develop an annex to the state emergency management plan that addresses planning for deploying facilities leased, operated, procured, or owned under statutory provisions relating to TDU facilities for power restoration after a significant power outage, the substitute requires TDEM, in coordination with the PUC and TDUs, to develop such an annex that addresses planning for deploying facilities leased under those provisions.

With respect to the requirement in the introduced for the annex to include procedures for TDUs to maintain a current list of facilities leased, operated, procured, or owned under statutory provisions relating to TDU facilities for power restoration after a significant power outage and of agreements submitted to the division, the substitute does the following:

· omits facilities operated, procured, or owned under those provisions; and

· replaces agreements submitted to the division, as in the introduced, with information submitted to the PUC.

With respect to the requirement for the list of facilities to be accessible to each TDU, the PUC, TDEM, and each state agency with emergency response duties, the substitute specifies that the list is required to be accessible to those entities on request, whereas the introduced did not. Whereas the introduced required each TDU that leases, operates, procures, or owns an applicable facility to notify the PUC not later than the 30th day after the date of a change in the TDU's lease or ownership of the facility, the substitute requires each TDU that leases an applicable facility to notify the PUC not later than the 30th day after the date of a change in the TDU's lease of the facility.

With respect to the requirement in the introduced for the PUC by rule to require a TDU that leases, operates, procures, or owns an applicable facility to offer to enter into mutual aid agreements with other TDUs to facilitate the deployment of undeployed facilities on the request of another TDU, the substitute omits from the requirement a TDU that operates, procures, or owns an applicable facility. Whereas the introduced required the PUC to require a TDU to which these provisions apply to make offers for mutual aid agreements before the 2026 hurricane season, the substitute requires the PUC to do so before June 1, 2026.

The substitute omits the following provisions present in the introduced:

· a requirement for each TDU to submit any mutual aid agreement entered into with other TDUs under the bill's provisions to the PUC and report to the PUC not later than the 30th day after the date of any change in the submitted agreement; and

· a requirement for the PUC to consider any failure to deploy an applicable facility that is leased, operated, procured, or owned by a TDU, including a failure to deploy a facility under the terms of a mutual aid agreement, in the next base rate proceeding of the TDU and, if the failure to deploy was not reasonable, to revise the TDU's rate of return on investment with a presumption that the investment in the facility was not reasonable.

The substitute includes a requirement absent from the introduced for the PUC by rule to require a TDU that enters into a mutual aid agreement described by the bill's provisions to provide to the PUC, not later than the 30th day after the date the TDU enters into the agreement, information regarding the agreement and to provide updated information to the PUC not later than the 30th day after the date of any change in the required information.

With respect to the requirement for a leased facility to be mobile and capable of generating electric energy within three hours after being connected to a demand source, the substitute establishes that the requirement applies only to a temporary emergency electric energy facility leased by a TDU on or after the bill's effective date, whereas the introduced did not. The substitute includes a provision absent from the introduced establishing that a temporary emergency electric energy facility that was leased by a TDU before the bill's effective date is governed by the law in effect at the time the lease was executed, and the former law is continued in effect for that purpose.