80R1793 JJT-D

By: Burnam H.B. No. 491

A BILL TO BE ENTITLED

AN ACT

relating to regulation of electric generation capacity in the electric power market.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 39.153, Utilities Code, is amended by amending Subsections (d), (e), and (f) and adding Subsection (a-1) to read as follows:

(a-1) Each electric utility subject to this section shall sell at auction or otherwise divest additional entitlements to the utility's Texas jurisdictional installed generation so that a utility does not own or control more than:

(1) 50 percent of installed generation capacity in ERCOT or 50 percent of the installed generation capacity inside an ERCOT zonal boundary or a functional market recognized by the commission by September 1, 2008;

(2) 40 percent of installed generation capacity in ERCOT or 40 percent of the installed generation capacity inside an ERCOT zonal boundary or a functional market recognized by the commission by September 1, 2009;

(3) 30 percent of installed generation capacity in ERCOT or 30 percent of the installed generation capacity inside an ERCOT zonal boundary or a functional market recognized by the commission by September 1, 2010; or

(4) 20 percent of installed generation capacity in ERCOT or 20 percent of the installed generation capacity inside an ERCOT zonal boundary or a functional market recognized by the commission by September 1, 2011.

(d) An electric utility may choose to auction additional entitlements [beyond those required by Subsection (a) or continue to auction entitlements after the period required by Subsection (b)] in order to comply with Section 39.154.

(e) The commission shall adopt rules by December 31, 2000, that define the scope of the initial capacity entitlements to be auctioned and shall adopt additional rules not later than December 31, 2007, that define the scope of the auctions necessary to comply with Subsection (a-1). Entitlements may be auctioned in blocks of less than 15 percent. The rules shall state the minimum amount of capacity that can be sold at auction as an entitlement. At a minimum, the rules shall provide that the entitlements:

(1) may be sold and purchased in periods of not less than one month nor more than four years;

(2) may be resold to any lawful purchaser, except for a retail electric provider affiliated with the electric utility that originally auctioned the entitlement;

(3) include no possessory interest in the unit from which the power is produced;

(4) include no obligations of a possessory owner of an interest in the unit from which the power is produced; and

(5) give the purchaser the right to designate the dispatch of the entitlement, subject to planned outages, outages beyond the control of the utility operating the unit, and other considerations subject to the oversight of the applicable independent organization.

(f) The commission shall adopt rules by December 31, 2000, that prescribe the procedure for the auction of the entitlements as required by Subsection (a). If necessary, the commission shall adopt additional rules that prescribe the procedure for the auction of the entitlements as required by Subsection (a-1). The rules shall include:

(1) a process for conducting the auction or auctions, including who shall conduct it, how often it shall be conducted, and how winning bidders shall be determined;

(2) a process for the electric utility to designate which generation units or combination of units are offered for auction;

(3) a provision for the utility to establish an opening bid price based on the electric utility's expected cost, with the commission prescribing the means for determining the opening bid price, which may not include return on equity; and

(4) a provision that allows a bidder to specify the magnitude and term of the entitlement, subject to the conditions established in Subsection (e).

SECTION 2. Sections 39.154(a) and (c), Utilities Code, are amended to read as follows:

(a) A [Beginning on the date of introduction of customer choice, a] power generation company may not own and control more than the percentage [20 percent] of the installed generation capacity located in, or capable of delivering electricity to, a power region, zone, or functional market recognized by the commission in a power region to which the company is limited following auctions required by Section 59.153(a-1).

(c) In determining the percentage shares of installed generation capacity under this section, the commission shall combine capacity owned and controlled by a power generation company and any entity that is affiliated with that power generation company within the power region, zone, or functional market recognized by the commission in the power region, reduced by the installed generation capacity of those facilities that are made subject to capacity auctions under Section [Sections] 39.153 [(a) and (d)].

SECTION 3. Sections 39.156(b) and (g), Utilities Code, are amended to read as follows:

(b) An electric utility or power generation company that owns and controls [owning and controlling] more than the percentage [20 percent] of the generation capacity located in, or capable of delivering electricity to, a power region, zone, or functional market recognized by the commission in the power region to which the company is limited following auctions required by Section 39.153(a-1) shall file a market power mitigation plan with the commission not later than the 90th day after the date the electric utility's or power generation company's generation capacity exceeds the limitation prescribed by this subsection [December 1, 2000].

(g) In reaching its determination under Subsection (f), the commission shall consider:

(1) the degree to which the electric utility's or power generation company's stranded costs, if any, are minimized;

(2) whether on disposition of the generation assets the reasonable value is likely to be received;

(3) the effect of the plan on the electric utility's or power generation company's federal income taxes;

(4) the effect of the plan on current and potential competitors in the generation market; [and]

(5) whether the plan is consistent with the public interest;

(6) the ownership of generation resources in a zone;

(7) the control of generation through the use of contracts between affiliated retail electric providers and independent power producers; and

(8) the emissions credits owned or controlled in a nonattainment area for national ambient air quality standards.

SECTION 4. Section 39.153(b), Utilities Code, is repealed.

SECTION 5. 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, 2007.