CHAPTER 41. ELECTRIC COOPERATIVES AND COMPETITION - Texas Statutes

UTILITIES CODE

TITLE 2. PUBLIC UTILITY REGULATORY ACT

SUBTITLE B. ELECTRIC UTILITIES

CHAPTER 41. ELECTRIC COOPERATIVES AND COMPETITION

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 41.001. APPLICABLE LAW. Notwithstanding any other

provision of law, except Sections 39.155, 39.157(e), 39.203,

39.903, and 39.904, this chapter governs the transition to and

the establishment of a fully competitive electric power industry

for electric cooperatives. Regarding the regulation of electric

cooperatives, this chapter shall control over any other provision

of this title, except for sections in which the term "electric

cooperative" is specifically used.

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

1999.

Sec. 41.002. DEFINITIONS. In this chapter:

(1) "Board of directors" means the board of directors of an

electric cooperative as described in Section 161.071.

(2) "Rate" includes any compensation, tariff, charge, fare,

toll, rental, or classification that is directly or indirectly

demanded, observed, charged, or collected by an electric

cooperative for any service, product, or commodity and any rule,

practice, or contract affecting the compensation, tariff, charge,

fare, toll, rental, or classification.

(3) "Stranded investment" means:

(A) the excess, if any, of the net book value of generation

assets over the market value of the generation assets; and

(B) any above market purchased power costs.

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

1999.

Sec. 41.003. SECURITIZATION. (a) Electric cooperatives may

adopt and use securitization provisions having the effect of the

provisions provided by Subchapter G, Chapter 39, to recover

through rates stranded costs at a recovery level deemed

appropriate by the board of directors up to 100 percent, under

rules and procedures that shall be established by the commission.

(b) The rules and procedures for securitization established

under Subsection (a) shall include rules and procedures for the

recovery of stranded costs under the terms of a rate order

adopted by the board of directors of the electric cooperative,

which rate order shall have the effect of a financing order.

(c) The rules and procedures established by the commission under

Subsection (b) shall include rules and procedures for the

issuance of transition bonds issued in a securitized financing

transaction. The issuance of any transition bonds issued in a

securitized financing transaction by an electric cooperative is

expressly authorized and shall be governed by the laws governing

the issuance of bonds or other obligations by the electric

cooperative. Findings made by the board of directors of an

electric cooperative in a rate order issued under the rules and

procedures described by this subsection shall be conclusive, and

any transition charges incorporated in the rate order to recover

the principal, interest, and all reasonable expenses associated

with any securitized financing transaction shall constitute

property rights, as described in Subchapter G, Chapter 39, and

shall otherwise conform in all material respects to the

transition charges provided by Subchapter G, Chapter 39.

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

1999.

Sec. 41.004. JURISDICTION OF COMMISSION. Except as specifically

provided otherwise in this chapter, the commission has

jurisdiction over electric cooperatives only as follows:

(1) to regulate wholesale transmission rates and service,

including terms of access, to the extent provided in Subchapter

A, Chapter 35;

(2) to regulate certification to the extent provided in Chapter

37;

(3) to establish a code of conduct as provided in Section

39.157(e) subject to Section 41.054;

(4) to establish terms and conditions, but not rates, for open

access to distribution facilities for electric cooperatives

providing customer choice, as provided in Section 39.203; and

(5) to require reports of electric cooperative operations only

to the extent necessary to:

(A) ensure the public safety;

(B) enable the commission to satisfy its responsibilities

relating to electric cooperatives under this chapter;

(C) enable the commission to determine the aggregate electric

load and energy requirements in the state and the resources

available to serve that load; or

(D) enable the commission to determine information relating to

market power as provided in Section 39.155.

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

1999.

Sec. 41.005. LIMITATION ON MUNICIPAL AUTHORITY. Notwithstanding

any other provision of this title, a municipality may not

directly or indirectly regulate the rates, operations, and

services of an electric cooperative, except, with respect to

operations, to the extent necessary to protect the public health,

safety, or welfare. This section does not prohibit a municipality

from making a lawful charge for the use of public rights-of-way

within the municipality as provided by Section 182.025, Tax Code,

and Section 33.008. An electric cooperative shall be an electric

utility for purposes of Section 182.025, Tax Code, and Section

33.008.

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

1999.

SUBCHAPTER B. ELECTRIC COOPERATIVE UTILITY CHOICE

Sec. 41.051. BOARD DECISION. (a) The board of directors has

the discretion to decide when or if the electric cooperative will

provide customer choice.

(b) Electric cooperatives that choose to participate in customer

choice may do so at any time on or after January 1, 2002, by

adoption of an appropriate resolution of the board of directors.

The decision to participate in customer choice by the adoption of

a resolution may be revoked only if no customer has opted for

choice within four years of the resolution's adoption. An

electric cooperative may initiate a customer choice pilot project

at any time.

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

1999.

Sec. 41.052. ELECTRIC COOPERATIVES NOT OFFERING CUSTOMER CHOICE.

(a) An electric cooperative that chooses not to participate in

customer choice may not offer electric energy at unregulated

prices directly to retail customers outside its certificated

retail service area.

(b) An electric cooperative under Subsection (a) retains the

right to offer and provide a full range of customer service and

pricing programs to the customers within its certificated retail

service area and to purchase and sell electric energy at

wholesale without geographic restriction.

(c) A generation and transmission electric cooperative may offer

electric energy at unregulated prices directly to retail

customers outside of its parent electric cooperatives'

certificated service areas only if a majority of the parent

electric cooperatives of the generation and transmission electric

cooperative have chosen to offer customer choice.

(d) A subsidiary of an electric cooperative may not provide

electric energy at unregulated prices outside of its parent

electric cooperative's certificated retail service area unless

the electric cooperative offers customer choice inside its

certificated retail service area.

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

1999.

Sec. 41.053. RETAIL CUSTOMER RIGHT OF CHOICE. (a) If an

electric cooperative chooses to participate in customer choice,

after that choice, all retail customers within the certificated

service area of the electric cooperative shall have the right of

customer choice, and the electric cooperative shall provide

nondiscriminatory open access for retail service.

(b) Notwithstanding Section 39.107, the metering function may

not be deemed a competitive service for customers of the electric

cooperative within that service area and may, at the option of

the electric cooperative, continue to be offered by the electric

cooperative as sole provider.

(c) On its initiation of customer choice, an electric

cooperative shall designate itself or another entity as the

provider of last resort for retail customers within the electric

cooperative's certificated service area and shall fulfill the

role of default provider of last resort in the event no other

entity is available to act in that capacity.

(d) If a retail electric provider fails to serve a customer

described in Subsection (c), on request by the customer, the

provider of last resort shall offer the customer the standard

retail service package for the appropriate customer class, with

no interruption of service, at a fixed, nondiscountable rate that

is at least sufficient to cover the reasonable costs of providing

that service, as approved by the board of directors.

(e) The board of directors may establish the procedures and

criteria for designating the provider of last resort and may

redesignate the provider of last resort according to a schedule

it considers appropriate.

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

1999.

Sec. 41.054. SERVICE OUTSIDE CERTIFICATED AREA. (a)

Notwithstanding any provisions of Chapter 161:

(1) an electric cooperative participating in customer choice

shall have the right to offer electric energy and related

services at unregulated prices directly to retail customers who

have customer choice without regard to geographic location; and

(2) any person, without restriction, except as may be provided

in the electric cooperative's articles of incorporation and

bylaws, may be a member of an electric cooperative.

(b) In providing service under Subsection (a) to retail

customers outside its certificated service area as that area

exists on the date of adoption of customer choice, an electric

cooperative becomes subject to commission jurisdiction as to the

commission's rules establishing a code of conduct regulating

anticompetitive practices under Section 39.157(e), except to the

extent those rules conflict with this chapter.

(c) For electric cooperatives participating in customer choice,

the commission shall have jurisdiction to establish terms and

conditions, but not rates, for access by other electric providers

to the electric cooperative's distribution facilities.

(d) Notwithstanding Subsections (b) and (c), the commission

shall make accommodation in the code of conduct for specific

legal requirements imposed by state or federal law applicable to

electric cooperatives. The commission shall accommodate the

organizational structures of electric cooperatives and may not

prohibit an electric cooperative and any related entity from

sharing officers, directors, or employees.

(e) The commission does not have jurisdiction to require the

unbundling of services or functions of, or to regulate the

recovery of stranded investment of, an electric cooperative or,

except as provided by this section, jurisdiction with respect to

the rates, terms, and conditions of service for retail customers

of an electric cooperative within the electric cooperative's

certificated service area.

(f) An electric cooperative shall maintain separate books and

records of its operations and the operations of any subsidiary

and shall ensure that the rates charged for provision of electric

service do not include any costs of its subsidiary or any other

costs not related to the provision of electric service.

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

1999.

Sec. 41.055. JURISDICTION OF BOARD OF DIRECTORS. A board of

directors has exclusive jurisdiction to:

(1) set all terms of access, conditions, and rates applicable to

services provided by the electric cooperative, except as provided

by Sections 41.054 and 41.056, including nondiscriminatory and

comparable rates for distribution but excluding wholesale

transmission rates, terms of access, and conditions for wholesale

transmission service set by the commission under Subchapter A,

Chapter 35, provided that the rates for distribution established

by the electric cooperative shall be comparable to the

distribution rates that apply to the electric cooperative and its

subsidiaries;

(2) determine whether to unbundle any energy-related activities

and, if the board of directors chooses to unbundle, whether to do

so structurally or functionally;

(3) reasonably determine the amount of the electric

cooperative's stranded investment;

(4) establish nondiscriminatory transition charges reasonably

designed to recover the stranded investment over an appropriate

period of time;

(5) determine the extent to which the electric cooperative will

provide various customer services, including nonelectric

services, or accept the services from other providers;

(6) manage and operate the electric cooperative's utility

systems, including exercise of control over resource acquisition

and any related expansion programs;

(7) establish and enforce service quality standards, reliability

standards, and consumer safeguards designed to protect retail

electric customers;

(8) determine whether a base rate reduction is appropriate for

the electric cooperative;

(9) determine any other utility matters that the board of

directors believes should be included;

(10) sell electric energy and capacity at wholesale, regardless

of whether the electric cooperative participates in customer

choice;

(11) determine the extent to which the electric cooperative

offers energy efficiency programs and how the programs are

administered by the electric cooperative; and

(12) make any other decisions affecting the electric

cooperative's method of conducting business that are not

inconsistent with the provisions of this chapter.

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. 28, eff. September 1, 2007.

Sec. 41.056. ANTICOMPETITIVE ACTIONS. (a) If, after notice and

hearing, the commission finds that an electric cooperative

providing customer choice has engaged in anticompetitive behavior

by not providing other retail electric providers with

nondiscriminatory terms and conditions of access to distribution

facilities or customers within the electric cooperative's

certificated service area that are comparable to the electric

cooperative's and its subsidiaries' terms and conditions of

access to distribution facilities or customers, the commission

shall notify the electric cooperative.

(b) The electric cooperative shall have three months to cure the

anticompetitive or noncompliant behavior described in Subsection

(a). If the behavior is not fully remedied within that time, the

commission may prohibit the electric cooperative or its

subsidiary from providing retail service outside its certificated

retail service area until the behavior is remedied.

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

1999.

Sec. 41.057. BILLING. (a) An electric cooperative that opts

for customer choice may continue to bill directly electric

customers located in its certificated service area for all

transmission and distribution services. The electric cooperative

may also bill directly for generation and customer services

provided by the electric cooperative or its subsidiaries to those

customers.

(b) A customer served by an electric cooperative for

transmission and distribution services and by a retail electric

provider for retail service has the option of being billed

directly by each service provider or receiving a single bill for

distribution, transmission, and generation services from the

electric cooperative.

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

1999.

Sec. 41.058. TARIFFS FOR OPEN ACCESS. An electric cooperative

that owns or operates transmission and distribution facilities

shall file tariffs implementing the open access rules established

by the commission under Section 39.203 with the appropriate

regulatory authorities having jurisdiction over the transmission

and distribution service of the electric cooperative before the

90th day preceding the date the electric cooperative offers

customer choice.

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

1999.

Sec. 41.059. NO POWER TO AMEND CERTIFICATES. Nothing in this

chapter empowers a board of directors to issue, amend, or rescind

a certificate of public convenience and necessity granted by the

commission.

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

1999.

Sec. 41.060. CUSTOMER SERVICE INFORMATION. (a) The commission

shall keep information submitted by customers and retail electric

providers pertaining to the provision of electric service by

electric cooperatives.

(b) The commission shall notify the appropriate electric

cooperative of information submitted by a customer or retail

electric provider, and the electric cooperative shall respond to

the customer or retail electric provider. The electric

cooperative shall notify the commission of its response.

(c) The commission shall prepare a report for the Sunset

Advisory Commission that includes information submitted and

responses by electric cooperatives in accordance with the Sunset

Advisory Commission's schedule for reviewing the commission.

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

1999.

Sec. 41.061. RETAIL RATE CHANGES BY ELECTRIC COOPERATIVES. (a)

This section shall apply to retail rates of an electric

cooperative that has not adopted customer choice and to the

retail delivery rates of an electric cooperative that has adopted

customer choice. This section may not apply to rates for:

(1) sales of electric energy by an electric cooperative that has

adopted customer choice; or

(2) wholesale sales of electric energy.

(b) An electric cooperative may change its rates by:

(1) adopting a resolution approving the proposed change;

(2) mailing notice of the proposed change to each affected

customer whose rate would be increased by the proposed change at

least 30 days before implementation of the proposed change, which

notice may be included in a monthly billing; and

(3) holding a meeting to discuss the proposed rate changes with

affected customers, if any change is expected to increase total

system annual revenues by more than $100,000 or one percent,

whichever is greater.

(c) An electric cooperative may implement the proposed rates on

completion of the requirements under Subsection (b), and those

rates shall remain in effect until changed by the electric

cooperative as provided by this section or, for rates other than

retail delivery rates, until this section is no longer applicable

because the electric cooperative adopts customer choice.

(d) The electric cooperative may reconsider a rate change at any

time and adjust the rate by board resolution without additional

notice or meeting of customers if the rate as adjusted is not

expected to increase the revenues from a customer class. However,

if notice is given to a customer class that would receive an

increase as a result of the adjustment, then the rates for the

customer class may be increased without additional meeting of the

customers. A customer may petition to appeal within the time

provided in Subsection (f).

(e) Retail rates set by an electric cooperative that has not

adopted customer choice and retail delivery rates set by an

electric cooperative that has adopted customer choice shall be

just and reasonable, not unreasonably preferential, prejudicial,

or discriminatory; provided, however, if the customer agrees, an

electric cooperative may charge a market-based rate to customers

who have energy supply options if rates are not increased for

other customers as a result.

(f) A customer of the electric cooperative who is adversely

affected by a rate setting resolution of the electric cooperative

is entitled to judicial review. A person initiates judicial

review by filing a petition in the district court of Travis

County not later than the 90th day after the resolution is

implemented.

(g) The resolution of the electric cooperative setting rates, as

it may have been amended as described in Subsection (d), shall be

presumed valid, and the burden of showing that the resolution is

invalid rests on the persons challenging the resolution. A court

reviewing a change of a rate or rates by an electric cooperative

may consider any relevant factor including the cost of providing

service.

(h) If the court finds that the electric cooperative's

resolution setting rates violates the standards contained in

Subsection (e), or that the electric cooperative's rate violates

Subsection (e), the court shall enter an order:

(1) stating the specific basis for its determination that the

rates set in the electric cooperative's resolution violate

Subsection (e); and

(2) directing the electric cooperative to:

(A) set, within 60 days, revised retail rates that do not

violate the standards of Subsection (e); and

(B) refund or credit against future bills, at the electric

cooperative's option, revenues collected under the rate found to

violate the standards of Subsection (e) that exceed the revenues

that would have been collected under the revised rates. The

refund or credit shall be made over a period of not more than 12

months, as determined by the court.

(i) The court may not enter an order delaying or prohibiting

implementation of a rate change or set revised rates either for

the period the challenged resolution was in effect or

prospectively.

(j) A person having obtained an order of the court requiring an

electric cooperative to set revised retail rates pursuant to

Subsection (h)(2)(A) may, once the order is no longer subject to

appeal, initiate an original proceeding in the district court of

Travis County either to:

(1) seek enforcement of the court's order by writ of mandamus if

the electric cooperative has failed to adopt a resolution

approving revised rates within the time prescribed; or

(2) seek judicial review of the electric cooperative's most

current resolution setting rates as provided in this section, if

the electric cooperative has set revised rates pursuant to the

order of the court within the time prescribed. In the event of

such enforcement proceeding or judicial review the court may, in

addition to the other remedies provided for in this section,

award reasonable costs, including reasonable attorney's fees, to

the party prevailing on the case as a whole. Additionally, if the

court finds that either party has acted in bad faith solely for

the purpose of perpetuating the rate dispute between the parties,

the court may impose sanctions on the offending party in

accordance with the provisions of Subsections (b), (c), and (e),

Section 10.004, Civil Practice and Remedies Code.

(k) An electric cooperative that has not adopted customer choice

and that has not changed each of its nonresidential rates since

January 1, 1999, shall, on or before May 1, 2002, adopt a

resolution setting rates. The resolution shall be subject to

judicial review as provided in this section whether or not any

rate is changed. In the event the electric cooperative fails to

adopt a resolution setting rates pursuant to this subsection, a

customer may petition for judicial review of the electric

cooperative's rates. A person initiates judicial review by filing

a petition in the district court of Travis County not later than

November 1, 2002.

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

1999.

Sec. 41.062. ALLOCATION OF STRANDED INVESTMENT. Any competition

transition charge shall be allocated among retail customer

classes based on the relevant customer class characteristics as

of the end of the electric cooperative's most recent fiscal year

before implementation of customer choice, in accordance with the

methodology used to allocate the costs of the underlying assets

or expenses in the electric cooperative's most recent cost of

service study certified by a professional engineer or certified

public accountant or approved by the commission. In multiply

certificated areas, a retail customer may not avoid stranded cost

recovery charges by switching to another electric cooperative, an

electric utility, or a municipally owned utility.

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

1999.

SUBCHAPTER C. RIGHTS NOT AFFECTED

Sec. 41.101. INTERFERENCE WITH CONTRACT. (a) This subtitle may

not interfere with or abrogate the rights or obligations of

parties, including a retail or wholesale customer, to a contract

with an electric cooperative or its subsidiary.

(b) No provision of this subtitle may interfere with or be

deemed to abrogate the rights or obligations of a party under a

contract or an agreement concerning certificated service areas.

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

1999.

Sec. 41.102. ACCESS TO WHOLESALE MARKET. Nothing in this

subtitle shall limit the access of an electric cooperative or its

subsidiary, either on its own behalf or on behalf of its

customers, to the wholesale electric market.

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

1999.

Sec. 41.103. PROTECTION OF BONDHOLDERS. Nothing in this

subtitle or any rule adopted under this subtitle shall impair

contracts, covenants, or obligations between an electric

cooperative and its lenders and holders of bonds issued on behalf

of or by the electric cooperative.

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

1999.

Sec. 41.104. TAX-EXEMPT STATUS. Nothing in this subtitle may

impair the tax-exempt status of electric cooperatives, nor shall

anything in this subtitle compel any electric cooperative to use

its facilities in a manner that violates any contractual

provisions, bond covenants, or other restrictions applicable to

facilities financed by tax-exempt or federally insured or

guaranteed debt.

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

1999.