BILL ANALYSIS C.S.S.B. 373 By: Armbrister State Affairs 4-24-95 Committee Report (Substituted) BACKGROUND The Public Utility Commission of Texas (PUC) was created in 1975 and is responsible for regulating electric and telephone utilities in Texas. The key functions of the PUC include certifying a utility's initial operation, reviewing any new construction or changes to existing facilities, setting rates, and monitoring and auditing the operations of utilities under its jurisdiction. Currently, the PUC has oversight of investor-owned utilities, electric cooperatives, river authorities, and local telephone companies. Cities have retained original ratemaking authority for electric utilities and cooperatives operating within their boundaries, but the commission reviews these rates on an appellate basis. The commission also reviews on appeal the rates of city utilities. The Office of Public Utility Counsel (OPUC) was created in 1983 to represent residential and small business consumers before the PUC. OPUC participates in many proceedings before PUC but concentrates its efforts on telephone and electric utility rate cases having the greatest impact on residential and small business consumers. The OPUC has participated in major rate cases, but only a percentage of all cases before the PUC since 1983. The PUC and OPUC are subject to the sunset act and will be abolished September 1, 1995 unless continued by the legislature. PURPOSE As proposed, C.S.S.B. 373 continues and revises the functions of the Public Utility Commission of Texas and the Office of Public Utility Counsel, including adding provisions to allow for competition in the electric wholesale market; provides an administrative penalty. RULEMAKING AUTHORITY It is the committee's opinion that rulemaking authority is granted to the Public Utility Commission in SECTION 1.14 (Section 1.036(b), PURA 1995), SECTION 1.22 (Section 1.101(b), PURA 1995), SECTION 1.24 (Section 1.104(a), PURA 1995), SECTION 1.33 (Section 1.407(a), PURA 1995), SECTION 1.34 (Sections 2003.047(b) and (f), Government Code), SECTION 2.03 (Sections 2.051(a), (b), (e), (u), (v), and (cc), PURA 1995), SECTION 2.05 (Section 2.053(c), PURA 1995), SECTION 2.08 (Sections 2.057(a) and (b), PURA 1995), SECTION 2.19 (Sections 2.212(g)(2)(A) and (B)), and SECTION 2.23(a), and to the Office of Public Utility Counsel in SECTION 1.34 (Section 2003.047(b), Government Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1.01. Amends Section 1.003, Public Utility Regulatory Act, as enacted by S.B. 319, 74th Legislature, Regular Session (PURA 1995), by adding Subdivisions (13A) and (18), to define "ratemaking proceeding" and "trade association." SECTION 1.02. Amends Section 1.005, PURA 1995, as follows: Sec. 1.005. New heading: APPLICABILITY OF ADMINISTRATIVE PROCEDURE ACT AND OPEN MEETINGS LAW. Subjects the Public Utility Commission (commission) to Chapter 551, Government Code. SECTION 1.03. Amends Title IA, PURA 1995, by adding Section 1.006, as follows: Sec. 1006. ENTITY, COMPETITOR, OR SUPPLIER AFFECTED IN MANNER OTHER THAN BY SETTING OF RATES. Provides that an entity, utility competitor, or utility supplier is considered to be affected in a manner other than by the setting of rates if during a relevant year the entity provides fuel, or utility-related goods, products, or services to a provider of telecommunications or electric services or to an affiliated interest valued at the greater of $10,000 or 10 percent of the person's business. SECTION 1.04. Amends Sections 1.021(c) and (d), PURA 1995, to require the governor to designate a member of the commission as presiding officer of the commission to serve in that capacity at the pleasure of the governor, rather than requiring the commission to elect a chairman. Makes nonsubstantive changes. SECTION 1.05. Amends Section 1.022, PURA 1995, to provide that the commission and the Office of Public Utility Counsel (office) are subject to the Texas Sunset Act and, unless continued, are abolished and this Act expires September 1, 2001, rather than 1995. SECTION 1.06. Amends Section 1.023, PURA 1995, as follows: Sec. 1.023. New heading: QUALIFICATIONS; OATH; PROHIBITED ACTIVITIES. (a) Deletes a provision requiring a commissioner to be older than 30 years old. Requires a commissioner to be a representative of the general public. (b) Deletes a provision requiring a commissioner to execute a bond for $5,000 payable to the state and conditioned on the faithful performance of the commissioner's duties. (c) Includes people associated for two years before appointment with direct competitors of public utilities in the list of individuals who are ineligible to serve as commissioner. (d) Prohibits a person who is required to register as a lobbyist because of the person's activities for compensation on behalf of a profession related to the operation of the commission from serving as a commissioner member or public utility counsel or act as the general counsel to the commission. (e) Provides that a person is ineligible for appointment as a public member of the commission or for employment as the general counsel or executive director (director) if the person or the person's spouse meet certain criteria. (f) Authorizes a person otherwise ineligible because of the application of Subsection (e)(2)(B) to be appointed to the commission and serve as commissioner or be employed as the general counsel or director if the person meets certain criteria. (g)-(h) Prohibit an officer, employee, or paid consultant of a trade association in the field of public utilities or spouse of an officer, manager, or paid consultant from being a member or employee of the commission who is exempt from the state's position classification plan or is compensated at or above the amount prescribed for step 1, salary group 17, of the position classification salary schedule. SECTION 1.07. Amends Sections 1.024(a), (d), and (e), PURA 1995, as follows: (a) Prohibits a commissioner or an employee from having certain pecuniary interests in a trade association, owning or controlling any securities of a direct competitor of a public utility, or accepting gifts from parties closely associated with direct competitors. (d) Prohibits a direct competitor of a public utility or any parties closely associated from furnishing gifts to commission members or employees or aiding any person to violate this subsection or Subsection (a)(3). (e) Makes conforming changes. SECTION 1.08. Amends Section 1.025, PURA 1995, as follows: Sec. 1.025. PROHIBITION OF EMPLOYMENT OR REPRESENTATION. (a) Includes an employee of the commission or of the State Office of Administrative Hearings (hearing office) involved in hearing utility cases among those prohibited from being employed by a public utility or affiliate in the scope of the commissioner's or employee's official responsibility or a utility competitor or other entity affected in a manner other than by the setting of rates for that class of customer within one year of employment with the commission or hearing office. (b) Prohibits an employee of the hearing office from representing a business entity before the commission or hearing office at any time. (c) Requires the commission to provide its members and employees information regarding their qualifications for office or employment. SECTION 1.09. Amends Section 1.026, PURA 1995, as follows: Sec. 1.026. GROUNDS FOR REMOVAL; VALIDITY OF ACTIONS. (a) Adds to the list of grounds for removing a member from the commission. (b) Makes nonsubstantive changes. (c) Requires the director to notify the presiding officer, or the next highest officer if the potential ground involves the presiding officer, if a potential ground for removal exists. Requires the presiding officer to notify the governor and the attorney general that a potential ground for removal exists. (d) Requires a member to complete a training program before a member may assume the member's duties or be confirmed. (e) Requires the training program to provide certain information to the member. SECTION 1.10. Amends Sections 1.028(a), (b), and (e), PURA 1995, as follows: (a) Requires the commission to employ a director, a general counsel, and other officers and employees, rather than specifying employees, to carry out this Act. Requires the commission to develop and implement policies that define the responsibilities of the commission and the staff. (b) Provides that the director is responsible for the operations of the commission and shall coordinate employee activities. Deletes provisions specifying positions the commission is required to hire. (e) Deletes existing subsection. SECTION 1.11. Amends Section 1.029, PURA 1995, as follows: Sec. 1.029. PERSONNEL POLICIES. (a) Requires the director or a designee to develop an intra-agency career ladder program that addresses opportunities for employee mobility and to post all positions, rather than only nonentry level positions concurrently with any public posting, rather than in advance. Makes nonsubstantive changes. (b) Requires an equal opportunity policy statement to include certain elements. (c) Requires the statement to be reviewed annually by the Texas Commission on Human Rights, but does not specify a time frame. (d) Requires the governor's office to deliver a biennial report to the legislature based on the statement. Authorizes the report to be made separately or as a part of other biennial reports. SECTION 1.12. Amends Section 1.031, PURA 1995, to require the commission to develop policies to provide the public with an opportunity to appear before the commission and speak on any issue under the commission's jurisdiction. SECTION 1.13. Amends Section 1.035(a), PURA 1995, to require the commission to prepare annually a report accounting for all funds received and disbursed by the commission during the preceding fiscal year. Requires the report to meet the applicable financial reporting requirements. SECTION 1.14. Amends Section 1.036, PURA 1995, as follows: Sec. 1.036. New heading: INFORMATION; ACCESSIBILITY. (a) Makes nonsubstantive changes. (b) Requires the commission, by rule, to establish methods by which consumers and service recipients are notified of the name, address and telephone number of the commission for the purpose of directing complaints. (c) Requires the commission to comply with laws related to program and facility accessibility. Requires the commission to prepare a plan that describes how a non-English speaker can be provided access to the commission's programs. SECTION 1.15. Amends Section 1.051, PURA 1995, as follows: Sec. 1.051. OFFICE OF PUBLIC UTILITY COUNSEL. (a) Makes no changes. (b) Requires the appointment of the public utility counsel (counsellor) to be made without regard to certain personal characteristics. (c) Makes no changes. (d) Provides that a person is ineligible for appointment as counsellor if the person or the person's spouse meets certain criteria. (e) Prohibits a person from serving as counsellor or acting as the general counsel for the office if the person is required to register as a lobbyist because of the person's activities for compensation related to the operation of the commission or the office. (f) Prohibits an officer, employee, or paid consultant of a trade association in the field of public utilities or the spouse of an officer, manager, or paid consultant of a related trade association, from serving as counsellor or being an office employee who is exempt from the state's position classification plan or is compensated at or above the amount prescribed for step 1, salary group 17, of the position classification salary schedule. (g) Authorizes a person otherwise ineligible to be appointed as counsellor to serve if the person meets certain qualifications. SECTION 1.16. Amends Title IC, PURA 1995, by adding Section 1.0511, as follows: Sec. 1.0511. GROUNDS FOR REMOVAL. (a) Sets forth grounds for removing the counsellor from office. (b) Provides that the validity of an office action is not affected by the fact that it is taken when a ground for removal of the counsellor exists. SECTION 1.17. Amends Title IC, PURA 1995, by adding Section 1.0512, as follows: Sec. 1.0512. PROHIBITION OF EMPLOYMENT OR REPRESENTATION. (a) Prohibits the counsellor within two years, and an office employee within one year after employment with the office has ceased, from being employed by a public utility which was in the scope of the counsellor's or employee's official responsibility. (b) Prohibits the counsellor or employee from representing a business entity before the commission or a court in a matter in which the person was involved or within the person's responsibility. SECTION 1.18. Amends Title IC, PURA 1995, by adding Section 1.0513, as follows: Sec. 1.0513. INFORMATION; ACCESSIBILITY. (a) Requires the office to prepare annually a report accounting for all funds received and disbursed by the office during the preceding fiscal year. Requires the report to meet the financial reporting requirements. (b) Requires the office to prepare information of public interest describing the office functions to be made available to the public and appropriate state agencies. (c) Requires the office to comply with federal and state laws related to program and facility accessibility. Requires the office to prepare a plan describing how a non-English speaker can be provided reasonable access to the office's programs. SECTION 1.19. Amends Section 1.052, PURA 1995, to provide that it is unlawful for a period of two years following employment for any counsellor to have an interest in, provide legal services to, or to be employed by a utility competitor, utility supplier, among other entities affected in a manner other than by the setting of rates for that class of customer. SECTION 1.20. Amends Section 1.053, PURA 1995, as follows: Sec. 1.053. EMPLOYEES. (a) Makes no changes. (b) Requires the counsellor or a designee to develop an intra-agency career ladder program that addresses opportunities for mobility for employees within the commission. Requires the program to post all intra-agency positions concurrently with any public posting. Requires the counsellor or a designee to develop a system of annual performance evaluations. Requires all merit pay to be based on the system established under this subsection. Requires the counsellor or a designee to provide to the public utility counsel and its employees information regarding their qualification for office or employment and their responsibilities relating to standards of conduct. (c) Requires the counsellor or a designee to prepare a policy statement to assure implementation of a program of equal employment opportunity. Sets forth requirements to be included in the statement. (d) Requires the statement to cover an annual period, be updated and reviewed annually by the Commission on Human Rights, and be filed with the governor's office. Requires the governor's office to deliver a biennial report to the legislature based on the statement, to be made separately or as a part of other biennial reports. (e) Requires the office to provide to its employees information regarding their qualification for office or employment and their responsibilities relating to standards of conduct. SECTION 1.21. Section 1.054, PURA 1995, makes no changes. SECTION 1.22. Amends Section 1.101, PURA 1995, as follows: Sec. 1.101. GENERAL POWER; RULES; HEARINGS; AUDITS. (a) Makes no changes. (b) Requires the commission to make rules regarding practice and procedure before the utility division of the hearing office. Requires the office to adopt rules authorizing an administrative law judge (judge) to perform certain actions. (c) Requires the rules adopted to ensure that all parties receive due process. (d) Redesignates existing text. (e) Requires hearings in contested cases not conducted by one or more commissioners to be conducted by the utility division of the hearing office. Authorizes the commission to delegate to the utility division the authority to make a final decision and to issue certain findings or orders in a proceeding in which there is no contested issue of fact or law. Deletes a provision providing that the final decision of the hearings examiner has the same effect as a final decision of the commission unless a commissioner requests formal review of the decision. SECTION 1.23. Amends Section 1.102(b), PURA 1995, to delete a provision requiring the commission to audit each utility at least once every 10 years. SECTION 1.24. Amends Title ID, PURA 1995, by adding Section 1.104, as follows: Sec. 1.104. SETTLEMENTS. (a) Requires the commission, by rule, to adopt procedures governing the use of settlements to resolve contested cases. (b) Requires the rules to ensure certain conditions are met. SECTION 1.25. Amends Section 1.202, PURA 1995, as follows: Sec. 1.202. POWERS OF COMMISSION. (a) Makes no changes. (b) Deletes a provision requiring the railroad commission to have the power to review and approve applications by gas utilities for the purchase of natural gas from producing affiliates. Redesignates existing Subsection (c). SECTION 1.26. Amends Section 1.251(b), PURA 1995, to require the commission in determining whether a transaction involving the sale of 50 percent or more of a public utility's stock is consistent with the public interest, to take into consideration the value of the entity to be transferred, among other actions, and whether such a transaction will adversely affect the health or safety of customers or employees, result in the transfer of jobs, or result in the decline of service, that the public utility will receive consideration equal to the reasonable value of the assets when it sells, leases, or transfers assets, and that the transaction is consistent with the public interest. SECTION 1.27. Amends Section 1.271, PURA 1995, to require any accounts or records obtained by the commission related to sales of electrical energy at wholesale by an affiliated interest to the public utility to be confidential and not subject to disclosure. SECTION 1.28. Amends Subtitle I, Title I, PURA 1995, by adding Section 1.3215, as follows: Sec. 1.3215. ADMINISTRATIVE PENALTY. (a) Authorizes the commission to impose an administrative penalty against a person regulated under this Act who violates it or a rule or order adopted under it. (b) Authorizes the penalty to be up to $5,000. Provides that each day of violation is a separate violation. (c) Sets forth terms on which the penalty shall be based. (d) Authorizes the director to issue to the commission a report that states the facts on which the determination is based and the director's recommendation on the imposition of a penalty. (e) Requires the director to give notice of the report to the person within 14 days after issuing the report. Authorizes the notice to be given by certified mail. Requires the notice to include a summary of the violation, a recommended penalty, and a statement informing the person of the person's right to a hearing. (f) Authorizes the person to accept the determination and penalty or to make a request for a hearing. (g) Requires the commission, by order, to approve the determination and impose the penalty if the person accepts the determination and penalty. (h) Requires the director to set and give notice to the person of a hearing if the person requests a hearing or fails to respond to the notice. Sets forth requirements for conducting the hearing and imposing penalties. (i) Requires the notice of the commission's order to include a statement of the right of the person to judicial review of the order. (j) Requires the person to take certain actions within 30 days after the commission's order is final. (k) Sets forth authorized actions for a person who files a petition for judicial review without paying the amount of the penalty. (l) Authorizes the director, on receipt of a copy of an affidavit requesting the court to stay the penalty, to file a contest to the affidavit. Requires the court to hold a hearing on the facts alleged in the affidavit as soon as possible and to stay the enforcement of the penalty on finding that the alleged facts are true. Provides that the person who files an affidavit has the burden of providing that the person is financially unable to pay the amount of the penalty and to give a supersedeas bond. (m) Authorizes the director to refer the matter to the attorney general for collection if the person does not pay the penalty and the enforcement is not stayed. (n) Provides that judicial review of the order is instituted by filing a petition and is under the substantial evidence rule. (o) Authorizes the court to uphold or reduce the amount of the penalty and to order the person to pay that amount. Requires the court to order that no penalty is owed if the court does not sustain the occurrence of the violation. (p) Requires the court to proceed under this subsection when the judgment of the court becomes final. Requires the court to order that the penalty plus accrued interest be remitted or the supersedeas bond released if the person paid a penalty that was reduced or not upheld. Sets forth the procedure for determining the rate of interest. (q) Requires the penalty to be remitted to the comptroller for the general revenue fund. (r) Subjects all proceedings under this section to Chapter 2001, Government Code. (s) Authorizes the director to delegate any power or duty given the director by this section. SECTION 1.29. Amends Section 1.351(b), PURA 1995, to authorize the legislature, rather than requiring the commission with the legislature's approval, to adjust an assessment to provide a level of income sufficient to fund the commission and the office. SECTION 1.30. Amends Section 1.354, PURA 1995, to make conforming changes. Deletes a provision requiring the commission to notify the comptroller of any adjustment of the assessment imposed. Subjects all money paid to the commission or to the office to Chapter 404F, Government Code. SECTION 1.31. Amends Section 1.355, PURA 1995, as follows: Sec. 1.355. GRANTS OF FEDERAL FUNDS. (a) Authorizes the commission to apply to any appropriate agency or officer of the United States to receive and spend federal funds which it may obtain from grants or other similar forms of financial assistance. Prohibits anything in this section from inhibiting the commission's ability to contract with or otherwise receive assistance from any authorized source of funds. (b) Provides that Sections 403.094 and 403.095, Government Code, do not apply to the special account established. Deletes a provision requiring the commission's budget to be subject to legislative approval. SECTION 1.32. Amends Sections 1.401(a) and (b), PURA 1995, as follows: (a) Sets forth requirements for the information the commission is required to keep regarding complaints. (b) Requires the commission to keep a file about each complaint filed with the commission. Requires the commission to provide to the person filing the complaint and to the persons or entities complained about the commission's procedures pertaining to complaint investigation and resolution. Makes conforming changes. SECTION 1.33. Amends Title IK, PURA 1995, by adding Section 1.407, as follows: Sec. 1.407. HISTORICALLY UNDERUTILIZED BUSINESSES. (a) Requires the commission, by rule, to require each utility to make a good faith effort to overcome the underuse of historically underutilized businesses (HUBs). Requires the rules to take into account different disparity ratios shown for different race and sex groups. (b) Requires the commission to conduct further research and analysis to adjust the results of the disparity study to account for underuse of HUBs by the utility industry. (c) Requires the rules adopted to require each utility to submit to the commission a strategic plan for the use of HUBs. (d) Defines "historically underutilized business" and "minority group members." SECTION 1.34. Amends Chapter 2003C, Government Code, by adding Section 2003.047, as follows: Sec. 2003.047. UTILITY DIVISION. (a) Requires the office to establish a utility division to perform the contested case hearings for the commission. (b) Authorizes the commission, by rule, to delegate the responsibility to hear any other matter before the commission if consistent with the commission's duties and responsibilities. Makes conforming changes. (c) Authorizes only a judge in the utility division to conduct a hearing on behalf of the commission. Authorizes the judge to conduct hearings for other state agencies as time allows. Authorizes the office to transfer a judge into the division on a temporary or permanent basis and to contract with individuals to serve as temporary judges. (d) Requires a judge to be licensed to practice law in this state and have a certain amount of experience to preside at a hearing. (e) Requires the commission to provide to the judge a list of issues or areas that must be addressed at the time the office receives jurisdiction of a proceeding. Authorizes the commission to identify and provide to the judge at any time additional issues to be addressed. (f) Requires the office and the commission to jointly adopt rules providing for the certification to the commission of an issue that involves an ultimate finding of compliance with a statutory standard the determination of which is committed to the discretion or judgment of the commission by law. Requires the rules to address the issues that are appropriate for certification and procedure to be used in certifying the issue. Requires each agency to publish the jointly adopted rules. (g) Authorizes the commission to change a finding or conclusion made by the judge or vacate or modify an order issued by the judge only in certain circumstances. (h) Requires the commission to state the reason and legal basis for its determination. (i) Authorizes a judge, on the judge's or a notified party's motion, to impose appropriate sanctions against a party or its representative for certain actions. (j) Authorizes a sanction to include issuance of certain orders. (k) Requires hearings to be conducted in hearing rooms provided by the commission. Requires the commission to provide the utility division access to certain resources. (l) Requires the office to charge the commission a fixed annual fee for services rendered by the division to the commission. Requires the office and the commission to negotiate the amount of the fixed fee biennially to coincide with the commission's appropriations request. SECTION 1.35. (a) Establishes a task force to administer the transfer of the hearings division from the commission to the hearing office. Sets forth persons who compose the task force. (b) Provides that the governor or a designee is the presiding officer of the task force. (c) Sets forth requirements for the task force. (d) Requires the task force to prepare a report detailing the specifics of the transfers and submit it to the governor and the legislature. (e) Requires the task force to ensure the transfer does not adversely affect a proceeding before the commission or the rights of the parties to the proceeding. (f) Provides that this section takes effect immediately. SECTION 1.36. (a) Transfers all personnel and items of the hearings division of the commission other than the items of the central records office to the utility division of the hearing office on September 1, 1995. Authorizes an employee transferred to the utility division to be terminated or subject to salary reduction, until September 1, 1996, only for cause and only in relation to poor performance or unacceptable conduct. Provides that a hearings examiner transferred to the State Office of Administrative Hearings becomes an administrative law judge on the date of transfer. (b) Requires the hearings examiners or judge transferred from the commission to the hearing office to continue to hear any case assigned to the person. (c) Makes application of this Act prospective regarding procedures governing a hearing before the utility division of the hearing office. (d) Provides that the commission is not required to adopt new rules governing practice and procedure before the commission or the utility division of the hearing office. Provides that the rules remain in effect until amended or repealed as required by law. Requires any rules adopted after the effective date governing practice before the utility division of the hearing office to be adopted jointly by that office and the commission. SECTION 1.37. Makes application of Section 1.3215, PURA 1995, prospective. SECTION 1.38. Applies Section 1.104, PURA 1995, only to a proceeding for which a final order has not been issued before the effective date and does not apply Section 1.104 to an electric utility merger proceeding filed before January 1, 1995, in which a final order has not been issued. Prohibits the commission from approving a settlement unless the settlement has been reached in accordance with rules adopted under Section 1.104. SECTION 1.39. Makes application of this Act prospective regarding personnel requirements. Provides that the changes do not affect the entitlement of a commission member, counsellor, director, or general counsellor serving on August 31, 1995, to hold office. ARTICLE 2 SECTION 2.01. Amends Title IIA, PURA 1995, by amending Section 2.001 and adding Sections 2.0011 and 2.0012, as follows: Sec. 2.001. LEGISLATIVE POLICY AND PURPOSE. Sets forth the legislative findings and purpose relating to protection of the public interest inherent in the rates and services of public utilities. Sec. 2.0011. DEFINITIONS. Redefines "public utility" and "utility." Defines "exempt wholesale generator," "power marketer," "qualifying cogenerator" and "qualifying small power producer," "qualifying facility," and "transmission service." Sec. 2.0012. CERTAIN RIVER AUTHORITIES. (a) Prohibits the commission from having the authority to regulate the revenue requirements, rates, fuel costs, fuel charges, or fuel acquisitions that are related to the generation and sale of electricity at wholesale and not to ultimate consumers by a river authority operating steam generating plants. Defines "public utility," "retail public utility," and "utility." (b) Requires this section to constitute full authority for any river authority operating steam generating plants to acquire, finance, construct, rebuilt, repower, and use new and existing power plants and assets, for the sale of electricity exclusively at wholesale and not at retail to any purchaser within San Saba, Llano, Burnet, Travis, Bastrop, Blanco, Colorado, and Fayette counties and any purchaser within the area served by the river authority on January 1, 1975. (c) Requires this section to constitute full authority for a corporation described in Subsection (a) to acquire, finance, construct, rebuild, repower, operate, or sell facilities directly related to the generation of electricity and sell the output of such facilities, provided that nothing in this section shall preclude the corporation from purchasing transmission and related services from such river authority. Requires this project to be subject to the provisions of all applicable laws other than this Act and the property, gross receipts, and income of such corporation acting on behalf of a river authority to be subject to, and such corporation shall pay, taxes and assessments of the federal government, this state, or any municipal corporation or other political subdivision or taxing district of this state on the same basis as an exempt wholesale generator. Prohibits any proceeds from the sale of any obligations, other than as may be available to investor-owned utilities or exempt generators, from being used to finance the construction, acquisition, rebuilding, or repowering of any facilities for the generation of electricity by the corporation. (d) Prohibits this section from authorizing the river authority to perform the listed actions on generating plants whose aggregate capacity is greater than 5,000 megawatts to serve purchasers within the area served by the river authority on January 1, 1975. Authorizes any river authority subject to this section to provide retail service only to those retail customers served by the river authority or corporation acting on behalf of the river authority on September 1, 1995. (e) Prohibits anything in this section from limiting the powers granted a river authority in its enabling legislation and other applicable law. SECTION 2.02. Amends Title IIA, PURA 1995, by adding Section 2.003, as follows: Sec. 2.003. SCOPE OF COMPETITION. Requires the commission to report to the legislature within a certain time frame on the scope of competition in electric markets and the impact of competition and industry restructuring on customers. Requires the report to include certain information and recommendations. SECTION 2.03. Amends Section 2.051, PURA 1995, as follows: Sec. 2.051. INTEGRATED RESOURCE PLANNING. (a) Requires the commission, by rule, to develop an integrated resources planning process to provide reliable energy service at the lowest reasonable cost. Sets forth the issues the commission is required to consider in addition to direct costs in determining the lowest cost of an electric utility's plan. (b) Requires the commission, by rule, to adopt and update a statewide integrated resource plan that includes the commission's long-term goals. Requires the commission to send a report on the plan to the governor and to notify each public utility of the approval of the statewide plan. Requires the commission to make the report available to the public. (c) Sets forth requirements for the report on the plan. (d) Requires the commission to consider the different generating capacities of small and large utilities. (e) Requires generating public utilities and non-generating public utilities planning to construct generating resources to submit to the commission a preliminary integrated resource plan (preliminary plan) every three years covering a 10-year period. Requires the commission, by rule, to meet certain criteria and authorizes it to take certain actions regarding the preliminary plan. (f) Sets forth required contents for a preliminary plan. (g) Requires a municipally owned utility to submit to the commission a report containing all of the information required in a preliminary plan, but prohibits the utility from being otherwise subject to the requirements of this section. (h) Requires the commission on its own or the motion of a utility or an affected person to convene a public hearing on the preliminary plan. Authorizes any interested party to intervene, present evidence, and cross-examine witnesses. Limits discovery to certain issues. Provides that a hearing is not required for a plan filed by a river authority or generating electric cooperative that does not intend to build a new generating plant or for a plan filed by a municipally owned public utility. (i) Requires the commission to determine after the hearing whether the preliminary plan meets certain criteria. (j) Requires the commission to issue an interim order on the preliminary plan within 180 days after the plan's filing. Requires the commission to approve, modify, or remand the plan for additional proceedings. Authorizes the 180-day period from being extended for a period up to 30 days for extenuating circumstances encountered in the development and processing of an initial plan, if the circumstances are explained and agreed on by the commissioners. (k) Requires the utility to conduct solicitations for demand-side and supply-side resources. Authorizes the utility to take certain actions in addition to soliciting resources from unaffiliated third parties. (l) Requires each bidder to submit two copies of its bid to the commission. Requires the commission to ensure that the utility has access to all bids at the same time. Requires the commission to keep a copy of each bid submitted to determine whether the utility complied with the criteria established for conduct of the solicitation. Provides that a bid is confidential and not subject to disclosure. (m) Requires the utility, if the utility wants to use a proposed demand-side management program, to prepare a bid reflecting that resource. Requires the bid to comply with the solicitation, evaluation, selection, and rejection criteria specified in the preliminary plan. Prohibits the utility from giving preferential treatment to a bid prepared under this subsection. (n) Requires the utility to evaluate each bid submitted and to negotiate all contracts. Provides that the utility is not required to accept a bid and may reject bids in accordance with the criteria specified in the preliminary plan. Authorizes the utility to apply for a certificate of convenience and necessity (certificate) for a utility-owned resource addition if the results of the solicitations and contract negotiations do not meet the supply-side needs in the plan. (o) Requires the utility, after conducting solicitations and negotiating contracts, to submit to the commission a proposed final integration resource plan including certain items. (p) Requires the commission, on request by any affected person and within 90 days of filing its final plan, to convene a public hearing on the proposed final plan. Authorizes any interested party to intervene, present evidence, and cross-examine witnesses regarding the final plan. Provides that parties are not allowed to litigate or conduct discovery on issues that were or could have been litigated in connection with the preliminary plan. Authorizes the commission to issue an order for access to the books, accounts, memoranda, contracts, or records of any exempt wholesale generator or power marketer selling energy at wholesale to a utility, if the examination is required for the effective discharge of the commission's regulatory responsibilities, with an exception. (q) Requires the commission to determine after the hearing whether the final plan meets certain criteria. (r)(1) Requires the commission to consider the reliability, financial condition, and safety of a resource and whether the contract was conducted in accordance with the preliminary plan in determining whether to certify a supply-side or demand-side contract that results from solicitations. Prohibits the commission from certifying contracts for new purchases of power by a utility unless the utility has determined after making certain considerations, that the contract would not impair the reliability of electric systems affected by the purchase, and the purchase can reasonably be expected to produce benefits to customers of the purchasing utility. Provides that certification of a resource contract does not negate the necessity to comply with environmental and siting regulations. Requires the commission, if the contract is with an affiliate, to determine whether the utility treated the bid in the same manner as others and whether, in connection with such purchase, whether the transaction meets certain criteria. (2) Requires the regulatory authority to consider payments made to be reasonable and necessary operating expenses of the public utility in setting a public utility's rates for a period during which a certified contract is effective. Authorizes the regulatory authority to provide for monthly recovery of the approved costs of the contract as those costs are incurred. (s) Requires the commission to consider the effect of granting a certificate on the recipient and on any public utility of the same kind already serving the proximate area. Requires the commission to consider other factors if the certificate is granted. Requires the commission to grant the certificate as part of the approval of the final plan if it finds that certain circumstances exist. (t) Requires the commission to issue a final order on the plan within 180 days after the utility files the proposed final plan. Requires the commission to approve, modify, or remand the final plan for additional proceedings. (u) Requires the commission to adopt rules allowing a utility to add new or incremental resources outside the solicitation process. (v) Requires the commission to establish rules and guidelines that will promote the development of renewable energy technologies consistent with the guidelines of the planning process. (w) Authorizes the commission to take certain actions in carrying out its duties related to the planning process. (x) Sets forth examples of new or incremental resources outside the solicitation process the utility, including a nongenerating utility, is authorized to add. (y) Provides that the addition of new or incremental resources does not require an amendment to the utility's integrated resource plan. (z) Provides that the submission of a bid from a qualifying facility has certain effects, regardless of whether that bid is accepted or rejected and only with respect to the capacity need for which the bid has been submitted. Sets forth requirements for determining a utility's avoided capacity costs. Prohibits anything in this subsection from affecting the validity of any contract entered into between a qualifying facility and an electric utility for any purchase. (aa) Defines "utility." Deletes existing section regarding electrical forecast. (bb) Provides that nongenerating utilities not planning to construct generating resources are not required to submitted a statewide integrated resource plan to the commission. Requires the utility to conduct a solicitation for resources if such a utility seeks to purchase certain amounts of megawatts from a wholesale power supplier other than its existing power supplier, but not for a purchase from its existing supplier. Authorizes new or incremental resources to be added outside the solicitation process as provided in Subsection (x). Authorizes the commission to review the reasonableness of any contract for resources resulting from the solicitation on the utility's request. Requires the commission to certify a contract found to be reasonable. Requires the commission to make its determination within 90 days after the date the proposed contract is submitted. Provides that nothing in this subsection is intended to alter or amend existing wholesale power supply contracts. (cc) Requires the commission to make final reconciliation of the costs recovered through those cost recovery factors to the extent that the commission authorizes utilities to recover certain costs. Requires the commission to adopt rules regarding matters necessary to perform the reconciliation. Sets forth requirements for the reconciliation. Deletes existing Section 2.051 regarding electrical energy forecasts. SECTION 2.04. Amends Section 2.052, PURA 1995, to authorize a qualifying cogenerator or small power producer to sell electric energy in this state only at wholesale, with an exception. SECTION 2.05. Amends Title IIB, PURA 1995, by adding Section 2.053, as follows: Sec. 2.053. EXEMPT WHOLESALE GENERATORS AND POWER MARKETERS. (a) Authorizes an exempt wholesale generator or power marketer to sell electric energy only at wholesale. (b) Sets forth the commission's jurisdiction over exempt wholesale generators and power marketers that sell electric energy in this state. (c) Requires each exempt wholesale generator and power marketer to register with the commission or the Federal Energy Regulatory Commission (FERC) or provide proof that it has been authorized by the FERC to sell electric energy at market-based rates. Sets forth the authorized procedure for registration including information the commission prescribes by rule. SECTION 2.06. Amends Title IIB, PURA 1995, by adding Section 2.054, as follows: Sec. 2.054. EXEMPT WHOLESALE GENERATOR AND POWER MARKETER AFFILIATES. (a) Authorizes an affiliate to be an exempt wholesale generator or power marketer and sets forth authorized actions for the affiliate. (b) Prohibits a facility from being sold, transferred, or considered an eligible facility if a rate or charge for or in connection with the construction of a facility or for electric energy produced by a facility other than any portion of a rate or charge which represents recovery of the cost of a wholesale rate or charge was in effect as of the date of enactment of this section. Authorizes the commission to allow such facility to undergo any of these actions only if such sale or transfer will benefit ratepayers of the utility taking the action, is in the public interest, and complies with state law. SECTION 2.07. Amends Title IIB, PURA 1995, by adding Section 2.056, as follows: Sec. 2.056. TRANSMISSION SERVICE. (a) Authorizes the commission to require a utility to provide transmission service (service) at wholesale to another utility, a qualifying facility, an exempt wholesale generator, or a power marketer and to determine whether the terms for the service are reasonable. Authorizes the commission to require transmission service at wholesale in a proceeding not related to approval of an integrated resource plan. Prohibits the commission from issuing a decision or rule relating to service that is contrary to an applicable decision of a federal regulatory agency. (b) Requires the commission to appoint, with the governor's advice and consent, a five-person interstate interconnection committee to recommend the most economical, reliable, and efficient means to synchronously interconnect, by the year 2001, the alternating current electric facilities of electric utilities within the Electric Reliability Council of Texas reliability area to the alternating current electric facilities of utilities within the Southwest Power Pool reliability area. SECTION 2.08. Amends Title IIB, PURA 1995, by adding Section 2.057, as follows: Sec. 2.057. WHOLESALE COMPETITION. (a) Requires a public utility that owns or operates transmission facilities to provide service comparable to the rates, terms of access, and conditions of the utility's use of its system. Requires the commission to ensure that the utilities provide nondiscriminatory access to service. Requires the commission to adopt rules within 180 days if the effective date of this Act relating to wholesale transmission service, rates, and access. Requires the rules to be consistent with the standards in this section, to not be contrary to federal law, and to require services that are not less than the transmission services the FERC may require. Requires all public utilities that own or operate transmission facilities to file tariffs implementing such rules within a certain time period. Requires such tariffs to be filed with the appropriate state or federal regulatory agency having jurisdiction over the transmission service of the entity filing the tariff. (b) Requires the commission to adopt rules relating to the registration and reporting requirements of qualifying facilities, exempt wholesale generators, and power marketers. (c) Prohibits the regulator from requiring a public utility to wheel or transmit electricity over that public utility's facilities from another entity to an ultimate consumer of electricity in the utility's area if the entity is an ultimate consumer of electricity. (d) Requires the commission to ensure that the costs of transmission are not borne by the utility's other customers by requiring the utility to recover from the entity for which the transmission is provided all reasonable costs incurred. (e) Authorizes the commission to require that parties to a dispute over the service engage in an alternative dispute resolution before seeking a resolution from the commission. (f) Authorizes public utilities, affiliates, exempt wholesale generators, qualifying facilities, and all other providers of generation to compete for the business of selling power to a third party that is not an ultimate consumer of electricity. Authorizes a public utility to purchase power from an affiliate. Prohibits a public utility from granting preference to any person in connection with the utility's purchase or sale of electric energy at wholesale or other utility services. (g) Defines "public utility." SECTION 2.09. Amends Section 2.101(a), PURA 1995, to require the governing body of certain municipalities to have exclusive original jurisdiction over retail, rather than all, utility rates, operations, and services provided within city or town limits. Makes conforming changes. SECTION 2.10. Amends Section 2.105, PURA 1995, by adding Subsection (c), to require the utility to provide to each municipality having original jurisdiction notice of intent to file the statement. Authorizes the municipality to request that the utility file a statement of intent within 30 days of receiving the utility's notice and, upon request, requires the utility to file the statement with the municipality, commission, and office simultaneously. SECTION 2.11. Amends Section 2.106(a), PURA 1995, to require the governing body of any municipality participating in proceedings initiated pursuant to Section 2.051 of this Act to have the right to select and engage certain professionals to conduct investigations, present evidence, advise and represent the governing body, and assist with litigation in proceedings initiated pursuant to Section 2.051 of this Act. SECTION 2.12. Amends Title IID, PURA 1995, by adding Section 2.1511, as follows: Sec. 2.1511. MARKUP. Authorizes any cost recovery factor established for recovery of purchased power costs to include the costs incurred by the utility for the purchase of capacity and energy, together with a markup added to compensate the utility for financial risks and the value added associated with making the purchased power available to its customers. Authorizes the mark-ups and cost recovery factors to be those that are necessary to encourage the utility to include economical purchased power as part of its resource supply plan. SECTION 2.13. Amends Section 2.152, PURA 1995, by adding Subsection (e), to authorize reasonable costs of participating in a proceeding to be allowed, but not exceeding the regulator's approved amount. SECTION 2.14. Amends Section 2.154(b), PURA 1995, to require prices being charged to individual customers for retail electric service to be filed with the regulator. Requires the regulator to consider any information concerning a price charge filed with the regulator to be a trade secret not subject to disclosure. SECTION 2.15. Amends Title IIE, PURA 1995, by adding Section 2.2011, as follows: Sec. 2.2011. (a) Exempts an electric cooperative corporation (cooperative) that provides retail electric utility service at distribution voltage from rate regulation if a majority of the members vote to approve the exemption (exemption election) and the cooperative sends notice of the action to each applicable regulator. Sets forth required procedure for a cooperative that wants to hold an exemption election. (b) Prohibits any regulator from fixing and regulating the rates of a cooperative that has made an exemption election, except as provided for the commission. Provides that the commission has exclusive original jurisdiction in all of the proceedings initiated under Subsection (g) or (i). (c) Sets forth ways a cooperative may change its rates. (d) Sets forth requirements for the notice of a rate change. Prohibits requiring a cooperative to include additional information in the notice. (e) Requires the cooperative to make available to a member of the cooperative a copy of any written opposition to the rate change. (f) Requires the cooperative to file tariffs with the commission. Requires the commission to approve the tariffs within a certain period if the cooperative complies with Subsection (c), with an exception. Sets forth the date that the rate change takes effect if approved or not required to be reviewed. Provides that the rates of a cooperative are not subject to review, with exceptions. (g) Requires the commission to review a rate change if within a certain time period the commission receives a petition requesting review signed by certain parties. (h) Requires a person to notify the cooperative when a person files a petition. (i) Authorizes the commission on its own motion to review the rates if the commission first finds that there is good cause to believe the cooperative is earning more than a reasonable return on certain revenue. (j) Requires the commission to conduct a review in accordance with Section 2.212 and the other applicable rate-setting principles of this subtitle, with exceptions. (k) Requires the cooperative to file with the commission a copy of the cost-of-service study within a certain time period if reviewed. Sets forth requirements for the commission in conducting the review. Requires the cooperative to estimate the cost of providing service to a class and to base revenues on estimates of billing units if the cooperative proposes a rate class solely for a new customer. (l) Provides that the rate for each class for which review has been requested is suspended during the review. Sets forth requirements for the commission to dismiss the petition or disapprove the rate change. Provides that the cooperative's rate is approved and may be placed into effect if the commission fails to make its determination within 45 days of receiving the cost-of-service study. (m) Authorizes the cooperative members to revoke the exemption election or to elect to again be exempt from rate regulation by majority vote, with an exception. (n) Provides that this section does not affect the application of other provisions of this Act not directly related to rates or to the commission's authority to file reports or rules adopted by the commission. Requires a service fee or regulation to comply with commission rules applicable to all electric utilities. Authorizes the commission to determine whether an electric cooperative has unlawfully charged, collected, or received a rate for service. (o) Authorizes a single customer to seek a review of the rates of an electric cooperative if the customer consumes or purchases more than a certain amount within a given time period. Provides that a right conferred by this subsection is in addition to rights that the customer has under Subsection (i) and not in limitation or in lieu of those rights. SECTION 2.16. Amends Section 2.203(b), PURA 1995, to make conforming changes. SECTION 2.17. Amends Sections 2.208(b) and (d), PURA 1995, as follows: (b) Transactions with Affiliated Interests. Deletes a provision setting forth requirements for setting the price paid for natural gas from Outer Continental Shelf lands. (d) Expenses Disallowed. Prohibits the regulator from considering for ratemaking purposes expenditures including administrative penalties. SECTION 2.18. Amends Section 2.211, PURA 1995, by adding Subsections (c)-(e), as follows: (c) Requires the utility to file a rate-filing package concurrently with the regulator within a certain time period. Authorizes the regulator to extend the period or waive the requirement on agreement of the parties. Requires the regulator to make a determination concerning the matter within a certain time period, with an exception. (d) Authorizes the regulator to issue an interim order fixing temporary rates until a determination is made. Authorizes the regulator to require the utility to make adjustments for sums collected when temporary rates were in effect that are in excess or less than the final rate. (e) Provides that the utility rates become temporary rates if the regulator has not issued a final order or fixed temporary rates within a certain period. Requires the regulator to require the utility to make adjustments for rates collected when temporary rates were in effect. SECTION 2.19. Amends Sections 2.212(a), (e), and (g), PURA 1995, as follows: (a) and (e) Make conforming changes. (g) Provides that the commission is not prohibited from reviewing and providing adjustments of a utility's fuel factor. Requires the commission, by rule, to implement procedures that provide for the adjustment of a utility's fuel factor. Sets forth requirements for the procedures. Requires the commission to render a decision approving, disapproving, or modifying the adjustment. Requires the commission, by rule, to provide for the reconciliation of a utility's fuel costs on a timely basis. Authorizes the commission to provide for a mechanism to allow any public utility that has a noncontiguous geographical service area and that purchases power for resale for that area from public utilities that are not members of the Electric Reliability Council of Texas, to recover purchased power cost for that area reflecting the cost for that specific noncontiguous area. Prohibits the commission from requiring such a mechanism for any cooperative unless requested by the cooperative. SECTION 2.20. Amends Section 2.215, PURA 1995, by adding Subsection (c), to require the commission to include community colleges in the rate class with public school customers when the commission has approved the establishment of a separate rate class for electric service for a university and for public schools. SECTION 2.21. Amends Sections 2.255(d)-(f), PURA 1995, to provide that this section does not apply to a certificate for an electric generating plant (plant) that is requested under Section 2.051. Authorizes the commission to grant a certificate for a plant only in accordance with Section 2.051. Deletes existing provisions regarding the application for a certificate. SECTION 2.22. Amends Section 2302.043, Government Code, to make conforming changes. SECTION 2.23. (a) Requires the commission, by rule, to adopt an integrated planning process by September 1, 1996. (b) Makes application of this Act prospective. SECTION 2.24. Requires the commission to adopt the initial rules required by Section 2.057 within 90 days after the effective date of this Act. SECTION 2.25. Requires an exempt wholesale generator or power marketer required to register to do so within 90 days of the effective date. SECTION 2.26. Effective date: September 1, 1995. SECTION 2.27. Emergency clause.