By: Strama H.B. No. 3532

A BILL TO BE ENTITLED

AN ACT

relating to the creation of a competitive solar schools incentive program.

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 solar generation" means distributed renewable generation, as defined by Section 39.916, using an energy source derived directly from the sun.

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

(3) "Owner of distributed solar generation" includes a school district who contracts with another person to install or maintain distributed solar generation on the school district's side of the meter, regardless of whether the school district takes ownership of the installed distributed solar generation.

(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 only 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 within 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. 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:

(1) 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 assessed under this subsection must be in the following amounts:

(A) $0.00028 per kilowatt hour for each residential or commercial meter which, if applicable, must be included in nonbypassable delivery charges paid by the customer's retail electric provider; and

(B) $20 each month for each industrial meter, except that the total of nonbypassable fees assessed against a single industrial account may not exceed $200 in a single month.

(2) incentives to defray the cost of installing distributed solar generation on property owned by school districts in Texas. These incentives shall be distributed according to the provisions outlined in (g) of this section. The commission shall ensure that:

(A) the schedule for payment of these 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

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

(i) ensures the timely payment of incentives; and

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

(f) Unless this program is extended by the Legislature, 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. This report may include recommendations on how the program can be modified to increase the deployment of distributed solar generation on public schools in Texas. For each biennium in which the program is scheduled to terminate, the report shall include a recommendation on whether or not the Legislature should extend the program.

(g) The commission shall distribute the incentives mandated in (e) by administering quarterly reverse auctions, beginning as soon as practicable, and continuing for 20 quarters.

(1) The total value of the incentives available in each auction will be determined by the commission based upon projected funding availability and the number of remaining quarters, allowing for a reasonable margin of error for the conversion to production based incentives according to Subsection (i). The commission may set the total quarterly incentive value in terms of either cost or capacity.

(2) Participants in each reverse auction will submit bids to receive incentives to install distributed solar generation technology on property owned by school districts in Texas. Each bid will include a price component, expressed in dollars per installed watt, and a volume component, expressed in terms of the total installed capacity of the proposed project measured in rated watts.

(3) Only qualified bids will be eligible for participation in the reverse auction. Bids will be considered qualified if:

(A) they can demonstrate the ability to finance the remainder of the cost of the distributed solar project. The commission may establish specific procedures and guidelines for this requirement;

(B) they make a deposit equal to 5 percent of the total value of the bid. This deposit shall be refunded for bids that are not accepted. The deposits for bids that are accepted are non-refundable; and

(C) they meet any other requirements that the commission deems necessary for the successful implementation of this program.

(4) The commission will create a bid stack by ordering the bids from lowest to highest according to the dollar per watt price component of each bid. The commission will accept bids from the bid stack, from lowest to highest, until the limit determined in (1) has been reached. The price component of the highest bid accepted will set the quarterly incentive clearing price for that quarter, and the bidders of all accepted bids shall receive the quarterly incentive clearing price for the full volume of their accepted bid.

(5) No bid will be accepted by the commission that exceeds the bid price cap for that quarter. The bid price cap for each quarter will be set according to the lesser of:

(A) $1.50 per rated watt; or,

(B) the quarterly incentive clearing price from the previous quarter.

(6) Any funding that is still available according to (1) after the quarterly reverse auction shall be made available in the form of nonparticipating incentives on a first come first serve basis. Any entity that is eligible to participate in the quarterly reverse auctions may apply for a nonparticipating incentive. The dollar per watt value of nonparticipating incentives for each quarter will be set at 90% of the quarterly incentive clearing price for that quarter.

(7) Any funding that is still available at the end of each quarter shall be rolled forward, divided evenly between the remaining quarters.

(h) If program funds are rolled forward at the end of consecutive quarters, the commission may consider the following measures. The commission should implement one or more of these measures if the commission determines that it will increase the deployment of distributed solar generation technology on property owned by school districts in Texas:

(1) Expanding program eligibility to include community colleges located in Texas;

(2) diverting program dollars to outreach programs intended to increase program participation;

(3) conducting or commissioning a study on the available capacity and optimal locations for the installation of distributed solar generation technology on educational facilities in the state of Texas; and

(4) increasing the bid price cap. The commission should only consider increasing the bid price cap if 25% or more of the funds allotted to each quarter go unused for two or more consecutive quarters.

(i) The incentives provided in (e) will take the form of a production-based incentive.

(1) Incentives will be disbursed in quarterly payments over a three year term based upon a payment per unit of electricity produced.

(2) The commission will establish the payment per unit of solar electricity produced by converting the quarterly incentive clearing price and the nonparticipating incentive price from a capacity incentive price to a production incentive price. In making this conversion the commission should consider a reasonable production factor that, if a system produced at exactly that rate, the market clearing price for that system's auction would be reached at the conclusion of the three year term, accounting for an appropriate discount rate.

(3) Winning bidders must interconnect within 6 quarters of the quarter in which their bid was accepted. If the project fails to interconnect within this time, the incentive claim is rescinded, and that capacity returns to the program fund, unless the winning bidder opts for a one-time extension of their bid at the nonparticipating incentive level.

(4) The 12 quarters during which a winning project may claim its incentives can begin as soon as the project owner files to claim their incentives, but in no case shall the first of those 12 quarters be later than the 4th quarter after the acceptance of their bid or their one time extension. Projects that connect during the 5th or 6th quarter may still claim their remaining incentives in subsequent quarters, but the incentives for lost quarters cannot be recovered.

(j) Notwithstanding any other provision of this title, a retail electric provider or any other person may own distributed renewable generation and enter into a contract with the school district on whose property the generation is located to lease the generation or sell the output to a retail customer or to a customer's retail electric provider. The owner of the generation is not an electric utility and is not required to register with the commission as a power generation company or self generator unless the commission determines that such registration is necessary to maintain the reliability of the distribution grid. The commission may establish appropriate reporting requirements for trading renewable energy credits. An area of this state in which a distributed renewable generation owner sells output as provided by this subsection is not considered an area in which customer choice has been introduced.

(k) The commission by rule shall provide a method by which a retail electric provider and a transmission and distribution utility shall use money collected by 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.

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 Sections 39.9155(e)(1).

(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)(1) or another cost recovery mechanism as determined by the governing body of the electric cooperative or municipally owned utility.

(f) An electric cooperative or municipally owned utility may waive the requirements of this section by opting into the solar schools incentive program in Section 39.9155. Any electric cooperative or municipally owned utility that chooses to opt in to the incentive program in 39.9155 may propose an alternate revenue structure to that outlined in 39.9155(e)(1). The commission will accept any proposed revenue structures which it determines will likely provide an equal or greater level of revenues that would have been provided by the structure outlined in 39.9155(e)(1). Any electric cooperative or municipally owned utility that chooses to opt in to the statewide incentive program in 39.9155 will not, as a result, be entered into the deregulated electricity market, nor will the commission gain any additional powers with regard to the electric cooperative or municipally owned utility other than those required to administer this program. Any additional powers assumed by the commission in this regard will be construed narrowly, and will dissolve at the end of the program or upon the withdrawal of the electric cooperative or the municipally owned utility from the program. The commission will determine an equitable method for withdrawal from the program by an electric cooperative or municipally owned utility that has opted in, but in no circumstances will the withdrawal affect the incentives of winning bidders, whether those bidders have interconnected or not.

SECTION 4. Section 39.914, Utilities Code, is repealed and replaced with the following:

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

(a) The commission shall require that:

(1) a retail electric provider offer service to a school district that has distributed renewable generation equipment installed on the district's property; and

(2) a retail electric provider that provides service to a school district that has distributed renewable generation equipment installed on the district's property:

(A) purchase from the school district the surplus electricity generated by distributed renewable generation installed on the district's property at a price equal to or greater than a fair market price; or

(B) credit the school district's electric services bill for the billing cycle in which the surplus electricity is generated by distributed renewable generation installed on the district's property at a price equal to or greater than the equivalent of a fair market price determined in accordance with this section and allow any unused credit on the school district's bill to be carried forward to subsequent billing cycles for the district; and

(b) The commission shall develop appropriate net metering policies and retail rate options for school districts served by electric utilities outside the Electric Reliability Council of Texas.

SECTION 5. The Public Utility Commission of Texas shall adopt rules establishing the programs required under Sections 39.914, 39.9155 and 39.9156, Utilities Code, as added by this Act, as soon as practicable.

SECTION 6. 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.