BILL ANALYSIS

Senate Research Center	S.B. 1287
88R4001 DIO-F	By: King
	Business & Commerce
	3/21/2023
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

Currently, the costs arising from the interconnection of certain electric generation facilities with the Electric Reliability Council of Texas (ERCOT) transmission system are socialized and paid for by Texas consumers while the interconnecting generator bears none of the costs. Because generators do not pay for interconnection costs, they are not incentivized to look for the best locations to efficiently interconnect new resources and instead often opt for cheap land that is far from the consumers they wish to serve, thus causing millions of dollars of costs to the system for all consumers. It has been noted that outside of the ERCOT region this practice is less common and generators are often made to bear some or all of the costs associated with the interconnection of their generation assets. Because there are about $1 billion of interconnection costs associated with pending generation projects in the ERCOT queue, it is essential that reform is undertaken so that Texas consumers are not forced to bear the totality of these costs. S.B. 1287 seeks to provide for a cap on the amount of capital costs incurred to interconnect generation resources and electric energy storage resources with the ERCOT transmission system that may be socialized and require that any excess costs be borne directly by the applicable generation resource or electric energy storage resource.

As proposed, S.B. 1287 amends current law relating to the cost of interconnecting certain electric generation and energy storage facilities with the ERCOT transmission system.

RULEMAKING AUTHORITY

Rulemaking authority is expressly granted to the Public Utility Commission of Texas in SECTION 1 (Section 35.004, Utilities Code) of this bill.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 35.004, Utilities Code, by amending Subsection (d) and adding Subsections (d-1) and (d-2), as follows:

(d) Requires the Public Utility Commission of Texas (PUC) to price wholesale transmission services within the Electric Reliability Council of Texas (ERCOT) based on the postage stamp method of pricing under which a transmission-owning utility's rate is based on the ERCOT utilities' combined annual costs of transmission, other than costs described by Subsection (d-2), divided by the total demand placed on the combined transmission systems of all such transmission-owning utilities within a power region.�

(d-1) Requires the PUC by rule to establish an allowance to be applied on a per megawatt basis for capital costs incurred to interconnect generation resources and electric energy storage resources described by Section 35.152(a) (relating to providing that certain entities are generation assets) with the ERCOT transmission system, including costs of utility interconnection facilities and all necessary system upgrades. Requires that the allowance:

(1) take into account average historical interconnection costs and system upgrade costs, other than transmission costs associated with Section 39.904(g) (relating to requiring the PUC, after consultation with certain appropriate entities, to take certain actions); and

(2) be designed to lower costs to consumers and encourage owners of generation resources and electric energy storage resources to locate the resources closer to load.

(d-2) Requires that capital costs in excess of the allowance provided by Subsection (d-1) incurred to interconnect generation resources and electric energy storage resources described by Section 35.152(a) with the ERCOT transmission system, including costs of utility interconnection facilities and all necessary system upgrades, be directly assigned to the generation resource or electric energy storage resource receiving interconnection service through the facilities.

SECTION 2. Effective date: September 1, 2023.

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