S.B. 1866

By: Nichols

State Affairs

Committee Report (Unamended)






Two years ago, Winter Storm Uri hit Texas and caused widespread power outages. As a response to severe weather events, Entergy has initiated pilot projects to offer commercial businesses up to 10 megawatts of natural gas backup generation. S.B. 1866 seeks to allow an electric utility operating in the portion of Texas included within the Southeastern Electric Reliability Council, such as Entergy, to provide backup electrical service to a nonresidential retail customer through a customer-sited distributed generation facility such as these natural gas backup generators. These investments can be hugely beneficial to Southeast Texas' generation capacity and support businesses that without power can experience significant losses of product or be unable to complete critical job functions.




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.




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.




S.B. 1866 amends the Utilities Code to authorize an electric utility that operates solely outside of ERCOT in areas of Texas included in the Southeastern Electric Reliability Council to provide backup electric service to a nonresidential retail customer through a customer-sited distributed generation facility. The bill requires the Public Utility Commission of Texas (PUC), on the petition of such an electric utility, to establish just and reasonable rates for backup electric service supplied using a customer-sited distributed generation facility, consistent with provisions of the Public Utility Regulatory Act governing electric utility rates, provided that costs are allocated as follows:

         if the facility is capable of directly supplying energy to the distribution system or of disconnecting the host customer from the distribution system when not being used to supply backup electric service to the host customer and thereby reducing system load, the PUC must allocate the cost of owning and operating the facility between the host customer and the utility's broader customer base, including an allocation of any margins from energy sales attributable to the facility to the host customer in reasonable proportion to the allocation of nonfuel costs; and

         the allocation of nonfuel costs to the host customer must be based on the cost to purchase, install, interconnect, own, operate, and maintain the facility that is above the utility's levelized avoided cost to install, own, operate, and maintain a single-cycle combustion turbine, on a per kilowatt basis, grossed up for avoided line losses based on the utility's transmission and distribution line loss factors last approved by the PUC.


S.B. 1866 establishes that, in a rate proceeding in which the utility seeks to recover the utility's investment in a customer-sited distributed generation facility that is interconnected to the utility's distribution system, the full cost of the utility's investment is eligible for recovery and the cost of the facility and backup electric service revenues must be allocated among customer classes on the same basis used to allocate the utility's distribution‑level investments.


S.B. 1866 defines "customer-sited distributed generation facility" for purposes of the bill's provisions as a dispatchable generation facility with a nameplate capacity of not more than 10 megawatts that is, as follows:

         installed on the electric utility's side of the retail meter;

         owned and operated by the electric utility;

         capable of generating and providing backup electric service to a customer during a power grid outage; and

         sited at or adjacent to the customer's premises.




On passage, or, if the bill does not receive the necessary vote, September 1, 2023.