82R7843 JJT-F

By: Strama H.B. No. 3532

Substitute the following for H.B. No. 3532:

By: Sheffield C.S.H.B. No. 3532

A BILL TO BE ENTITLED

AN ACT

relating to the creation of an incentive program for solar and wind-powered distributed electric generation for public school property.

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

SECTION 1. Section 39.002, Utilities Code, is amended to read as follows:

Sec. 39.002. APPLICABILITY. This chapter, other than Sections 39.155, 39.157(e), 39.203, 39.903, 39.904, 39.9051, 39.9052, [and] 39.914(e), and 39.9156, does not apply to a municipally owned utility or an electric cooperative. Sections 39.157(e), 39.203, and 39.904, however, apply only to a municipally owned utility or an electric cooperative that is offering customer choice. If there is a conflict between the specific provisions of this chapter and any other provisions of this title, except for Chapters 40 and 41, the provisions of this chapter control.

SECTION 2. Subchapter Z, Chapter 39, Utilities Code, is amended by adding Section 39.9155 to read as follows:

Sec. 39.9155. SOLAR SCHOOLS INCENTIVE PROGRAM. (a) In this section:

(1) "Distributed renewable generation" has the meaning assigned by Section 39.916.

(2) "Distributed solar generation" means distributed renewable generation using an energy source derived directly from the sun.

(3) "Low-income electric customer" has the meaning assigned by Section 39.903(l).

(4) "Rated watts" means the output of a solar energy device as specified by the manufacturer of the device expressed in watts of direct current.

(5) "School district" has the meaning assigned by Section 21.201, Education Code.

(b) The program developed under this section applies to an electric utility operating inside or outside of ERCOT.

(c) The commission shall develop and implement a program as provided by this section to increase the amount of distributed solar generation installed on property owned by school districts in the state. The program must apply statewide and must be designed to be transparent, cost-effective, and limited in scope. The commission shall act as program administrator to oversee and administer the implementation of the program.

(d) The solar schools incentive fund is established as a special trust fund held by the comptroller outside of the state treasury and administered by the program administrator for the payment of the incentives authorized by this section, without the necessity of an appropriation. Money in the fund may be used only for the purposes of the program as provided by this section, including the administrative costs incurred by the commission. The fund consists of:

(1) fees imposed under this section and remitted to the comptroller for deposit to the credit of the fund;

(2) gifts or grants awarded for the purposes of the program and deposited to the credit of the fund; and

(3) interest and other income from investment of the money deposited to the credit of the fund.

(e) The commission by rule shall provide for the assessment and collection of nonbypassable fees by electric utilities and transmission and distribution utilities. An electric utility or transmission and distribution utility shall remit all fees collected to the comptroller for deposit to the credit of the solar schools incentive fund. The fees must appear as a separate charge on customers' bills. In an area where customer choice has been introduced, a fee assessed under this subsection must be included in delivery charges assessed by a transmission and distribution utility and collected by the customer's retail electric provider. The fee for each industrial electric service identifier is $50 each month. The fees for residential and commercial electric service identifiers must be assessed in an amount established as applicable for each billing period that falls during the next six-month period. For a six-month period that follows a six-month period in which the average natural gas futures closing price is less than $6 per million British thermal units, the fee for a residential or commercial electric service identifier is $0.00028 per kilowatt hour. For a six-month period that follows a six-month period in which the average natural gas futures closing price is $6 or more per million British thermal units, the fee for a residential or commercial electric service identifier is $0.00014 per kilowatt hour. Commission rules must provide that the average natural gas futures closing price be evaluated for the purposes of this subsection on a semiannual basis and that the resulting assessment of the fee for a residential or commercial electric service identifier applies only to billing periods that begin at least 30 days after the resulting assessment is made.

(f) The commission by rule shall provide for incentives to defray the cost of installing distributed solar generation on property owned by school districts and for the incentives to be distributed as provided by this section. The commission shall ensure that:

(1) the schedule for payment of the incentives does not obligate payment of incentives in amounts that would cause the incentive payments to exceed the amount budgeted for incentive payments over the duration of the program; and

(2) incentives are paid directly to school districts, qualified installers, or third-party owners of installed distributed solar generation in a simple, uniform, and reliable administrative manner that:

(A) ensures the timely payment of incentives; and

(B) allows for the assignment of the incentive to another person at the direction of the qualified recipient.

(g) Electric utilities may not assess the fees authorized by this section after the fifth anniversary of the date the program required by this section is established by commission rule. Each biennium, the commission shall report to the legislature on the progress of the program. The report may include recommendations on how the program can be modified to increase the deployment of distributed solar generation on school district property. For the biennium in which the program is scheduled to end, the report must include a recommendation to the legislature on whether to extend the program.

(h) The commission must distribute the incentives provided by rules adopted under Subsection (f) by administering reverse auctions quarterly. The total of incentives available in each quarter's auction must be determined by the commission based on the projected amount of available funding and on the number of quarters remaining in the program, allowing for a reasonable margin of error for the conversion to production-based incentives in accordance with Subsection (n). The commission may establish the total of incentives available for a quarter in terms of cost or in terms of capacity.

(i) A participant in a reverse auction for an incentive to install distributed solar generation on school district property must submit a bid and a deposit as provided by this subsection. Each bid must include a price component, expressed in dollars per installed watt of capacity, and a volume component, expressed in terms of the proposed total capacity, measured in rated watts, to be installed by the proposed project. The deposit must be in an amount equal to five percent of the total value of the bid. The commission shall retain the deposit for an accepted bid and shall refund the deposit for a bid that is not accepted.

(j) At a reverse auction, a bid is not qualified unless the bidder:

(1) demonstrates, in accordance with any procedure and guideline the commission may adopt for that purpose, the bidder's ability to finance the costs of the project if the incentive were awarded; and

(2) meets all other requirements adopted by the commission to ensure successful implementation of the program.

(k) The commission may not accept a bid for a quarter's reverse auction if the bid exceeds the quarter's bid price limit. The bid price limit for a quarter is the lesser of:

(1) $1.50 per rated watt of capacity;

(2) the bid limit from the previous quarter's reverse auction; or

(3) the quarterly incentive clearing price established for the previous quarter in the manner provided by Subsection (l), unless that price was established by a bid for a wind-powered electric generation project.

(l) On receiving bids in a reverse auction under this section, the commission shall order the qualified bids from the lowest bid to the highest bid according to the price component of the qualified bids. The commission shall accept qualified bids from the bid stack in that order, from lowest to highest, until the limit on the total of incentives available, as determined under Subsection (h), is reached. The price component of the highest bid accepted is the quarterly incentive clearing price for that quarter, and the commission shall award the incentives to each bidder for each accepted bid according to the quarter's incentive clearing price.

(m) If, following the awarding of incentives through a quarterly reverse auction, funding remains available, the commission shall make available to applicants on a first-come, first-served basis, in the form of nonparticipating incentives, incentives set at a dollar-per-watt value of 90 percent of that quarter's incentive clearing price. The commission shall carry forward any quarterly funding remaining after the incentives are awarded under this subsection, with the remaining funding divided equally among the quarters remaining in the program. If funding is carried forward under this subsection in two consecutive quarters, the commission may implement any of the following measures that the commission determines may increase the installation of distributed solar generation on school district property:

(1) making distributed solar generation projects for community college property in this state eligible for program incentives;

(2) using available program funding for outreach programs that may increase program participation;

(3) conducting or commissioning a study on the available capacity and optimal locations for installation of distributed solar generation on the property of school districts or community colleges; or

(4) only if 25 percent or more of quarterly funding is carried forward in two consecutive quarters, increasing the bid price limit.

(n) Incentives awarded under this section must be in the form of a production-based incentive and must be disbursed by 12 quarterly payments over a term of three years with the amount paid determined by the units of electricity produced by the installed distributed solar generation during the previous quarter. The commission shall establish the amount of the payment per unit of electricity produced by the installed distributed solar generation by converting the quarterly incentive clearing price or the nonparticipating incentive price from a capacity incentive price to a production-based incentive price. In making this conversion, the commission must consider a reasonable production factor, including an appropriate discount rate, that would result in the quarterly incentive clearing price or the nonparticipating incentive price being fully paid with the final quarterly payment of the three-year payment period, were the distributed solar generation system to produce at the production factor's assumed rate.

(o) Quarterly payments of an incentive awarded under this section must begin not later than the fourth quarter following the acceptance of bids for a quarter. Payment of an incentive may begin earlier than the fourth quarter on the filing of a claim with the commission by the person awarded the incentive.

(p) A person awarded an incentive under this section must have the distributed solar generation interconnected not later than the end of the fourth quarter following the quarter in which the bid was accepted. If the person has not interconnected the distributed solar generation by the end of the period prescribed by this subsection, the person's claim to the incentive is rescinded and the capacity and funding returns to the program and available program funding, except that the commission may grant one extension of the period for interconnection, not to exceed two additional quarters, if the commission finds based on evidence provided in the person's application for extension that substantial construction work has been completed by the date of the application for extension. Quarterly payments may resume if the distributed solar generation is interconnected during the fifth or sixth quarter, but the person awarded the incentive may not recover a quarterly payment lost because of a failure to interconnect.

(q) The commission by rule shall provide a method by which a retail electric provider and a transmission and distribution utility shall use money collected through nonbypassable fees imposed in accordance with rules adopted under Subsection (e) to credit the electric service bill of a low-income electric customer for an amount equal to the customer's share of the fee, based on the customer's electric energy consumption during the billing period.

(r) The commission by rule shall provide for making incentives under the program available to projects to install on property owned by school districts distributed renewable generation that uses wind-driven turbines, subject to all requirements for a distributed solar generation incentive. The eligibility under the rules may extend only to projects for wind turbine distributed renewable technology projects with a combined capacity of not more than 150 kilowatts at any one school district property location.

(s) Notwithstanding any provision of this title:

(1) any person, including a retail electric provider, may own distributed renewable generation installed under the program and enter into a contract with a school district on the property of which the distributed renewable generation is installed to lease the generation or to sell the surplus electricity generated by the distributed renewable generation to a retail customer or the district's retail electric provider;

(2) the owner of distributed renewable generation installed under the program is not, as a result of that ownership, an electric utility and is not required, as a result of that ownership, to register with the commission as a power generation company or self-generator unless the commission determines that requiring registration is necessary to maintain the reliability of the electric distribution grid;

(3) the commission may establish appropriate reporting requirements to provide for trading renewable energy credits gained by the installation of distributed renewable generation under the program; and

(4) an area of this state in which distributed renewable generation is installed under the program is not, for reason of that installation, considered an area in which customer choice has been introduced.

SECTION 3. Subchapter Z, Chapter 39, Utilities Code, is amended by adding Section 39.9156 to read as follows:

Sec. 39.9156. SOLAR SCHOOLS PROGRAMS; MUNICIPALLY OWNED UTILITIES AND COOPERATIVES. (a) It is the goal of the legislature that:

(1) electric cooperatives and municipally owned utilities administer incentive programs that increase the amount of distributed solar generation installed on property owned by school districts in this state in a cost-effective, market-neutral, and nondiscriminatory manner;

(2) customers of electric cooperatives and municipally owned utilities have access to incentives for the installation of distributed solar generation on property owned by school districts; and

(3) electric cooperatives and municipally owned utilities spend money to increase the amount of distributed solar generation at a total funding level consistent with the requirements for electric utilities in this state under Section 39.9155(e).

(b) This section applies only to an electric cooperative or municipally owned utility with retail sales of more than 500,000 megawatt hours in 2007.

(c) Beginning not later than September 1, 2014, a municipally owned utility or electric cooperative must report annually to the State Energy Conservation Office, in a form and manner determined by the office, information regarding the efforts of the municipally owned utility or electric cooperative related to this section.

(d) This section does not prevent the governing body of an electric cooperative or municipally owned utility from adopting rules, programs, or incentives to encourage or provide for the installation of more solar generation capacity than the goal established by Subsection (a)(3).

(e) An electric cooperative or municipally owned utility may recover the costs required by this section through a nonbypassable fee consistent with that authorized by the commission for electric utilities under Section 39.9155(e) or another cost recovery mechanism as determined by the governing body of the electric cooperative or municipally owned utility.

(f) The commission shall credit toward compliance with this section funding for distributed solar generation provided after May 1, 2009.

SECTION 4. The heading to Section 39.914, Utilities Code, is amended to read as follows:

Sec. 39.914. CREDIT FOR SURPLUS DISTRIBUTED RENEWABLE [SOLAR] GENERATION BY PUBLIC SCHOOLS.

SECTION 5. Section 39.914, Utilities Code, is amended by amending Subsections (a), (b), and (c) and adding Subsection (a-1) to read as follows:

(a) In this section, "distributed renewable generation" has the meaning assigned by Section 39.916.

(a-1) An electric utility or retail electric provider shall offer service to [provide for net metering] and contract with an independent school district so that:

(1) surplus electricity produced by distributed renewable generation on school district property [a school building's solar electric generation panels] is made available for sale to the electric transmission grid and distribution system; and

(2) the [net] value of that surplus electricity is credited to the school district at a price that is at least the fair market price.

(b) For areas of this state in which customer choice has not been introduced, the commission by rule shall require that credits for electricity produced by distributed renewable generation on school district property [a school building's solar electric generation panels] reflect the value of the surplus electricity [that is made available for sale to the electric utility in accordance with federal regulations].

(c) For independent school districts in areas in which customer choice has been introduced, the [district must sell the school buildings' surplus electricity produced to the] retail electric provider that serves the school district's load shall provide a credit to the school district for the surplus electricity produced by distributed renewable generation on school district property at a fair market value [agreed to between the district and the provider that serves the district's load. The agreed value may be] based on the clearing price of energy at the time of day that the electricity is made available to the grid and shall allow any unused credits to be carried forward to a subsequent billing cycle until used. The independent organization identified in Section 39.151 shall develop procedures so that the amount of electricity purchased from a school district under this section is accounted for in settling the total load served by the provider that serves the school district's load. A school district requesting [net] metering services for purposes of this section must have metering devices capable of providing measurements consistent with the independent organization's settlement requirements.

SECTION 6. The Public Utility Commission of Texas shall adopt rules establishing the program required under Section 39.9155, Utilities Code, as added by this Act, as soon as practicable.

SECTION 7. 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, 2011.