82R3928 RWG-F

By: Fraser S.B. No. 492

A BILL TO BE ENTITLED

AN ACT

relating to the creation of a distributed solar generation incentive program.

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

SECTION 1. Section 31.002(6), Utilities Code, is 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]

(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; or

(K) a distributed renewable generation owner, as defined by Section 39.916.

SECTION 2. Section 39.002, Utilities Code, is amended to read as follows:

Sec. 39.002. APPLICABILITY. Except as provided by this section, this [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 to 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. Section 39.916 applies to an electric cooperative. Section 39.9161 applies to a municipally owned utility. 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 3. Subchapter Z, Chapter 39, Utilities Code, is amended by adding Sections 39.9155 and 39.9156 to read as follows:

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

(1) "Distributed solar generation" means distributed renewable generation, as defined by Section 39.9161, using solar energy technology.

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

(3) "Surplus electricity" means electricity generated by distributed solar generation that is not consumed at the place the distributed solar generation is installed but flows onto the electric distribution system.

(b) It is the goal of the legislature that electric utilities administer incentive programs for residential and commercial customers to increase the amount of distributed solar generation, utility scale solar generation capacity, and energy storage capacity installed in this state in a cost-effective, market-neutral, and nondiscriminatory manner.

(c) The commission by rule shall:

(1) establish a solar generation incentive program, to be implemented by electric utilities;

(2) oversee the implementation of the program required by Subdivision (1); and

(3) establish procedures to achieve the goal described by Subsection (b).

(d) The rules adopted under Subsection (c) must include provisions:

(1) for recovery of the cost of electric utility programs authorized by this section through nonbypassable fees, which may not exceed:

(A) 20 cents per month for residential customers;

(B) $2 per month for commercial customers; and

(C) $20 per month for industrial customers;

(2) for rebates to customers to defray the cost of installing distributed solar generation as provided by Subsection (f);

(3) to require that customers in the Electric Reliability Council of Texas who install distributed solar generation will have the option to be equipped with an advanced meter and appropriate procedures to give the customers an option to settle on the basis of their real-time energy usage instead of on the basis of a load profile and to receive the real-time energy price for surplus electricity exported to the grid by the customer;

(4) to require:

(A) a retail electric provider to offer service to a retail electric service customer who has installed distributed solar generation; and

(B) a retail electric provider that provides service to a retail electric service customer who has installed distributed solar generation to:

(i) purchase the customer's surplus electricity at a price equal to or greater than a fair market price determined in accordance with this section; or

(ii) credit the customer's bill for the billing cycle in which the customer's surplus electricity is generated 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 customer's bill to be carried forward to subsequent billing cycles for the customer;

(5) for appropriate net metering policies and retail rate options for customers served by electric utilities outside the Electric Reliability Council of Texas; and

(6) for the utility scale solar and energy storage capacity program provided by Subsection (g).

(e) 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, except as provided by Subsection (l). The commission shall ensure that all fees collected under this section are used for the programs authorized by this section, except that utilities may not use more than 2.5 percent of the funds collected for administrative expenses related to this section, as approved by the commission.

(f) The commission shall set a rebate amount for the installation of distributed solar generation capacity. The commission shall periodically adjust the rebate amount such that the quantity of solar generation capacity installed under this section is maximized, but shall reduce rebate amounts by not less than five percent per year. The commission may set a higher rebate amount for solar generation capacity using equipment manufactured wholly or substantially in this state, provided that the higher amount is not more than 20 percent higher than the rebate applicable to all other solar generation capacity. The commission may provide for rebates to be provided directly to customers or to qualified installers of solar generation equipment. Unless adjusted by the commission, the initial rebates shall be:

(1) $2.40 per watt for installations on residential buildings;

(2) $1.50 per watt for installations on commercial buildings; and

(3) $1 per watt for installations at industrial facilities.

(g) The commission may direct not more than 70 percent of the money collected from the fees authorized by this section to utility scale solar generation capacity if the commission determines such projects are more cost-effective per megawatt of installed capacity than distributed solar generation or will provide a greater benefit to the reliability of the electric grid. The commission may establish rebate amounts not to exceed $1 per watt for utility scale solar generation projects or may consider a competitive bidding process, a reverse auction, or other methods to award money in order to maximize the quantity of generation capacity installed under this section. If the demand for money under this section exceeds the money available, the commission shall consider the following in determining which projects receive subsidies:

(1) projects that, to be commercially viable, require the lowest amount of subsidy per megawatt of installed capacity;

(2) projects that use the transmission capacity built under Section 39.904(g) and that require minimal additional transmission facilities;

(3) projects that enhance the reliability of the transmission and distribution grid or defer the need for additional transmission and distribution infrastructure;

(4) projects in development that can use rebates to secure additional financing;

(5) projects that provide maximum output during periods when electricity demand is highest in this state; and

(6) projects that can provide ancillary services to the electric grid.

(h) The commission shall develop a "Made in Texas" certification program for energy products useful for distributed solar generation. The commission shall post a list of energy products that are wholly or substantially produced in this state and shall conduct education efforts to inform customers of the availability of those energy products. The commission may partner or contract with third parties or nonprofit organizations to achieve the goals of this subsection.

(i) Notwithstanding any other provision of this title, a retail electric provider or any other person may own distributed solar generation and enter into a contract with the retail customer on whose property the solar generation capacity is located to lease the solar generation equipment or sell the generated output to the retail customer or to that customer's retail electric provider. An owner of the distributed solar 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 a registration system of that type is necessary to maintain the reliability of the distribution grid. The commission may establish appropriate reporting and other requirements for an owner of distributed solar generation to be eligible to earn renewable energy credits.

(j) The commission, in consultation with the Electric Reliability Council of Texas, shall conduct and make available the results of a study indicating geographic areas where utility scale, non-wind, renewable energy generation capacity can be located with minimal need for additional transmission facilities.

(k) The commission is not required to conduct its selection of projects under Subsection (g) by contested case proceedings. The commission may appoint an advisory committee to assist the commission in evaluating proposals made under Subsection (g). Members of an advisory committee appointed under this subsection may not have a financial interest in any of the proposals. After the conclusion of a process authorized by Subsection (g), the commission shall release a complete record of the proposals and of the evaluation of the factors required to be considered under Subsection (g).

(l) The commission may extend the fees and program authorized by this section for an additional five years if the commission finds that:

(1) a substantial amount of manufacturing of solar generation products has begun in Texas during the initial five-year program; and

(2) the extension of the program's fees does not present an undue burden to customers.

(m) The commission by rule shall provide a methodology for determining a fair market value price for surplus electricity. The fair market value price may not be less than an amount equal to 80 percent of the customer's applicable retail rate less any nonbypassable charges. The commission shall post on the commission's Internet website the fair market value prices derived from the methodology provided under this subsection.

(n) In an area in which customer choice has been introduced, a retail electric provider shall pay an owner of distributed solar generation for surplus electricity:

(1) the local market clearing price for energy at the time of day the surplus electricity is made available to the grid; or

(2) a price that is not less than the fair market value price determined in accordance with the methodology provided under Subsection (m).

(o) An owner of distributed solar generation is qualified to be paid for surplus electricity under Subsection (n) only if the owner's distributed solar generation:

(1) is installed on a residential retail electric customer's side of the meter;

(2) has a generating capacity of not greater than 50 kilowatts; and

(3) is rated to produce an amount of electricity less than or equal to the amount of electricity the residential retail electric customer for whom the distributed solar generation is installed is reasonably expected to consume.

(p) The commission by rule shall require a retail electric provider that purchases a customer's surplus electricity to include on each bill of the customer line items to inform the owner of:

(1) the amount of surplus electricity, in terms of kilowatt hours;

(2) the price credited to the owner for each kilowatt hour; and

(3) the amount of any credit for surplus electricity applied or carried forward from the previous billing period.

(q) Until the commission provides the methodology under Subsection (m) for determining a fair market value price, a retail electric provider shall pay a price for surplus electricity that is not less than five cents per kilowatt hour.

(r) If, at the time distributed solar generation is installed on a retail electric customer's side of the meter, the estimated annual amount of electric energy to be generated by the distributed solar generation is less than or equal to the customer's estimated annual electric energy consumption, the commission may not consider the owner of distributed solar generation to be a power generation company or require the owner of distributed solar generation to register as a power generation company.

Sec. 39.9156. SOLAR GENERATION INCENTIVE PROGRAMS. (a) It is the goal of the legislature that:

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

(2) customers of electric cooperatives and municipally owned utilities will have access to incentives for the installation of distributed solar generation as defined by Section 39.9155(a); and

(3) electric cooperatives and municipally owned utilities expend funds to increase the amount of solar generation capacity at a total funding level consistent with the requirements for electric utilities in this state under Sections 39.9155(d)(1) and (e).

(b) Beginning not later than September 1, 2014, an electric cooperative or municipally owned utility 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.

(c) 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 goals established by Section 39.9155 or rules adopted under that section.

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

(e) An electric cooperative or municipally owned utility is entitled to have funding for solar generation capacity provided by an electric cooperative or municipally owned utility after May 1, 2007, counted toward its compliance with this section.

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

SECTION 4. The heading to Section 39.916, Utilities Code, is amended to read as follows:

Sec. 39.916. [INTERCONNECTION OF] DISTRIBUTED RENEWABLE GENERATION.

SECTION 5. Section 39.916, Utilities Code, is amended by amending Subsections (a), (b), (c), (e), (f), (h), and (j) and adding Subsections (d-1), (k), (l), (m), (n), (o), (p), (q), and (r) to read as follows:

(a) In this section:

(1) "Distributed renewable generation" means electric generation with a capacity of not more than 2,000 kilowatts provided by a renewable energy technology, as defined by Section 39.904, that is installed on a retail electric customer's side of the meter.

(2) "Distributed renewable generation owner" means:

(A) the owner of distributed renewable generation;

(B) a retail electric customer who contracts with another person to finance, install, or maintain distributed renewable generation on the customer's side of the meter, regardless of whether the customer takes ownership of the installed distributed renewable generation; or

(C) a person who by contract is assigned ownership rights to distributed renewable generation located at the premises of a customer on the customer's side of the meter.

(3) "Interconnection" means the right of a distributed renewable generation owner to physically connect distributed renewable generation to an electricity distribution system, and the technical requirements, rules, or processes for the connection.

(b) A transmission and distribution utility, electric cooperative, or electric utility shall allow interconnection if:

(1) the distributed renewable generation to be interconnected has a five-year warranty against breakdown or undue degradation; and

(2) the rated capacity of the distributed renewable generation does not exceed the transmission and distribution utility, electric cooperative, or electric utility service capacity.

(c) A customer may request interconnection by filing an application for interconnection with the transmission and distribution utility, electric cooperative, or electric utility. Procedures of a transmission and distribution utility, electric cooperative, or electric utility for the submission and processing of a customer's application for interconnection shall be consistent with rules adopted by the commission regarding interconnection.

(d-1) If, at the time distributed renewable generation is installed on a retail electric customer's side of the meter, the estimated annual amount of electric energy to be produced by the distributed renewable generation is less than or equal to the customer's estimated annual electric energy consumption, the commission may not consider the distributed renewable generation owner to be a power generation company or require the distributed renewable generation owner to register as a power generation company.

(e) A transmission and distribution utility, electric cooperative, electric utility, or retail electric provider may not require a distributed renewable generation owner whose distributed renewable generation meets the standards established by rule under Subsection (d) to purchase an amount, type, or classification of liability insurance the distributed renewable generation owner would not have in the absence of the distributed renewable generation.

(f) A transmission and distribution utility, electric cooperative, or electric utility shall make available to a distributed renewable generation owner for purposes of this section metering required for services provided under this section, including separate meters that measure the load and generator output or a single meter capable of measuring in-flow and out-flow at the point of common coupling meter point. The distributed renewable generation owner must pay the differential cost of the metering unless the meters are provided at no additional cost. Except as provided by this section, Section 39.107 applies to metering under this section.

(h) On the request of a distributed renewable generation owner and in accordance with this section, an [An] electric utility, electric cooperative, or retail electric provider shall [may] contract with a distributed renewable generation owner so that:

(1) surplus electricity produced by distributed renewable generation is made available for sale to the transmission grid and distribution system; and

(2) the fair market [net] value of that surplus electricity is credited to the distributed renewable generation owner.

(j) For a distributed renewable generation owner who chooses to sell the owner's surplus electricity in an area [owners in areas] in which customer choice has been introduced, the distributed renewable generation owner must sell the owner's surplus electricity produced to the retail electric provider that serves the [distributed renewable generation] owner's load. For a distributed renewable generation owner who chooses to sell the owner's surplus electricity in an area in which customer choice has not been introduced, the owner must sell the owner's surplus electricity to the electric utility or electric cooperative that serves the owner's load at a value that is greater than or equal to the avoided cost of the electric utility or electric cooperative, as determined in accordance with commission rules, and, for an electric cooperative, that is at least 4.5 cents per kilowatt hour regardless of the electric cooperative's avoided cost. A distributed generation owner who chooses to sell the owner's surplus electricity in an area in which customer choice has been introduced must sell the owner's surplus electricity at a fair market value, determined in accordance with this section, [agreed to between the distributed renewable generation owner and the provider that serves the owner's load which may include, but is not limited to, an agreed value based on the clearing price of energy at the time of day that the electricity is made available to the grid] or the owner's surplus electricity may be exchanged for [it may be] a credit applied at a fair market value, determined in accordance with this section, to an account during a billing period that may be carried over to subsequent billing periods until the credit has been redeemed. The independent organization identified in Section 39.151 shall develop procedures so that the amount of electricity purchased from a distributed renewable generation owner under this section is accounted for in settling the total load served by the provider that serves that owner's load [by January 1, 2009]. A distributed renewable generation owner 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.

(k) In areas in which customer choice has been introduced, the commission by rule shall provide a methodology for determining a fair market value price for surplus electricity generated by distributed renewable generation that provides a monthly or longer periodic proxy for the market clearing price. The methodology must not allow the aggregate fair market value of surplus electricity in any billing period to be less than zero. The commission shall review the methodology periodically. The commission shall post on its Internet website the fair market value prices derived from the methodology provided under this subsection.

(l) In an area in which customer choice has been introduced, a retail electric provider shall pay a distributed renewable generation owner for surplus electricity generated by the owner's distributed renewable generation the local market clearing price for energy at the time of day the surplus electricity is made available to the grid or a price that is not less than the fair market value price determined in accordance with the methodology provided under Subsection (k).

(m) In areas in which customer choice has been introduced, a distributed renewable generation owner is qualified to be paid for surplus electricity under Subsection (h), (j), (k), or (l) only if:

(1) the owner's distributed renewable generation is:

(A) rated to produce an amount of electricity that is less than or equal to the amount of electricity the retail electric customer for whom the distributed renewable generation is installed is reasonably expected to consume; and

(B) installed on the customer's side of the meter for a residential retail electric customer or a retail electric customer who is a public school or a church; and

(2) the generating capacity of the distributed renewable generation does not exceed:

(A) 10 kilowatts for a residential retail electric customer;

(B) 150 kilowatts for a church retail electric customer; or

(C) 250 kilowatts for a public school retail electric customer.

(n) A distributed renewable generation owner who does not meet the qualifications prescribed by Subsection (m) will be paid for the owner's surplus electricity or will have the owner's surplus electricity exchanged for a credit to the owner's electric service account at a value to which the owner and the provider that serves the owner's load agree.

(o) The commission by rule may establish standards distributed renewable generation must meet to be eligible for compensation under this section, including interconnection standards and standards for the generating equipment. The standards must be designed so that small-scale distributed renewable generation at residential addresses is eligible for compensation.

(p) The commission by rule shall require an electric utility, retail electric provider, or electric cooperative that purchases surplus electricity from distributed renewable generation to include on each bill or separate statement to the distributed renewable generation owner line items to inform the owner of:

(1) the amount of surplus electricity from the distributed renewable generation, in terms of kilowatt hours;

(2) the price credited to or the payment made to the owner for each kilowatt hour; and

(3) the amount of any credit for surplus electricity applied or carried forward from the previous billing period.

(q) Until the commission provides the methodology under Subsection (k) for determining a fair market value price in an area open to competition, a retail electric provider shall pay a price for surplus electricity that is not less than five cents per kilowatt hour for electricity generated by a solar energy technology or not less than four cents per kilowatt hour for electricity generated by another renewable energy technology.

(r) This section expires September 2, 2016.

SECTION 6. Subchapter Z, Chapter 39, Utilities Code, is amended by adding Sections 39.9161, 39.917, and 39.918 to read as follows:

Sec. 39.9161. DISTRIBUTED RENEWABLE GENERATION WITHIN MUNICIPALLY OWNED UTILITIES. (a) In this section:

(1) "Distributed renewable generation" means electric generation with a capacity of not more than 2,000 kilowatts provided by a renewable energy technology, as defined by Section 39.904, that is installed on a retail electric customer's side of the meter.

(2) "Distributed renewable generation owner" means:

(A) the owner of distributed renewable generation;

(B) a retail electric customer who contracts with another person to finance, install, or maintain distributed renewable generation on the customer's side of the meter, regardless of whether the customer takes ownership of the installed distributed renewable generation; or

(C) a person who by contract is assigned ownership rights to distributed renewable generation located at the premises of a customer on the customer's side of the meter.

(3) "Interconnection" means the right of a distributed renewable generation owner to physically connect distributed renewable generation to an electricity distribution system, and the technical requirements, rules, or processes for the connection.

(b) It is the goal of the legislature that municipally owned utilities shall allow interconnection and net metering by distributed renewable generation owners.

(c) A municipally owned utility shall provide its customers access to the interconnection and net metering of distributed renewable generation.

(d) The governing body of a municipally owned utility shall provide oversight and adopt rates, rules, and procedures to allow interconnection and provide net metering consistent with the goals of Section 39.916. This section does not prevent the governing body of a municipally owned utility from adopting rates, rules, and procedures for interconnection and net metering that are more favorable to a distributed renewable generation owner than those established by Section 39.916 or rules of the commission.

(e) If a municipally owned utility implements customer choice under Chapter 40, the commission:

(1) has jurisdiction over the municipally owned utility's distributed renewable generation interconnection and net metering; and

(2) by rule shall establish minimum standards and procedures for interconnection and net metering by the municipally owned utility.

(f) A municipally owned utility that had retail sales of 500,000 megawatt hours or greater in 2008 shall file its interconnection and net metering rates, rules, and procedures with the state energy conservation office not later than January 1, 2012, and shall make timely updates to the utility's filed rates, rules, and procedures.

(g) A municipally owned utility that has adopted rules and procedures related to interconnection and net metering shall make available, on a publicly accessible Internet website or at the customary location for publicly posted notices:

(1) information on the purchase price offered per kilowatt hour for surplus electricity produced by distributed renewable generation; and

(2) information instructing customers with distributed renewable generation how to request and obtain the purchase rates offered.

(h) The governing body of a municipally owned utility that had retail sales of less than 500,000 megawatt hours in 2008 shall provide oversight and adopt rules and procedures related to interconnection and net metering of distributed renewable generation systems sized with a generating capacity deemed appropriate by the municipally owned utility on or before the 120th day after the date the governing body receives a bona fide request for interconnection.

Sec. 39.917. INFORMATION ON INTERNET REGARDING PURCHASE OF SURPLUS ELECTRICITY PRODUCED BY DISTRIBUTED RENEWABLE GENERATION. (a) In this section:

(1) "Distributed renewable generation" means electric generation with a capacity of not more than 2,000 kilowatts provided by a renewable energy technology, as defined by Section 39.904, that is installed on a retail electric customer's side of the meter.

(2) "Distributed renewable generation owner" means:

(A) the owner of distributed renewable generation;

(B) a retail electric customer who contracts with another person to finance, install, or maintain distributed renewable generation on the customer's side of the meter, regardless of whether the customer takes ownership of the installed distributed renewable generation; or

(C) a person who by contract is assigned ownership rights to distributed renewable generation located at the premises of a customer on the customer's side of the meter.

(b) On the Internet website found at http://www.powertochoose.org, the commission shall provide for access to easily comparable information regarding retail electric providers' offers to residential distributed renewable generation owners for their surplus electricity, including information regarding their contract terms, for each retail electric provider using that website.

(c) On the Internet website found at http://www.powertochoose.org, the commission shall provide for access to easily comparable information regarding offers of renewable energy credit marketers to residential distributed renewable generation owners, for each renewable energy credit marketer using that website.

(d) The commission by rule shall require electric utilities, electric cooperatives, and retail electric providers to provide on publicly accessible Internet websites information on purchase price offers per kilowatt hour for surplus electricity produced by residential distributed renewable generation and information instructing customers with distributed renewable generation on how to request and obtain the purchase rates offered.

Sec. 39.918. INFORMATION ON INTERNET REGARDING PURCHASE OF SURPLUS ELECTRICITY PRODUCED BY DISTRIBUTED SOLAR GENERATION. (a) In this section, "distributed solar generation," "owner of distributed solar generation," and "surplus electricity" have the meanings assigned by Section 39.9155(a).

(b) On the Internet website found at http://www.powertochoose.org, the commission shall provide for access to easily comparable information regarding retail electric providers' offers to owners of distributed solar generation for their surplus electricity, including information regarding their contract terms, for each retail electric provider using that website.

(c) On the Internet website found at http://www.powertochoose.org, the commission shall provide for access to easily comparable information regarding offers of renewable energy credit marketers to owners of distributed solar generation, for each renewable energy credit marketer using that website.

(d) The commission by rule shall require electric utilities, electric cooperatives, and retail electric providers to provide on publicly accessible Internet websites information on purchase price offers per kilowatt hour for surplus electricity and information instructing customers with distributed solar generation on how to request and obtain the purchase rates offered.

SECTION 7. Chapter 202, Property Code, is amended by adding Section 202.010 to read as follows:

Sec. 202.010. REGULATION OF SOLAR ENERGY DEVICES. (a) In this section, "solar energy device" has the meaning assigned by Section 171.107, Tax Code.

(b) Except as otherwise provided by this section, a property owners' association may not include or enforce a provision in a dedicatory instrument that prohibits or restricts a property owner from installing a solar energy device.

(c) A provision that violates Subsection (b) is void.

(d) This section does not prohibit the inclusion or enforcement of a provision in a dedicatory instrument that prohibits a solar energy device that:

(1) a court determines threatens the public health or safety;

(2) a court determines violates a law;

(3) is located on property owned or maintained by the property owners' association;

(4) is located on property owned in common by the members of the property owners' association; or

(5) is located in an area on the property owner's property other than:

(A) on the roof of the home; or

(B) in a fenced yard or patio maintained by the property owner.

SECTION 8. Subtitle C, Title 5, Business & Commerce Code, is amended by adding Chapter 106 to read as follows:

CHAPTER 106. REGULATION OF CONSTRUCTION CONTRACTS

Sec. 106.001. SOLAR PANEL OPTION REQUIRED IN CERTAIN SUBDIVISIONS. (a) In this section, "solar energy device" means a system or series of mechanisms designed primarily to provide heating or cooling or to produce electrical or mechanical power by collecting and transferring solar-generated energy. The term includes a mechanical or chemical device that has the ability to store solar-generated energy for use in heating or cooling or in the production of power.

(b) This chapter applies only to a contract for construction of a new home in a subdivision that contains more than 50 lots on which the builder has built or is offering to build new homes.

(c) A builder who enters into a contract to which this chapter applies shall offer the home buyer an option to install a solar energy device on the home for heating or cooling or for the production of power.

SECTION 9. Subchapter D, Chapter 2305, Government Code, is amended by adding Section 2305.0321 to read as follows:

Sec. 2305.0321. PILOT REVOLVING LOAN PROGRAM FOR SOLAR ENERGY FOR SCHOOL BUILDINGS. (a) The energy office shall establish a pilot program under the loanstar revolving loan program to provide loans to pay the cost of installing photovoltaic solar panels on public school buildings and the cost of associated energy efficiency improvements to the buildings. The energy office shall allocate to the pilot program at least $4 million from the funds available to the loanstar revolving loan program.

(b) The energy office by rule shall establish the terms under which a loan may be made under the pilot program, including the interest rate for repayment of pilot program loans.

(c) Through the pilot program, the energy office shall offer to each school district the opportunity to apply for a loan to pay the cost of installing photovoltaic solar panels on at least one school building of the school district's choice and the cost of associated energy efficiency improvements to that building. The energy office by rule shall establish a procedure for determining which school districts qualify for a loan under the pilot program, including rules for selecting the school districts that will receive a loan if there is not sufficient money set aside for pilot program improvements at all school districts.

(d) Each school district that receives a loan shall pay for the principal of and interest on the loan for each school building improvement primarily from the amount budgeted for the energy costs of the school at which the solar panels are installed. The school district may make additional payments of the principal of or interest on a loan from money rebated to it as compensation for electric energy generated by the solar panels or money received as a gift or grant for the purpose of paying the loan.

(e) This section expires September 1, 2013, and the pilot program established under this section is abolished on that date.

SECTION 10. The Public Utility Commission of Texas shall adopt rules establishing the programs required under Sections 39.9155 and 39.9156, Utilities Code, as added by this Act, as soon as practicable.

SECTION 11. Not later than January 1, 2012, the Public Utility Commission of Texas shall provide the methodology for determining a fair market value price for surplus electricity generated by distributed renewable generation, as required by Section 39.916(k), Utilities Code, as added by this Act.

SECTION 12. (a) The Public Utility Commission shall conduct a study to determine the effect of the pricing methodology the commission develops under Section 39.916(k), Utilities Code, as added by this Act, and shall report its findings and recommendations to the 83rd Legislature not later than January 15, 2013. The study must include an assessment of:

(1) the development of the market in ERCOT for the sale of surplus electricity, including the prices that retail electric providers and electric utilities, municipal electric utilities, and electric cooperatives in areas in which customer choice has not been introduced pay for surplus electricity, and the amount of surplus electricity those entities have purchased;

(2) the rate of adoption by customers in this state of distributed renewable generation, including generation by solar and other on-site renewable technologies, including a comparison of adopted rates in this state compared to the adopted rates in other states, the extent to which adopted rates vary by retail market structure, the amount of direct installation incentives, the pricing for purchasing of surplus electricity, and the extent to which adopted rates are affected by the cost of other electric supplies;

(3) a comparison of the default fair market value price for surplus electricity to:

(A) the local market clearing prices of energy at the time of day surplus electricity has been made available to the grid; and

(B) the avoided costs of electric utilities as determined in accordance with commission rules; and

(4) the extent to which electric service customers with distributed renewable generation help avoid transmission and distribution upgrades and reduce pollution, including an estimation of the value of those benefits regionally.

(b) The study report must include any recommendations for improvements in policies necessary to appropriately encourage the development of distributed renewable generation technologies on customer premises.

SECTION 13. Section 202.010, Property Code, as added by this Act, applies to a deed restriction enacted before, on, or after the effective date of this Act.

SECTION 14. Chapter 106, Business & Commerce Code, as added by this Act, applies only to a contract for new home construction entered into on or after the effective date of this Act. A contract entered into before the effective date of this Act is governed by the law in effect immediately before the effective date of this Act, and that law is continued in effect for that purpose.

SECTION 15. The state energy conservation office shall establish a program under Section 2305.0321, Government Code, as added by this Act, not later than January 1, 2012.

SECTION 16. 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.