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A BILL TO BE ENTITLED
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AN ACT
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relating to energy efficiency goals and programs, public |
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information regarding energy efficiency programs, and the |
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participation of loads in certain energy markets. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 39.905, Utilities Code, is amended by |
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amending Subsections (a), (b), (e), (f), (g), (h), (i), and (j) and |
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adding Subsections (a-1), (a-2), (a-3), (f-1), (i-1), (i-2), and |
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(l) to read as follows: |
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(a) The commission shall ensure [It is the goal of the |
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legislature] that: |
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(1) electric utilities [will] administer energy |
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efficiency incentive programs in a market-neutral, |
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nondiscriminatory manner but will not offer underlying competitive |
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services; |
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(2) all customers, in all customer classes, [will] |
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have a choice of and access to energy efficiency alternatives and |
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other choices from the market that allow each customer to reduce |
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energy consumption, summer and winter peak demand, summer and |
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winter peak net demand, or energy costs; |
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(3) each electric utility administers energy |
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efficiency programs that: |
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(A) cause the utility's portfolio of programs to |
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be cost-effective; |
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(B) for an electric utility operating in an area |
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open to competition, acquire the following minimum quantifiable |
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reductions in demand annually without the inclusion of demand |
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reduction achieved through load management programs: |
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(i) 2,500 kilowatts for utilities with an |
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average of less than 300,000 total eligible residential and |
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commercial customers in the previous five years; |
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(ii) 7,500 kilowatts for utilities with an |
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average of greater than 300,000 but less than 750,000 total |
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eligible residential and commercial customers in the previous five |
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years; |
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(iii) 12,500 kilowatts for utilities with |
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an average of greater than 750,000 but less than 1.5 million total |
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eligible residential and commercial customers in the previous five |
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years; |
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(iv) 37,500 kilowatts for utilities with an |
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average of greater than 1.5 million but less than 3 million total |
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eligible residential and commercial customers in the previous five |
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years; |
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(v) 50,000 kilowatts for utilities with an |
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average of greater than 3 million but less than 5 million total |
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eligible residential and commercial customers in the previous five |
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years; or |
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(vi) 62,500 kilowatts for utilities with an |
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average of greater than 5 million total eligible residential and |
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commercial customers in the previous five years; |
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(C) for an electric utility operating in an area |
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not open to competition, include demand response programs and |
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acquire the following minimum quantifiable reductions in demand |
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annually: |
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(i) 5,000 kilowatts for utilities with an |
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average of less than 300,000 total eligible residential and |
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commercial customers in the previous five years; |
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(ii) 15,000 kilowatts for utilities with an |
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average of greater than 300,000 but less than 750,000 total |
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eligible residential and commercial customers in the previous five |
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years; |
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(iii) 25,000 kilowatts for utilities with |
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an average of greater than 750,000 but less than 1.5 million total |
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eligible residential and commercial customers in the previous five |
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years; |
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(iv) 75,000 kilowatts for utilities with an |
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average of greater than 1.5 million but less than 3 million total |
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eligible residential and commercial customers in the previous five |
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years; |
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(v) 100,000 kilowatts for utilities with an |
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average of greater than 3 million but less than 5 million total |
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eligible residential and commercial customers in the previous five |
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years; or |
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(vi) 125,000 kilowatts for utilities with |
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an average of greater than 5 million total eligible residential and |
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commercial customers in the previous five years; and |
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(D) acquire annual energy savings of no less than |
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75 percent of what the utility achieved in energy savings in 2024 as |
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previously reported by the utility to the commission; |
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(4) each electric utility annually provides [will |
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provide], through market-based standard offer programs or through |
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targeted market-transformation programs, incentives sufficient for |
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retail electric providers and competitive energy service providers |
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to acquire additional cost-effective energy efficiency, subject to |
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cost ceilings established by the commission, for the utility's |
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residential and commercial customers; and |
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(5) [equivalent to: |
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[(A) not less than: |
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[(i) 30 percent of the electric utility's |
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annual growth in demand of residential and commercial customers by |
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December 31 of each year beginning with the 2013 calendar year; and |
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[(ii) the amount of energy efficiency to be |
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acquired for the utility's residential and commercial customers for |
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the most recent preceding year; and |
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[(B) for an electric utility whose amount of |
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energy efficiency to be acquired under this subsection is |
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equivalent to at least four-tenths of one percent of the electric |
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utility's summer weather-adjusted peak demand for residential and |
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commercial customers in the previous calendar year, not less than: |
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[(i) four-tenths of one percent of the |
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utility's summer weather-adjusted peak demand for residential and |
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commercial customers by December 31 of each subsequent year; and |
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[(ii) the amount of energy efficiency to be |
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acquired for the utility's residential and commercial customers for |
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the most recent preceding year; |
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[(4)] each electric utility in the ERCOT region uses |
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[shall use] its best efforts to encourage and facilitate the |
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involvement of the region's retail electric providers in the |
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delivery of efficiency programs [and demand response programs] |
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under this section, including programs for demand-side renewable |
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energy systems that[: |
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[(A) use distributed renewable generation, as |
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defined by Section 39.916; or |
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[(B)] reduce the need for energy consumption by |
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using a renewable energy technology, a geothermal technology [heat |
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pump], a solar water heater, or another natural mechanism of the |
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environment[; |
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[(5) retail electric providers in the ERCOT region, |
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and electric utilities outside of the ERCOT region, shall provide |
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customers with energy efficiency educational materials; and |
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[(6) notwithstanding Subsection (a)(3), electric |
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utilities shall continue to make available, at 2007 funding and |
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participation levels, any load management standard offer programs |
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developed for industrial customers and implemented prior to May 1, |
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2007]. |
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(a-1) Beginning with the 2027 calendar year, the minimum |
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goals in Subsections (a)(3)(B), (C), and (D) are increased by 2.5 |
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percent each year through 2030. Beginning with the 2031 calendar |
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year, the commission shall update the minimum goals with |
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appropriate demand reductions and energy savings. |
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(a-2) The commission shall: |
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(1) allow an electric utility operating in an area |
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open to competition to claim energy savings and demand reduction |
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for energy efficiency incentive programs supporting the |
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requirements of Section 39.919(b)(9); and |
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(2) by rule establish a deemed savings and avoided |
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demand per device to be used for the purposes of Subdivision (1). |
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(a-3) The commission may not allow an electric utility |
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operating in an area open to competition to claim energy savings and |
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demand reduction from demand response programs offered by a retail |
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electric provider. |
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(b) The commission shall provide oversight and adopt rules |
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and procedures to ensure that the utilities can achieve the goals |
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[goal] of this section, including: |
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(1) establishing an energy efficiency cost recovery |
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factor for ensuring timely and reasonable cost recovery for utility |
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expenditures made to satisfy the goals [goal] of this section; |
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(2) establishing an incentive under Section 36.204 to |
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reward utilities administering programs under this section that |
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exceed the minimum goals established by this section; |
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(3) providing that an incentive achieved under this |
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section: |
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(A) may not be included in an electric utility's |
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revenues or net income for the purposes of establishing a utility's |
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rates or the utility's earnings monitoring report under Section |
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36.157, 36.210, or 36.212; and |
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(B) entitles the electric utility to receive an |
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amount equal to the net benefits realized in meeting the applicable |
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demand reduction and energy savings goals, provided that: |
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(i) the net benefits must be calculated by |
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subtracting the total program costs from the total of the avoided |
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costs associated with the portfolio of programs administered by the |
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utility; |
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(ii) a utility that exceeds its demand |
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reduction and energy savings goals through energy efficiency |
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programs is entitled to receive an incentive equal to one percent of |
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the net benefits for every two percent that the energy savings goal |
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has been exceeded, with a maximum of 25 percent of the utility's |
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total net benefits; and |
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(iii) shareholder incentives must be |
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excluded from program costs and in the determination of future year |
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shareholder incentives; |
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(4) [(3)] providing a utility that is unable to |
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establish an energy efficiency cost recovery factor in a timely |
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manner due to a rate freeze with a mechanism to enable the utility |
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to: |
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(A) defer the costs of complying with this |
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section; and |
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(B) recover the deferred costs through an energy |
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efficiency cost recovery factor on the expiration of the rate |
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freeze period; |
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(5) [(4)] ensuring that the costs associated with |
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programs provided under this section and any shareholder incentive |
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[bonus] awarded are borne by the customer classes that receive the |
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services under the programs; |
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(6) establishing cost ceilings that: |
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(A) allow electric utilities to meet the goals of |
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this section; and |
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(B) exclude: |
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(i) any shareholder incentive; and |
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(ii) any third-party evaluation |
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measurement and verification costs; |
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(7) [(5)] ensuring the program rules encourage the |
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value of the incentives to be passed on to the end-use customer; |
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(8) [(6)] ensuring that programs are evaluated, |
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measured, and verified using a framework established by the |
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commission that promotes effective program design and consistent |
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and streamlined reporting; and |
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(9) [(7)] ensuring that an independent organization |
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certified under Section 39.151 allows load participation in all |
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energy markets for residential, commercial, and industrial |
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customer classes, either directly or through retail electric |
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providers or aggregations as authorized by commission rule or the |
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independent organization [aggregators of retail customers], to the |
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extent that load participation by each of those customer classes |
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complies with reasonable requirements adopted by the organization |
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relating to the reliability and adequacy of the regional electric |
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network and in a manner that will increase market efficiency, |
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competition, and customer benefits. |
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(e) An electric utility may use money approved by the |
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commission for energy efficiency programs to perform necessary |
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energy efficiency research and development to foster continuous |
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improvement and innovation in the application of energy efficiency |
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technology and energy efficiency program design and |
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implementation. Money the utility uses under this subsection may |
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not exceed 10 percent of the greater of: |
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(1) the amount the commission approved for energy |
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efficiency programs in the utility's most recent [full rate] |
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proceeding in which an energy efficiency cost recovery factor is |
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set; or |
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(2) the commission-approved expenditures by the |
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utility for energy efficiency in the previous year. |
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(f) Each electric [unbundled transmission and distribution] |
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utility operating in an area open to competition shall include in |
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its energy efficiency plan a [targeted] low-income energy |
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efficiency program, and the savings achieved by the program shall |
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count toward the [transmission and distribution] utility's energy |
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efficiency goal. The commission shall ensure that, for each |
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program year, not less than 15 percent of the total energy |
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efficiency budget of each electric utility operating in an area |
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open to competition is dedicated to low-income energy efficiency |
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programs. The commission may determine that a higher level of |
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funding above the minimum requirement should [determine the |
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appropriate level of funding to] be allocated to [both targeted and |
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standard offer] low-income energy efficiency programs in each |
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utility's [unbundled transmission and distribution utility] |
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service area. The level of funding for low-income energy |
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efficiency programs shall be provided from money approved by the |
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commission for the [transmission and distribution] utility's |
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energy efficiency programs. [The commission shall ensure that |
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annual expenditures for the targeted low-income energy efficiency |
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programs of each unbundled transmission and distribution utility |
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are not less than 10 percent of the transmission and distribution |
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utility's energy efficiency budget for the year. A targeted |
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low-income energy efficiency program must comply with the same |
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audit requirements that apply to federal weatherization |
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subrecipients.] In an energy efficiency cost recovery factor |
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proceeding related to expenditures under this subsection, the |
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commission shall make findings of fact regarding whether the |
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utility meets requirements imposed under this subsection. A |
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low-income energy efficiency program administered under this |
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section is not required to meet minimum cost-effectiveness |
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standards, but the commission shall evaluate the program for |
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opportunities to improve cost-effectiveness while delivering |
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services to low-income customers. A utility may use the customer |
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identification process established under Section 17.007 to |
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validate customer eligibility. [The state agency that administers |
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the federal weatherization assistance program shall participate in |
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energy efficiency cost recovery factor proceedings related to |
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expenditures under this subsection to ensure that targeted |
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low-income weatherization programs are consistent with federal |
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weatherization programs and adequately funded.] |
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(f-1) Notwithstanding Subsection (f), an electric utility |
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operating in an area open to competition may request that the |
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commission grant an exemption for good cause for a program year to |
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allow the utility to dedicate not less than 10 percent of the total |
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energy efficiency budget of the utility to low-income energy |
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efficiency programs. |
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(g) The commission may provide for a good cause exemption to |
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a utility's liability for an administrative penalty or other |
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sanction if the utility fails to meet a goal for energy efficiency |
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under this section and the utility's failure to meet the goal is |
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caused by one or more factors outside of the utility's control, |
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including: |
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(1) limitations caused by the imposition of cost |
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ceilings on the energy efficiency cost recovery factor; |
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(2) insufficient demand [by retail electric providers |
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and competitive energy service providers] for program incentive |
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funds made available by the utility through its programs; |
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(3) [(2)] changes in building energy codes; [and] |
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(4) [(3)] changes in government-imposed appliance or |
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equipment efficiency standards; or |
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(5) interruptions in the supply chain. |
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(h) For an electric utility operating in an area not open to |
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competition, the utility may achieve the goal of this section by: |
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(1) providing rebate or incentive funds directly to |
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customers to promote or facilitate the success of programs |
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implemented under this section; or |
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(2) developing, subject to commission approval, new |
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programs other than standard offer programs and market |
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transformation programs, provided [to the extent] that the new |
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programs do not render the portfolio of programs no longer |
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cost-effective [satisfy the same cost-effectiveness requirements |
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as standard offer programs and market transformation programs]. |
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(i) For an electric utility operating in an area open to |
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competition that provides[, on demonstration] to the commission |
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notice, sufficient under commission rules or determined to be |
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sufficient by the commission, [after a contested case hearing,] |
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that the requirements under Subsection (a) cannot be met in |
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hard-to-reach areas [a rural area] through retail electric |
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providers or competitive energy service providers, the utility may |
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achieve the goal of this section by providing rebate or incentive |
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funds directly to customers in those areas [the rural area] to |
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promote or facilitate the success of programs implemented under |
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this section. A notice provided under this section expires on the |
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second anniversary of the date the notice was provided. The |
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commission by rule shall define a hard-to-reach area for the |
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purposes of this subsection. |
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(i-1) The commission shall provide an opportunity for a |
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hearing for a person to contest an electric utility notice provided |
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under Subsection (i). The person who contests the notice has the |
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burden of proving to the commission that the requirements of |
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Subsection (a) can be met through retail electric providers or |
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competitive energy service providers in hard-to-reach areas. |
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(i-2) An electric utility that provides a notice under |
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Subsection (i) may use the customer identification process |
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established under Section 17.007 for the purposes of Subsection |
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(i). Each electric utility that submits a request to the commission |
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or the Health and Human Services Commission to receive customer |
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information must reimburse the appropriate agency for the prorated |
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cost of the development of the low-income electric customer |
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matching service on terms agreed to by the agency and the low-income |
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electric customer list administrator. An electric utility that |
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receives information under this subsection may use the information |
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only to implement a program adopted under this section and may not |
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share or disclose the information to an affiliate or third party |
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unrelated to that purpose. |
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(j) An electric utility may use energy audit programs to |
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achieve the goal of this section if[: |
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[(1) the programs do not constitute more than three |
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percent of total program costs under this section; and |
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[(2)] the addition of the programs does not cause a |
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utility's portfolio of programs to no longer be cost-effective. |
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(l) A municipally owned utility subject to Section 39.9051 |
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or an electric cooperative may offer programs described by this |
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section but is not subject to the requirements of this section. |
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SECTION 2. The Public Utility Commission of Texas shall |
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adopt rules to implement Section 39.905, Utilities Code, as amended |
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by this Act, not later than March 1, 2027. |
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SECTION 3. This Act takes effect immediately if it receives |
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a vote of two-thirds of all the members elected to each house, as |
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provided by Section 39, Article III, Texas Constitution. If this |
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Act does not receive the vote necessary for immediate effect, this |
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Act takes effect September 1, 2025. |
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* * * * * |