BILL ANALYSIS

 

 

 

H.B. 2073

By: Price

State Affairs

Committee Report (Unamended)

 

 

 

BACKGROUND AND PURPOSE

 

Non-ERCOT utilities are obligated to purchase the natural gas, coal, or other fuels needed to operate their generation fleets. The process governing the recovery of those fuel costs from customers is overly complicated and litigious and has led utilities to carry very large uncollected balances that must be resolved through surcharges on customer bills. Uncollected fuel balances accumulate because it is impossible to accurately predict the future price of fuel when establishing a fuel charge on customer bills. The process of approving a surcharge does not correct the underlying fuel charge on customer bills, which must be done in a separate contested case proceeding. H.B. 2073 seeks to address this issue by establishing a more efficient fuel cost validation process that will allow for more timely, incremental corrections to fuel charges while avoiding the need for surcharges or refunds except in extreme circumstances.

 

CRIMINAL JUSTICE IMPACT

 

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

 

RULEMAKING AUTHORITY

 

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

 

ANALYSIS

 

H.B. 2073 amends the Utilities Code to set out provisions relating to the review and adjustment of an electric utility's fuel factor, which are a replacement for the following requirements:

·         the requirements for the Public Utility Commission of Texas (PUC) to render a timely decision approving, disapproving, or modifying the adjustment to a utility's fuel factor and provide by rule for the reconciliation of a utility's fuel costs on a timely basis; and

·         the requirement for the procedures implemented by the PUC providing for the timely adjustment of a fuel factor to require that an affected party receive notice and have the opportunity to request a hearing before the PUC.

 

H.B. 2073 requires the PUC rules that implement the procedures providing for the timely adjustment of an electric utility's fuel factor to ensure the following:

·         the utility collects as contemporaneously as reasonably possible the electric fuel and purchased power costs that the utility incurs; and

·         the utility's under-collected or over-collected balance of electric fuel and purchased power costs is collected from or refunded to customers through adjustment of the utility's fuel factor not later than the 90th day after the date the balance is accrued.

The bill authorizes the PUC, on a finding that an electric utility has an under-collected balance that is the result of extraordinary electric fuel and purchased power costs that are unlikely to continue, to direct the utility by order to adjust the utility's fuel factor to defer recovery to take place over a period not to exceed two years, with the utility receiving on the balance during the recovery period a return set at the utility's most recently established weighted average cost of capital set in a base rate case.

 

H.B. 2073 authorizes a customer of the electric utility, a municipality with original jurisdiction over the utility, or the Office of Public Utility Counsel to protest an established fuel factor and establishes as the sole issue that may be considered in the protest whether the factor reasonably reflects costs the utility has incurred or will incur so that the utility is not substantially over-collecting or under-collecting the utility's reasonably stated fuel and purchased power costs on an ongoing basis, including the true-up of any over- or under-collected balance. The bill requires the PUC, on a finding that the utility is over-collecting or under-collecting on that basis, to order the utility to modify the utility's fuel factor to more accurately reflect the utility's costs and attempt to remedy any over-collected or under-collected position before the 90th day after the date the PUC issues the order.

 

H.B. 2073 requires an electric utility to apply to reconcile the utility's electric fuel and purchased power costs at least once every two years and not later than the 180th day after the last day of the period to be reconciled. The bill authorizes the PUC by rule to establish the calendar year timing of the reconciliation period for each electric utility to facilitate efficient work by the PUC. To the extent a reconciliation results in a change to the utility's under-collected or over-collected fuel balance, that change must be incorporated into the utility's fuel factor to eliminate any resulting under-collected or over-collected balance in commensurate increments over a three-month period. The bill authorizes the PUC to extend the three-month period for a reasonable time if the utility demonstrates that the change in the fuel balance will impact the utility's financial integrity. The bill establishes that the prudence of the costs the utility has incurred or will incur so that the utility is not substantially over-collecting or under-collecting the utility's reasonably stated fuel and purchased power costs on an ongoing basis may be considered only in the fuel reconciliation proceeding.

 

H.B. 2073 requires an electric utility, the first time the utility applies to reconcile its fuel costs and purchase power costs after the PUC adopts the rules required to implement the requirement to do so, to include in the application any previous periods that have not been addressed in a prior reconciliation proceeding.

 

EFFECTIVE DATE

 

September 1, 2023.