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.