H.B. No. 1567
AN ACT
relating to the transition to competition of certain electric
utilities outside of ERCOT.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 39, Utilities Code, is amended by adding
Subchapter J to read as follows:
SUBCHAPTER J. TRANSITION TO COMPETITION IN CERTAIN
NON-ERCOT AREAS
Sec. 39.451. APPLICABILITY. This subchapter applies only
to an investor-owned electric utility that is operating solely
outside of ERCOT in areas of this state that were included in the
Southeastern Electric Reliability Council on January 1, 2005.
Sec. 39.452. REGULATION OF UTILITY AND TRANSITION TO
COMPETITION. (a) Until the date on which an electric utility
subject to this subchapter is authorized by the commission to
implement customer choice under Section 39.453, the rates of the
electric utility shall be regulated under traditional
cost-of-service regulation and the electric utility is subject to
all applicable regulatory authority prescribed by this subtitle and
Subtitle A, including Chapters 14, 32, 33, 36, and 37.
(b) Notwithstanding Subsection (a), except for adjustments
authorized by Sections 36.203, 39.454, 39.455, and 39.456, a person
may not file a proceeding to change, alter, or revoke any rate
offered or charged by an electric utility subject to this
subchapter before June 30, 2007, with an effective date no earlier
than June 30, 2008. As part of a Subchapter C, Chapter 36, rate
proceeding, the utility shall propose a competitive generation
tariff to allow eligible customers the ability to contract for
competitive generation. The commission shall approve, reject, or
modify the proposed tariff. The tariffs subject to this subsection
may not be considered to offer a discounted rate or rates under
Section 36.007, and the utility's rates shall be set, in the
proceeding in which the tariff is adopted, to recover any costs
unrecovered as a result of the implementation of the tariff.
(c) That portion of any commission order issued before the
effective date of this section requiring the electric utility to
comply with a provision of this chapter is void.
(d) Until the date on which an electric utility subject to
this subchapter implements customer choice:
(1) the provisions of this chapter do not apply to that
electric utility, other than this subchapter, Sections 39.904 and
39.905, and the provisions relating to the duty to obtain a permit
from the Texas Commission on Environmental Quality for an electric
generating facility and to reduce emissions from an electric
generating facility; and
(2) the electric utility is not subject to a rate
freeze and, subject to the limitation provided by Subsection (b),
may file for rate changes under Chapter 36 and for approval of one
or more of the rate rider mechanisms authorized by Sections 39.454
and 39.455.
(e) An electric utility subject to this subchapter may
proceed with and complete jurisdictional separation to establish
two vertically integrated utilities, one of which is solely subject
to the retail jurisdiction of the commission and one of which is
solely subject to the retail jurisdiction of the Louisiana Public
Service Commission.
(f) Not later than January 1, 2006, an electric utility
subject to this subchapter shall file a plan with the commission for
identifying the applicable power region or power regions,
enumerating the steps to achieve the certification of a power
region in accordance with Section 39.453, and specifying the
schedule for achieving the certification of a power region. The
utility may amend the plan as appropriate. The commission may, on
its own motion or the motion of any affected person, initiate a
proceeding to certify a qualified power region under Section 39.152
when the conditions supporting such a proceeding exist.
(g) Not later than the earlier of January 1, 2007, or the
90th day after the date the applicable power region is certified in
accordance with Section 39.453, the electric utility shall file a
transition to competition plan. The transition to competition plan
must:
(1) identify how the electric utility intends to
mitigate market power and to achieve full customer choice,
including specific alternatives for constructing additional
transmission facilities, auctioning rights to generation capacity,
divesting generation capacity, or any other measure that is
consistent with the public interest;
(2) include a provision to reinstate a customer choice
pilot project and to establish a price to beat for residential
customers and commercial customers having a peak load of 1,000
kilowatts or less; and
(3) include any other additional information or
provisions that the commission may require.
(h) The commission shall approve, modify, or reject a plan
filed under Subsection (g) not later than the 180th day after the
date the plan is filed unless a hearing is requested by any party to
the proceeding. A modification to the plan by the commission may
not be in conflict with the jurisdiction or orders of the Federal
Energy Regulatory Commission or result in significant additional
cost without allowing for timely recovery for that cost. If a
hearing is requested, the 180-day deadline is extended one day for
each day of the hearing. The transition to competition plan shall
be updated or amended annually, subject to commission approval,
until the initiation of customer choice by an electric utility
subject to this subchapter. Consistent with its jurisdiction, the
commission shall have the authority in approving or modifying the
transition to competition plan to require the electric utility to
take reasonable steps to facilitate the development of a wholesale
generation market within the boundaries of the electric utility's
service territory.
Sec. 39.453. CUSTOMER CHOICE AND RELEVANT MARKET AND
RELATED MATTERS. (a) The commission may not authorize customer
choice until the commission certifies the applicable power region
as a qualifying power region under Section 39.152(a). Sections
39.152(b)-(d) also apply to the electric utility and commission in
determining whether to certify the applicable power region.
(b) The commission shall certify that the requirement of
Section 39.152(a)(3) is met for an electric utility subject to this
subchapter only if the commission finds that the total capacity
owned and controlled by the electric utility and the utility's
affiliates does not exceed 20 percent of the total installed
generation capacity within the power region of that utility.
Sec. 39.454. RECOUPMENT OF TRANSITION TO COMPETITION COSTS.
An electric utility subject to this subchapter is entitled to
recover, as provided by this section, all reasonable and necessary
expenditures made or incurred before the effective date of this
section to comply with this chapter, to the extent the costs have
not otherwise been recovered. The electric utility may file with
the commission an application for recovery that gives details of
the amounts spent or incurred. After notice and hearing, the
commission shall review the amounts and, if the amounts are found to
be reasonable and necessary and not otherwise previously recovered,
approve a transition to competition retail rate rider mechanism for
the recovery of the approved transition to competition costs. A
rate proceeding under Chapter 36 is not required to implement the
rider. A rate rider implemented to recover approved transition to
competition costs shall provide for recovery of those costs over a
period not to exceed 15 years, with appropriate carrying costs.
Sec. 39.455. RECOVERY OF INCREMENTAL CAPACITY COSTS. An
electric utility subject to this subchapter is entitled to recover,
through a rate rider mechanism, reasonable and necessary costs of
incremental resources required to meet load requirements to the
extent those costs result in the utility expending more for
capacity costs under purchase power agreements than were included
in the utility's last base rate case, adjusted for load growth. Any
rider under this section shall be implemented after review and
approval by the commission, after notice and opportunity for
hearing. Following the initial implementation of the rider, an
electric utility subject to this subchapter may request revisions
semiannually, after notice and opportunity for hearing, on the
dates provided in the commission's rules for filing petitions to
revise the utility's fuel factor. In conjunction with the utility's
fuel reconciliation proceedings, the commission shall reconcile
the costs recovered under the rider and the actual incremental
capacity costs eligible for recovery under this section. The rider
shall expire on the introduction of customer choice or on the
implementation of rates resulting from the filing of a Subchapter
C, Chapter 36, rate proceeding. In no event may the amount
recovered annually under the rider exceed five percent of the
utility's annual base rate revenues.
Sec. 39.456. FRANCHISE AGREEMENTS. A municipality, with
the agreement of an electric utility, may accelerate the expiration
date of a franchise agreement that was in existence on September 1,
1999. Any new franchise agreement must be approved by the governing
body of the municipality. To the extent that a new franchise
agreement would result in an increase in the payment of franchise
fees to the municipality, and subject to the terms of the franchise
agreement, either the electric utility or the municipality, without
the need for a rate proceeding under Chapter 36, may file with the
commission for approval of a rider for the electric utility's
recovery of franchise payments resulting from the agreement, so
long as such rider is collected only from customers of the electric
utility that are located within the boundaries of the municipality.
Sec. 39.457. CONTRACTUAL RIGHTS. In the event that the
electric utility subject to this subchapter either merges,
consolidates, or otherwise becomes affiliated with another owner of
electric generation, or completes the jurisdictional separation
authorized by Section 39.452(e) and the resulting vertically
integrated utility proposes to join a regional transmission
organization, and either action adversely affects the rights or
obligations of an electric cooperative under a wholesale generation
or transmission agreement entered into before the effective date of
this subchapter or otherwise adversely affects the electric
cooperative's access to its existing generation resources under
said agreements, then the utility shall submit a proposal agreeable
to the cooperative and the utility for addressing such rights and
obligations in the appropriate regulatory proceeding. Such
proposal shall be consistent with applicable law regarding the
rights and obligations of the electric cooperative and the utility
under such existing generation or transmission agreements.
SECTION 2. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2005.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 1567 was passed by the House on April
21, 2005, by the following vote: Yeas 144, Nays 0, 1 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 1567 on May 26, 2005, by the following vote: Yeas 141, Nays 0,
2 present, not voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 1567 was passed by the Senate, with
amendments, on May 24, 2005, by the following vote: Yeas 31, Nays
0.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor