CHAPTER 39. RESTRUCTURING OF ELECTRIC UTILITY INDUSTRY - Texas Statutes

UTILITIES CODETITLE 2. PUBLIC UTILITY REGULATORY ACTSUBTITLE B. ELECTRIC UTILITIESCHAPTER 39. RESTRUCTURING OF ELECTRIC UTILITY INDUSTRYSUBCHAPTER A. GENERAL PROVISIONSSec. 39.001. LEGISLATIVE POLICY AND PURPOSE. (a) The legislature finds that the production and sale of electricity is not a monopoly warranting regulation of rates, operations, and services and that the public interest in competitive electric markets requires that, except for transmission and distribution services and for the recovery of stranded costs, electric services and their prices should be determined by customer choices and the normal forces of competition. As a result, this chapter is enacted to protect the public interest during the transition to and in the establishment of a fully competitive electric power industry.(b) The legislature finds that it is in the public interest to:(1) implement on January 1, 2002, a competitive retail electric market that allows each retail customer to choose the customer's provider of electricity and that encourages full and fair competition among all providers of electricity;(2) allow utilities with uneconomic generation-related assets and purchased power contracts to recover the reasonable excess costs over market of those assets and purchased power contracts;(3) educate utility customers about anticipated changes in the provision of retail electric service to ensure that the benefits of the competitive market reach all customers; and(4) protect the competitive process in a manner that ensures the confidentiality of competitively sensitive information during the transition to a competitive market and after the commencement of customer choice.(c) Regulatory authorities, excluding the governing body of a municipally owned electric utility that has not opted for customer choice or the body vested with power to manage and operate a municipally owned electric utility that has not opted for customer choice, may not make rules or issue orders regulating competitive electric services, prices, or competitors or restricting or conditioning competition except as authorized in this title and may not discriminate against any participant or type of participant during the transition to a competitive market and in the competitive market.(d) Regulatory authorities, excluding the governing body of a municipally owned electric utility that has not opted for customer choice or the body vested with power to manage and operate a municipally owned electric utility that has not opted for customer choice, shall authorize or order competitive rather than regulatory methods to achieve the goals of this chapter to the greatest extent feasible and shall adopt rules and issue orders that are both practical and limited so as to impose the least impact on competition.(e) Judicial review of competition rules adopted by the commission shall be conducted under Chapter 2001, Government Code, except as otherwise provided by this chapter. Judicial review of the validity of competition rules shall be commenced in the Court of Appeals for the Third Court of Appeals District and shall be limited to the commission's rulemaking record. The rulemaking record consists of:(1) the notice of the proposed rule;(2) the comments of all interested persons;(3) all studies, reports, memoranda, or other materials on which the commission relied in adopting the rule; and(4) the order adopting the rule.(f) A person who challenges the validity of a competition rule must file a notice of appeal with the court of appeals and serve the notice on the commission not later than the 15th day after the date on which the rule as adopted is published in the Texas Register. The notice of appeal shall designate the person challenging the rule as the appellant and the commission as the appellee. The commission shall prepare the rulemaking record and file it with the court of appeals not later than the 30th day after the date the notice of appeal is served on the commission. The court of appeals shall hear and determine each appeal as expeditiously as possible with lawful precedence over other matters. The appellant, and any person who is permitted by the court to intervene in support of the appellant's claims, shall file and serve briefs not later than the 30th day after the date the commission files the rulemaking record. The commission, and any person who is permitted by the court to intervene in support of the rule, shall file and serve briefs not later than the 60th day after the date the appellant files the appellant's brief. The court of appeals may, on its own motion or on motion of any person for good cause, modify the filing deadlines prescribed by this subsection. The court of appeals shall render judgment affirming the rule or reversing and, if appropriate on reversal, remanding the rule to the commission for further proceedings, consistent with the court's opinion and judgment. The Texas Rules of Appellate Procedure apply to an appeal brought under this section to the extent not inconsistent with this section.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.002. APPLICABILITY. This chapter, other than Sections 39.155, 39.157(e), 39.203, 39.903, 39.904, 39.9051, 39.9052, and 39.914(e), does not apply to a municipally owned utility or an electric cooperative. Sections 39.157(e), 39.203, and 39.904, however, apply only to a municipally owned utility or an electric cooperative that is offering customer choice. If there is a conflict between the specific provisions of this chapter and any other provisions of this title, except for Chapters 40 and 41, the provisions of this chapter control.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.Amended by: Acts 2007, 80th Leg., R.S., Ch. 939, Sec. 19, eff. September 1, 2007.

Sec. 39.003. CONTESTED CASES. Unless specifically provided otherwise, each commission proceeding under this chapter, other than a rulemaking proceeding, report, notification, or registration, shall be conducted as a contested case and the burden of proof is on the incumbent electric utility.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

SUBCHAPTER B. TRANSITION TO COMPETITIVE RETAIL ELECTRIC MARKETSec. 39.051. UNBUNDLING. (a) On or before September 1, 2000, each electric utility shall separate from its regulated utility activities its customer energy services business activities that are otherwise also already widely available in the competitive market.(b) Not later than January 1, 2002, each electric utility shall separate its business activities from one another into the following units:(1) a power generation company;(2) a retail electric provider; and(3) a transmission and distribution utility.(c) An electric utility may accomplish the separation required by Subsection (b) either through the creation of separate nonaffiliated companies or separate affiliated companies owned by a common holding company or through the sale of assets to a third party. An electric utility may create separate transmission and distribution utilities. Notwithstanding any other provision of this chapter, an electric utility that does not have stranded costs described by Section 39.254 and that on September 1, 2005, has not finalized unbundling pursuant to a commission order approving an unbundling plan may also meet the requirements of Subsection (b) for generation facilities existing on September 1, 2005, in the Electric Reliability Council of Texas if it meets and maintains compliance with the following requirements:(1) the electric utility has no more than 400 megawatts of Texas jurisdictional capacity from generating units within the Electric Reliability Council of Texas that have not been mothballed or retired;(2) the electric utility has a contract or contracts with separate nonaffiliated companies or separate affiliated companies for the sale of all of the output from its generating units that have not been mothballed or retired with a contract term that is no shorter than 20 years or the life of the generating units, whichever is shorter; and(3) the electric utility has a separate division within the electric utility for its generation business activities.(c-1) A separate division described by Subsection (c)(3) is subject to Subsection (d) and, for the purposes of this chapter, is considered a separate affiliated power generation company and a competitive affiliate.(d) Each electric utility shall unbundle under this section in a manner that provides for a separation of personnel, information flow, functions, and operations, consistent with Section 39.157(d).(e) Each electric utility shall file with the commission a plan to implement this section by January 10, 2000.(f) The commission shall adopt the utility's plan for business separation required by Subsection (b), adopt the plan with changes, or reject the plan and require the utility to file a new plan.(g) Transactions by electric utilities involving sales, transfers, or other disposition of assets to accomplish the purposes of this section are not subject to Section 14.101, 35.034, or 35.035.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.Amended by: Acts 2005, 79th Leg., Ch. 413, Sec. 3, eff. June 17, 2005.

Sec. 39.052. FREEZE ON EXISTING RETAIL BASE RATE TARIFFS. (a) Until January 1, 2002, an electric utility shall provide retail electric service within its certificated service area in accordance with the electric utility's retail base rate tariffs in effect on September 1, 1999, including its purchased power cost recovery factor.(b) During the freeze period, an electric utility may not increase its retail base rates above the rates provided by this section except for losses caused by force majeure as provided by Section 39.055.(c) Notwithstanding any other provision of this title, during the freeze period the regulatory authority may not reduce the retail base rates of an electric utility, except as may be ordered as stipulated to by an electric utility in a proceeding for which a final order had not been issued by January 1, 1999.(d) During the freeze period, the retail base rates, overall revenues, return on invested capital, and net income of an electric utility are not subject to complaint, hearing, or determination as to reasonableness.(e) An electric utility that has a rate proceeding pending before the commission as of January 2, 1999, shall provide service in accordance with the tariffs approved in that proceeding from the date of approval until the end of the freeze period.(f) Nothing in this section affects the authority of the commission to fulfill its obligations under Section 39.262.(g) Nothing in this section shall deny a utility its right to have the commission conduct proceedings and issue a final order pertaining to any matter that may be remanded to the commission by a court having jurisdiction, except that the final order may not affect the rates charged to customers during the freeze period but shall be taken into account during the utility's true-up proceeding under Section 39.262.(h) Nothing in this title shall be construed to prevent an electric utility or a transmission and distribution utility from filing, and the commission from approving, a change in wholesale transmission service rates during the freeze period.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.053. COST RECOVERY ADJUSTMENTS. This subchapter does not limit or alter the ability of an electric utility during the freeze period to revise its fuel factor or to reconcile fuel expenses and to either refund fuel overcollections or surcharge fuel undercollections to customers, as authorized by its tariffs and Sections 36.203 and 36.205.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.054. RETAIL ELECTRIC SERVICE DURING FREEZE PERIOD. (a) An electric utility shall provide retail electric service during the freeze period in accordance with any contract terms applicable to a particular retail customer approved by the regulatory authority and in effect on December 31, 1998.(b) Nothing in Sections 39.052(c) and (d) shall be construed to restrict any customer's right to complain during the freeze period to the regulatory authority regarding the quality of retail electric service provided by the electric utility or the applicability of an electric utility's particular tariff to the customer.(c) Nothing in this title shall be construed to restrict an electric utility, voluntarily and at its sole discretion, from offering new services or new tariff options to its customers during the freeze period, consistent with Section 39.051(a).(d) Any offering of new services or tariff options under this section shall be equal to or greater than an electric utility's long-run marginal cost and may not be unreasonably preferential, prejudicial, discriminatory, predatory, or anticompetitive.(e) Revenue from any new offering under this section shall be accounted for in a manner consistent with Section 36.007.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.055. FORCE MAJEURE. (a) An electric utility may recover losses resulting from force majeure through an increase in its retail base rates during the freeze period.(b) Notwithstanding Subchapter C, Chapter 36, the regulatory authority, after a hearing to determine the electric utility's losses from force majeure, shall permit the utility to fully collect any approved force majeure increase through an appropriate customer surcharge mechanism.(c) For purposes of this section, "force majeure" means a major event or combination of major events, including new or expanded state or federal statutory or regulatory requirements; hurricanes, tornadoes, ice storms, or other natural disasters; or acts of war, terrorism, or civil disturbance, beyond the control of an electric utility that the regulatory authority finds increases the utility's total reasonable and necessary nonfuel costs or decreases the utility's total nonfuel revenues related to the generation and delivery of electricity by more than 10 percent for any calendar year during the freeze period. The term does not include any changes in general economic conditions such as inflation, interest rates, or other factors of general application.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

SUBCHAPTER C. RETAIL COMPETITIONSec. 39.101. CUSTOMER SAFEGUARDS. (a) Before customer choice begins on January 1, 2002, the commission shall ensure that retail customer protections are established that entitle a customer:(1) to safe, reliable, and reasonably priced electricity, including protection against service disconnections in an extreme weather emergency as provided by Subsection (h) or in cases of medical emergency or nonpayment for unrelated services;(2) to privacy of customer consumption and credit information;(3) to bills presented in a clear format and in language readily understandable by customers;(4) to the option to have all electric services on a single bill, except in those instances where multiple bills are allowed under Chapters 40 and 41;(5) to protection from discrimination on the basis of race, color, sex, nationality, religion, or marital status;(6) to accuracy of metering and billing;(7) to information in English and Spanish and any other language as necessary concerning rates, key terms and conditions, in a standard format that will permit comparisons between price and service offerings, and the environmental impact of certain production facilities;(8) to information in English and Spanish and any other language as necessary concerning low-income assistance programs and deferred payment plans; and(9) to other information or protections necessary to ensure high-quality service to customers.(b) A customer is entitled:(1) to be informed about rights and opportunities in the transition to a competitive electric industry;(2) to choose the customer's retail electric provider consistent with this chapter, to have that choice honored, and to assume that the customer's chosen provider will not be changed without the customer's informed consent;(3) to have access to providers of energy efficiency services, to on-site distributed generation, and to providers of energy generated by renewable energy resources;(4) to be served by a provider of last resort that offers a commission-approved standard service package;(5) to receive sufficient information to make an informed choice of service provider;(6) to be protected from unfair, misleading, or deceptive practices, including protection from being billed for services that were not authorized or provided; and(7) to have an impartial and prompt resolution of disputes with its chosen retail electric provider and transmission and distribution utility.(c) A retail electric provider, power generation company, aggregator, or other entity that provides retail electric service may not refuse to provide retail electric or electric generation service or otherwise discriminate in the provision of electric service to any customer because of race, creed, color, national origin, ancestry, sex, marital status, lawful source of income, disability, or familial status. A retail electric provider, power generation company, aggregator, or other entity that provides retail electric service may not refuse to provide retail electric or electric generation service to a customer because the customer is located in an economically distressed geographic area or qualifies for low-income affordability or energy efficiency services. The commission shall require a provider to comply with this subsection as a condition of certification or registration.(d) A retail electric provider, power generation company, aggregator, or other entity that provides retail electric service shall submit reports to the commission and the office annually and on request relating to the person's compliance with this section. The commission by rule shall specify the form in which a report must be submitted. A report must include:(1) information regarding the extent of the person's coverage;(2) information regarding the service provided, compiled by zip code and census tract; and(3) any other information the commission or the office considers relevant to determine compliance.(e) The commission has the authority to adopt and enforce such rules as may be necessary or appropriate to carry out Subsections (a)-(d), including rules for minimum service standards for a retail electric provider relating to customer deposits and the extension of credit, switching fees, levelized billing programs, interconnection and use of on-site generation, termination of service, and quality of service. The commission has jurisdiction over all providers of electric service in enforcing Subsections (a)-(d) and may assess civil and administrative penalties under Section 15.023 and seek civil penalties under Section 15.028.(f) On or before June 30, 2001, the commission shall modify its current rules regarding customer protections to ensure that at least the same level of customer protection against potential abuses and the same quality of service that exists on December 31, 1999, is maintained in a restructured electric industry.(g) Compliance with Subsections (a)-(e) by a provider of electric service which is a municipally owned utility shall be administered solely by the governing body of the municipally owned utility, which shall adopt, implement, and enforce, as to the municipally owned utility, rules having the effect of accomplishing the objectives of Subsections (a)-(e). Reports containing the information required by Subsection (d) shall be filed by the municipally owned utility with the governing body.(h) A retail electric provider, power generation company, aggregator, or other entity that provides retail electric service may not disconnect service to a residential customer during an extreme weather emergency or on a weekend day. The entity providing service shall defer collection of the full payment of bills that are due during an extreme weather emergency until after the emergency is over and shall work with customers to establish a pay schedule for deferred bills. For purposes of this subsection, "extreme weather emergency" means a period when:(1) the previous day's highest temperature did not exceed 32 degrees Fahrenheit and the temperature is predicted to remain at or below that level for the next 24 hours according to the nearest National Weather Service reports; or(2) the National Weather Service issues a heat advisory for any county in the relevant service territory, or when such an advisory has been issued on any one of the previous two calendar days.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.102. RETAIL CUSTOMER CHOICE. (a) Each retail customer in this state, except retail customers of electric cooperatives and municipally owned utilities that have not opted for customer choice, shall have customer choice on and after January 1, 2002.(b) The affiliated retail electric provider of the electric utility serving a retail customer on December 31, 2001, may continue to serve that customer until the customer chooses service from a different retail electric provider, an electric cooperative offering customer choice, or a municipally owned utility offering customer choice.(c) An electric utility that has in effect a systemwide freeze for residential and commercial customers in effect September 1, 1997, extending beyond December 31, 2001, that has been found by a regulatory authority to be in the public interest is not subject to this chapter. At the expiration of the utility's freeze period, the utility shall be subject to this chapter and, at that time, has no claim for stranded cost recovery.(d) The commission shall oversee the compliance with this chapter by electric utilities that were not subject to this chapter before September 1, 2003, and in so doing shall establish schedules and procedures and require commission approvals as it deems necessary to achieve the objectives of this chapter. This subsection does not apply to an electric utility to which Subsection (c) applies.(e) In establishing a schedule under Subsection (d), the commission shall consider:(1) the effect of customer choice on the reliability of service provided by the electric utility;(2) whether the electric utility's service area is located in more than one power region;(3) whether any applicable power region has been certified as a qualifying power region under Section 39.152(a);(4) whether other electric utilities in the power region offer retail customer choice; and(5) any other relevant factor.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999. Amended by Acts 2003, 78th Leg., ch. 1327, Sec. 2, eff. Sept. 1, 2003.

Sec. 39.1025. LIMITATIONS ON TELEPHONE SOLICITATION. (a) A person may not make or cause to be made a telephone solicitation to a nonresidential electric customer who has given notice to the commission of the customer's objection to receiving telephone solicitations relating to the customer's choice of retail electric providers.(b) The commission shall establish and provide for the operation of a database to compile a list of nonresidential electric customers who object to receiving telephone solicitations. The commission may operate the database or contract with another entity to operate the database.(c) A customer shall pay a fee of not more than $5 for inclusion in the database. The commission shall prescribe the amount of the fee.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.Amended by: Acts 2005, 79th Leg., Ch. 171, Sec. 3, eff. May 27, 2005.

Sec. 39.103. COMMISSION AUTHORITY TO DELAY COMPETITION AND SET NEW RATES. If the commission determines under Section 39.104 that a power region is unable to offer fair competition and reliable service to all retail customer classes on January 1, 2002, the commission shall delay customer choice for the power region and may on or after January 1, 2002, establish new rates for all electric utilities in the power region as provided by Chapter 36.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.104. CUSTOMER CHOICE PILOT PROJECTS. (a) Customer choice pilot projects may be used to allow the commission to evaluate the ability of each power region and electric utility to implement customer choice. However, in a multiply certificated area, an electric utility may not include customers that were served by an electric cooperative or a municipally owned utility on May 1, 1999.(b) The commission shall require each electric utility to offer customer choice in its service area within this state amounting to five percent of the utility's combined load of all customer classes within this state beginning on June 1, 2001.(c) The load designated for customer choice under this section shall be distributed among all customer classes of a utility consistent with the purpose of this section and subject to commission approval.(d) Customers participating in a pilot project under this section may buy electric energy from any retail electric provider certified by the commission under Section 39.352, including an affiliated retail electric provider; provided, however, that a retail electric provider may not participate in a pilot project in the certificated service area served by the electric utility with which it is affiliated.(e) Each utility operating a pilot project under this section shall charge residential and small commercial customers in accordance with Section 39.052.(f) The commission may prescribe reporting requirements it considers necessary to evaluate a pilot project consistent with the purpose of this section.(g) Customers having customer choice under this section shall be billed as provided by Section 39.107.(h) The commission may prescribe terms and conditions it considers necessary to prohibit anticompetitive practices and to encourage customer choice offered under this section.(i) Notwithstanding any other provision of this title, a retail electric provider participating in a pilot project under this section is not an electric utility or a retail electric utility.(j) Twenty percent of the load designated for customer choice under this section shall be initially set aside for aggregated loads.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.105. LIMITATION ON SALE OF ELECTRICITY. (a) After January 1, 2002, a transmission and distribution utility may not sell electricity or otherwise participate in the market for electricity except for the purpose of buying electricity to serve its own needs.(b) A person or retail electric utility may not provide, furnish, or make available electric service at retail within the certificated service area of an electric cooperative that has not adopted customer choice or a municipally owned utility that has not adopted customer choice. However, this subsection does not prohibit the provision of electric service in multiply certificated service areas to customers of any other retail electric utility.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.106. PROVIDER OF LAST RESORT. (a) The commission shall designate retail electric providers in areas of the state in which customer choice is in effect to serve as providers of last resort.(b) A provider of last resort shall offer a standard retail service package for each class of customers designated by the commission at a fixed, nondiscountable rate approved by the commission.(c) A provider of last resort shall provide the standard retail service package to any requesting customer in the territory for which it is the provider of last resort.(d) The commission shall designate the provider or providers of last resort not later than June 1, 2001.(e) The commission shall determine the procedures and criteria, which may include the solicitation of bids, for designating a provider or providers of last resort. The commission may redesignate the provider of last resort according to a schedule it considers appropriate.(f) In the event that no retail electric provider applies to be the provider of last resort for a given area of the state on reasonable terms and conditions, the commission may require a retail electric provider to become the provider of last resort as a condition of receiving or maintaining a certificate under Section 39.352.(g) In the event that a retail electric provider fails to serve any or all of its customers, the provider of last resort shall offer that customer the standard retail service package for that customer class with no interruption of service to any customer.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.107. METERING AND BILLING SERVICES. (a) On introduction of customer choice in a service area, metering services for the area shall continue to be provided by the transmission and distribution utility affiliate of the electric utility that was serving the area before the introduction of customer choice. Metering services provided to commercial and industrial customers that are required by the independent system operator to have an interval data recorder meter may be provided on a competitive basis.(b) Metering services provided to residential customers and to nonresidential customers other than those required by the independent system operator to have an interval data recorder meter shall continue to be provided by the transmission and distribution utility affiliate of the electric utility that was serving the area before the introduction of customer choice. Retail electric providers serving residential and nonresidential customers other than those required by the independent system operator to have an interval data recorder meter may request that the transmission and distribution utility provide specialized meters, meter features, or add-on accessories so long as they are technically feasible and generally available in the market and provided that the retail electric provider pays the differential cost of such a meter or accessory. Metering and billing services provided to residential customers shall be governed by the customer safeguards adopted by the commission under Section 39.101. All meter data, including all data generated, provided, or otherwise made available, by advanced meters and meter information networks, shall belong to a customer, including data used to calculate charges for service, historical load data, and any other proprietary customer information. A customer may authorize its data to be provided to one or more retail electric providers under rules and charges established by the commission.(c) Beginning on the date of introduction of customer choice in a service area, tenants of leased or rented property that is separately metered shall have the right to choose a retail electric provider, an electric cooperative offering customer choice, or a municipally owned utility offering customer choice, and the owner of the property must grant reasonable and nondiscriminatory access to transmission and distribution utilities, retail electric providers, electric cooperatives, and municipally owned utilities for metering purposes.(d) Beginning on the date of introduction of customer choice in a service area, a transmission and distribution utility, or an electric cooperative or municipally owned utility providing the customer's energy requirements shall bill a customer's retail electric provider for nonbypassable delivery charges as determined under Section 39.201. The retail electric provider or the electric cooperative or municipally owned utility, as appropriate, must pay these charges.(e) A transmission and distribution utility may bill retail customers at the request of a retail electric provider or, if an electric cooperative or municipally owned utility is providing the customer's energy requirements, at the request of the electric cooperative or municipally owned utility. A transmission and distribution utility that provides billing service on such request shall offer billing service on comparable terms and conditions to those of any such requesting retail electric provider or, as applicable, the electric cooperative or municipally owned utility providing energy requirements to a customer served by the transmission and distribution utility.(f) Beginning on the date of introduction of customer choice in a service area, any charges for metering and billing services shall comply with rules adopted by the commission relating to nondiscriminatory rates of service.(g) Metered electric service sold to residential customers on a prepaid basis may not be sold at a price that is higher than the price charged by the provider of last resort.(h) The commission shall establish a nonbypassable surcharge for an electric utility or transmission and distribution utility to use to recover reasonable and necessary costs incurred in deploying advanced metering and meter information networks to residential customers and nonresidential customers other than those required by the independent system operator to have an interval data recorder meter. The commission shall ensure that the nonbypassable surcharge reflects a deployment of advanced meters that is no more than one-third of the utility's total meters over each calendar year and shall ensure that the nonbypassable surcharge does not result in the utility recovering more than its actual, fully allocated meter and meter information network costs. The expenses must be allocated to the customer classes receiving the services, based on the electric utility's most recently approved tariffs.(i) Subject to the restrictions in Subsection (h), it is the intent of the legislature that net metering and advanced meter information networks be deployed as rapidly as possible to allow customers to better manage energy use and control costs, and to facilitate demand response initiatives.(j) Notwithstanding Subsection (b), a nonresidential customer may have a meter installed and metering services provided on a competitive basis as part of an energy savings performance contract.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.Amended by: Acts 2005, 79th Leg., Ch. 1095, Sec. 7, eff. September 1, 2005.Acts 2007, 80th Leg., R.S., Ch. 527, Sec. 10, eff. June 16, 2007.Acts 2007, 80th Leg., R.S., Ch. 939, Sec. 20, eff. September 1, 2007.Acts 2009, 81st Leg., R.S., Ch. 87, Sec. 27.001(110), eff. September 1, 2009.

Sec. 39.108. CONTRACTUAL OBLIGATIONS. This chapter may not:(1) interfere with or abrogate the rights or obligations of any party, including a retail or wholesale customer, to a contract with an investor-owned electric utility, river authority, municipally owned utility, or electric cooperative;(2) interfere with or abrogate the rights or obligations of a party under a contract or agreement concerning certificated utility service areas; or(3) result in a change in wholesale power costs to wholesale customers in Texas purchasing electricity under wholesale power contracts the pricing provisions of which are based on formulary rates, fuel adjustments, or average system costs.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.109. NEW OWNER OR SUCCESSOR. (a) To ensure the continued safe and reliable operation of electric generating facilities, the commission shall require a generating facility that is transferred to a new owner or successor in interest between June 1, 1999, and January 1, 2002, to continue to be operated and maintained by the same operating personnel for not less than two years, except that the personnel may be dismissed for cause.(b) This section shall apply only if the facility is actually operated during the two-year period after the sale.(c) This section shall not require that the purchaser cause the facility to be operated in whole or in part, nor shall it preclude a temporary closure of the facility during the two-year period.(d) This section shall not create any obligation extending after the two-year period following the sale.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.112. NOTICE OF EXPIRATION AND PRICE CHANGE. (a) In this section, "fixed rate product" means a retail electric product with a term of at least three months for which the price for each billing period, including recurring charges, does not change throughout the term of the contract, except that the price may vary to reflect actual changes in transmission and distribution utility charges, changes to ERCOT or Texas Regional Entity administrative fees charged to loads, or changes to federal, state, or local laws that result in new or modified fees or costs that are not within the retail electric provider's control.(b) A retail electric provider shall provide a residential customer who has a fixed rate product with at least one written notice of the date the fixed rate product will expire. The notice must:(1) be sent to the customer's billing address by mail at least 30, but not more than 60, days preceding the date the contract will expire;(2) be sent to the customer's e-mail address, if available to the provider and if the customer has agreed to receive notices electronically, at least 30, but not more than 60, days preceding the date the contract will expire;(3) include on the outside of the envelope in which the notice is sent, a statement that reads: "Contract Expiration Notice. See Enclosed.";(4) if included with a customer's bill, be printed on a separate page; and(5) include a description of any fees or charges associated with the early termination of the customer's fixed rate product.(c) A retail electric provider shall include on each billing statement the end date of the fixed rate product.(d) No provision in this section shall be construed to prohibit the commission from adopting rules that would provide a greater degree of customer protection.

Added by Acts 2009, 81st Leg., R.S., Ch. 648, Sec. 5, eff. September 1, 2009.

Sec. 39.116. NOTICE REGARDING CUSTOMER CHOICE INFORMATION. A retail electric provider shall include on each residential customer's bill a statement, in at least 12-point type on the front of the first page, that reads: "For more information about residential electric service please visit www.powertochoose.com." This section expires September 1, 2011.

Added by Acts 2009, 81st Leg., R.S., Ch. 647, Sec. 1, eff. September 1, 2009.

SUBCHAPTER D. MARKET STRUCTURESec. 39.151. ESSENTIAL ORGANIZATIONS. (a) A power region must establish one or more independent organizations to perform the following functions:(1) ensure access to the transmission and distribution systems for all buyers and sellers of electricity on nondiscriminatory terms;(2) ensure the reliability and adequacy of the regional electrical network;(3) ensure that information relating to a customer's choice of retail electric provider is conveyed in a timely manner to the persons who need that information; and(4) ensure that electricity production and delivery are accurately accounted for among the generators and wholesale buyers and sellers in the region.(b) "Independent organization" means an independent system operator or other person that is sufficiently independent of any producer or seller of electricity that its decisions will not be unduly influenced by any producer or seller. (c) The commission shall certify an independent organization or organizations to perform the functions prescribed by this section. The commission shall apply the provisions of this section and Sections 39.1511, 39.1512, and 39.1515 so as to avoid conflict with a ruling of a federal regulatory body.(d) The commission shall adopt and enforce rules relating to the reliability of the regional electrical network and accounting for the production and delivery of electricity among generators and all other market participants, or may delegate to an independent organization responsibilities for establishing or enforcing such rules. Any such rules adopted by an independent organization and any enforcement actions taken by the organization are subject to commission oversight and review. An independent organization certified by the commission is directly responsible and accountable to the commission. The commission has complete authority to oversee and investigate the organization's finances, budget, and operations as necessary to ensure the organization's accountability and to ensure that the organization adequately performs the organization's functions and duties. The organization shall fully cooperate with the commission in the commission's oversight and investigatory functions. The commission may take appropriate action against an organization that does not adequately perform the organization's functions or duties or does not comply with this section, including decertifying the organization or assessing an administrative penalty against the organization. The commission by rule shall adopt procedures governing decertification of an independent organization, selecting and certifying a successor organization, and transferring assets to the successor organization to ensure continuity of operations in the region. The commission may not implement, by order or by rule, a requirement that is contrary to an applicable federal law or rule.(d-1) The commission may:(1) require an independent organization to provide reports and information relating to the independent organization's performance of the functions prescribed by this section and relating to the organization's revenues, expenses, and other financial matters;(2) prescribe a system of accounts for an independent organization;(3) conduct audits of an independent organization's performance of the functions prescribed by this section or relating to its revenues, expenses, and other financial matters and may require an independent organization to conduct such an audit;(4) inspect an independent organization's facilities, records, and accounts during reasonable hours and after reasonable notice to the independent organization;(5) assess administrative penalties against an independent organization that violates this title or a rule or order adopted by the commission and, at the request of the commission, the attorney general may apply for a court order to require an independent organization to comply with commission rules and orders in the manner provided by Chapter 15; and(6) resolve disputes between an affected person and an independent organization and adopt procedures for the efficient resolution of such disputes.(e) The commission may authorize an independent organization that is certified under this section to charge a reasonable and competitively neutral rate to wholesale buyers and sellers to cover the independent organization's costs. The commission shall investigate the organization's cost efficiencies, salaries and benefits, and use of debt financing and may require the organization to provide any information needed to effectively evaluate the organization's budget and the reasonableness and neutrality of a rate or proposed rate or to evaluate the effectiveness or efficiency of the organization. The commission shall work with the organization to establish the detail of information, both current and historical, and the time frames the commission needs to effectively evaluate a rate or a rate request.(f) In implementing this section, the commission may cooperate with the utility regulatory commission of another state or the federal government and may hold a joint hearing or make a joint investigation with that commission.(g) To maintain certification as an independent organization under this section, an organization's governing body must be composed of persons specified by this section and selected in accordance with formal bylaws or protocols of the organization. The bylaws or protocols must be approved by the commission and must reflect the input of the commission. The bylaws must specify the process by which appropriate stakeholders elect members and, for unaffiliated members, prescribe professional qualifications for selection as a member. The bylaws must require the use of a professional search firm to identify candidates for membership of unaffiliated members. The process must allow for commission input in identifying candidates. The governing body must be composed of:(1) the chairman of the commission as an ex officio nonvoting member;(2) the counsellor as an ex officio voting member representing residential and small commercial consumer interests;(3) the chief executive officer of the independent organization as an ex officio voting member;(4) six market participants elected by their respective market segments to serve one-year terms, with:(A) one representing independent generators;(B) one representing investor-owned utilities;(C) one representing power marketers;(D) one representing retail electric providers;(E) one representing municipally owned utilities; and(F) one representing electric cooperatives;(5) one member representing industrial consumer interests and elected by the industrial consumer market segment to serve a one-year term;(6) one member representing large commercial consumer interests selected in accordance with the bylaws to serve a one-year term; and(7) five members unaffiliated with any market segment and selected by the other members of the governing body to serve three-year terms.(g-1) The presiding officer of the governing body must be one of the members described by Subsection (g)(7).(h) The ERCOT independent system operator may meet the criteria relating to the other functions of an independent organization provided by Subsection (a) by adopting procedures and acquiring resources needed to carry out those functions, consistent with any rules or orders of the commission.(i) The commission may delegate authority to the existing independent system operator in ERCOT to enforce operating standards within the ERCOT regional electrical network and to establish and oversee transaction settlement procedures. The commission may establish the terms and conditions for the ERCOT independent system operator's authority to oversee utility dispatch functions after the introduction of customer choice.(j) A retail electric provider, municipally owned utility, electric cooperative, power marketer, transmission and distribution utility, or power generation company shall observe all scheduling, operating, planning, reliability, and settlement policies, rules, guidelines, and procedures established by the independent system operator in ERCOT. Failure to comply with this subsection may result in the revocation, suspension, or amendment of a certificate as provided by Section 39.356 or in the imposition of an administrative penalty as provided by Section 39.357.(k) To the extent the commission has authority over an independent organization outside of ERCOT, the commission may delegate authority to the independent organization consistent with Subsection (i).(l) No operational criteria, protocols, or other requirement established by an independent organization, including the ERCOT independent system operator, may adversely affect or impede any manufacturing or other internal process operation associated with an industrial generation facility, except to the minimum extent necessary to assure reliability of the transmission network.(m) A power region outside of ERCOT shall be deemed to have met the requirement to establish an independent organization to perform the transmission functions specified in Subsection (a) if the Federal Energy Regulatory Commission has approved a regional transmission organization for the region and found that the regional transmission organization meets the requirements of Subsection (a).

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.Amended by: Acts 2005, 79th Leg., Ch. 797, Sec. 9, eff. September 1, 2005.

Sec. 39.1511. PUBLIC MEETINGS OF THE GOVERNING BODY OF AN INDEPENDENT ORGANIZATION. (a) Meetings of the governing body of an independent organization certified under Section 39.151 and meetings of a subcommittee that includes a member of the governing body must be open to the public. The bylaws of the independent organization and the rules of the commission may provide for the governing body or subcommittee to enter into executive session closed to the public to address sensitive matters such as confidential personnel information, contracts, lawsuits, competitively sensitive information, or other information related to the security of the regional electrical network.(b) The bylaws of the independent organization and rules of the commission must ensure that a person interested in the activities of the independent organization has an opportunity to obtain at least seven days' advance notice of meetings and the planned agendas of the meetings and an opportunity to comment on matters under discussion at the meetings. The bylaws and commission rules governing meetings of the governing body may provide for a shorter period of advance notice and for meetings by teleconference technology for governing body meetings to take action on urgent matters. The bylaws and rules must require actions taken on short notice or at teleconference meetings to be ratified at the governing body's next regular meeting. The notice requirements may be met by a timely electronic posting on the Internet.(c) The commission shall ensure that an independent organization certified under Section 39.151 makes publicly accessible without charge live Internet video of all public meetings subject to this section for viewing from an Internet website.

Added by Acts 2005, 79th Leg., Ch. 797, Sec. 10, eff. September 1, 2005.Amended by: Acts 2009, 81st Leg., R.S., Ch. 400, Sec. 2, eff. September 1, 2009.

Sec. 39.1512. DISCLOSURE OF INTEREST IN MATTER BEFORE INDEPENDENT ORGANIZATION'S GOVERNING BODY; PARTICIPATION IN DECISION. (a) If a matter comes before the governing body of an independent organization certified under Section 39.151 and a member has a direct interest in that matter or is employed by or has a substantial financial interest in a person who has a direct interest in that matter, that member shall publicly disclose the fact of that interest to the governing body at a public meeting of the body. The member shall recuse himself or herself from the governing body's deliberations and actions on the matter and may not vote on the matter or otherwise participate in a governing body decision on the matter.(b) A disclosure made under Subsection (a) shall be entered in the minutes of the meeting at which the disclosure is made.(c) The fact that a member is recused from a vote or decision by application of this section does not affect the existence of a quorum.

Added by Acts 2005, 79th Leg., Ch. 797, Sec. 10, eff. September 1, 2005.

Sec. 39.1515. WHOLESALE ELECTRIC MARKET MONITOR. (a) An independent organization certified under Section 39.151 shall contract with an entity selected by the commission to act as the commission's wholesale electric market monitor to detect and prevent market manipulation strategies and recommend measures to enhance the efficiency of the wholesale market.(b) The independent organization shall provide to the personnel of the market monitor:(1) full access to the organization's main operations center and the organization's records that concern operations, settlement, and reliability; and(2) other support and cooperation the commission determines is necessary for the market monitor to perform the market monitor's functions.(c) The independent organization shall use money from the rate authorized by Section 39.151(e) to pay for the market monitor's activities.(d) The commission is responsible for ensuring that the market monitor has the resources, expertise, and authority necessary to monitor the wholesale electric market effectively and shall adopt rules and perform oversight of the market monitor as necessary. The market monitor shall operate under the supervision and oversight of the commission. The commission shall retain all enforcement authority conferred under this title, and this section may not be construed to confer enforcement authority on the market monitor or to authorize the commission to delegate the commission's enforcement authority to the market monitor. The commission by rule shall define:(1) the market monitor's monitoring responsibilities, including reporting obligations and limitations;(2) the standards for funding the market monitor, including staffing requirements;(3) qualifications for personnel of the market monitor; and(4) ethical standards for the market monitor and the personnel of the market monitor.(e) In adopting rules governing the standards for funding the market monitor, the commission shall consult with a subcommittee of the independent organization's governing body to receive information on how money is or should be spent for monitoring functions. Rules governing ethical standards must include provisions designed to ensure that the personnel of the market monitor are professionally and financially independent from market participants. The commission shall develop and implement policies that clearly separate the policymaking responsibilities of the commission and the monitoring, analysis, and reporting responsibilities of the market monitor.(f) The market monitor immediately shall report directly to the commission any potential market manipulations and any discovered or potential violations of commission rules or rules of the independent organization.(g) The personnel of the market monitor may communicate with commission staff on any matter without restriction.(h) The market monitor annually shall submit to the commission and the independent organization a report that identifies market design flaws and recommends methods to correct the flaws. The commission and the independent organization shall review the report and evaluate whether changes to rules of the commission or the independent organization should be made.

Added by Acts 2005, 79th Leg., Ch. 797, Sec. 10, eff. September 1, 2005.

Sec. 39.152. QUALIFYING POWER REGIONS. (a) The commission shall certify a power region if:(1) a sufficient number of interconnected utilities in the power region fall under the operational control of an independent organization as described by Section 39.151;(2) the power region has a generally applicable tariff that guarantees open and nondiscriminatory access for all users to transmission and distribution facilities in the power region as provided by Section 39.203; and(3) no person owns and controls more than 20 percent of the installed generation capacity located in or capable of delivering electricity to a power region, as determined according to Section 39.154.(b) In determining whether a power region not entirely within the state meets the requirements of this section, the commission shall consider the extent to which the available transmission facilities limit the delivery of electricity from generators located outside the state to areas of the power region within the state.(c) For a power region outside of ERCOT, the requirements of Subsection (a)(2) shall be deemed to have been met if power aggregating to approximately 50,000 megawatts can be delivered to the portion of the power region that is in this state through the payment of not more than one transmission tariff.(d) For a power region outside of ERCOT, a power generation company that is affiliated with an electric utility may elect to demonstrate that it meets the requirements of Subsection (a)(3) by showing that it does not own and control more than 20 percent of the installed capacity in a geographic market that includes the power region, using the guidelines, standards, and methods adopted by the Federal Energy Regulatory Commission.(e) In a power region outside of ERCOT, if customer choice is introduced before the requirements of Subsection (a) are met, an affiliated retail electric provider may not compete for retail customers in any area of the power region that is within this state and outside of the affiliated transmission and distribution utility's certificated service area 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 municipally owned utility that was a wholesale customer on January 1, 1999, and was purchasing power at rates that were based on cost of service. This subsection requires a power generation company to sell power at rates that are based on cost of service, notwithstanding the expiration of a contract for that service, until the requirements of Subsection (a) are met.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.153. CAPACITY AUCTION. (a) Each electric utility subject to this section shall sell at auction, at least 60 days before the date set for customer choice to begin, entitlements to at least 15 percent of the electric utility's Texas jurisdictional installed generation capacity. For the purposes of this section, the term "electric utility" includes any affiliated power generation company that is unbundled from the electric utility in accordance with Section 39.051, but does not include any entity owning less than 400 megawatts of installed generation capacity.(b) The obligation to auction the entitlements shall continue until the earlier of 60 months after the date customer choice is introduced or the date the commission determines that 40 percent or more of the electric power consumed by residential and small commercial customers within the affiliated transmission and distribution utility's certificated service area before the onset of customer choice is provided by nonaffiliated retail electric providers.(c) An affiliate of the electric utility selling entitlements in the auction required by this section may not purchase entitlements from the affiliated electric utility at the auction. Entitlements may only be purchased by entities lawfully able to sell electricity in Texas.(d) An electric utility may choose to auction additional entitlements beyond those required by Subsection (a) or continue to auction entitlements after the period required by Subsection (b) in order to comply with Section 39.154.(e) The commission shall adopt rules by December 31, 2000, that define the scope of the capacity entitlements to be auctioned. Entitlements may be auctioned in blocks of less than 15 percent. The rules shall state the minimum amount of capacity that can be sold at auction as an entitlement. At a minimum, the rules shall provide that the entitlements:(1) may be sold and purchased in periods of not less than one month nor more than four years;(2) may be resold to any lawful purchaser, except for a retail electric provider affiliated with the electric utility that originally auctioned the entitlement;(3) include no possessory interest in the unit from which the power is produced;(4) include no obligations of a possessory owner of an interest in the unit from which the power is produced; and(5) give the purchaser the right to designate the dispatch of the entitlement, subject to planned outages, outages beyond the control of the utility operating the unit, and other considerations subject to the oversight of the applicable independent organization.(f) The commission shall adopt rules by December 31, 2000, that prescribe the procedure for the auction of the entitlements. The rules shall include:(1) a process for conducting the auction or auctions, including who shall conduct it, how often it shall be conducted, and how winning bidders shall be determined;(2) a process for the electric utility to designate which generation units or combination of units are offered for auction;(3) a provision for the utility to establish an opening bid price based on the electric utility's expected cost, with the commission prescribing the means for determining the opening bid price, which may not include return on equity; and(4) a provision that allows a bidder to specify the magnitude and term of the entitlement, subject to the conditions established in Subsection (e).(g) In adopting the process under Subsection (f)(2), the commission shall consider the furtherance of the development of the competitive market, the cost of transmission, physical constraints of the transmission system, the proximity of the generation to load, economic efficiency, and any other factors the commission finds relevant. The process may provide for commission approval of the designation before auction. The commission may consult with the applicable independent organization to develop the process.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.154. LIMITATION OF OWNERSHIP OF INSTALLED CAPACITY. (a) Beginning on the date of introduction of customer choice, a power generation company may not own and control more than 20 percent of the installed generation capacity located in, or capable of delivering electricity to, a power region.(b) In a power region not entirely within the state, the commission may waive or modify the requirement in Subsection (a) on a finding of good cause.(c) In determining the percentage shares of installed generation capacity under this section, the commission shall combine capacity owned and controlled by a power generation company and any entity that is affiliated with that power generation company within the power region, reduced by the installed generation capacity of those facilities that are made subject to capacity auctions under Sections 39.153(a) and (d).(d) In this chapter, "installed generation capacity" means all potentially marketable electric generation capacity, including the capacity of:(1) generating facilities that are connected with a transmission or distribution system;(2) generating facilities used to generate electricity for consumption by the person owning or controlling the facility; and(3) generating facilities that will be connected with a transmission or distribution system and operating within 12 months.(e) In determining the percentage shares of installed generation capacity owned and controlled by a power generation company under this section and Section 39.156, the commission shall, for purposes of calculating the numerator, reduce the installed generation capacity owned and controlled by that power generation company by the installed generation capacity of any "grandfathered facility" within an ozone nonattainment area as of September 1, 1999, for which that power generation company has commenced complying or made a binding commitment to comply with Section 39.264. This subsection applies only to a power generation company that is affiliated with an electric utility that owned and controlled more than 27 percent of the installed generation capacity in the power region on January 1, 1999.

Added by Acts 1999, 76th Leg., ch. 405, Sec. 39, eff. Sept. 1, 1999.

Sec. 39.155. COMMISSION ASSESSMENT OF MARKET POWER. (a) Each person, municipally owned utility, electric cooperative, and river authority that owns generation facilities and offers electricity for sale in this state shall report to the commission its installed generation capacity, the total amount of capacity available for sale to others, the total amount of capacity under contract to others, the total amount of capacity dedicated to its own use, its annual wholesale power sales in the state, its annual retail power sales in the state, and any other information necessary for the commission to assess market power or the development of a competitive retail market in the state. The commission shall by rule prescribe the nature and detail of the reporting requirements and shall administer those reporting requirements in a manner that ensures the confidentiality of competitively sensitive information.(b) The ERCOT independent system operator shall submit an annual report to the commission identifying existing and potential transmission and distribution constraints and system needs within ERCOT, alternatives for meeting system needs, and recommendations for meeting system needs. The first report shall be submitted on or before October 1, 1999. Subsequent reports shall be submitted by January 15 of each year or as determined necessary by the commission.(c) Before the date of introduction of customer choice in a power region other than ERCOT, each electric utility owning transmission and distribution facilities in that region shall submit an annual report to the