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Monitor the implementation of the provisions of S.B. 373, 74th
Legislature, regarding electric utility regulation including:
Assessing the effectiveness of the integrated resource planning
process as implemented by the Public Utility Commission (PUC);
Assessing the effectiveness of the rate deregulation of electric
Assessing the impact on the electric utility wholesale market
and on the development of competition in the electric industry.
S.B. 373. In response to federal legislative, judicial,
and administrative actions, the 74th Legislature provided for
wholesale competition in the electric industry. Section 2.001
of S.B. 373 states that
"the wholesale electric industry . . . is becoming a more
competitive industry which does not lend itself to traditional
electric utility regulatory rules, policies, and principles and
that, therefore, the public interest requires that new rules,
policies, and principles be formulated and applied to protect
the public interest in a more competitive market place."
Accordingly, S.B. 373 stipulates the following:
Exempt wholesale generators and power marketers may sell electric
energy only at wholesale;
Utilities that own or operate transmission facilities are required
to provide wholesale transmission service with rates and conditions
that are comparable to the utility's rates for use of its own
An electric utility may exercise rate flexibility (that is,
charge less than its normal tariff for either a wholesale or retail
customer), subject to PUC approval.
PUC Dockets. S.B. 373 requires the PUC to report to the
legislature on the scope of competition in electric markets and
the impact of competition and industry restructuring on customers
in both competitive and non-competitive markets. According to
the report, the scope of competition language in the statute gives
the PUC "some latitude to address issues beyond the wholesale
In September 1995, the PUC commissioners discussed the current
status of electric industry restructuring and decided to set up
a separate docket on restructuring issues in addition to the statutorily
required reports on stranded costs and the scope of competition.
The commission is scheduled to issue draft reports on Scope of
Competition and Stranded Investment by September 4, with a final
vote scheduled for October. While the report recognizes that
the commission needs to study restructuring issues, it expresses
concern that staff resources are being allocated to retail access
issues to the detriment of researching the wholesale market (p.
S.B. 373 adds a new section governing the integrated resource
planning (IRP) process. Each utility is required to develop a
plan to provide electricity at the lowest reasonable system cost,
and the PUC is required to develop an IRP planning process. At
the time of the printing of the interim report, the PUC was still
in the process of finalizing the IRP rule.
Although rural electric cooperatives (COOPs) are non-profit and
self-governing, until recently they have been under the rate jurisdiction
of the PUC, leading to excessive costs even though most COOP rate
cases are uncontested. Positive findings from other states helped
convince the Texas Legislature to deregulate the rates of distribution
COOPs in Texas. The legislature also included safeguards to protects
the interests of COOP customers and certain investor-owned utilities
operating in dually certified areas.
To date, the PUC has issued 37 certificates of deregulation, all
approved in voter elections.
The report makes no recommendations, stating that it is too early
to conclusively evaluate the effectiveness of electric coop deregulation.
At this stage there have been very few, if any, problems with
the system put into place by S.B. 373. The popularity of COOP
deregulation, coupled with the total absence of petitions for
rate review, seems to indicate the new setup is operating effectively.
Determine the effectiveness of the transfer of administrative
hearings from individual state agencies to the State Office of
Administrative Hearings (SOAH).
The Senate State Affairs Committee prepared an interim report
for this charge. Prior to the creation of the SOAH, contested
case hearings were of the "agency-staff" approach, employing
judges who were under the direct supervision of the agency. SOAH
was established in 1991 by the 72nd Legislature to create a centralized
state office of administrative hearings.