After Winter Storm Uri ransacked Texas in February, Texas politicians started the debate of what part of the system fell through and how to apply legislation that would prevent the same type of damage by a similar storm, in the future. The Texas House and Senate, both passed several bills on May 31, 2021, at the close of the state’s 87th legislative session.
Several bills signed and passed by Gov. Greg Abbott can be divided into four types of rulings:
- The unpredictable wholesale electricity rates and risks that electricity customers are exposed to (HB 16 & SB 3)
- The reorganizing of oversight committees including ERCOT, the Public Utility Commission (PUC), other new or less commonly used systems that will be a large part of the grid’s failure (HB 2586, HB 3648, SB 2 & SB 3)
- The consequential financial impact that Uri caused (HB 4492)
- Long and dire laws that strive to convey the flaws in both industries, electric and natural gas, where state institutions have a benefit and a level of negligence, including the Railroad Commission, the PUC, among others.
High points of the bills that are most likely to affect how electricity customers purchase natural gas and power and how much that will cost them is reviewed below.
House Bill 16- Wholesale Index Products Prohibition
HB 16 was signed into law on May 26, 2021, and will be effective Sep 1, 2021. This bill focuses on limiting residential and small commercial (<50 kW) consumers to unstable wholesale energy prices, including auxiliary services. For consumers greater than 50 kW, a clause which explains the instability of wholesale energy prices is to be included on all agreements for retail electricity that advance any of the wholesale costs through to the consumer. The bill also places a limit on the kinds of pricing system consumers are assigned to once their original agreement ends, and they continue to receive energy services. The particulars of the post-contract prices are to be updated every month, easy to understand by the consumer, and explained clearly.
House Bill 3648 – The PUC & RRC Collaborate
This bill passed on June 18, 2021, and intends to rectify the lack of proper attention in areas of responsibility shared between the Railroad Commission and their responsibility as related to the natural gas field and the PUC and ERCOT over generation of power. HB 3648 enforces both organizations to work in sync with each other, to appoint essential gas production establishments that stock electricity generators during an emergency. The objective of this bill is to make sure essential natural gas production facilities retain electricity during rolling blackouts. Also, it limits the responsibility of an electricity utility for following ERCOT’s authoritative orders to reduce the load.
House Bill 4492 – Securitization Corporation
This bill passed on June 18, 202, and it is the only fragment of legislation to address the economic repercussions of Uri. This bill generates a course of action for those entities who owe ERCOT money due to the storm, to be able to finance the debt. Current procedure grants ERCOT the authorization to uplift unsettled bills at the rate of $2.5 million monthly. Considering the large quantity of money that is owed to ERCOT as well as other entities, at the rate of $2.5M per month, they estimated time for pay off would be 90 years. HB 4492 establishes the Texas Electric Securitization Corporation, which is an institution not supported or financed by the state. This organization is self-funded and performs as a mortgage bank for any party who owes ERCOT payment, permitting the party to acquire a loan and pay back over a term of 30 years.
Senate Bill 2 – Reconditioning ERCOT
This legislation went into effect on June 8, 2021, and it is the response by Texas law-makers regarding the impression of the lack of control and supervision at ERCOT. The bill creates the Board Selecting Committee, dictating the configuration of ERCOT Board of Directors, consisting of individuals appointed by the governor, the lieutenant governor, and house speaker. This ruling allows the PUC full supervision and access to review ERCOT’s changes of any rules. More than likely, this law will not have a direct effect on the electricity market, but will impact the entities who administer how ERCOT functions and how time and market conditions change it.
Senate Bill 3 – The Omnibus Uri Bill
The 51-page legislation went into effect on June 8, 2021, and it communicates many of the problems related to winter storm Uri. The new legislation forms a board to administer the dependability and winterizing of natural gas and all electricity infrastructure. Also, the law puts into place daily sanctions of $1,000,000 for not complying and establishes a State Energy Plan. Wind and solar power generators also would need to be winterized, and requires a more vigorous planning process for load shedding.
The Texas 87th legislative regular session ended on Monday May 31, 2021. Additional proposed legislation could be included but Gov. Abbott in the summer session or it may have to wait until the spring of 2023 for the 88th legislative session. Our point of view is that any other legislation relating to energy will not be brought up during any session, since many bills recently passed include energy talk and new legislation, plus the time it will take to determine their efficacy. State legislators are more than likely to debate on other issues, and leave the events of Uri in the past.
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