HBA-SEP H.B. 1692 77(R)BILL ANALYSIS


Office of House Bill AnalysisH.B. 1692
By: Chisum
State Affairs
7/18/2001
Enrolled



BACKGROUND AND PURPOSE 

The Texas Panhandle region, served by Southwestern Public Service Company
(SPS), is transmission constrained, which means that power consumed in the
Panhandle must be generated in the region.  Prior to the 77th Legislature,
SPS was scheduled to sell 80% of its generation assets to unregulated
companies and to unbundle its generation company which would weaken the
ability of the Public Utility Commission of Texas (PUC) to regulate
generation rates paid by customers.  Transmission and generation shortages
do not provide for a competitive market and attempts to cap consumer prices
offer little protection.  The entities paying high wholesale prices without
the ability to pass those prices on to their customers potentially face
bankruptcy.  A slower, more structured transition to competition for
regions with transportation and generation shortages may serve to protect
consumers.  House Bill 1692 prohibits full retail customer choice for
competitive development areas from beginning until the later of January 1,
2007 or the date on which a non-ERCOT utility is authorized by the PUC to
implement customer choice. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

House Bill 1692 amends the Utilities Code to require the rates of an
investor-owned electric utility operating solely outside of ERCOT having
fewer than six synchronous interconnections with voltage levels above 69
kilovolts systemwide on September 1, 1999 (utility) to be regulated under
traditional cost of service regulation until the later of January 1, 2007
or the date on which a utility is authorized by the Public Utility
Commission of Texas (PUC) to implement customer choice.  The utility is
subject to all specified, applicable regulatory authority.  Until customer
choice, provisions governing the restructuring of electric utility industry
other than provisions regarding certain utilities, goals for renewable
energy, and the duty to obtain a permit from the Texas Natural Resource
Conservation Commission for generating and reducing emissions from an
electric generating facility do not apply.  The bill provides that any
portion of a PUC order entered before September 1, 2001 to comply with
provisions for certain utilities is null and void.  Until customer choice,
the utility is required to pay franchise fees to a municipality as required
by the franchise agreement.   

On or after January 1, 2007, a utility is authorized to choose to
participate in customer choice.  Such a utility is required to file a
transition to competition plan (plan) with the PUC that identifies how a
utility intends to mitigate market power.  The utility is required to
include in the plan a provision to establish a price to beat for
residential and commercial customers having a peak load of 1,000 kilowatts
or less.  The PUC may prescribe additional information or provisions that
must be included in the plan.  The bill provides that if a hearing is
requested by any party to the proceeding, the 180-day deadline will be
extended for each day of hearings.  The bill authorizes the plan to be
updated annually, rather than as circumstances change, until the applicable
power region is certified as a qualifying power region.  On implementation
of customer choice, a utility is subject to the provisions applicable to
electric utilities and all utilities to the same extent as other electric
utilities including the provisions concerning certificates of convenience
and necessity (Sec.  39.402).  

If an electric utility chooses on or after January 1, 2007 to participate
in customer choice, the PUC is prohibited from authorizing customer choice
until the applicable power region has been certified as a qualifying power
region.  Not later than May 1, 2002, each utility is required to submit to
the electric utility restructuring legislative oversight committee an
analysis of the needed transmission facilities necessary to make the
utility's service area transmission capability comparable to areas within
the ERCOT power region.  On or after September 1, 2003, each utility is
required to file the utility's plans to develop the utility's transmission
interconnections with the utility's power region or other adjacent power
regions.  The PUC is required to review the plan and not later than the
180th day after the date the plan is filed, determine the additional
transmission facilities necessary to provide access to power and energy
that is comparable to the access provided in areas within the ERCOT power
region; provided, however, that if a hearing is requested by any party to
the proceeding, the 180 day deadline will be extended one day for each day
of hearings.  The PUC is also required, as a part of PUC's approval of the
plan, to approve a rate rider mechanism for the recovery of the incremental
costs of those facilities after the facilities are completed and
in-service.  A finding of need is required to meet the requirements of
provisions regarding the grant or denial of a certificate.   

The PUC is authorized to certify an electric utility as a qualifying power
region if the PUC finds that the utility has sufficient transmission
facilities to provide customers access to power and energy from capacity
controlled by suppliers not affiliated with the incumbent utility that is
comparable to the access to power and energy from capacity controlled by
suppliers not affiliated with the incumbent utilities in areas of the ERCOT
power region and the total capacity owned and controlled by each such
electric utility and its affiliates does not exceed 20 percent of the total
installed generation capacity within the power region.  The bill prohibits
a utility from choosing to participate in customer choice unless the
affiliated power generation company makes a commitment to maintain and does
maintain rates that are based on cost of service for any electric
cooperative or municipality owned utility that was a wholesale customer on
the date the utility chooses to participate in customer choice and was
purchasing power at rates that were based on cost of service (Sec. 39.407). 

A utility is entitled to recover all reasonable and necessary expenditures
made or incurred before September 1, 2001, to comply with provisions
governing the restructuring of the electric utility industry. Not later
than December 1, 2001, each utility is authorized to file with the PUC  an
application for recovery detailing the amounts spent or incurred.  After
notice and hearing, the PUC is required to review the amounts and, if found
to be reasonable and necessary, approve a transition to competition retail
rate rider mechanism for the recovery of the approved transition to
competition costs.  A rate rider implemented to recover approved transition
to competition costs shall expire not later than December 31, 2006 (Sec.
39.409).   

The bill repeals provisions requiring utilities to unbundle, freeze rates,
and to undertake customer choice pilot projects (SECTION 3). 

EFFECTIVE DATE

June 15, 2001.