88R11656 JXC-F
 
  By: Morales of Maverick H.B. No. 3964
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to energy efficiency goals and programs, public
  information regarding energy efficiency programs, and the
  participation of loads in certain energy markets.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 39.905, Utilities Code, is amended by
  amending Subsections (a), (b), (e), (g), (h), (i), and (j) and
  adding Subsection (i-1) to read as follows:
         (a)  It is the goal of the legislature that:
               (1)  electric utilities will administer energy
  efficiency incentive programs in a market-neutral,
  nondiscriminatory manner but will not offer underlying competitive
  services;
               (2)  all customers, in all customer classes, will have
  a choice of and access to energy efficiency alternatives and other
  choices from the market that allow each customer to reduce energy
  consumption, summer and winter peak demand, or energy costs;
               (3)  each electric utility will administer energy
  efficiency programs that:
                     (A)  cause the utility's portfolio of programs to
  be cost-effective; 
                     (B)  include load management programs and demand
  response programs;
                     (C)  acquire the following minimum quantifiable
  reductions in demand annually:
                           (i)  5,000 kilowatts for utilities with an
  average of less than 300,000 total eligible residential and
  commercial customers in the previous five years;
                           (ii)  15,000 kilowatts for utilities with an
  average of greater than 300,000 but less than 750,000 total
  eligible residential and commercial customers in the previous five
  years;
                           (iii)  25,000 kilowatts for utilities with
  an average of greater than 750,000 but less than 1.5 million total
  eligible residential and commercial customers in the previous five
  years;
                           (iv)  75,000 kilowatts for utilities with an
  average of greater than 1.5 million but less than 3 million total
  eligible residential and commercial customers in the previous five
  years;
                           (v)  100,000 kilowatts for utilities with an
  average of greater than 3 million but less than 4 million total
  eligible residential and commercial customers in the previous five
  years; or
                           (vi)  125,000 kilowatts for utilities with
  an average of greater than 4 million total eligible residential and
  commercial customers in the previous five years; and
                     (D)  acquire energy savings in the following
  amounts corresponding to that utility's total demand reductions
  identified by Paragraph (C):
                           (i)  8,760,000 kilowatt hours for a demand
  reduction goal of 5,000 kilowatts;
                           (ii)  26,280,000 kilowatt hours for a demand
  reduction goal of 15,000 kilowatts;
                           (iii)  43,800,000 kilowatt hours for a
  demand reduction goal of 25,000 kilowatts;
                           (iv)  131,400,000 kilowatt hours for a
  demand reduction goal of 75,000 kilowatts;
                           (v)  175,200,000 kilowatt hours for a demand
  reduction goal of 100,000 kilowatts; or
                           (vi)  219,000,000 kilowatt hours for a
  demand reduction goal of 125,000 kilowatts [annually will provide,
  through market-based standard offer programs or through targeted
  market-transformation programs, incentives sufficient for retail
  electric providers and competitive energy service providers to
  acquire additional cost-effective energy efficiency, subject to
  cost ceilings established by the commission, for the utility's
  residential and commercial customers equivalent to:
                     [(A)  not less than:
                           [(i)  30 percent of the electric utility's
  annual growth in demand of residential and commercial customers by
  December 31 of each year beginning with the 2013 calendar year; and
                           [(ii)  the amount of energy efficiency to be
  acquired for the utility's residential and commercial customers for
  the most recent preceding year; and
                     [(B)  for an electric utility whose amount of
  energy efficiency to be acquired under this subsection is
  equivalent to at least four-tenths of one percent of the electric
  utility's summer weather-adjusted peak demand for residential and
  commercial customers in the previous calendar year, not less than:
                           [(i)  four-tenths of one percent of the
  utility's summer weather-adjusted peak demand for residential and
  commercial customers by December 31 of each subsequent year; and
                           [(ii)  the amount of energy efficiency to be
  acquired for the utility's residential and commercial customers for
  the most recent preceding year;]
               (4)  each electric utility in the ERCOT region will
  [shall] use its best efforts to encourage and facilitate the
  involvement of the region's retail electric providers in the
  delivery of efficiency programs and demand response programs under
  this section, including programs for demand-side renewable energy
  systems that:
                     (A)  use distributed renewable generation, as
  defined by Section 39.916; or
                     (B)  reduce the need for energy consumption by
  using a renewable energy technology, a geothermal technology [heat
  pump], a solar water heater, or another natural mechanism of the
  environment;
               (5)  retail electric providers in the ERCOT region, and
  electric utilities outside of the ERCOT region, shall provide
  customers with energy efficiency educational materials; and
               (6)  notwithstanding Subsection (a)(3), electric
  utilities shall continue to make available, at 2023 [2007] funding
  and participation levels, any load management [standard offer]
  programs or demand response programs developed for [industrial]
  customers and implemented before January 1, 2023 [prior to May 1,
  2007].
         (b)  The commission shall provide oversight and adopt rules
  and procedures to ensure that the utilities can achieve the goals
  [goal] of this section, including:
               (1)  establishing an energy efficiency cost recovery
  factor for ensuring timely and reasonable cost recovery for utility
  expenditures made to satisfy the goals [goal] of this section;
               (2)  establishing an incentive under Section 36.204 to
  reward utilities administering programs under this section that
  exceed the minimum goals established by this section;
               (2-a)  prohibiting an incentive achieved under this
  section from being included in an electric utility's revenues or
  net income for the purposes of establishing a utility's rates or the
  utility's earnings monitoring report under Section 36.157, 36.210,
  or 36.212;
               (2-b)  providing that an incentive achieved by an
  electric utility under this section entitles the utility to receive
  an amount equal to the net benefits realized in meeting the
  applicable demand reduction and energy savings established under
  this section, provided that:
                     (A)  the net benefits must be calculated by
  subtracting the total program costs from the total of the avoided
  costs associated with the portfolio of programs administered by the
  utility; and
                     (B)  an electric utility that exceeds its demand
  reduction and energy savings goals is entitled to receive an
  incentive equal to one percent of the net benefits for every two
  percent that the demand reduction goal has been exceeded, with a
  maximum of 10 percent of the utility's total net benefits;
               (3)  providing a utility that is unable to establish an
  energy efficiency cost recovery factor in a timely manner due to a
  rate freeze with a mechanism to enable the utility to:
                     (A)  defer the costs of complying with this
  section; and
                     (B)  recover the deferred costs through an energy
  efficiency cost recovery factor on the expiration of the rate
  freeze period;
               (4)  ensuring that the costs associated with programs
  provided under this section and any shareholder incentive [bonus]
  awarded are borne by the customer classes that receive the services
  under the programs;
               (5)  establishing cost caps that:
                     (A)  allow electric utilities to meet the goals of
  this section; and
                     (B)  exclude:
                           (i)  any shareholder incentive; and
                           (ii)  any third-party evaluation
  measurement and verification costs;
               (6)  requiring that, for an industrial customer to opt
  out of an electric utility's energy efficiency cost recovery
  factor, the industrial customer must submit a notice to the
  electric utility and the commission;
               (7)  ensuring the program rules encourage the value of
  the incentives to be passed on to the end-use customer;
               (8) [(6)]  ensuring that programs are evaluated,
  measured, and verified using a framework established by the
  commission that promotes effective program design and consistent
  and streamlined reporting; and
               (9) [(7)]  ensuring that an independent organization
  certified under Section 39.151 allows load participation in all
  energy markets for residential, commercial, and industrial
  customer classes, either directly or through aggregators of retail
  customers, to the extent that load participation by each of those
  customer classes complies with reasonable requirements adopted by
  the organization relating to the reliability and adequacy of the
  regional electric network and in a manner that will increase market
  efficiency, competition, and customer benefits.
         (e)  An electric utility may use money approved by the
  commission for energy efficiency programs to perform necessary
  energy efficiency research and development to foster continuous
  improvement and innovation in the application of energy efficiency
  technology and energy efficiency program design and
  implementation. Money the utility uses under this subsection may
  not exceed 10 percent of the greater of:
               (1)  the amount the commission approved for energy
  efficiency programs in the utility's most recent [full rate]
  proceeding in which an energy efficiency cost recovery factor is
  set; or
               (2)  the commission-approved expenditures by the
  utility for energy efficiency in the previous year.
         (g)  The commission shall [may] provide for a good cause
  exemption to a utility's liability for an administrative penalty or
  other sanction if the utility fails to meet a goal [for energy
  efficiency] under this section and the utility's failure to meet
  the goal is caused by one or more factors outside of the utility's
  control, including:
               (1)  limitations caused by the imposition of cost caps
  on the energy efficiency cost recovery factor;
               (2)  insufficient demand by retail electric providers
  and competitive energy service providers for program incentive
  funds made available by the utility through its programs;
               (3) [(2)]  changes in building energy codes; and
               (4) [(3)]  changes in government-imposed appliance or
  equipment efficiency standards.
         (h)  For an electric utility operating in an area not open to
  competition, the utility may achieve the goal of this section by:
               (1)  providing rebate or incentive funds directly to
  customers to promote or facilitate the success of programs
  implemented under this section; or
               (2)  developing, subject to commission approval, new
  programs other than standard offer programs and market
  transformation programs, to the extent that the new programs make
  the portfolio of programs no longer cost-effective [satisfy the
  same cost-effectiveness requirements as standard offer programs
  and market transformation programs].
         (i)  For an electric utility operating in an area open to
  competition that provides [, on demonstration] to the commission a
  notice [, after a contested case hearing,] that the requirements
  under Subsection (a) cannot be met [in a rural area] through retail
  electric providers or competitive energy service providers in
  hard-to-reach areas or areas with low-income customers, the utility
  may achieve the goal of this section by providing rebate or
  incentive funds directly to customers in those areas [the rural
  area] to promote or facilitate the success of programs implemented
  under this section. The electric utility must provide the notice to
  the commission at least once every two years. In this subsection:
               (1)  "Hard-to-reach area" means a rural area not
  adequately served by retail electric providers or competitive
  energy service providers.
               (2)  "Low-income customer" means a residential
  customer with an annual household income at or below 200 percent of
  the federal poverty guidelines or who meets income eligibility
  requirements established by the commission.
         (i-1)  An electric utility described by Subdivision (i) may
  receive information identifying low-income electric customers
  under Section 17.007(a).
         (j)  An electric utility may use energy audit programs to
  achieve the goal of this section if[:
               [(1)  the programs do not constitute more than three
  percent of total program costs under this section; and
               [(2)]  the addition of the programs does not cause a
  utility's portfolio of programs to no longer be cost-effective.
         SECTION 2.  Section 39.905(k), Utilities Code, is repealed.
         SECTION 3.  The Public Utility Commission of Texas shall
  adopt rules to implement Section 39.905, Utilities Code, as amended
  by this Act, not later than January 1, 2024.
         SECTION 4.  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, 2023.