BILL ANALYSIS

Senate Research Center	S.B. 2994
	By: Johnson
	Business & Commerce
	4/11/2025
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

As Texas' population grows, ERCOT expects a sharp rise in demand for electricity over the next decade. In addition to increasing the supply of energy to the grid, another important aspect of ensuring grid reliability in the years to come is the conservation and efficient use of electricity. Current law sets goals for demand reduction and energy savings as a percentage of demand growth experienced by each individual electric utility, with performance bonuses awarded by the Public Utility Commission of Texas (PUC) for exceedance of these goals.

S.B. 2994 encourages further energy efficiency by raising baseline goals for energy demand reduction and energy savings and by removing load management from goal calculations. Removing load management programs from the goals helps paint a more accurate picture of energy efficiency and savings. S.B. 2994 also instructs the PUC to evaluate the goals and benefit structure and amend them as necessary at the end of a three-year period. S.B. 2994 marks a novel collaboration between electric utilities, the PUC, and a number of other stakeholders with the common goal of improving energy reliability and stability in Texas.

S.B. 2994 helps Texas to improve grid stability and energy reliability by removing load management from demand reduction and energy savings goals, increasing utilities' annual demand reduction and energy savings goals, and instructing the PUC to evaluate the goals at the end of a three-year term.

As proposed, S.B. 2994 amends current law relating to energy efficiency goals and programs.

RULEMAKING AUTHORITY

Rulemaking authority is expressly granted to the Public Utility Commission of Texas in SECTION 1 (Section 39.905, Utilities Code) of this bill.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 39.905, Utilities Code, by amending Subsections (a), (b), (e), (f), (g), (h), (i), and (j) and adding Subsections (a-1),(i-1), and (i-2), as follows:

(a) Requires the Public Utility Commission of Texas (PUC) to ensure that:

(1) makes a nonsubstantive change to this subdivision;

(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, summer and winter peak net demand, or energy costs;

(3) each electric utility administers energy efficiency programs that:

(A) cause the utility's portfolio of programs to be cost-effective;

(B) for an electric utility in an area of the state not open to competition, include demand response programs;

(C) acquire certain minimum quantifiable reductions in demand annually from energy efficiency programs, without the inclusion of demand reduction achieved through load management programs;

(D) acquire energy savings of no less than a certain level;

(E) Beginning with the 2027 calendar year, the goals in Subsections (a)(3)(C) and (a)(3)(D) are required to increase by three percent each year through 2028. Requires the PUC to update the goals to set appropriate energy savings increases for years 2028 and thereafter;

(F) Requires the PUC, for an electric utility in an area of the state open to competition, to claim energy savings and demand reduction from programs described by Section 39.919(b)(9) (relating to requiring that certain rules provide for the adoption of a program that allows certain retail electric providers to obtain certain funding). Requires the PUC to adopt rules that establish a deemed savings and avoided demand per device to be used for this purpose;

(4) each electric utility annually provides, through certain methods, certain incentives sufficient for certain entities to acquire additional cost-effective energy efficiency, subject to cost ceilings established by the PUC, for the utility's residential and commercial customers;

(5) each electric utility in the ERCOT region uses its best efforts to encourage and facilitate the involvement of the region's retail electric providers in the delivery of certain programs, under Section 39.905 (Goal for Energy Efficiency), including programs for demand-side renewable energy systems that meet certain criteria.

Deletes existing text providing that it is the goal of the legislature that each electric utility annually provide, through certain methods, certain incentives, subject to cost ceilings established by the PUC, for the utility's residential and commercial customers equivalent to not less than certain amounts; for an electric utility whose amount of energy efficiency to be acquired under this subsection is equivalent to certain levels, not less than certain amounts; each electric utility in the ERCOT region is required to 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 certain demand-side renewable energy systems; retail electric providers in the ERCOT region, and electric utilities outside of the ERCOT region, are required to provide customers with energy efficiency educational materials; and, notwithstanding Subsection (a)(3), electric utilities are required to continue to make available, at 2007 funding and participation levels, any load management standard offer programs developed for industrial customers and implemented prior to May 1, 2007.

(a-1) Provides that utilities subject to Sections 39.9051 (Energy Efficiency for Municipally Owned Utilities) or 39.9052 (Energy Efficiency for Electric Cooperatives) are not subject to the requirements of this section, although such utilities are authorized to offer programs described by this section.

(b) Requires the PUC to provide oversight and adopt rules and procedures to ensure that the utilities can achieve the goals of this section, including 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 certain sections and establishing cost caps that meet certain criteria. Makes conforming and nonsubstantive changes.

(e) Prohibits money the utility uses under this subsection from exceeding 10 percent of the greater of the amount the PUC approved for energy efficiency programs in the utility's most recent proceeding, rather than full rate proceeding, in which an energy efficiency cost recovery factor is set.

(f) Authorizes electric utilities to participate in the process enabled by Section 17.007 (Identification Process for Customer Service Benefits) to validate customer eligibility. Requires the PUC to ensure that annual expenditures for the low-income energy efficiency programs, rather than both the targeted and the standard offer efficiency programs, of each unbundled transmission and distribution utility are not less than 15 percent of the transmission and distribution utility's energy efficiency budget for the year. Provides that low-income programs administered under this section do not have to meet minimum cost-effectiveness standards but should be evaluated for opportunities to improve cost-effectiveness while delivering services to low-income customers.

Deletes existing text authorizing each unbundled transmission and distribution utility to include in its energy efficiency plan a targeted low-income energy efficiency program, and the savings achieved by the programs shall count toward the transmission and distribution utility's energy efficiency goal. Deletes existing text requiring the PUC to ensure that annual expenditures for the targeted low-income energy efficiency programs of each unbundled transmission and distribution utility are not less than 10 percent of the transmission and distribution utility's energy efficiency budget for the year. Deletes existing text requiring that a targeted low-income energy efficiency program comply with the same audit requirements that apply to federal weatherization subrecipients. Deletes existing text requiring the state agency that administers the federal weatherization assistance program to participate in energy efficiency cost recovery factor proceedings related to expenditures under this subsection to ensure that targeted low-income weatherization programs are consistent with federal weatherization programs and adequately funded.

(g) Authorizes the PUC to 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 limitations caused by the imposition of cost caps on the energy efficiency cost recovery factor and interruptions in the supply chain.

Deletes existing text authorizing the PUC to provide for a good cause exemption to a utility's liability for an administrative penalty or other sanction if the utility fails to certain goals and the failure to meet the goal is caused by certain factors outside of the utility's control, including insufficient demand by retail electric providers and competitive energy service providers for program incentive funds made available by the utility through its programs. Makes nonsubstantive changes.

(h) Authorizes the utility, for an electric utility operating in an area not open to competition, to achieve the goal of this section by developing, subject to PUC approval, new programs other than standard offer programs and market transformation programs, provided, rather than to the extent, that the new programs do not render the portfolio of programs no longer cost-effective, rather than that the new programs satisfy the same cost-effectiveness requirements as standard offer programs and market transformation programs.

(i) Authorizes a utility, for an electric utility operating in an area open to competition that provides to the PUC a notice and opportunity for hearing that the requirements under Subsection (a) cannot be met through retail electric providers or competitive energy service providers in hard-to-reach areas, to achieve the goal of this section by providing rebate or incentive funds directly to customers in those areas to promote or facilitate the success of programs implemented under this section. Requires that the electric utility provide the notice to the PUC at least once every two years. Requires the PUC, for purposes of this subsection, to adopt rules that define a hard-to-reach area.

Deletes existing text authorizing the utility, for an electric utility operating in an area open to competition, on demonstration to the PUC, 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, to achieve the goal of this section by providing rebate or incentive funds directly to customers in the rural area to promote or facilitate the success of programs implemented under this section.

(i-1) Provides that a person who contests an electric utility notice in a hearing described by Subdivision (i) has the burden of proving to the PUC that the requirements of Subsection (a) can be met through retail electric providers or competitive energy service providers in hard-to-reach areas.

(i-2) Authorizes an electric utility described by Subdivision (i) to receive information identifying low-income electric customers under Section 17.007(a) (relating to requiring the Health and Human Services Commission, on request of the PUC, to assist in developing an automatic process for identifying certain customers to certain entities). Provides that each electric utility that submits a request to the PUC to receive such information agrees to reimburse the PUC for the cost of the development of the low-income electric customer matching service on terms agreed to by the PUC and the low-income electric customer list administrator. Authorizes an electric utility that receives information pursuant to this subsection to only use such information implementing programs adopted under this section and prohibits the utility from sharing or disclosing such information to affiliates or third parties unrelated to these purposes.

(j) Deletes existing text prohibiting an electric utility from using energy audit programs to achieve the goal of this section if the programs do not constitute more than three percent of total program costs under this section.

SECTION 2. Requires the PUC to adopt rules to implement Section 39.905, Utilities Code, as amended by this Act, not later than September 1, 202_.

SECTION 3. Effective date: upon passage or September 1, 2025.