81R14462 TRH-F
 
  By: Davis, Wendy S.B. No. 1480
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to regulation of electric generation capacity ownership in
  the electric power market.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Sections 39.152(a) and (d), Utilities Code, are
  amended to read as follows:
         (a)  The commission shall certify a power region if:
               (1)  a sufficient number of interconnected utilities in
  the power region fall under the operational control of an
  independent organization as described by Section 39.151;
               (2)  the power region has a generally applicable tariff
  that guarantees open and nondiscriminatory access for all users to
  transmission and distribution facilities in the power region as
  provided by Section 39.203; and
               (3)  no person owns, controls, or owns and controls in
  any combination more than 20 percent of the installed generation
  capacity located in or capable of delivering electricity to a power
  region, as determined according to Section 39.154.
         (d)  For a power region outside of ERCOT, a power generation
  company that is affiliated with an electric utility may elect to
  demonstrate that it meets the requirements of Subsection (a)(3) by
  showing that it does not own, control, or own and control in any
  combination more than 20 percent of the installed capacity in a
  geographic market that includes the power region, using the
  guidelines, standards, and methods adopted by the Federal Energy
  Regulatory Commission.
         SECTION 2.  Section 39.153, Utilities Code, is amended by
  adding Subsection (a-1) and amending Subsections (e) and (f) to
  read as follows:
         (a-1)  Not later than September 30, 2010, each electric
  utility subject to this section shall sell at auction or otherwise
  divest any additional entitlements to the utility's jurisdictional
  installed generation capacity necessary to ensure that the electric
  utility does not control more than 20 percent of the installed
  generation capacity:
               (1)  in ERCOT;
               (2)  in an ERCOT zonal boundary; or
               (3)  in a functional market recognized by the
  commission.
         (e)  The commission shall adopt rules by December 31, 2000,
  that define the initial scope of the capacity entitlements to be
  auctioned and not later than December 31, 2009, shall adopt
  additional rules 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 may 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 3.  Sections 39.154(a) and (c), Utilities Code, are
  amended to read as follows:
         (a)  Beginning on the date of introduction of customer
  choice, a power generation company may not own, [and] control, or
  own and control in any combination more than 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 the power region.
         (c)  In determining the percentage shares of installed
  generation capacity under this section, the commission shall
  combine capacity owned or [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 Sections 39.153(a) and (d).
         SECTION 4.  Section 39.155(a), Utilities Code, is amended to
  read as follows:
         (a)  Each person, municipally owned utility, electric
  cooperative, and river authority that owns or controls generation
  facilities and offers electricity for sale in this state shall
  report to the commission its installed generation capacity, the
  total amount of capacity available for sale to others, the total
  amount of capacity under contract to others, the total amount of
  capacity dedicated to its own use, its annual wholesale power sales
  in the state, its annual retail power sales in the state, and any
  other information necessary for the commission to assess market
  power or the development of a competitive retail market in the
  state. The commission shall by rule prescribe the nature and detail
  of the reporting requirements and shall administer those reporting
  requirements in a manner that ensures the confidentiality of
  competitively sensitive information.
         SECTION 5.  Sections 39.156(a), (b), and (g), Utilities
  Code, are amended to read as follows:
         (a)  In this section, "market power mitigation plan" or
  "plan" means a written proposal by an electric utility or a power
  generation company for reducing its ownership or [and] control of
  installed generation capacity as required by Section 39.154.
         (b)  An electric utility or power generation company owning,
  controlling, or owning and controlling in any combination more than
  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 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 20 percent limitation
  under 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 by an
  electric utility or power generation company in a nonattainment
  area for national ambient air quality standards.
         SECTION 6.  Section 39.157(a), Utilities Code, is amended to
  read as follows:
         (a)  The commission shall monitor market power associated
  with the generation, transmission, distribution, and sale of
  electricity in this state. On a finding that market power abuses or
  other violations of this section are occurring, the commission
  shall require reasonable mitigation of the market power by ordering
  the construction of additional transmission or distribution
  facilities, by seeking an injunction or civil penalties as
  necessary to eliminate or to remedy the market power abuse or
  violation as authorized by Chapter 15, by imposing an
  administrative penalty as authorized by Chapter 15, or by
  suspending, revoking, or amending a certificate or registration as
  authorized by Section 39.356. The commission shall allow affected
  customers, including political subdivisions, retail electric
  providers, and commercial power users to participate in an
  enforcement proceeding that alleges market power abuse or
  manipulation of the wholesale market. The commission shall order
  refunds be made to end users adversely impacted by a finding of
  market power abuse or manipulation of the wholesale market. A
  person may seek a remedy in any appropriate forum, regardless of
  whether the commission takes action regarding an allegation of
  market power abuse or manipulation of a wholesale market by an
  electric utility or power generation company. An electric utility
  or power generation company may not use the filed rate doctrine as a
  defense to a suit by a private party that alleges market power abuse
  or manipulation of the wholesale market. Section 15.024(c) does
  not apply to an administrative penalty imposed under this section.
  For purposes of this subchapter, market power abuses are practices
  by persons possessing market power that are unreasonably
  discriminatory or tend to unreasonably restrict, impair, or reduce
  the level of competition, including practices that tie unregulated
  products or services to regulated products or services or
  unreasonably discriminate in the provision of regulated services.
  For purposes of this section, "market power abuses" include
  predatory pricing, withholding of production, precluding entry,
  and collusion. A violation of the code of conduct provided by
  Subsection (d) that materially impairs the ability of a person to
  compete in a competitive market shall be deemed to be an abuse of
  market power. The possession of a high market share in a market
  open to competition may not, of itself, be deemed to be an abuse of
  market power; however, this sentence shall not affect the
  application of state and federal antitrust laws. The possession of
  a low market share within a market open to competition does not, of
  itself, preclude a finding that an investor-owned generator engaged
  in an abuse of market power.
         SECTION 7.  Section 39.407(a), Utilities Code, is amended to
  read as follows:
         (a)  If an electric utility chooses on or after January 1,
  2007, to participate in customer choice, the commission may not
  authorize customer choice until the applicable power region has
  been certified as a qualifying power region under Section
  39.152(a). Except as otherwise provided by this subsection, the
  commission shall certify that the requirements of Section
  39.152(a)(3) are met for electric utilities subject to this
  subchapter only upon a finding that the total capacity owned,
  controlled, or owned and controlled in any combination by each such
  electric utility and its affiliates does not exceed 20 percent of
  the total installed generation capacity within the constrained
  geographic region served by each such electric utility plus the
  total available transmission capacity capable of delivering firm
  power and energy to that constrained geographic region. Not later
  than May 1, 2002, each electric utility subject to this subchapter
  shall submit to the electric utility restructuring legislative
  oversight committee an analysis of the needed transmission
  facilities necessary to make the electric utility's service area
  transmission capability comparable to areas within the ERCOT power
  region. On or after September 1, 2003, each electric utility
  subject to this subchapter shall file the utility's plans to
  develop the utility's transmission interconnections with the
  utility's power region or other adjacent power regions. The
  commission shall review the plan and not later than the 180th day
  after the date the plan is filed, determine the additional
  transmission facilities necessary to provide access to power and
  energy that is comparable to the access provided in areas within the
  ERCOT power region; provided, however, that if a hearing is
  requested by any party to the proceeding, the 180-day deadline will
  be extended one day for each day of hearings. The commission shall,
  as a part of the commission's approval of the plan, approve a rate
  rider mechanism for the recovery of the incremental costs of those
  facilities after the facilities are completed and in-service. A
  finding of need under this subsection shall meet the requirements
  of Sections 37.056(c)(1), (2), and (4)(E). The commission may
  certify that the requirements of Section 39.152(a)(3) are met for
  electric utilities subject to this subchapter if the commission
  finds that:
               (1)  each such utility has sufficient transmission
  facilities to provide customers access to power and energy from
  capacity controlled by suppliers not affiliated with the incumbent
  utility that is comparable to the access to power and energy from
  capacity controlled by suppliers not affiliated with the incumbent
  utilities in areas of the ERCOT power region; and
               (2)  the total capacity owned, controlled, or owned and
  controlled in any combination by each such electric utility and its
  affiliates does not exceed 20 percent of the total installed
  generation capacity within the power region.
         SECTION 8.  Section 39.453(b), Utilities Code, is amended to
  read as follows:
         (b)  The commission shall certify that the requirement of
  Section 39.152(a)(3) is met for an electric utility subject to this
  subchapter only if the commission finds that the total capacity
  owned, controlled, or owned and controlled in any combination by
  the electric utility and the utility's affiliates does not exceed
  20 percent of the total installed generation capacity within the
  power region of that utility.
         SECTION 9.  Sections 39.153(b) and 39.154(e), Utilities
  Code, are repealed.
         SECTION 10.  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, 2009.