CHAPTER 35. ALTERNATIVE ENERGY PROVIDERS - Texas Statutes

UTILITIES CODE

TITLE 2. PUBLIC UTILITY REGULATORY ACT

SUBTITLE B. ELECTRIC UTILITIES

CHAPTER 35. ALTERNATIVE ENERGY PROVIDERS

SUBCHAPTER A. COMPETITION AND TRANSMISSION ACCESS IN THE

WHOLESALE MARKET

Sec. 35.001. DEFINITION. In this subchapter, "electric utility"

includes a municipally owned utility and an electric cooperative.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 405, Sec. 16, eff. Sept. 1,

1999.

Sec. 35.002. RIGHT TO COMPETE AT WHOLESALE. A provider of

generation, including an electric utility affiliate, exempt

wholesale generator, and qualifying facility, may compete for the

business of selling power.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.003. PURCHASE FROM AFFILIATE; UNDUE PREFERENCE

PROHIBITED. (a) An electric utility may purchase power from an

affiliate in accordance with this title.

(b) An electric utility may not grant an undue preference to a

person in connection with the utility's purchase or sale of

electric energy at wholesale or other utility service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.004. PROVISION OF TRANSMISSION SERVICE. (a) An

electric utility or transmission and distribution utility that

owns or operates transmission facilities shall provide wholesale

transmission service at rates and terms, including terms of

access, that are comparable to the rates and terms of the

utility's own use of its system.

(b) The commission shall ensure that an electric utility or

transmission and distribution utility provides nondiscriminatory

access to wholesale transmission service for qualifying

facilities, exempt wholesale generators, power marketers, power

generation companies, retail electric providers, and other

electric utilities or transmission and distribution utilities.

(c) When an electric utility, electric cooperative, or

transmission and distribution utility provides wholesale

transmission service within ERCOT at the request of a third

party, the commission shall ensure that the utility recovers the

utility's reasonable costs in providing wholesale transmission

services necessary for the transaction from the entity for which

the transmission is provided so that the utility's other

customers do not bear the costs of the service.

(d) The commission shall price wholesale transmission services

within ERCOT based on the postage stamp method of pricing under

which a transmission-owning utility's rate is based on the ERCOT

utilities' combined annual costs of transmission divided by the

total demand placed on the combined transmission systems of all

such transmission-owning utilities within a power region. An

electric utility subject to the freeze period imposed by Section

39.052 may treat transmission costs in excess of transmission

revenues during the freeze period as an expense for purposes of

determining annual costs in the annual report filed under Section

39.257. Notwithstanding Section 36.201, the commission may

approve wholesale rates that may be periodically adjusted to

ensure timely recovery of transmission investment.

Notwithstanding Section 36.054(a), if the commission determines

that conditions warrant the action, the commission may authorize

the inclusion of construction work in progress in the rate base

for transmission investment required by the commission under

Section 39.203(e).

(e) The commission shall ensure that ancillary services

necessary to facilitate the transmission of electric energy are

available at reasonable prices with terms and conditions that are

not unreasonably preferential, prejudicial, discriminatory,

predatory, or anticompetitive. In this subsection, "ancillary

services" means services necessary to facilitate the transmission

of electric energy including load following, standby power,

backup power, reactive power, and any other services as the

commission may determine by rule. On the introduction of customer

choice in the ERCOT power region, acquisition of

generation-related ancillary services on a nondiscriminatory

basis by the independent organization in ERCOT on behalf of

entities selling electricity at retail shall be deemed to meet

the requirements of this subsection.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 405, Sec. 17, eff. Sept. 1,

1999; Acts 2003, 78th Leg., ch. 295, Sec. 1, eff. June 18, 2003.

Sec. 35.005. AUTHORITY TO ORDER TRANSMISSION SERVICE. (a) The

commission may require an electric utility to provide

transmission service at wholesale to another electric utility, a

qualifying facility, an exempt wholesale generator, or a power

marketer and may determine whether terms for the transmission

service are reasonable.

(b) The commission may require transmission service at

wholesale, including the construction or enlargement of a

facility.

(c) The commission may not issue a decision or rule relating to

transmission service that is contrary to an applicable decision,

rule, or policy statement of a federal regulatory agency having

jurisdiction.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 405, Sec. 18, eff. Sept. 1,

1999.

Sec. 35.006. RULES RELATED TO WHOLESALE TRANSMISSION SERVICE,

RATES, AND ACCESS. (a) The commission shall adopt rules

relating to wholesale transmission service, rates, and access.

The rules:

(1) must be consistent with the standards in this subchapter;

(2) may not be contrary to federal law, including any applicable

decision, rule, or policy statement of a federal regulatory

agency having jurisdiction;

(3) must require transmission services that are not less than

the transmission services the Federal Energy Regulatory

Commission may require in similar circumstances;

(4) must require that an electric utility provide all ancillary

services associated with the utility's discounted wholesale sales

at the same prices and under the same terms as the services are

provided to a third person; and

(5) must require that an electric utility provide all ancillary

services associated with the utility's discounted wholesale sales

to a third person on request.

(b) The commission shall adopt rules relating to the

registration and reporting requirements of a qualifying facility,

exempt wholesale generator, and power marketer.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.007. TARIFFS REQUIRED. (a) Except as provided by

Subsection (b), an electric utility that owns or operates a

transmission facility shall file a tariff in compliance with

commission rules adopted under Section 35.006.

(b) An electric utility is not required to file a tariff under

this section if the utility's terms for access and pricing for

wholesale transmission service are included in another electric

utility's tariff.

(c) An electric utility shall file a tariff required by this

section with the appropriate state or federal regulatory agency

having jurisdiction over the utility's transmission service.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.008. ALTERNATIVE DISPUTE RESOLUTION. The commission may

require that each party to a dispute concerning prices or terms

of wholesale transmission service engage in a nonbinding

alternative dispute resolution process before seeking resolution

of the dispute by the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER B. EXEMPT WHOLESALE GENERATORS AND POWER MARKETERS

Sec. 35.031. AUTHORITY TO OPERATE. An exempt wholesale

generator or power marketer may sell electric energy only at

wholesale.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.032. COMMISSION REGISTRATION AND REQUIRED REPORTS. (a)

An exempt wholesale generator or power marketer that sells

electric energy in this state shall, not later than the 30th day

after the date it becomes subject to this section:

(1) register with the commission; or

(2) provide to the commission proof that it has registered with

the Federal Energy Regulatory Commission or has been authorized

by the Federal Energy Regulatory Commission to sell electric

energy at market-based rates.

(b) The exempt wholesale generator or power marketer may

register by filing with the commission:

(1) a description of the location of any facility used to

provide service;

(2) a description of the type of service provided;

(3) a copy of any information filed with the Federal Energy

Regulatory Commission in connection with registration with that

commission; and

(4) other information required by commission rule.

(c) An exempt wholesale generator or power marketer required to

register under Subsection (a) shall file any report required by

commission rule.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.033. AFFILIATE WHOLESALE PROVIDER. An affiliate of an

electric utility may be an exempt wholesale generator or power

marketer and may sell electric energy to its affiliated electric

utility in accordance with laws governing wholesale sales of

electric energy.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 405, Sec. 19, eff. Sept. 1,

1999.

Sec. 35.034. TRANSFER OF ASSETS. (a) Unless an electric

utility receives commission approval under Subsection (b), the

utility may not sell or transfer a facility to an affiliate or

otherwise consider the facility to be an eligible facility as

defined by federal law if on May 27, 1995, the utility had a rate

or charge in effect:

(1) for or in connection with the construction of the facility;

(2) for electric energy produced by the construction of the

facility; or

(3) for electric energy produced by the facility other than a

portion of a rate or charge that represents recovery of the cost

of a wholesale rate or charge.

(b) The commission, after notice and hearing, may allow an

electric utility to sell or transfer a facility governed by

Subsection (a) to an affiliate or otherwise allow the facility to

become an eligible facility only if the transaction:

(1) will benefit ratepayers of the utility making the sale or

transfer;

(2) is in the public interest; and

(3) otherwise complies with state law.

(c) For purposes of this section, "electric utility" does not

include a river authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 405, Sec. 20, eff. Sept. 1,

1999.

Sec. 35.035. VALUATION AND ACCOUNTING OF TRANSFERRED ASSETS.

(a) A transfer of assets from an electric utility to an

affiliated exempt wholesale generator or power marketer shall be

valued at the greater of net book cost or fair market value.

(b) A transfer of assets from an exempt wholesale generator or

power marketer to an affiliated electric utility shall be valued

at the lesser of net book cost or fair market value.

(c) At the time that a transfer of assets between an electric

utility and an affiliated exempt wholesale generator or power

marketer is approved, the commission shall order the utility to

adjust its rates so that the utility's tariffs reflect benefits

from the proceeds of the sale and exclude any costs associated

with the transferred facility.

(d) For purposes of this section, "electric utility" does not

include a river authority.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Amended by Acts 1999, 76th Leg., ch. 405, Sec. 21, eff. Sept. 1,

1999.

SUBCHAPTER C. QUALIFYING FACILITIES

Sec. 35.061. ENCOURAGEMENT OF ECONOMICAL PRODUCTION. The

commission shall adopt and enforce rules to encourage the

economical production of electric energy by qualifying

facilities.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.062. APPLICATION FOR CERTIFICATION. (a) An electric

utility or a qualifying facility may submit to the commission for

certification a copy of an agreement between the utility and

facility for the purchase of capacity.

(b) An agreement submitted for certification under this section

may provide that the agreement is contingent on certification by

the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.063. HEARING. (a) The commission, on its own motion or

on the request of a party to the agreement or another affected

person, may conduct a hearing on an agreement for which

certification is sought under Section 35.062.

(b) A request for a hearing or a commission decision to hold a

hearing must be made not later than the 90th day after the date

the agreement is submitted to the commission.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.064. CERTIFICATION STANDARDS. The commission shall

certify an agreement submitted under Section 35.062 if the

agreement:

(1) provides for payments over the contract term that are equal

to or less than the electric utility's avoided costs, as

established by the commission and in effect at the time the

agreement was signed; and

(2) provides the electric utility the opportunity to acquire the

cogeneration or small-power production installation before the

installation is offered to another purchaser or provides other

sufficient assurance that the electric utility will be provided

with a comparable supply of electricity, if the qualifying

facility ceases to operate the installation.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.065. DEADLINES FOR COMMISSION ACTION. (a) Except as

provided by Subsection (b), the commission shall make its

determination regarding whether a certification should be granted

under Section 35.064 not later than the 90th day after the date

the agreement is submitted.

(b) If a hearing is held under Section 35.063, the commission

shall make its determination regarding whether a certification

should be granted not later than the 120th day after the date the

agreement is submitted, except that this deadline is extended by

two days for each day in excess of five days on which the

commission conducts a hearing on the merits of the certification.

(c) If the commission does not make a determination by the date

provided by Subsection (a) or (b), as applicable, the agreement

is considered to meet the requirements of Section 35.064 and the

certification is considered granted.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

Sec. 35.066. TERM OF CERTIFICATION. A certification of an

agreement granted under this subchapter is effective until the

earlier of:

(1) the expiration date of the agreement; or

(2) the 15th anniversary of the date of the certification.

Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997.

SUBCHAPTER D. STATE AUTHORITY TO SELL OR CONVEY POWER

Sec. 35.101. DEFINITIONS. In this subchapter:

(1) "Commissioner" means the Commissioner of the General Land

Office.

(2) "Public retail customer" means a retail customer that is an

agency of this state, a state institution of higher education, a

public school district, a political subdivision of this state, a

military installation of the United States, or a United States

Department of Veterans Affairs facility.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 22, eff. Sept. 1,

1999. Amended by Acts 2003, 78th Leg., ch. 149, Sec. 19, eff. May

27, 2003.

Sec. 35.102. STATE AUTHORITY TO SELL OR CONVEY POWER OR NATURAL

GAS. (a) The commissioner, acting on behalf of the state, may

sell or otherwise convey power or natural gas generated from

royalties taken in kind as provided by Sections 52.133(f),

53.026, and 53.077, Natural Resources Code, directly to a public

retail customer regardless of whether the public retail customer

is also classified as a wholesale customer under other provisions

of this title.

(b) To ensure that the state receives the maximum benefit from

the sale of power or natural gas generated from royalties taken

in kind, the commissioner shall use all feasible means to sell

that power or natural gas first to public retail customers that

are military installations of the United States, agencies of this

state, institutions of higher education, or public school

districts. The remainder of the power or natural gas, if any, may

be sold to public retail customers that are political

subdivisions of this state or to a United States Department of

Veterans Affairs facility.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 22, eff. Sept. 1,

1999. Amended by Acts 2003, 78th Leg., ch. 149, Sec. 20, eff. May

27, 2003.

Sec. 35.103. ACCESS TO TRANSMISSION AND DISTRIBUTION SYSTEMS;

RATES. (a) Except as provided in Section 35.104, the state is

entitled to have access to all transmission and distribution

systems of all electric utilities, transmission and distribution

utilities, municipally owned utilities, and electric cooperatives

that serve public retail customers.

(b) An entity described by Subsection (a) shall provide any

utility service, including transmission, distribution, and other

services, which must include any stranded costs associated with

providing service, to the state at the lowest applicable rate

charged for similar service to other customers.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 22, eff. Sept. 1,

1999.

Sec. 35.104. LIMIT IN CERTAIN AREAS. Sections 35.102 and 35.103

do not apply to the rates, retail service area, facilities, or

public retail customers of a municipally owned electric utility

that has not adopted customer choice or an electric cooperative

that has not adopted customer choice. In a certificated service

area of an electric utility in which customer choice has not been

introduced, the state may not engage in retail transactions that

exceed 2.5 percent of a retail electric utility's total retail

load.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 22, eff. Sept. 1,

1999.

Sec. 35.105. WHOLESALE CUSTOMERS. This subchapter does not

prevent the commissioner, acting on behalf of this state, from

registering as a power marketer.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 22, eff. Sept. 1,

1999.

Sec. 35.106. ACCESS TO POWER GENERATION. If pipeline capacity

is available on an existing facility of a gas utility or

municipally owned utility, a gas utility or a municipally owned

utility may not refuse to provide gas service to an electric

utility generating facility, if the purpose of the service is to

generate power for public retail customers by the state or an

agency of this state.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 22, eff. Sept. 1,

1999.