HBA-TYH H.B. 2048 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2048 By: Brimer State Affairs 3/11/1999 Introduced BACKGROUND AND PURPOSE Under the current Utilities Code, natural gas and oil royalties may be taken in kind and marketed by the state. Natural Resources Code requires oil or gas leases from certain state entities or from the owner of the soil on Relinquishment Act land (Chapter 52, Subchapter F, Natural Resources Code) to include a provision granting these parties the right to take their respective royalty in kind and give the commissioner of the General Land Officer (commissioner) and others the right to negotiate and execute contracts for sale, transport, or storage. It also grants the right to enter into insurance contracts or other agreements to secure or to guarantee payment of the in kind sales and authorizes the parties to negotiate and execute contracts for disposing of royalty in kind. H.B. 2048 expands the scope of the program to convert natural gas into electricity, giving the commissioner the authority to market electricity to wholesale and public retail customers, the potential to take royalties in kind on all state owned land, including university lands, the ability to purchase or enhance these in kind volumes with additional volumes, and the flexibility to either sell the commodity as is or to convert it to other forms of energy. This bill enables the commissioner to convert in kind natural gas to electricity and gives the state the opportunity to increase the revenues generated from state lands for the benefit of public and higher education. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 31.002(1), Utilities Code, to provide that the term "electric utility" does not include this state or an agency of this state. Makes conforming changes. SECTION 2. Amends Chapter 35, Utilities Code, by adding Subchapter D, as follows: SUBCHAPTER D. STATE AUTHORITY TO SELL OR CONVEY POWER Sec. 35.101. DEFINITIONS. Defines "commissioner" and "public retail customer." Sec. 35.102. STATE AUTHORITY TO SELL OR CONVEY POWER. Authorizes the commissioner of the General Land Office (commissioner) to sell or otherwise convey power directly to a public retail customer regardless of whether the public retail customer is also a wholesale customer. Sec. 35.103. ACCESS TO TRANSMISSION AND DISTRIBUTION SYSTEMS; RATES. (a) Provides that the state is entitled to have access to all transmission and distribution systems of all electric utilities, municipally owned utilities, and electric cooperative corporations that serve public retail customers. (b) Requires an entity described by Subsection (a) to provide any utility service, including transmission, distribution, and other services to the state at the lowest applicable rate charged for similar service to other customers. Sec. 35.104. RETAIL TRANSACTION LIMIT. Prohibits the state from engaging in retail transactions that exceed two and one-half percent of a retail electric utility's total retail load in a service area. Sec. 35.105. COSTS OF SERVING STATE AGENCY. Prohibits an electric utility, municipally owned utility, or electric cooperative corporation from recovering from any customer the assigned and allocated costs of serving a state agency, institution of higher education, public school district, or political subdivision of this state. Sec. 35.106. WHOLESALE CUSTOMERS. Provides that this subchapter does not prevent the commissioner from registering as a power marketer. SECTION 3. Amends Sections 52.133(a), (c), and (d), Natural Resources Code, as follows: (a) Deletes the exception of the Board for Lease of University Lands from a list of boards required to include a provision granting land to various entities and the commissioner the authority to take their royalty in kind. (c) Authorizes the commissioner to negotiate and execute contracts, at the direction of the Board for Lease of University Lands and other specified boards, that are necessary to dispose of or enhance their portion of the royalty taken in kind, including contracts for sale, purchase, transportation, and storage and including other contracts or agreements, to secure or guarantee payment. Makes nonsubstantive changes. (d) Authorizes the commissioner, the owner of the soil under Subchapter F (Relinquishment) or the commissioner acting on behalf of and at the direction of an owner of the soil under Subchapter F, the school land board, or a board for lease, to negotiate and execute contracts or any other instruments or agreements necessary to convert that portion of the royalty taken in kind into other forms of energy, including electricity. Deletes text stating that this section is not applicable to the Board for Lease of University Lands. SECTION 4. Amends Section 53.026, Natural Resources Code, as follows: (a) Makes conforming changes and a nonsubstantive change. (b) Authorizes the commissioner or the commissioner acting on behalf of and at the direction of the board or a board for lease to negotiate and execute a contract or any other instrument or agreement necessary to convert that portion of the royalty taken in kind to other forms of energy, including electricity. (c) Created from existing text. SECTION 5. Amends Section 53.077, Natural Resources Code, as follows: (a) Makes a conforming change. (b) Authorizes the commissioner, each owner of the soil under this subchapter, or the commissioner acting on behalf of and at the direction of the owner of the soil under this subchapter to negotiate and execute a contract or any other instrument or agreement necessary to convert that portion of the royalty taken in kind to other forms of energy, including electricity. (c) Created from existing text. SECTION 6.Effective date: September 1, 1999. SECTION 7.Emergency clause.