By: Schwertner, King S.B. No. 2012

(In the Senate - Filed March 9, 2023; March 13, 2023, read first time and referred to Committee on Business & Commerce; April 4, 2023, reported adversely, with favorable Committee Substitute by the following vote: Yeas 11, Nays 0; April 4, 2023, sent to printer.) Click here to see the committee vote

COMMITTEE SUBSTITUTE FOR S.B. No. 2012 By: Schwertner

A BILL TO BE ENTITLED

AN ACT

relating to electricity services; increasing an administrative penalty.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Sections 15.023(b-1) and (f), Utilities Code, are amended to read as follows:

(b-1) Notwithstanding Subsection (b), the penalty for a violation of a voluntary mitigation plan entered into under Subsection (f) or of a provision of Section 35.0021 or 38.075 may be in an amount not to exceed $1,000,000 for a violation. Each day a violation continues or occurs is a separate violation for purposes of imposing a penalty.

(f) The commission and a person may develop and enter into a voluntary mitigation plan relating to a violation of Section 39.157 or rules adopted by the commission under that section. The commission may approve the plan only if the commission determines that the plan is in the public interest. The voluntary mitigation plan must be reviewed at least once every two years and not later than the 90th day after the implementation date of a wholesale market design change. As part of the review, the commission must determine whether the voluntary mitigation plan remains in the public interest. If the commission determines that the voluntary mitigation plan is no longer in the public interest, the commission and the person must agree to a modification of the plan or the commission must terminate the plan. Adherence [If the commission and a person enter into a voluntary mitigation plan, adherence] to the plan may be considered in determining whether a violation occurred and, if so, the penalty to be assessed [constitutes an absolute defense against an alleged violation with respect to activities covered by the plan].

SECTION 2. The heading to Section 39.159, Utilities Code, as added by Chapter 426 (S.B. 3), Acts of the 87th Legislature, Regular Session, 2021, is amended to read as follows:

Sec. 39.159. POWER REGION RELIABILITY AND DISPATCHABLE GENERATION.

SECTION 3. Section 39.159, Utilities Code, as added by Chapter 426 (S.B. 3), Acts of the 87th Legislature, Regular Session, 2021, is amended by amending Subsection (b) and adding Subsections (b-1) and (b-2) to read as follows:

(b) The commission shall ensure that the independent organization certified under Section 39.151 for the ERCOT power region:

(1) establishes requirements to meet the reliability needs of the power region;

(2) 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) 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;

(4) develops appropriate qualification and performance requirements for providing services under Subdivision (3), including appropriate penalties for failure to provide the services; [and]

(5) sizes the services procured under Subdivision (3) to prevent prolonged rotating outages due to net load variability in high demand and low supply scenarios; and

(6) allocates the cost of providing ancillary services and reliability services procured under this section on a semiannual basis among dispatchable generation facilities, non-dispatchable generation facilities, and load serving entities in proportion to their contribution to unreliability during the highest net load hours in the preceding six months, as determined by the commission based on a number of hours adopted by the commission for that six-month period, as follows:

(A) for each dispatchable generation facility, the difference between the forced outage rate of the facility and the forced outage rate of the facility during the corresponding season for the three years prior to the current season, multiplied by the installed capacity of the facility;

(B) for non-dispatchable generation facilities, the difference between the mean of the lowest quartile generation for each non-dispatchable generation facility and the mean generation of the facility; and

(C) for load serving entities, the difference between the mean of the highest quartile of total load and the mean of total load in the ERCOT power region, allocated to each load serving entity on a load ratio share basis.

(b-1) Subsection (b)(6) applies only to a generation facility or load serving entity that has participated in the ERCOT market for at least one year, including a load serving entity whose parent company or affiliate has participated in the ERCOT market for at least one year.

(b-2) Subsection (b)(6) does not apply to electric energy storage.

SECTION 4. Subchapter D, Chapter 39, Utilities Code, is amended by adding Sections 39.1595 and 39.1596 to read as follows:

Sec. 39.1595. RELIABILITY PROGRAM. (a) Under Section 39.159(b), as added by Chapter 426 (S.B. 3), Acts of the 87th Legislature, Regular Session, 2021, or other law, the commission may not adopt a reliability program for the ERCOT power region that requires the purchase of capacity credits earned by generators to support a reserve margin mandate unless the commission ensures that:

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

(2) credits are available only for dispatchable generation, excluding load resources and electric energy storage;

(3) the cost of credits is assigned to generation facilities and load serving entities according to Section 39.159(b)(6), as added by Chapter 426 (S.B. 3), Acts of the 87th Legislature, Regular Session, 2021;

(4) the program includes appropriate penalties for a failure to perform during a reliability event caused by factors within the reasonable control of the generator, including a requirement for a generator to buy back credits that the generator sold but for which the generator did not provide the required capacity;

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

(6) all elements of the program are initially implemented on a single starting date;

(7) the terms of the program and any associated market rules do not assign costs, credit, or collateral for the program in a manner that provides a cost advantage to load serving entities who own, or whose affiliates own, generation facilities;

(8) generators who receive credits may not self-arrange credit exchanges with any affiliated competitive retail electric providers;

(9) secured financial credit and collateral requirements are adopted for the program to ensure that other market participants do not bear the risk of nonperformance or nonpayment;

(10) qualifying generators do not receive credits that exceed the amount of generation bid into the forward market on an individual resource basis; and

(11) the wholesale electric market monitor has the authority and necessary resources to investigate potential instances of market manipulation by program participants, including financial and physical actions, and recommend penalties to the commission.

(b) This section does not require the commission to adopt a reliability program that requires an entity to purchase capacity credits.

(c) The commission and the independent organization certified under Section 39.151 for the ERCOT power region shall consider comments and recommendations from a technical advisory committee established under the bylaws of the independent organization that includes market participants when adopting and implementing a program described by Subsection (a), if any.

(d) If the commission adopts a program described by Subsection (a), not later than January 1, 2029, the commission shall require the wholesale electric market monitor to submit to the commission and the legislature a report on the costs and benefits of continuing the program. This subsection expires September 1, 2029.

Sec. 39.1596. GRID RELIABILITY LEGISLATIVE OVERSIGHT COMMITTEE. (a) In this section, "committee" means the Grid Reliability Legislative Oversight Committee established under this section.

(b) The Grid Reliability Legislative Oversight Committee is created to oversee the commission's implementation of Section 35.004, Sections 39.159 and 39.160, as added by Chapter 426 (S.B. 3), Acts of the 87th Legislature, Regular Session, 2021, and Section 39.1595.

(c) The committee is composed of eight members as follows:

(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) An appointed member of the committee serves at the pleasure of the appointing official.

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

(f) A member of the committee may not receive compensation for serving on the committee but 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) The committee shall meet at least twice each year at the call of either co-chair and shall meet at other times at the call of either co-chair, as that officer determines appropriate.

(h) Chapter 551, Government Code, applies to the committee.

(i) The committee shall 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. The report must include an update on the progress of and issues related to the commission's implementation of the laws under the committee's oversight as provided by Subsection (b).

SECTION 5. Subchapter D, Chapter 39, Utilities Code, is amended by adding Section 39.166 to read as follows:

Sec. 39.166. RETAIL SALES REPORT. (a) Each retail electric provider that offers electricity for sale shall report to the commission:

(1) its annual retail sales in this state;

(2) the annual retail sales of its affiliates by number of customers, kilowatts per hour sold, and revenue from kilowatts per hour sold by customer class; and

(3) any other information the commission requires relating to affiliations between retail electric providers.

(b) The commission by rule shall prescribe the nature and detail of the reporting requirements. The commission may accept information reported under other law to satisfy the requirements of this section. Information reported under this section is confidential and not subject to disclosure if the information is competitively sensitive information. The commission shall administer the reporting requirements in a manner that ensures the confidentiality of competitively sensitive information.

SECTION 6. Chapter 39, Utilities Code, is amended by adding Subchapter O to read as follows:

SUBCHAPTER O. CONSTRUCTION OF DISPATCHABLE GENERATION FACILITIES

FOR RELIABILITY

Sec. 39.701. CAPACITY EVALUATION. (a) The commission annually shall determine whether there is dispatchable generating capacity sufficient to ensure the reliability and adequacy of the regional electrical network installed in the ERCOT power region.

(b) If the commission determines that dispatchable generating capacity sufficient to ensure the reliability and adequacy of the regional electrical network is not installed in the ERCOT power region, the commission shall select entities to install new dispatchable generation capacity under Section 39.702.

(c) If the commission determines in two consecutive years that dispatchable generating capacity sufficient to ensure the reliability and adequacy of the regional electrical network is not installed in the ERCOT power region, the commission shall discontinue any reliability program described by Section 39.1595 in operation on the date of the second determination.

Sec. 39.702. CONSTRUCTION OF DISPATCHABLE GENERATION FACILITIES FOR RELIABILITY. (a) In this section, "entity" means an electric cooperative, a municipally owned utility, a transmission and distribution utility or affiliate, or a power generation company.

(b) Notwithstanding any other law, the commission shall, after a determination under Section 39.701(b), through a competitive bid process, select entities to install a sufficient amount of new dispatchable generation capacity to address the projected shortfall determined under Section 39.701.

(c) Costs incurred by an entity under this section related to the provision of additional dispatchable generation must be allocated to load-serving entities on a load-ratio share basis through administrative charges assessed by the independent organization certified under Section 39.151 for the ERCOT power region on load-serving entities following a cost recovery proceeding before the commission. The commission by rule shall adopt procedures for an entity to recover the entity's costs incurred in installing a dispatchable generation facility that are similar to procedures used under Section 36.214.

(d) If the commission selects an entity to install new dispatchable generation capacity under this section, the commission shall find that the generation facilities are used and useful to the entity in providing service for purposes of this section, regardless of the extent of the entity's actual use of the facilities.

(e) Notwithstanding any other law, a transmission and distribution utility that installs dispatchable generation capacity under this section shall register as a power generation company.

(f) The commission shall waive the requirements of Section 39.154 for a generation facility installed under this section.

SECTION 7. (a) The changes in law made by this Act to Chapter 15, Utilities Code, apply only to a violation committed on or after the effective date of this Act. A violation committed before the effective date of this Act is governed by the law in effect when the violation was committed, and the former law is continued in effect for that purpose.

(b) Not later than September 1, 2024, the Public Utility Commission of Texas shall implement the changes in law made by this Act to Section 39.159(b), Utilities Code, as added by Chapter 426 (S.B. 3), Acts of the 87th Legislature, Regular Session, 2021.

(c) The Public Utility Commission of Texas shall make the first determination required by Section 39.701(a), Utilities Code, as added by this Act, not later than the fourth anniversary of the date a program described by Section 39.1595, Utilities Code, as added by this Act, is implemented.

SECTION 8. This Act takes effect September 1, 2023.

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