80R6905 CBH-D

By: Thompson H.B. No. 2355

A BILL TO BE ENTITLED

AN ACT

relating to reregulation of retail electric services.

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

SECTION 1. The following provisions of the Utilities Code are repealed:

(1) Sections 31.002(1), (4), (8), and (9);

(2) Chapter 39;

(3) Section 40.001;

(4) Section 40.003;

(5) Sections 40.051, 40.052, 40.053, 40.054, 40.055, 40.056, 40.057, 40.058, and 40.059;

(6) Section 41.001;

(7) Section 41.003;

(8) Sections 41.051, 41.052, 41.053, and 41.054;

(9) Sections 41.056, 41.057, and 41.058;

(10) Section 41.060; and

(11) Section 41.062.

SECTION 2. Sections 31.002(6), (17), (18), and (19), Utilities Code, are amended to read as follows:

(6) "Electric utility" means a person or river authority that owns or operates for compensation in this state equipment or facilities to produce, generate, transmit, distribute, sell, or furnish electricity in this state. The term includes a lessee, trustee, or receiver of an electric utility and a recreational vehicle park owner who does not comply with Subchapter C, Chapter 184, with regard to the metered sale of electricity at the recreational vehicle park. The term does not include:

(A) a municipal corporation;

(B) a qualifying facility;

(C) a power generation company;

(D) an exempt wholesale generator;

(E) a power marketer;

(F) a corporation described by Section 32.053 to the extent the corporation sells electricity exclusively at wholesale and not to the ultimate consumer;

(G) an electric cooperative;

(H) [a retail electric provider;

[(I)] this state or an agency of this state; or

(I) [(J)] a person not otherwise an electric utility who:

(i) furnishes an electric service or commodity only to itself, its employees, or its tenants as an incident of employment or tenancy, if that service or commodity is not resold to or used by others;

(ii) owns or operates in this state equipment or facilities to produce, generate, transmit, distribute, sell, or furnish electric energy to an electric utility, if the equipment or facilities are used primarily to produce and generate electric energy for consumption by that person; or

(iii) owns or operates in this state a recreational vehicle park that provides metered electric service in accordance with Subchapter C, Chapter 184.

(17) "Retail electric provider" means a person that sells electric energy to retail customers in this state. [A retail electric provider may not own or operate generation assets.]

(18) "Separately metered" means metered by an individual meter that is used to measure electric energy consumption by a retail customer and for which the customer is directly billed by a utility, [retail electric provider,] electric cooperative, or municipally owned utility.

(19) "Transmission and distribution utility" means a person or river authority that owns or operates for compensation in this state equipment or facilities to transmit or distribute electricity, except for facilities necessary to interconnect a generation facility with the transmission or distribution network, a facility not dedicated to public use, or a facility otherwise excluded from the definition of "electric utility" under this section, in a [qualifying] power region [certified under Section 39.152, but does not include a municipally owned utility or an electric cooperative].

SECTION 3. Subchapter A, Chapter 32, Utilities Code, is amended by adding Section 32.0013 to read as follows:

Sec. 32.0013. COMMISSION JURISDICTION RELATING TO REREGULATION OF ELECTRIC UTILITIES. The commission has all necessary jurisdiction to take any action necessary to effectuate the reregulation of retail electric service in an area in which customer choice was introduced before January 1, 2008.

SECTION 4. Subtitle B, Title 2, Utilities Code, is amended by adding Chapter 34 to read as follows: CHAPTER 34. ELECTRICAL PLANNING SUBCHAPTER A. GENERAL PROVISIONS

Sec. 34.001. ADOPTION OF INTEGRATED RESOURCE PLANNING PROCESS. (a) The commission by rule shall develop an integrated resource planning process to provide reliable energy service at the lowest reasonable system cost.

(b) In determining the lowest reasonable system cost of an electric utility's integrated resource plan, the commission shall consider:

(1) direct costs;

(2) the effect on the rates and bills of various types of customers;

(3) minimization of the risks of future fuel costs and regulations;

(4) the appropriateness and reliability of the mix of resources; and

(5) the cost of compliance with environmental protection requirements of all applicable state and federal laws, rules, and orders.

(c) An appropriate and reliable mix under Subsection (b)(4) may include a portfolio of cost-effective sources of power, including fueled and nonfueled resources, such as renewable resources and conservation measures, and a mixture of long-term and short-term contracts.

(d) In establishing a requirement under this chapter, including a reporting requirement, the commission shall consider and recognize the different capabilities of small and large electric utilities.

Sec. 34.002. STATEWIDE INTEGRATED RESOURCE PLAN. (a) The commission by rule shall adopt and periodically update a statewide integrated resource plan that includes the commission's long-term resource planning goals. The commission shall notify each electric utility of the approval of the plan.

(b) The commission shall send a report on the statewide integrated resource plan to the governor when it adopts or revises the plan and make the report available to the public.

(c) The report on the statewide integrated resource plan must include:

(1) historical data for electric consumption statewide and by each electric utility;

(2) historical data for electric generation by each electric utility and by type of capacity, including alternative energy sources;

(3) an inventory of generation capacity statewide and by each electric utility;

(4) quantitative data on demand-side management programs to the extent the commission determines necessary;

(5) each generating electric utility's forecast without adjustment;

(6) the commission's long-term resource planning goals included in the plan;

(7) a projection of the need for electric services;

(8) a description of the approved individual integrated resource plan of each electric utility; and

(9) an assessment of transmission planning being conducted by electric utilities in this state.

Sec. 34.003. PROMOTION OF RENEWABLE ENERGY TECHNOLOGIES. The commission shall adopt rules consistent with the integrated resource planning process to promote the development of renewable energy technologies.

Sec. 34.004. REVIEW OF STATE TRANSMISSION SYSTEM. In carrying out its duties related to the integrated resource planning process, the commission may review this state's transmission system and make recommendations to electric utilities on the need to build new power lines, upgrade power lines, and make other necessary improvements and additions. [Sections 34.005-34.020 reserved for expansion] SUBCHAPTER B. PRELIMINARY INTEGRATED RESOURCE PLAN

Sec. 34.021. PRELIMINARY INTEGRATED RESOURCE PLAN REQUIRED. (a) Every three years each nongenerating electric utility planning to construct generating resources and each generating electric utility shall submit to the commission a preliminary integrated resource plan covering a 10-year period.

(b) The commission by rule shall:

(1) establish a staggered schedule for the submission of integrated resource plans by electric utilities;

(2) prescribe the form and manner in which a plan must be submitted;

(3) adopt filing requirements and schedules; and

(4) prescribe the methods by which an electric utility may recover supply-side and demand-side costs.

(c) The commission by rule may:

(1) define the scope and nature of public participation in the development of the integrated resource plan; and

(2) establish the general guidelines an electric utility shall use to evaluate and to select or reject a resource, including procedures governing the solicitation process.

Sec. 34.022. CONTENTS OF PRELIMINARY INTEGRATED RESOURCE PLAN. (a) A preliminary integrated resource plan must include:

(1) the electric utility's forecast of future demands;

(2) an estimate of the energy savings and demand reduction the electric utility can achieve during the time covered by the plan by use of demand-side management resources and the range of possible costs for those resources;

(3) if additional supply-side resources are needed to meet future demand, an estimate of:

(A) the amount and operational characteristics of the additional capacity needed;

(B) the types of viable supply-side resources for meeting that need; and

(C) the range of probable costs of those resources;

(4) if necessary, proposed requests for proposals to be used in a solicitation of demand-side or supply-side resources, or both;

(5) the specific criteria the electric utility will use to evaluate and to select or reject demand-side or supply-side resources;

(6) the methods by which the electric utility intends to monitor demand-side or supply-side resources, or both as appropriate, after selection;

(7) the method by which the electric utility intends to allocate costs;

(8) a description of how the electric utility will achieve equity among customer classes and provide demand-side programs to each customer class, including tenants and low-income ratepayers;

(9) any proposed incentive factors; and

(10) any other information the commission requires.

(b) If the commission adopts under Section 34.021(c) the general guidelines an electric utility shall use to evaluate and to select or reject a resource, the specific criteria proposed by the electric utility under Subsection (a)(5) may deviate from those guidelines only on a showing of good cause.

Sec. 34.023. PUBLIC HEARING ON PRELIMINARY INTEGRATED RESOURCE PLAN. (a) If a preliminary integrated resource plan includes a proposed solicitation of demand-side or supply-side resources, the commission, on its own motion or on the motion of the electric utility or an affected person, may convene a public hearing on the adequacy and merits of the plan.

(b) Any interested person may intervene in the hearing and, at the hearing, may present evidence and cross-examine witnesses regarding the contents and adequacy of the preliminary integrated resource plan.

(c) Discovery by a participant in the hearing is limited to:

(1) an issue relating to the development of the preliminary integrated resource plan;

(2) a fact issue included in the plan; and

(3) other issues the commission is required to decide relating to the plan.

(d) A hearing before the commission is not required for a preliminary integrated resource plan filed by a river authority or generating electric cooperative that does not intend to build a new generating plant.

Sec. 34.024. INTERIM ORDER ON PRELIMINARY INTEGRATED RESOURCE PLAN; DEADLINE. (a) After conducting a hearing on a preliminary integrated resource plan under Section 34.023, the commission shall determine:

(1) whether the plan is based on substantially accurate data and an adequate method of forecasting;

(2) whether the plan identifies and takes into account any present and projected reduction in the demand for energy that may result from cost-effective measures to improve conservation and energy efficiency in various customer classes of the area being served;

(3) if additional supply-side resources are needed to meet future demand, whether the plan adequately demonstrates:

(A) the amount and operational characteristics of the additional capacity needed;

(B) the types of viable supply-side resources for meeting that need; and

(C) the range of probable costs of those resources;

(4) whether the plan describes opportunities for appropriate persons to participate in developing the plan;

(5) whether the specific criteria the electric utility will use to evaluate and to select or reject resources are reasonable and consistent with the guidelines of the integrated resource planning process;

(6) whether the cost allocation method proposed by the electric utility is reasonable;

(7) how the electric utility will achieve equity among customer classes and provide demand-side programs to each customer class, including tenants and low-income ratepayers; and

(8) whether any incentive factors are appropriate and, if so, the levels of the factors.

(b) Not later than the 180th day after the date an electric utility submits a preliminary integrated resource plan, the commission shall issue an interim order approving the plan, approving the plan as modified by the commission, or remanding the plan for additional proceedings. The commission may extend the deadline for not more than 30 days for extenuating circumstances encountered in the development and processing of the plan if the circumstances are fully explained and agreed on by the commissioners. [Sections 34.025-34.050 reserved for expansion] SUBCHAPTER C. RESOURCE SOLICITATION

Sec. 34.051. COMMENCEMENT OF SOLICITATION. (a) After the commission approves an electric utility's preliminary integrated resource plan, the utility shall conduct solicitations of demand-side and supply-side resources as prescribed by the plan.

(b) In addition to soliciting resources from a nonaffiliated third party, an electric utility may:

(1) prepare and submit a bid of a new utility demand-side management program as prescribed by Section 34.053;

(2) receive bids from one or more affiliates; and

(3) request a certificate of convenience and necessity for a new rate-based generating plant.

Sec. 34.052. SUBMISSION OF BIDS; CONFIDENTIALITY. (a) Each bidder under Section 34.051, including the electric utility conducting the solicitation and each bidding affiliate, shall submit two copies of its bid to the commission. The commission shall ensure that the electric utility has access to all bids at the same time.

(b) The commission shall keep a copy of each bid submitted by the electric utility conducting the solicitation or a bidding affiliate to determine whether the utility complied with the criteria established for conducting the solicitation.

(c) A bid submitted or retained under this section is confidential and is not subject to disclosure under Chapter 552, Government Code.

Sec. 34.053. ELECTRIC UTILITY DEMAND-SIDE MANAGEMENT PROGRAMS. (a) An electric utility that intends to use a proposed demand-side management program to meet a need identified by the utility's preliminary integrated resource plan must prepare a bid reflecting that resource.

(b) A bid prepared by an electric utility under this section must comply with the solicitation, evaluation, selection, and rejection criteria specified by the utility's preliminary integrated resource plan. The electric utility may not give preferential treatment or consideration to the bid.

Sec. 34.054. QUALIFYING FACILITY BIDS; AVOIDED COSTS. (a) The submission of a bid under this chapter by a qualifying facility, regardless of whether the bid is accepted or rejected, with respect to the capacity need for which the bid is submitted:

(1) is a waiver by the qualifying facility of any right it may otherwise have under law to sell capacity to the electric utility;

(2) represents the qualifying facility's agreement to negotiate a rate for the purchase of capacity and terms relating to the purchase that differ from the rate or terms that would otherwise be required by 18 C.F.R. Part 292, Subpart C; and

(3) is a waiver by the qualifying facility of its right to the rate or terms for a purchase of capacity by the electric utility that might otherwise be required by 18 C.F.R. Part 292, Subpart C.

(b) The avoided capacity costs under 18 C.F.R. Part 292, Subpart C, of an electric utility that has submitted a preliminary integrated resource plan to the commission under this chapter is $0 and remains $0, with respect to any capacity needs shown in the preliminary plan or final plan that are to be satisfied by resources approved in the utility's final plan.

(c) This section does not affect the validity of a contract entered into between an electric utility and a qualifying facility for any purchase.

Sec. 34.055. EVALUATION OF BIDS; NEGOTIATION OF CONTRACTS. (a) An electric utility shall evaluate each bid submitted, including an affiliate bid, in accordance with the criteria specified by the utility's preliminary integrated resource plan and shall negotiate each necessary contract.

(b) An electric utility is not required to accept a bid and may reject any or all bids in accordance with the selection and rejection criteria specified by the utility's preliminary integrated resource plan.

Sec. 34.056. APPLICATION FOR CERTIFICATE OF CONVENIENCE AND NECESSITY FOR RESOURCE NOT INCLUDED IN PRELIMINARY PLAN. If the results of the solicitation and contract negotiations do not meet the supply-side needs identified by the electric utility's preliminary integrated resource plan, the utility may apply for a certificate of convenience and necessity for a utility-owned resource addition, notwithstanding that a solicitation was conducted and the resource addition was not included in the approved plan. [Sections 34.057-34.100 reserved for expansion] SUBCHAPTER D. FINAL INTEGRATED RESOURCE PLAN

Sec. 34.101. SUBMISSION OF FINAL INTEGRATED RESOURCE PLAN. After conducting each solicitation and negotiating each contract, an electric utility shall submit a proposed final integrated resource plan to the commission. The proposed plan must include:

(1) the results of each solicitation;

(2) any contracts for resources;

(3) the terms under which the electric utility will provide resources to meet a need identified by the preliminary integrated resource plan, if the electric utility accepts a bid submitted under Section 34.053; and

(4) an application for a certificate of convenience and necessity, if necessary.

Sec. 34.102. PUBLIC HEARING ON FINAL INTEGRATED RESOURCE PLAN. (a) The commission, on request by an affected person, shall convene a public hearing on the reasonableness and cost-effectiveness of a proposed final integrated resource plan. The commission shall convene the hearing, if requested, not later than the 90th day after the date the electric utility files its proposed plan.

(b) Any interested person may intervene in the hearing and, at the hearing, may present evidence and cross-examine witnesses regarding the reasonableness and cost-effectiveness of the proposed final integrated resource plan.

(c) A party to the hearing may not litigate or conduct discovery on an issue that was or could have been litigated in connection with the filing of the electric utility's preliminary integrated resource plan.

(d) To the extent permitted by federal law, the commission may issue a written order for access to the books, accounts, memoranda, contracts, or other records of an exempt wholesale generator or power marketer selling energy at wholesale to an electric utility, if access is required for the effective discharge of the commission's regulatory responsibilities under this subtitle. The materials obtained by the commission under this subsection are confidential and are not subject to disclosure under Chapter 552, Government Code.

Sec. 34.103. RULING ON FINAL INTEGRATED RESOURCE PLAN; DEADLINE. (a) After conducting a hearing on a proposed final integrated resource plan under Section 34.102, the commission shall determine whether:

(1) the final plan was developed in accordance with the electric utility's preliminary integrated resource plan and commission rules;

(2) the resource solicitations, evaluations, selections, and rejections were conducted in accordance with the criteria included in the utility's preliminary plan;

(3) the final plan is cost-effective;

(4) the final plan is equitable among customer classes and provides demand-side programs to each customer class, including tenants and low-income ratepayers;

(5) the commission should certify each contract and electric utility bid submitted under Section 34.053 that resulted from the solicitations; and

(6) the commission should grant a requested certificate of convenience and necessity for an electric utility-owned resource addition.

(b) Not later than the 180th day after the date an electric utility submits a proposed final integrated resource plan, the commission shall issue a final order approving the plan, approving the plan as modified by the commission, or remanding the plan for additional proceedings.

Sec. 34.104. CERTIFICATION OF CONTRACTS. (a) In determining whether to certify a supply-side or demand-side contract that results from a solicitation, the commission shall consider:

(1) the reliability, financial condition, and safety of the resource contract; and

(2) whether the solicitation, evaluation, and selection of the resource contract were conducted in accordance with the criteria included in the electric utility's preliminary integrated resource plan.

(b) In addition to the considerations in Subsection (a), if a contract proposed for certification is between an electric utility and its affiliate, the commission shall determine whether:

(1) the utility treated and considered the affiliate's bid in the same manner it treated and considered each other bid intended to meet the same resource needs;

(2) the transaction will benefit consumers;

(3) the transaction violates any state law, including least-cost planning;

(4) the transaction provides the affiliate with an unfair competitive advantage by virtue of its affiliation or association with the utility;

(5) the transaction is in the public interest; and

(6) the commission has sufficient regulatory authority, resources, and access to the books and records of the utility and its affiliate to make the determination required by this subsection.

(c) The commission may not certify a contract for a new purchase of power by an electric utility unless the utility has determined, after giving consideration to consistently applied regional or national reliability standards, guidelines, or criteria, that:

(1) the contract would not unreasonably impair the continued reliability of electric systems affected by the purchase; and

(2) the purchase can reasonably be expected to produce benefits to customers of the purchasing utility.

(d) Commission certification of a resource contract under this section does not negate the necessity of the resource to comply with all applicable environmental and siting regulations.

(e) In establishing an electric utility's rates, a regulatory authority shall consider a payment made under a certified contract to be a reasonable and necessary operating expense of the utility during the period for which the certified contract is effective. A regulatory authority may provide for monthly recovery of approved costs of the contract as those costs are incurred, including any markup allowed by the commission.

Sec. 34.105. CERTIFICATE OF CONVENIENCE AND NECESSITY. (a) In determining whether to grant a certificate of convenience and necessity requested by an electric utility in the utility's proposed final integrated resource plan, the commission shall consider:

(1) the effect of granting the certificate on the recipient of the certificate and on any electric utility serving the proximate area; and

(2) other factors, such as:

(A) community values;

(B) recreational and park areas;

(C) historical and aesthetic values;

(D) environmental integrity; and

(E) the probable improvement of service or lowering of cost to consumers in the area if the certificate is granted.

(b) The commission shall grant a requested certificate of convenience and necessity as part of the commission's approval of a final integrated resource plan if the commission finds that:

(1) the proposed resource addition is necessary under the plan;

(2) the proposed resource addition is the best and most economical choice of technology for the service area; and

(3) cost-effective conservation and other cost-effective alternative energy sources cannot reasonably meet the need. [Sections 34.106-34.150 reserved for expansion] SUBCHAPTER E. ACQUISITION OF RESOURCES OUTSIDE THE INTEGRATED RESOURCE PLANNING PROCESS

Sec. 34.151. EXEMPTIONS FROM SOLICITATION PROCESS. (a) The commission shall adopt rules allowing an electric utility to add new or incremental resources outside the solicitation process, consistent with the utility's last approved integrated resource planning goals, including resources listed in Subsection (b).

(b) Consistent with an electric utility's last approved integrated resource planning goals, if any, an electric utility, including a nongenerating electric utility, may add new or incremental resources outside the solicitation process, including:

(1) contract renegotiation for existing capacity from an electric cooperative or nonaffiliated power generating facility;

(2) electric cooperative or nonaffiliated demand-side management programs or renewable resources;

(3) capacity purchases with two-year or shorter terms from an electric cooperative or nonaffiliated power supplier;

(4) capacity purchases necessary to satisfy unanticipated emergency conditions;

(5) the exercise of an option in a purchased power contract with an electric cooperative or nonaffiliated supplier; and

(6) renewable distributed resources, located at or near the point of consumption, if the resources are less costly than transmission extensions or upgrades.

(c) The addition of new or incremental resources by an electric utility under Subsection (b) does not require an amendment to the utility's integrated resource plan.

Sec. 34.152. NONGENERATING ELECTRIC UTILITY SOLICITATIONS. (a) A nongenerating electric utility not planning to construct generating facilities shall conduct a solicitation of resources if the utility seeks to purchase from a wholesale power supplier other than the utility's existing power supplier more than 25 percent of the utility's peak demand or more than 70 megawatts. A nongenerating electric utility is not required to conduct a solicitation for a purchase from an existing power supplier and the utility may add new or incremental resources outside the solicitation process as provided by Section 34.151.

(b) The commission, on request by the nongenerating electric utility, may review a proposed contract for resources resulting from a solicitation to determine the contract's reasonableness. The commission shall certify the proposed contract if the commission finds that the contract is reasonable. The commission shall make its determination not later than the 90th day after the date the proposed contract is submitted.

(c) This section does not alter or amend a wholesale power supply contract executed before January 1, 2008.

Sec. 34.153. EXEMPTION FOR CERTAIN FACILITIES. (a) To provide for the orderly transition to an integrated resource planning process and to avoid delays in the construction of resources necessary to provide electric service, an integrated resource plan is not required for issuance of a certificate of convenience and necessity for the construction of a generating facility if:

(1) the electric utility has conducted a solicitation for resources to meet the need identified by the utility's notice of intent in accordance with commission rules in effect at the time of the solicitation; and

(2) the electric utility has submitted to the commission the results of the solicitation and an application for certification of the facility to meet the need identified by the utility's notice of intent.

(b) The commission shall grant a certificate of convenience and necessity for a generating facility to which this section applies if:

(1) the facility is needed to meet future demand;

(2) the facility is the best and most economical choice of technology for the service area; and

(3) cost-effective conservation and cost-effective alternative energy sources cannot reasonably meet the need. [Sections 34.154-34.170 reserved for expansion] SUBCHAPTER F. MISCELLANEOUS PROVISIONS

Sec. 34.171. COST RECOVERY AND INCENTIVES. In carrying out its duties related to the integrated resource planning process, the commission may:

(1) allow timely recovery of the reasonable costs of conservation, load management, and purchased power, notwithstanding Section 36.201; and

(2) authorize additional incentives for conservation, load management, purchased power, and renewable resources.

Sec. 34.172. RECONCILIATION OF RECOVERED COSTS. (a) To the extent that the commission authorizes an electric utility to recover the costs of demand-side management programs, conservation, load management, or purchased power through cost recovery factors, the commission shall make a final reconciliation of the costs recovered through the cost recovery factors.

(b) The commission shall adopt rules regarding:

(1) the timing of reconciliations for each cost recovery factor;

(2) the information an electric utility must file in support of each reconciliation; and

(3) other matters necessary to accomplish the reconciliation.

(c) Each reconciliation must:

(1) review the reasonableness of the electric utility's administration of the contracts and programs the costs of which are being reconciled; and

(2) reconcile the revenue collected under each cost recovery factor and the costs that the utility incurred on purchased power, demand-side management, conservation, or load management, as applicable, during the reconciliation period.

Sec. 34.173. RESOURCE PLANNING EXPENSES. (a) To the extent that an electric utility is required by the commission to reimburse a municipality for expenses incurred while participating in a proceeding under this chapter, the commission shall, as part of the commission's approval of the utility's integrated resource plan, authorize a surcharge to be included in the utility's rates to allow the utility to recover the amount paid to the municipality before the utility's next preliminary integrated resource plan is filed.

(b) An electric utility may recover its reasonable expenses arising from planning, preparing, and participating in a proceeding under this chapter only after commission review is conducted in accordance with Subchapter C or D, Chapter 36.

SECTION 5. Section 37.051, Utilities Code, is amended by adding Subsection (d) to read as follows:

(d) Notwithstanding any other provision of this title, the commission may issue multiple certificates to serve an area in which customer choice was introduced before January 1, 2008. On application, the commission shall issue a certificate to a retail electric provider authorizing the provider to continue to provide retail electric service in any area in which it was providing that service on December 21, 2007. After July 1, 2008, only retail electric providers certificated to serve an area in which customer choice was introduced before January 1, 2008, may continue to serve that area.

SECTION 6. Section 40.004, Utilities Code, is amended to read as follows:

Sec. 40.004. JURISDICTION OF COMMISSION. Except as specifically otherwise provided in this chapter, the commission has jurisdiction over municipally owned utilities only for the following purposes:

(1) to regulate wholesale transmission rates and service, including terms of access, to the extent provided by Subchapter A, Chapter 35;

(2) to regulate certification of retail service areas to the extent provided by Chapter 37;

(3) to regulate rates on appeal under Subchapters D and E, Chapter 33[, subject to Section 40.051(c)]; and

(4) [to establish a code of conduct as provided by Section 39.157(e) applicable to anticompetitive activities and to affiliate activities limited to structurally unbundled affiliates of municipally owned utilities, subject to Section 40.054;

[(5) to establish terms and conditions for open access to transmission and distribution facilities for municipally owned utilities providing customer choice, as provided by Section 39.203;

[(6) to require collection of the nonbypassable fee established under Section 39.903(b) and to administer the renewable energy credits program under Section 39.904(b) and the natural gas energy credits program under Section 39.9044(b); and

[(7)] to require reports of municipally owned utility operations only to the extent necessary to[:

[(A)] enable the commission to determine the aggregate load and energy requirements of the state and the resources available to serve that load[; or

[(B) enable the commission to determine information relating to market power as provided by Section 39.155].

SECTION 7. Section 40.104, Utilities Code, is amended to read as follows:

Sec. 40.104. TAX-EXEMPT STATUS. Nothing in this subtitle may impair the tax-exempt status of municipalities, electric cooperatives, or river authorities, nor shall anything in this subtitle compel any municipality, electric cooperative, or river authority to use its facilities in a manner that violates any contractual provisions, bond covenants, or other restrictions applicable to facilities financed by tax-exempt debt. [Notwithstanding any other provision of law, the decision to participate in customer choice by the adoption of a resolution in accordance with Section 40.051(b) is irrevocable.]

SECTION 8. Section 41.004, Utilities Code, is amended to read as follows:

Sec. 41.004. JURISDICTION OF COMMISSION. Except as specifically provided otherwise in this chapter, the commission has jurisdiction over electric cooperatives only as follows:

(1) to regulate wholesale transmission rates and service, including terms of access, to the extent provided in Subchapter A, Chapter 35;

(2) to regulate certification to the extent provided in Chapter 37;

(3) to establish a code of conduct as provided in Section 39.157(e) [subject to Section 41.054]; and

(4) [to establish terms and conditions, but not rates, for open access to distribution facilities for electric cooperatives providing customer choice, as provided in Section 39.203; and

[(5)] to require reports of electric cooperative operations only to the extent necessary to:

(A) ensure the public safety;

(B) enable the commission to satisfy its responsibilities relating to electric cooperatives under this chapter; or

(C) enable the commission to determine the aggregate electric load and energy requirements in the state and the resources available to serve that load[; or

[(D) enable the commission to determine information relating to market power as provided in Section 39.155].

SECTION 9. Section 41.055, Utilities Code, is amended to read as follows:

Sec. 41.055. JURISDICTION OF BOARD OF DIRECTORS. A board of directors has exclusive jurisdiction to:

(1) set all terms of access, conditions, and rates applicable to services provided by the electric cooperative, [except as provided by Sections 41.054 and 41.056,] including nondiscriminatory and comparable rates for distribution but excluding wholesale transmission rates, terms of access, and conditions for wholesale transmission service set by the commission under Subchapter A, Chapter 35, provided that the rates for distribution established by the electric cooperative shall be comparable to the distribution rates that apply to the electric cooperative and its subsidiaries;

(2) [determine whether to unbundle any energy-related activities and, if the board of directors chooses to unbundle, whether to do so structurally or functionally;

[(3) reasonably determine the amount of the electric cooperative's stranded investment;

[(4) establish nondiscriminatory transition charges reasonably designed to recover the stranded investment over an appropriate period of time;

[(5) determine the extent to which the electric cooperative will provide various customer services, including nonelectric services, or accept the services from other providers;

[(6)] manage and operate the electric cooperative's utility systems, including exercise of control over resource acquisition and any related expansion programs;

(3) [(7)] establish and enforce service quality standards, reliability standards, and consumer safeguards designed to protect retail electric customers;

(4) [(8) determine whether a base rate reduction is appropriate for the electric cooperative;

[(9)] determine any other utility matters that the board of directors believes should be included;

(5) [(10)] sell electric energy and capacity at wholesale[, regardless of whether the electric cooperative participates in customer choice]; and

(6) [(11)] make any other decisions affecting the electric cooperative's method of conducting business that are not inconsistent with the provisions of this chapter.

SECTION 10. Sections 41.061(a), (c), and (e), Utilities Code, are amended to read as follows:

(a) This section shall apply to retail rates of an electric cooperative [that has not adopted customer choice and to the retail delivery rates of an electric cooperative that has adopted customer choice]. This section may not apply to rates for[:

[(1) sales of electric energy by an electric cooperative that has adopted customer choice; or

[(2)] wholesale sales of electric energy.

(c) An electric cooperative may implement the proposed rates on completion of the requirements under Subsection (b), and those rates shall remain in effect until changed by the electric cooperative as provided by this section [or, for rates other than retail delivery rates, until this section is no longer applicable because the electric cooperative adopts customer choice].

(e) Retail rates set by an electric cooperative [that has not adopted customer choice and retail delivery rates set by an electric cooperative that has adopted customer choice] shall be just and reasonable, not unreasonably preferential, prejudicial, or discriminatory; provided, however, if the customer agrees, an electric cooperative may charge a market-based rate to customers who have energy supply options if rates are not increased for other customers as a result.

SECTION 11. Not later than February 1, 2008, a retail electric provider that wants to continue to provide retail electric service in ERCOT shall file with the Public Utility Commission of Texas:

(1) an application for a certificate of convenience and necessity under Section 37.051(d), Utilities Code, as added by this Act; and

(2) a tariff that complies with Section 32.101, Utilities Code.

SECTION 12. This Act does not affect bonds or other indebtedness issued before the effective date of this Act. Bonds or other indebtedness issued before the effective date of this Act are governed by the law in effect when the bonds or other indebtedness was issued, and that law is continued in effect for that purpose.

SECTION 13. This Act takes effect January 1, 2008.