BILL ANALYSIS

Senate Research Center	S.B. 2012
88R16679 JXC-D	By: Schwertner; King
	Business & Commerce
	3/20/2023
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

In the 87th session, the legislature directed the Public Utility Commission (PUC) to develop a reliability program to procure ancillary services on a cost-causation basis. The PUC hired a third-party consultant to scrutinize the state of Texas' electrical grid and recommend reforms to improve our market design. The PUC adopted the Performance Credit Mechanism (PCM), a resource adequacy mechanism to pay generators to be available during times of peak demand. S.B 2012 builds on the attributes of the PCM, but adds clear guardrails to prevent runaway rates and ensure reliability. These guardrails include penalties for generators that do not provide the electricity they commit to, creates a legislative oversight committee to oversee implementation, enhances oversight of voluntary mitigation plans, and caps the net-cost of the program.

As proposed, S.B. 2012 amends current law relating to electricity services and increases an administrative penalty.

RULEMAKING AUTHORITY

Rulemaking authority is expressly granted to the Public Utility Commission of Texas in SECTION 4 (Section 39.166, Utilities Code) of this bill.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Sections 15.023(b-1) and (f), Utilities Code, as follows:

(b-1) Authorizes the penalty for a violation of Subtitle B (Electric Utilities), rather than a provision of Section 35.0021 (Weather Emergency Preparedness) or 38.075 (Weather Emergency Preparedness), to be in amount not to exceed $1,000,000 for a violation, notwithstanding Subsection (b) (relating to authorizing the penalty for a violation to be in an amount not to exceed $25,000).

(f) Requires that the voluntary migration plan be updated at least once every two years. Authorizes adherence to the plan to be considered in determining whether a violation occurred and, if so, the penalty to be assessed. Deletes existing text providing that if the Public Utility Commission (PUC) and a person enter into a voluntary migration plan, adherence to the plan constitutes an absolute defense against an alleged violation with respect to activities covered by the plan.

SECTION 2. Amends Section 39.159(b), Utilities Code, as added by Chapter 426 (S.B. 3), Acts of the 87th Legislature, Regular Session, 2021, as follows:

(b) Requires the PUC to ensure that the independent organization certified under Section 39.151 (Essential Organizations) for the Electric Reliability Council of Texas (ERCOT) power region:

(1) makes no changes to this subdivision

(2) seasonally, rather than periodically but at least annually, determines the quantity and characteristics of ancillary or reliability services necessary to ensure appropriate reliability during extreme heat and extreme cold weather conditions and during times of low non-dispatchable power production in the power region;

(3) seasonally procures, rather than procures, ancillary or reliability services on a competitive basis to ensure appropriate reliability during extreme heat and extreme cold weather conditions and during times of low non-dispatchable power production in the power region; and

(4)-(5) makes no changes to these subdivisions

SECTION 3. Amends Subchapter D, Chapter 39, Utilities Code, by adding Sections 39.1595 and 39.1596, as follows:

Sec. 39.1595. RELIABILITY PROGRAM. Prohibits the PUC from adopting a reliability program for the ERCOT power region that requires the purchase of credits earned by generators based on generator availability during times of high demand and low supply at a centrally determined clearing price unless the PUC ensures that:

(1) the net cost to the ERCOT market of the program does not exceed $500 million;

(2) credits are available only for dispatchable generation;

(3) the cost of credits is assigned to generation facilities on a cost-causation basis rather than to load serving entities;

(4) the program includes appropriate penalties for a failure to provide a required program service;

(5) the independent organization certified under Section 39.151 for the ERCOT power region implements real time co-optimization of energy and ancillary services in the ERCOT wholesale market before the credit program is implemented; and

(6) the entire program is initiated on a single starting date.

Sec. 39.1596. GRID RELIABILITY LEGISLATIVE OVERSIGHT COMMITTEE. (a) Defines "committee."

(b) Provides that the Grid Reliability Legislative Oversight Committee (committee) is created to oversee the PUC's implementation of Section 35.004 (Provision of Transmission Service), Section 39.159 (Dispatchable Generation), as added by Chapter 426 (S.B. 3), Acts of the 87th Legislature, Regular Session, 2021, and Section 39.1595.

(1) three members of the senate, appointed by the lieutenant governor;

(2) three members of the house of representatives, appointed by the speaker of the house of representatives;

(3) the chair of the committee of the senate having primary jurisdiction over matters relating to the generation of electricity; and

(4) the chair of the committee of the house having primary jurisdiction over matters relating to the generation of electricity.

(d) Provides that an appointed member of the committee serves at the pleasure of the appointing official.

(e) Provides that the committee members described by Subsections (c)(3) and (4) serve as presiding co-chairs.

(f) Prohibits a member of the committee from receiving compensation for serving on the committee but provides that a member is entitled to reimbursement for travel expenses incurred by the member while conducting the business of the committee as provided by the General Appropriations Act.

(g) Requires the committee to meet at least twice each year at the call of either co-chair and to meet at other times at the call of either co-chair, as that officer determines appropriate.

(h) Provides that Chapter 551 (Open Meetings), Government Code, applies to the committee.

(i) Requires the committee to submit a report to the governor, lieutenant governor, speaker of the house of representatives, and legislature not later than December 1 of each even-numbered year. Requires that the report include an update on the progress of and issues related to the PUC's implementation of the laws under the committee's oversight as provided by Subsection (b).

SECTION 4. Amends Subchapter D, Chapter 39, Utilities Code, by adding Section 39.166, as follows:

Sec. 39.166. LIMITATION OF MARKET SHARE SERVED BY RETAIL ELECTRIC PROVIDER. (a) Prohibits a retail electric provider and a corporate parent of the retail electric provider from, considered together, providing retail market service to more than 20 percent of the customers in the competitive retail market in a power region.

(b) Requires each retail electric provider that offers electricity for sale to report to the PUC its annual retail sales in this state, the annual retail sales in this state by the provider's corporate parent, and any other information the PUC requires to assess compliance with Subsection (a). Requires the PUC by rule to prescribe the nature and detail of the reporting requirements. Requires the PUC to administer the reporting requirements in a manner that ensures the confidentiality of competitively sensitive information.

(c) Requires the PUC to require a retail electric provider that the PUC finds is violating Subsection (a) to submit to the PUC a plan for reducing the provider's market share. Requires that the plan be in a form prescribed by the PUC and provide information the PUC finds reasonably necessary to evaluate the plan.

(d) Requires the PUC to approve, modify, or reject a plan submitted under Subsection (c) not later than the 180th day after the date the plan is filed with the PUC. Requires the PUC, in evaluating a plan for approval, modification, or rejection, to consider:

(1) the effect of the plan on current and potential competitors in the generation market; and

(2) whether the plan is consistent with the public interest.

(e) Authorizes a retail electric provider with an approved plan to request that the PUC amend or repeal the plan. Requires the PUC to amend or repeal the plan on a showing of good cause.

SECTION 5. Amends Chapter 39, Utilities Code, by adding Subchapter O, as follows:

SUBCHAPTER O. CONSTRUCTION OF DISPATCHABLE GENERATION FACILITIES FOR RELIABILITY

Sec. 39.701. EVALUATION. Requires the PUC to determine, not later than January 31, 2027, whether at least 5,000 megawatts of dispatchable generation capacity was installed in the ERCOT power region between June 1, 2023, and December 31, 2026.

Sec. 39.702. CONSTRUCTION OF DISPATCHABLE GENERATION FACILITIES FOR RELIABILITY. (a) Requires the PUC to require transmission and distribution utilities to install an amount of dispatchable generation capacity sufficient to ensure that an additional 5,000 megawatts of dispatchable generation capacity is available in the ERCOT power region compared to the amount of installed dispatchable generation capacity on June 1, 2023, if the PUC determines under Section 39.701 that less than 5,000 megawatts of dispatchable generation capacity was installed in the ERCOT power region between June 1, 2023, and December 31, 2026, notwithstanding any other law.

(b) Provides that costs incurred by a transmission and distribution utility under this section are recoverable in the utility's rates.

(c) Requires a transmission and distribution utility that installs dispatchable generation capacity under this section to register as a power generation company. Requires the PUC to waive the requirements of Section 39.154 (Limitation of Ownership of Installed Capacity) for a facility installed under this section.

SECTION 6. Makes application of the changes in law made by this Act to Chapter 15, Utilities Code, prospective.

SECTION 7. Effective date: September 1, 2023.