BILL ANALYSIS

 

 

Senate Research Center	C.S.S.B. 1075
88R23271 JXC-F	By: King
	Business & Commerce
	4/19/2023
	Committee Report (Substituted)

 

 

 

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

 

Section 39.918, Utilities Code, was passed in 2021 (H.B. 2483) in the aftermath of Winter Storm Uri to allow transmission and distribution utilities to lease temporary emergency generation to be used during load shed events or otherwise when there is a widespread power outage, such as after a storm or hurricane. Protections were included such that this temporary emergency generation did not compete with competitive generation or otherwise distort the generation market. These assets may only be used to protect public health and safety in emergencies, not to sell power into the wholesale market. And the law has a sunset of September 1, 2029.

 

Since the passage of the 2021 law, utilities have deployed these assets multiple times for the benefit of Texans in emergencies. But the requirement that the utilities lease, not own, these assets makes them more expensive, because the utilities must pay the margin of a lessee that would not be incurred if the utilities owned the assets.

 

There have been questions raised about when these assets can be used, how much a utility can procure to protect public health and safety, and how these costs should be reviewed for recovery by the Public Utility Commission of Texas (PUC).

 

S.B. 1075 maintains the market safeguards from the 2021 legislation to prevent these emergency assets from competing with competitive generation or distorting that market.  But it allows utility ownership of those assets so that this public health and safety tool is less expensive to utility customers. The bill modifies the statutory use cases for when the assets can be used to include outages that affect critical infrastructure, declared disasters, and as directed by certain government officials. It also addresses cost recovery issues that have arisen at the PUC, as well as the amount of assets that a utility may procure. And it eliminates the September 1, 2029, sunset provision.

 

Electric utilities support this legislation. Generators and cities that intervene in rate cases may oppose the legislation.

 

(Original Author's/Sponsor's Statement of Intent)

 

C.S.S.B. 1075 amends current law relating to facilities and construction machinery used to respond to power outages.

 

RULEMAKING AUTHORITY

 

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

 

SECTION BY SECTION ANALYSIS

 

SECTION 1. Amends Section 39.918, Utilities Code, as follows:

 

Sec. 39.918. New heading: UTILITY FACILITIES FOR RESPONDING TO SIGNIFICANT POWER OUTAGE. (a) Defines "significant power outage." Deletes existing text defining "widespread power outage."

 

(a-1) Authorizes the Texas Division of Emergency Management, the independent organization certified under Section 39.151 (Essential Organizations) for the Electric Reliability Council of Texas (ERCOT) power region, or the executive director of the Public Utility Commission of Texas (PUC) to determine that a power outage other than an outage described by Subsection (a) is a significant power outage for the purposes of this section.

 

(a-2) Entitles a transmission and distribution utility to determine whether a loss of electric power described by Subsection (a)(1)(C) (relating to an event that results in a loss of electric power that effects distribution customers served by a radial transmission or distribution facility, creates a risk to public health or safety, and has lasted or is expected to last for at least 12 hours) creates a risk to public health or safety for the purposes of determining whether the loss event is a significant power outage.

 

(b) Authorizes a transmission and distribution utility, notwithstanding any other provision of Subtitle B (Electric Utilities), to:

 

(1) lease or own and operate facilities that provide temporary emergency electric energy to aid in restoring power to the utility's distribution customers during a significant power outage; and

 

(2) makes a conforming change to this subdivision.

 

Deletes existing text authorizing a transmission and distribution utility, notwithstanding any other provision of this subtitle, to lease and operate facilities that provide temporary emergency electric energy to aid in restoring power to the utility's distribution customers during a widespread power outage in which the independent system operator has ordered the utility to shed load or the utility's distribution facilities are not being fully served by the bulk power system under normal operations.

 

(b-1) Makes conforming and nonsubstantive changes to this subsection.

 

(c) Prohibits a transmission and distribution utility that operates a facility, rather than that leases and operates facilities, under Subsection (b)(1) from selling electric energy or ancillary services from the facility, rather than those facilities. Requires the utility, as soon as reasonably practicable after the utility deploys the facility, to provide written notice to the PUC and a written market notice to advise competitive market participants of the details of the deployment. Requires the utility, not later than the fifth business day after the date the deployment ends, to file a report, in a form approved by the PUC, providing the details of the deployment, including the start and end times of the deployment, the number of kilowatts or megawatts deployed, the number of facilities used, the locations of the facilities, and any other information required by the PUC.

 

(d) Makes a nonsubstantive change to this subsection.

 

(e) Requires a transmission and distribution utility that operates a facility, rather than that leases and operates facilities, under Subsection (b)(1) to ensure, to the extent reasonably practicable, that retail customer usage during operation of the facility, rather than those facilities, is adjusted out of the usage reported for billing purposes by the retail customer's retail electric provider.

 

(f) Requires a transmission and distribution utility that decides to lease a facility under Subsection (b)(1), when reasonably practicable, to solicit competitive bids and consider any bids received before leasing the facility, rather than requires a transmission and distribution facility to, when reasonably practicable, use a competitive bidding process to lease facilities under Subsection (b)(1).

 

(g) Makes a conforming change to this subsection.

 

(h) Requires the PUC to allow, rather than permit:

 

(1) makes conforming changes to this subdivision; and

 

(2)� makes no changes to this subdivision.

 

(i) Requires the PUC to authorize a transmission and distribution utility to defer for recovery in a future ratemaking proceeding the incremental operations and maintenance expenses and the return, not otherwise recovered in a rate proceeding, associated with the leasing, procurement, ownership, and operation, rather than the leasing or procurement, ownership, and operation, of the facilities.

 

(j) Authorizes a transmission and distribution utility to request recovery of the reasonable and necessary costs of leasing, procuring, owning, or operating, rather than leasing or procuring, owning, and operating, facilities under this section, including any deferred expenses, through a proceeding under Section 36.210 (Periodic Rate Adjustments) or in another ratemaking proceeding. Authorizes the PUC to review costs recovered through a proceeding under Section 36.210 in the following base rate proceeding and order refunds to customers if appropriate.

 

(k) Entitles a transmission and distribution utility requesting cost recovery under Subsection (j) to select whether the costs are considered to be distribution substation equipment costs or distribution transformer costs unless the PUC has found in a previous base rate proceeding for the utility that temporary emergency electric energy costs should be categorized in a different manner. Prohibits the costs from being considered transmission costs.

 

(l) Provides that the fact that the PUC has not previously approved a facility operated under this section or a cost of leasing, procuring, owning, or operating a facility under this section is not grounds for dismissal of the facility or the cost from a proceeding under Section 36.210 or another ratemaking proceeding.

 

(m) Prohibits the total capacity of facilities a transmission and distribution utility leases or owns and operates under Subsection (b)(1) from exceeding three percent of the utility's historical peak load. Requires each transmission and distribution utility that leases or owns and operates a facility under Subsection (b)(1) to:

 

(1) assess every four years the total capacity of facilities needed to aid in restoring power during a significant power outage, considering:

 

(A) the presence and frequency of extreme weather conditions, including hurricanes, tornadoes, high winds, lightning, flooding, icing, and freezes, in all or a portion of the utility's certificated service area;

 

(B) the utility's current and planned system hardening efforts;

 

(C) the utility's current and planned vegetation management efforts;

 

(D) the utility's current and planned expenditures on traditional distribution facilities;

 

(E) the utility's current and planned expenditures on automation of its distribution system;

 

(F) the utility's allocated load shed obligation based on historical seasonal peak demand, as determined by the independent system operator;

 

(G) the presence or number of communities that are remotely located or served radially in the utility's certificated service area;

 

(H) the number or location of critical infrastructure facilities that serve the public such as hospitals, health care facilities, law enforcement facilities, fire stations, and water or wastewater facilities in the utility's certificated service area;

 

(I) the utility's emergency operations plan filed with the PUC; and

 

(J) other engineering or operational needs; and

 

(2) submit to the PUC the assessment under Subdivision (1) for review.

 

(n) Provides that the PUC:

 

(1) is authorized to:

 

(A)� notwithstanding the total capacity prescribed by Subsection (m), establish the capacity of facilities that are authorized to be operated by a transmission and distribution utility in aid of restoration for each type or category of significant power outage, with the total capacity equal to or greater than three percent of the utility's historical peak load;

 

(B) establish reasonable conditions on the operation and use of facilities, including duration times and prioritizing use to serve critical infrastructure facilities that serve the public such as hospitals, health care facilities, law enforcement facilities, fire stations, and water or wastewater facilities; and

 

(C)� require compliance with applicable law, including any rule or order of the PUC; and

 

(2) is required to establish a rebuttable presumption that the facilities leased or owned and operated under Subsection (m) are used and useful to the utility in providing service and the utility's costs of leasing or owning and operating the facilities are prudent, reasonable, necessary, and recoverable under Section 36.210 or in another ratemaking proceeding.

 

(o) Authorizes a transmission and distribution utility, notwithstanding Subsections (m) and (n), to:

 

(1) provide facilities to or use facilities from other entities as part of a mutual assistance agreement during a significant power outage; and

 

(2) lease facilities on a short-term basis in response to a significant power outage if:

 

(A) the significant power outage constitutes an emergency and the utility determines that additional facilities are necessary;

 

(B) the term of the lease is only for the duration of that emergency;

 

(C) the utility notifies the PUC of the lease not later than the 30th day after the date of the lease agreement; and

 

(D) the PUC reviews the costs incurred by the utility in a proceeding under Section 36.210 or in another ratemaking proceeding.

 

SECTION 2. Amends Section 502.146(b), Transportation Code, as follows:

 

(b) Provides that an owner is not required to register a vehicle that is used only temporarily on the highways if the vehicle is:

 

(1)-(3) makes no changes to these subdivisions;

 

(4) construction machinery, including construction machinery that is owned by a transmission and distribution utility as defined by Section 31.002 (Definitions), Utilities Code, and used to maintain or repair electrical lines or substations in response to a power outage.

 

SECTION 3. Makes application of this Act prospective.

 

SECTION 4. Provides that this Act, to the extent of any conflict, prevails over another Act of the 88th Legislature, Regular Session, 2023, relating to nonsubstantive additions to and corrections in enacted codes.

 

SECTION 5. Effective date: September 1, 2023.