Texas House Passes Omnibus Texas Winter Weather Event Electricity Bill To Allow Residential Wholesale Index Plans To Continue, Subject To Price Cap & Notice Requirements

Adds Requirement For "Signed" Acknowledgment Of Risk For Large Customers To Be Served Under Wholesale Index Plans

Omnibus Bill Requires State Energy Plan & Evaluation Of Market Structure, Pricing

Includes TDU Load Shed Programs, Energy Storage For TDUs; New Obligation For REPs

May 24, 2021

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Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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The Texas House today passed on third reading an amended version of SB 3, which would allow residential and small commercial wholesale index electricity plans to continue to be sold, subject to a price cap and various notice requirements

The bill as passed by the House, which addresses a variety of other issues including weatherization of electricity and certain natural gas facilities, differs from the Senate version, and the Senate must either concur to the changes, or the bill must be addressed in conference, in order to be sent to the governor.

With respect to wholesale index electricity plans for residential and small commercial customers, SB 3 as passed by the House generally maintains the provisions from a previously reported (story here) committee substitute, adding language explicitly providing that aggregators and brokers are subject to the bill's provisions regarding the offering of wholesale index products.

The most notable change under a floor amendment is that, for customers other than residential and small commercial customers, the version of SB 3 passed by the House requires a signed acknowledgment from the customer about the price risk of wholesale index products in order for a customer to be served under such product

Specifically the House-passed version of SB 3 defines "wholesale indexed product" as, "a retail electric product in which the price a customer pays for electricity includes a direct pass-through of real-time settlement point prices determined by the independent organization certified under Section 39.151 for the ERCOT power region."

Under the house-passed bill, an aggregator, a broker, or a retail electric provider may only enroll a wholesale indexed product to a residential or small commercial customer only if:

(1) the enrollment complies with any other applicable law or commission rule;

(2) the product caps the monthly average all-in price per kilowatt hour of electricity charged to the customer at a maximum of 200 percent more than the monthly average price of electricity in this state during the same month for the prior year, as determined by monthly electric power industry reports required by the United States Energy Information Administration; and

(3) the aggregator, broker, or retail electric provider provides to each potential customer before enrollment notice of the highest monthly average price for the next six months for the product.

Furthermore, the House-passed version of SB3 provides that a retail electric provider may maintain a residential or small commercial customer's enrollment in a wholesale indexed product only if:

(1) the retail electric provider provides to each customer in each billing statement notice of the highest monthly average price for the next six months; and

(2) for service starting at the beginning of the next month, the retail electric provider allows the customer to switch without charge or penalty at the beginning of the next month to a fixed rate product offered by the provider to other residential and small commercial customers.

The provisions described above do not apply to accounts of a customer on the same property or contiguous properties in which one or more of the accounts has a peak demand of at least 250 kilowatts.

For large customers, the House-passed version of SB 3 includes (added under a floor amendment) a provision that, "An aggregator, a broker, or a retail electric provider may enroll a customer other than a residential and small commercial customer in a wholesale indexed product only if the aggregator, broker, or provider obtains before the customer's enrollment an acknowledgment signed by the customer that the customer accepts the potential price risks associated with a wholesale indexed product."

The acknowledgment required by the bill must include the following statement, in clear, boldfaced text: "I understand that the volatility and fluctuation of wholesale energy pricing may cause my energy bill to be multiple times higher in a month in which wholesale energy prices are high. I understand that I will be responsible for charges caused by fluctuations in wholesale energy prices."

Such acknowledgment may be included as an addendum to a contract.

A retail electric provider that provides a wholesale indexed product to a customer other than a residential and small commercial customer must keep on file the required acknowledgment for each customer while the customer is enrolled with the retail electric provider in the wholesale indexed product.

The wholesale index provisions under SB 3 as passed by the House would apply only to an enrollment or re-enrollment of a customer in a retail electric product that is executed on or after the effective date of the Act. An enrollment or re-enrollment of a customer in a retail electric product that is executed before the effective date of the Act would be governed by the law as it existed immediately before the effective date of the Act, and that law is continued in effect for that purpose.

As previously reported (see story here), the legislature has already sent to the governor HB 16, which would completely ban wholesale index electricity plans for residential and small commercial customers.

The version of SB 3 passed by the House explicitly provides that SB 3's provisions will control, as the bill states, "If H.B. 16, 87th Legislature, Regular Session, 2021, becomes law, Section 39.110, Utilities Code, as added by that Act, is repealed, effective September 1, 2021."

Obligation For REPs To Send Critical Care, Load Shedding Info To Customers

SB 3 provides that REPs are required to share certain information on critical designations and load shedding to customers.

Specifically, SB 3 provides that an electric utility providing electric delivery service for a retail electric provider, as defined by Section 31.002, shall provide to the retail electric provider, and the retail electric provider shall periodically provide to the retail electric provider's retail customers together with bills sent to the customers, information about:

(1) the electric utility's procedures for implementing involuntary load shedding initiated by the independent organization certified under Section 39.151 for the ERCOT power region;

(2) the types of customers who may be considered critical care residential customers, critical load industrial customers, or critical load according to commission rules adopted under Section 38.075;

(3) the procedure for a customer to apply to be considered a critical care residential customer, a critical load industrial customer, or critical load according to commission rules adopted under Section 38.075; and

(4) reducing electricity use at times when involuntary load shedding events may be implemented.

TDU Emergency Load Management Program

SB 3 provides that the PUC shall allow a transmission and distribution utility, "to design and operate a load management program for nonresidential customers to be used during extreme weather where the independent organization certified under Section 39.151 for the ERCOT power region has declared an emergency."

"A transmission and distribution utility implementing a load management program under this subsection shall be permitted to recover the reasonable and necessary costs of the load management program under Chapter 36. A load management program operated under this subsection is not considered a competitive service," the bill provides

State Energy Plan, Evaluation Of Market Structure, Pricing

SB 3 as passed by the House requires development of a state energy plan by September 1, 2022

The plan must:

(1) evaluate barriers in the electricity and natural gas markets that prevent sound economic decisions;

(2) evaluate methods to improve the reliability, stability, and affordability of electric service in this state;

(3) provide recommendations for removing the barriers described by Subdivision (1) of this subsection and using the methods described by Subdivision (2) of this subsection; and

(4) evaluate the electricity market structure and pricing mechanisms used in this state, including the ancillary services market and emergency response services.

Evaluation Of New Ancillary Services

SB 3 as passed by the House requires the PUC to review and consider additional ancillary services

Specifically, under the bill, the commission shall:

(1) review the type, volume, and cost of ancillary services to determine whether those services will continue to meet the needs of the electricity market in the ERCOT power region; and

(2) evaluate whether additional voluntary seasonal, month-ahead, or other forward products would enhance reliability in the ERCOT power region while providing adequate incentives for dispatchable generation.

However, the final version of SB 3 passed by the House removes proposed language stating that the PUC shall, "ensure that all generation resources, energy storage resources, and loads in the ERCOT power region are allowed to provide ancillary services on a voluntary basis and that the ancillary services are procured and costs recovered on an equitable and nondiscriminatory basis."

The final bill also strikes proposed language stating that, "The commission may require the independent organization certified under Section 39.151 for the ERCOT power region to modify the design, procurement, and cost allocation of ancillary services for the region in a manner consistent with cost-causation principles and on a nondiscriminatory basis."

Dispatchable Generation; Ancillary Services For Extreme Weather

SB 3 provides that the PUC shall ensure that the independent organization certified under Section 39.151 for the ERCOT power region:

(1) establishes requirements to meet the reliability needs of the power region;

(2) periodically determines the quantity and characteristics of ancillary or reliability services necessary to ensure appropriate reliability during extreme heat and extreme cold weather conditions and during times of low non-dispatchable power production in the power region;

(3) procures ancillary or reliability services on a competitive basis to ensure appropriate reliability during extreme heat and extreme cold weather conditions and during times of low non-dispatchable power production in the power region;

(4) develops appropriate qualification and performance requirements for providing services under Subdivision (3), including appropriate penalties for failure to provide the services; and

(5) sizes the services procured under Subdivision (3) to prevent prolonged rotating outages due to net load variability in high demand and low supply scenarios.

Under the bill, the PUC commission shall ensure that:

(1) resources that provide ancillary services under the provisions listed above are dispatchable and able to meet continuous operating requirements for the season in which the service is procured;

(2) winter resource capability qualifications for a service described above include on-site fuel storage, dual fuel capability, or fuel supply arrangements to ensure winter performance for several days; and

(3) summer resource capability qualifications for a service described above include facilities or procedures to ensure operation under drought conditions.

Electricity Storage For TDUs

SB 3 provides that a transmission and distribution utility, with prior approval of the PUC, may contract with a power generation company to provide electric energy from an electric energy storage facility to ensure reliable service to distribution customers.

The total amount of electric energy storage capacity reserved by TDU contracts under the bill may not exceed 100 megawatts.

The PUC may not authorize ownership of an electric energy storage facility by a transmission and distribution utility.

Other Issues

SB 3 requires weatherization of electricity facilities, including generation, and natural gas facilities that are designated critical to the electricity supply chain

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