On September 1, new bills passed by the 84th Texas legislature go into effect. These bills affect a variety of Texas electric market stakeholders, including transmission and distribution utilities, electric utilities, conventional and renewable energy generators, retail customers, and desalination projects. The following is a summary of new legislation impacting the Texas power market. 

Transmission and Distribution

Two bills add additional Public Utility Commission of Texas (PUCT) oversight to potential new DC ties to ERCOT for the import and export of power from other electric markets. 

  • SB 776: Relating to the authority of the PUCT to approve certain transmission facilities constructed by a municipally-owned utility

This bill requires municipally-owned utilities to obtain a certificate of convenience and necessity (CCN) before building transmission outside their municipal boundaries. The bill contains exemptions for Pattern’s Southern Cross Project and, according to the PUCT, the Tenaska Brownsville power plant. The bill allows municipally-owned utilities that build transmission outside their boundaries to recover the costs of payments in lieu of taxes in the utility’s wholesale transmission rate. The bill also has a number of provisions that relate to the governance of the Texas Municipal Power Agency.

  • SB 933: Relating to the authority of the PUCT to review transmission interconnections that enable imports or exports from the ERCOT power grid

This bill prohibits interconnecting a DC tie to import or export power from ERCOT without prior CCN approval by the PUCT. A CCN application will be required at least 180 days before seeking a Federal Energy Regulatory Commission (FERC) order related to the interconnection. The PUCT will apply the requirements of Texas Utility Code § 37.056, as well as look at whether the application is consistent with the public interest in determining whether to grant the CCN. The bill also provides that the PUCT shall approve an application under this section for the Southern Cross project within 185 days of filing the application and that the PUCT may approve “reasonable conditions to protect the public interest.”

Renewables

Several bills impact the residential solar and energy efficiency markets.

  • SB 1626: Relating to regulation by a developer of the installation of solar energy devices in a residential subdivision

This bill states that only small residential developments (those with 50 homes or fewer) can restrict homeowners from installing solar on their homes.  

  • HB 706: Relating to the procedure for claiming an exemption from ad valorem taxation of property on which a solar or wind-powered energy device is installed or constructed

This bill amends the Tax Code to include the solar and wind-powered property tax exemption among the list of exemptions that, once allowed, do not need to be claimed in subsequent years. 

  • HB 1184: Relating to authorizing certain utility cost savings and alternative fuel programs as eligible for local government energy savings performance contracts

This bill amends the Local Government Code to expand coverage of the energy savings performance contract provision, which allows local governments to finance contracts to install more efficient systems through a guarantee of future savings, to include alternative fuel programs for fleet vehicles and programs resulting in utility cost savings. 

Desalination

The legislature passed two bills in response to concerns that the current electric market structure may not support seawater desalination projects.

  • HB 4097: Relating to seawater desalination projects

This bill amends the Texas Utility Code to require the PUCT, in cooperation with transmission and distribution utilities and ERCOT, to study whether existing transmission and distribution processes are sufficient to provide adequate infrastructure for seawater desalination projects. The PUCT is required to make recommendations if it determines that statutory changes are needed to ensure adequate infrastructure is developed for seawater desalination projects. Further, the PUCT, in cooperation with ERCOT, is required to study the potential for seawater desalination projects to participate in existing demand response opportunities in the ERCOT market. The bill also amends the Texas Water Code to allow the Texas Commission on Environmental Quality (TCEQ) to issue permits authorizing diversions of state water and water discharges for seawater desalination projects. 

  • SB 991: Relating to a requirement that the General Land Office conduct a study regarding the use of wind or solar power to desalinate brackish groundwater

This bill requires the Texas General Land Office (GLO), in conjunction with the Texas Water Development Board (TWDB), to conduct a study by the end of 2016 regarding the use of wind or solar power to desalinate brackish groundwater.

Utility Ratemaking

  • SB 774: Relating to studies on the rates of electric utilities

In 2011, the Texas Legislature created periodic rate adjustment (PRA) as a mechanism to allow electric utilities to recover certain distribution costs between rate cases. This bill extends authorization for the PRA from January 2017 until September 2019. The bill also requires the PUCT to conduct a study by January 2017 that analyzes ratemaking mechanisms adopted by other states and make legislative recommendations for improving the ratemaking process.

  • SB 932: Relating to the authority of the Public Utility Commission of Texas to retain assistance for the federal proceedings affecting certain electric utilities and consumers

This bill extends the PUCT’s authority to retain legal and consulting services for Entergy proceedings before FERC until 2023. It also allows the PUCT to retain these services for FERC proceedings involving Southwestern Public Service Company and Southwestern Electric Power Company.

  • HB 1535: Relating to rates of and certificates of convenience and necessity for certain non-ERCOT electric utilities

This bill makes a number of changes to the ratemaking process for non-ERCOT utilities. The bill provides that, in an application to change base rates, the utility can include additional information subsequent to the test-year data. The final rate will be effective 155 days after the utility filed to initial the rate proceeding, with a corresponding credit or surcharge over a period not to exceed 18 months. The bill also requires an electric utility to initiate a rate case within four years of its most recent rate case. In a proceeding to purchase an existing generation facility, the PUCT has 181 days to issue a final order on a CCN. For a newly constructed facility, the PUCT has a year to issue a final order.

  • HB 1101: Relating to extending the period over which the balance of the system benefit fund is to be eliminated

This bill extends the System Benefit Fund by one year to end on September 1, 2017. The bill removes the cap on the amount of the discount. The bill allows discounts in every month