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79R15445 JJT-D


By:  Fraser                                                       S.B. No. 743

Substitute the following for S.B. No. 743:                                    

By:  King of Parker                                           C.S.S.B. No. 743


A BILL TO BE ENTITLED
AN ACT
relating to independent organizations in ERCOT and their regulation and certification by the Public Utility Commission of Texas; providing an administrative penalty. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Section 39.151, Utilities Code, is amended by amending Subsections (b), (c), (d), (e), (g), and (j) and adding Subsections (g-1), (g-2), and (n) to read as follows: (b) "Independent organization" means an independent system operator or other person that is sufficiently independent of any producer or seller of electricity that its decisions will not be unduly influenced by any producer or seller. [An entity will be deemed to be independent if it is governed by a board that has three representatives from each segment of the electric market, with the consumer segment being represented by one residential customer, one commercial customer, and one industrial retail customer.] (c) The commission shall certify an independent organization or organizations to perform the functions prescribed by this section. The commission has complete authority to oversee, require the commission's approval of, and order modifications of any part of the finances, budget, or administration of an independent organization certified under this section. (d) An independent organization certified by the commission for a power region shall establish and enforce procedures, consistent with this title and the commission's rules, relating to the reliability of the regional electrical network and accounting for the production and delivery of electricity among generators and all other market participants. The procedures shall be subject to commission oversight and review. An independent organization certified by the commission is directly responsible and accountable to the commission. The organization shall fully cooperate with the commission in the commission's oversight and investigatory functions. The commission may decertify an organization that does not adequately perform the organization's functions or duties or does not comply with this section. (e) The commission by rule shall require an independent organization certified under this section to provide the commission with sufficiently detailed information to allow the commission to review and approve or disapprove the independent organization's budget for cost efficiencies and for the reasonableness and necessity of budget items. The rules must include a timetable for an independent organization to file its budget for review under the rules. The commission's budget review must include a review of salaries, employee benefits, and the independent organization's use of debt financing. After determining the overall reasonableness and necessity of an independent organization's budget, the [The] commission, in the same proceeding, may authorize the [an] independent organization [that is certified under this section] to charge [a reasonable and competitively neutral rate] to wholesale buyers and sellers a reasonable and competitively neutral rate determined by the commission to allow [cover] the independent organization a reasonable opportunity to take in a reasonable and necessary amount of revenue, as determined by the commission in the budget review process. The independent organization may change the rate established by the commission in the budget review process only with the commission's approval. On the commission's own initiative or on receiving a complaint, the commission may inquire into the reasonableness of an independent organization's budget or rate [costs]. (g) To maintain certification as an independent organization under this section, an organization's [If it amends its governance rules to provide that its governing body is composed as prescribed by this subsection, the existing independent system operator in ERCOT will meet the criteria provided by Subsection (a) with respect to ensuring access to the transmission systems for all buyers and sellers of electricity in the ERCOT region and ensuring the reliability of the regional electrical network. To comply with this subsection, the] governing body must be composed of persons specified by this section and selected in accordance with formal bylaws or protocols of the organization. The process must allow for commission input in identifying candidates. The governing body must be composed of: (1) the chairman of the commission as an ex officio nonvoting member; (2) the counsellor as an ex officio voting member representing residential and small commercial consumer interests; (3) the chief executive officer [director] of the independent system operator as an ex officio voting member; (4) six market participants elected by their respective market segments to serve one-year terms, with: (A) one representing independent generators; (B) one representing investor-owned utilities; (C) one representing power marketers; (D) one representing retail electric providers; (E) one representing municipally owned utilities; and (F) one representing electric cooperatives [four representatives of the power generation sector as voting members]; (5) one member representing industrial consumer interests and elected by the industrial consumer market segment to serve a one-year term [four representatives of the transmission and distribution sector as voting members]; (6) one member representing large commercial consumer interests selected by the outgoing large commercial consumer representative to serve a one-year term [four representatives of the power sales sector as voting members]; and (7) five members unaffiliated with any market segment and selected by the other members of the governing body to serve three-year terms [the following people as voting members, appointed by the commission: [(A) one representative of residential customers; [(B) one representative of commercial customers; and [(C) one representative of industrial customers]. [The four representatives specified in each of Subdivisions (4), (5), and (6) shall be selected in a manner that ensures equitable representation for the various sectors of industry participants.] (g-1) The presiding officer of the governing body must be one of the members described by Subsection (g)(7). (g-2) The governing body and its members are subject to Chapter 551, Government Code, in the same manner as that chapter applies to a governmental body and the members of a governmental body, except that the requirements pertaining to executive sessions of the governing body, to advance notice of meetings and planned agendas of the meetings, and the opportunity to comment on matters under discussion at the meetings contained in the independent organization's bylaws apply in lieu of conflicting requirements of that chapter. (j) A retail electric provider, municipally owned utility, electric cooperative, power marketer, transmission and distribution utility, or power generation company, or any other person who participates in a market operated by the independent system operator in ERCOT, shall observe all scheduling, operating, planning, reliability, and settlement policies, rules, guidelines, and procedures established by the independent system operator in ERCOT. A violation by any person of [Failure to comply with] this subsection may result in the revocation, suspension, or amendment of that person's [a] certificate or registration as provided by Section 39.356 or in the imposition against that person of an administrative penalty [as provided by Section 39.357]. The commission may require the refunding or disgorgement of unjust profits that accrue as a result of a violation of this subsection. (n) Subsections (a), (b), (f), (k), (l), and (m) apply to an independent organization established to serve areas located outside of the ERCOT power region. Subsections (c), (d), (e), (g), (h), (i), and (j) do not apply to an independent organization established to serve areas located outside of the ERCOT power region. The commission, however, may certify an independent organization or organizations outside of ERCOT to perform the functions described by Subsection (a). SECTION 2. Subchapter D, Chapter 39, Utilities Code, is amended by adding Sections 39.1511, 39.1512, and 39.1515 to read as follows: Sec. 39.1511. PUBLIC MEETINGS OF GOVERNING BODY OF INDEPENDENT ORGANIZATION. (a) The bylaws of the independent organization and the rules of the commission shall provide for the governing body or subcommittee to enter into executive session closed to the public to address sensitive matters such as confidential personnel information, contracts, lawsuits, competitively sensitive information, customer proprietary information, or other information that by law is privileged or confidential or that is related to security of the regional electrical network. (b) The bylaws of the independent organization and rules of the commission must ensure that a person interested in the activities of the independent organization has an opportunity to obtain at least seven days' advance notice of meetings of the governing body and the planned agendas of the meetings and an opportunity to comment on matters under discussion at the meetings. (c) In an emergency or if there is an urgent public necessity, the notice of a meeting or the supplemental notice of a subject added as an item to the agenda for a meeting for which notice has been posted in accordance with Subsection (b) is sufficient if the notice is posted for at least two hours before the meeting is convened and if the notice or supplemental notice clearly identifies the emergency or urgent public necessity. An emergency or an urgent public necessity is considered to exist only if immediate action is required of the governing body because of an imminent threat to public health and safety or a reasonably unforeseeable situation. (d) This section does not apply to an independent organization established to serve areas located outside of ERCOT. Sec. 39.1512. DISCLOSURE OF INTEREST IN MATTER BEFORE INDEPENDENT ORGANIZATION'S GOVERNING BODY; PARTICIPATION IN DECISION. (a) If a matter comes before the governing body of an independent organization certified under Section 39.151 and a member or a person that member represents has a direct interest in that matter, the member shall publicly disclose the fact of that interest to the governing body at a public meeting of the body. The member shall recuse himself or herself from the governing body's deliberations and actions on the matter and may not vote on the matter or otherwise participate in a governing body decision on the matter. (b) A disclosure made under Subsection (a) shall be entered in the minutes of the meeting at which the disclosure is made. (c) The fact that a member is recused from a vote or decision by application of this section does not affect the existence of a quorum. (d) This section does not apply to an independent organization established to serve areas located outside ERCOT. Sec. 39.1515. WHOLESALE ELECTRIC MARKET MONITOR. (a) An independent organization certified under Section 39.151 shall contract with a private person selected by the commission to act as the wholesale electric market monitor and to detect and prevent market power abuses, potential market power abuses, and other violations of this subchapter. (b) The independent organization shall provide to the personnel of the market monitor: (1) full access to the organization's main operations center; and (2) other support and cooperation necessary for the market monitor to perform the market monitor's functions. (c) The independent organization shall use money from the rate authorized by Section 39.151(e) to pay for the market monitor's activities. (d) The commission is responsible for ensuring that the market monitor has the resources, expertise, and access to information necessary to monitor effectively the wholesale electric market administered by the independent organization and shall adopt rules and perform oversight of the market monitor as necessary. The market monitor shall operate under the supervision and oversight of the commission. The commission shall retain all enforcement authority conferred under this title and this section may not be construed to confer enforcement authority on the market monitor or to authorize the commission to delegate the commission's enforcement authority to the market monitor. The commission by rule shall define: (1) the market monitor's monitoring responsibilities; (2) the standards for funding the market monitor, including staffing requirements; (3) qualifications for personnel of the market monitor; (4) ethical standards for the market monitor and the personnel of the market monitor; (5) procedures and standards for communications between the market monitor and both the commission and the independent organization; (6) the nature and timing of reports the commission determines the market monitor shall provide to the commission, market participants, and the independent organization; and (7) procedures for the market monitor to observe in complying with Subsection (i). (e) In adopting rules governing the standards for funding the market monitor, the commission shall consult with a subcommittee of the independent organization's governing body to receive information on how money is or should be spent for monitoring functions. Rules governing ethical standards must include provisions designed to ensure that the personnel of the market monitor are professionally and financially independent from market participants and consumer market segments described by Section 39.151(g). The commission shall develop and implement policies that clearly separate the policy-making responsibilities of the commission and the operational responsibilities of the market monitor. (f) The market monitor immediately shall confidentially report directly to the commission and to a market participant that is the subject of the report any potential market power abuses and any discovered or potential violations of commission rules or rules of the independent organization that involve markets administered by the independent organization. (g) The personnel of the market monitor may communicate with any person, including the commission, in accordance with commission rules and with independent organization procedures. (h) The market monitor annually shall submit to the commission and the independent organization a report that identifies market design flaws and recommends methods to correct the flaws. The commission and the independent organization shall review the report and evaluate whether changes to rules of the commission or the independent organization should be made. The report shall be made available to the public. (i) The market monitor shall comply with this title, commission rules and orders, and bylaws of the independent organization. The market monitor shall perform the monitor's functions in a manner that ensures the confidentiality of information that is customer proprietary information, competitively sensitive, or otherwise confidential or privileged under this title, commission rules or orders, procedures or bylaws of the independent organization, or other law. (j) This section does not apply to an independent organization established to serve areas located outside of ERCOT. SECTION 3. An independent organization certified by the Public Utility Commission of Texas before September 1, 2005, shall modify the organization's governing body to comply with Section 39.151(g), Utilities Code, as amended by this Act, not later than January 1, 2006. On or after January 1, 2006, the Public Utility Commission of Texas may decertify an independent organization whose governing body does not comply with Section 39.151(g), Utilities Code, as amended by this Act. SECTION 4. This Act takes effect September 1, 2005.