JD Supra: Bills Related To Storage And Cybersecurity And Other Energy Issues Signed Into Law After Close Of 86th Texas Legislature’s Regular Session

Bills Related To Storage And Cybersecurity And Other Energy Issues Signed Into Law After Close Of 86th Texas Legislature’s Regular Session

by Husch Blackwell LLP

Lawmakers of the 86th Texas Legislature passed several bills in regular session related to storage and cybersecurity, as well as a bill extending the expiration of a Chapter 312 tax abatement program that benefits renewable energy. These energy-related bills passed by the Texas Legislature are discussed below, as are notable bills that failed to gain traction this session.

Storage: SB 1012, signed by the Governor into law effective September 1, 2019, amends Section 35.152 of the Texas Utilities Code to clarify that municipally-owned utilities and electric cooperatives may own and operate batteries without having to register as power generation companies with the Public Utility Commission of Texas (PUC). This bill was one of the PUC’s recommendations in its Scope of Competition Report to the Legislature.

Cybersecurity: SB 936, which requires the PUC and the Electric Reliability Council of Texas (ERCOT) to contract with an entity to act as the PUC’s cybersecurity monitor (Monitor), has been sent to the Governor for signature. The Monitor manages a cybersecurity outreach program for utilities, including transmission and distribution utilities, wholesale retailers of electric energy on behalf of river authorities, and certain municipally-owned utilities or electric cooperatives that either operate inside the ERCOT power region or operate solely outside of the ERCOT power region and elect to participate in the program. The Monitor is required to meet regularly with utilities to discuss emerging threats, best business practices, and training opportunities, and would review self-assessments of cybersecurity efforts voluntarily disclosed by utilities. The bill also amends Section 35.213 of the Texas Utilities Code to allow electric utilities to recover reasonable and necessary costs incurred in connection with activities under Section 39.1516. Upon becoming law, the bill will take effect on September 1, 2019.

SB 475, also sent to the Governor for signature and to take effect immediately upon becoming law, establishes the Texas Electric Grid Security Council as an advisory body to facilitate the development and dissemination of best security practices for the electric industry. The Council is composed of the PUC Commissioner, the CEO of ERCOT, and the Governor (or the Governor’s representative). This bill was one of the PUC’s recommendations in its Scope of Competition Report to the Legislature.

SB 64, which revises cybersecurity requirements for state agency information resources, including oversight of cybersecurity practices and the state’s electric grid, has also been sent to the Governor for signature. The bill requires the PUC to establish a program to monitor cybersecurity efforts among utilities in Texas and defines utilities as electric co-ops, electric utilities, municipally-owned electric utilities, retail electric providers, and transmission and distribution utilities. It also requires ERCOT to conduct an internal cybersecurity risk assessment, vulnerability testing, and employee training and to submit an annual report to the PUC on compliance with applicable cybersecurity and information security laws. If it becomes law, the bill will take effect on September 1, 2019.

Tax Matters: HB 3143, which extends the Chapter 312 Property Redevelopment and Tax Abatement Act’s expiration date from September 1, 2019 to September 1, 2029, has been sent to the Governor. Chapter 312 property tax abatements are often used by local governments to attract new development, including renewable energy projects. The bill imposes additional public notice, hearing, and reporting requirements for certain tax abatement agreements under the Act. If it becomes law, it will take effect on September 1, 2019.

Advanced Metering: HB 1595, signed by the Governor and effective May 14, 2019, allows certain investor-owned, non-ERCOT electric utilities operating under Texas Utilities Code Ch. 39, Subch. K (Southwestern Electric Power Company) that elect to deploy advanced metering and meter information networks to recover reasonable and necessary costs incurred in deploying those networks as rapidly as possible. While ERCOT utilities have been permitted to do this, it was unclear before the passage of this bill whether non-ERCOT utilities could do the same. Under the new law, a non-ERCOT utility is expressly subject to PUC rules related to customer surcharges and privacy of customer information. HB 853, signed into law and effective May 24, 2019, is identical to HB 1595, with the exception that it applies to investor-owned, non-ERCOT electric utilities operating under Texas Utilities Code Ch. 39, Subch. L (El Paso Electric Company). HB 986, also signed into law and effective May 24, 2019, is also identical, with the exception that it applies to investor-owned, non-ERCOT electric utilities operating under Texas Utilities Code Ch. 39, Subch. I (Southwestern Public Service Company).

CCNs: SB 1938, which amends the Texas Utilities Code to remove the prohibition against a person who is not an electric utility providing service to the public under a franchise or permit without first obtaining a certificate of convenience and necessity (CCN), was signed by the Governor and effective on May 16, 2019. The bill limits the persons to whom the PUC may grant a certificate to build, own, or operate a new electric transmission facility that directly interconnects with an existing electric utility facility or municipally-owned utility facility to the owner of that existing facility. The bill also requires both a new transmission facility directly interconnecting with facilities owned by different electric utilities or municipally-owned utilities and the different electric utility to be certificated by the PUC to build, own, or operate the new facility in separate and discrete equal parts unless they agree otherwise.

Electricity Sales: HB 2263, signed by the Governor, removes the authorization of the commissioner of the General Land Office (GLO) to sell power directly to a public retail customer. The GLO or an entity contracting with the GLO can continue to provide retail electric services until the date the agreement expires, and an agreement can be extended to a date no later than January 1, 2024. The Act is effective as of May 17, 2019, except the portion modifying Section 182.022(d) of the Tax Code to prohibit a tax under that chapter from being imposed on gross receipts from the sale of electricity to a public school district customer is effective January 1, 2024.

Mergers of Generators: SB 1211, which changes the requirements for the PUC to review and approve transactions of power generation companies (PGCs), is with the Governor for signature. Under the bill, the PUC will only review a transaction to merge PGCs if the combined entity will own or control more than 10% of the total installed generation capacity located in, or capable of delivering electricity to, the ERCOT power region. The current Utilities Code § 39.158 requires PUC review if the combined entity would exceed 1% of the total electricity for sale in the ERCOT region. If not vetoed, the bill will take effect on September 1, 2019. This bill was one of the PUC’s recommendations in its Scope of Competition Report to the Legislature.

Registration of Brokers: SB 1497 has been sent to the Governor and would prohibit a person from providing electric brokerage services, including services offered online, unless that person were registered with the PUC. The bill defines “brokerage services” as providing advice or procurement services to, or acting on behalf of, a retail electric customer regarding the selection of a retail electric provider (REP) or a product or service offered by an REP. If it becomes law, the bill will take effect on September 1, 2019. This bill was one of the PUC’s recommendations in its Scope of Competition Report to the Legislature.

Removal of Wind Power Facilities: HB 2845 has been sent to the Governor, and would require wind power facility agreements to include a removal bond provision and a provision stating that the grantee is responsible for removing wind power facilities from a landowner’s property. The bill defines “wind power facility” as a wind turbine generator and facilities or equipment used to support its operation. The bill would also void provisions of wind power facility agreements that purport to waive a right or exempt a grantee from a liability or duty established by the bill. The bill will take effect on September 1, 2019, if it becomes law.

Bills that did not pass include:

Bills related to grid security, HB 3378, HB 2493, HB 400, SB 76, HB 2591, HB 3377, and SB 1003.
A bill that would have allowed a transmission and distribution utility to enter into an agreement with a PGC to provide electricity from an energy storage facility, SB 1941.
Bills that would have entitled a residential or small commercial customer to have access to on-site distributed generation and energy storage resources to generate and export electricity to the grid, consume electricity from the grid, and reduce the customer’s use of electricity from the grid, HB 2860 and SB 2066.
A bill that would have required residential customer choice consultants to register with the PUC, HB 2212.
A bill which would have permitted a retail customer or group of customers to file a petition for PUC review of current or proposed rates of a municipally-owned utility, HB 2829.
A bill which would have created a wind generation decommissioning fund to be used by the PUC to conduct site investigations or environmental assessments of wind-powered generation facilities for which CCNs had been issued, SB 1372.
A bill which would have required the termination of the listing of retail electric offers on the state’s Power to Choose website, HB 1408.
A bill which would have required the PUC, Railroad Commission of Texas, and Texas Division of Emergency Management to promote public awareness of utility bill payment assistance available during a disaster, HB 2224.
A bill which would have allowed the PUC to impose an administrative penalty without a hearing if a person failed to timely respond to the penalty, HB 2226. This bill was one of the PUC’s recommendations in its Scope of Competition Report to the Legislature.
Bills which would have required the PUC and Comptroller to provide grants to projects to reduce emissions through improvements in energy production efficiency using supercritical carbon dioxide, SB 765 and HB 1507.
A bill which would have extended the expiration of ad valorem tax incentives for economic development under Chapters 312 and 313 of the Tax Code until December 31, 2032, HB 2438.
Bills which would have narrowed the reach of SB 277, which disqualifies wind farm owners from tax incentives if wind facilities are placed within 25 nautical miles of a military facility, HB 4180 and HB 3168.
A bill which would have amended Chapters 312 and 313 of the Tax Code to prevent the governing body of a taxing unit from entering an agreement to exempt from taxation any portion of the value of real property on which a solar facility is located, unless the owner of the property executed an agreement under a proposed new section of the Utilities Code, SB 1610.
A bill which would have eliminated the Operating Reserve Demand Curve pricing provisions in ERCOT, HB 2908.