By: Fraser S.B. No. 743
(In the Senate - Filed February 24, 2005; March 10, 2005,
read first time and referred to Committee on Business and Commerce;
April 6, 2005, reported favorably by the following vote: Yeas 9,
Nays 0; April 6, 2005, sent to printer.)
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), (d), (g), and (h) and adding Subsection
(g-1) 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.]
(d) The commission has the general power to regulate and
supervise the business of an independent organization in ERCOT and
to do anything specifically designated or implied by this title
that is necessary and convenient to the exercise of that power and
jurisdiction. The commission, by order or rule, may not implement a
requirement that is contrary to an applicable federal law or rule.
The commission may:
(1) require an independent organization to provide
reports and information relating to the independent organization's
performance of the functions prescribed by this section and
relating to its revenues, expenses, and other financial matters;
(2) prescribe a system of accounts for an independent
organization;
(3) conduct audits of an independent organization's
performance of the functions prescribed by this section or relating
to its revenues, expenses, and other financial matters and may
require an independent organization to conduct such audits;
(4) inspect an independent organization's facilities,
records, and accounts during reasonable hours and after reasonable
notice to the independent organization;
(5) assess administrative penalties against an
independent organization that violates this title or a rule or
order adopted by the commission, and the attorney general, at the
request of the commission, may apply for a court order to require an
independent organization to comply with commission rules and
orders, in the manner provided by Chapter 15;
(6) resolve disputes between an affected person and an
independent organization and may adopt procedures for the efficient
resolution of such disputes; and
(7) adopt and enforce rules [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, or may delegate to an independent organization
responsibilities for establishing and enforcing such rules. Any
such rules adopted by an independent organization and any
enforcement actions taken by it[. The procedures] shall be subject
to commission oversight and review.
(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 bylaws or protocols
must be approved by the commission and must reflect the input of the
commission. The bylaws or protocols must prescribe professional
qualifications for selection as a member, require the use of a
professional search firm to identify candidates for membership, and
specify the process by which appropriate stakeholders elect
members. 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).
(h) The ERCOT independent system operator may meet the
criteria relating to the other functions of an independent
organization provided by Subsection (a) by adopting procedures and
acquiring resources needed to carry out those functions, consistent
with any rules or orders of the commission.
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 THE GOVERNING BODY OF AN
INDEPENDENT ORGANIZATION. (a) Meetings of the governing body of
an independent organization certified under Section 39.151 and
meetings of a subcommittee of the governing body must be open to the
public. The bylaws of the independent organization and the rules of
the commission may 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, or other
information related to the 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 and the
planned agendas of the meetings and an opportunity to comment on
matters under discussion at the meetings.
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.
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 state's wholesale electric market monitor and to detect and
prevent market manipulation strategies.
(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 the commission
determines is 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 authority
necessary to monitor the wholesale electric market effectively and
shall adopt rules and perform oversight of the market monitor as
necessary. 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; and
(4) ethical standards for the market monitor and the
personnel of the market monitor.
(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. The commission shall develop and implement
policies that clearly separate the policymaking responsibilities
of the commission and the operational responsibilities of the
market monitor.
(f) The market monitor shall immediately report directly to
the commission any potential market manipulations and any
discovered or potential violations of commission rules or rules of
the independent organization.
(g) The personnel of the market monitor may communicate with
commission staff on any matter without restriction.
(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.
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 Subsection
(g), Section 39.151, Utilities Code, as amended by this Act, not
later than September 1, 2006. On or after September 1, 2006, the
Public Utility Commission of Texas may decertify an independent
organization whose governing body does not comply with Subsection
(g), Section 39.151, Utilities Code, as amended by this Act.
SECTION 4. This Act takes effect September 1, 2005.
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