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.