Recap of Utility Law Implications From the 89th Legislative Session

by Roslyn Warner, Rick Arnett, and Jake Dyer

Utility-related legislation remained an area of focus for many lawmakers in the pink dome during this year’s session, but much of the Winter Storm Uri fallout present in the prior two sessions has lessened. During the 140-day session concluding on June 1, a few specific utility issues stood out in the approximately 300 electric and gas bills filed: growing concern over projected energy demand surges across Texas due to crypto-mining, data center, and Permian Basin operations; utilities’ ability to recover infrastructure costs more expeditiously; and reactions to CenterPoint Energy’s unsatisfactory Hurricane Beryl response in 2024, culminating in new laws designed to enhance the reliability and resiliency of electric service.

Passed Bills

The following bills of note passed during the 89th session:

SB 6 by Sen. Phil King and Sen. Charles Schwertner – SB 6 focuses on integrating large loads (energy consumers that consume at least 75 megawatts of energy) into the Electric Reliability Council of Texas (ERCOT) grid. The legislation requires the Public Utility Commission of Texas (PUCT) to establish uniform standards for large load interconnections. The goal is to address concerns such as eliminating excessive costs and removing duplicative loads that may be impacting the load forecast. Notably, the Legislature has granted the PUCT authority to require certain large loads to deploy back-up or co-located capacity and to curtail large load power consumption during emergency grid conditions. With these measures, SB 6 provides the PUCT with valuable reliability tools that should help mitigate load shed events.

SB 6 additionally requires the PUCT to revisit the four coincident peak (4CP) methodology for allocating transmission usage costs within ERCOT. Currently, the grid operator examines peak electricity demand during four 15-minute intervals in June, July, August, and September. ERCOT then calculates and assigns transmission costs associated with these time intervals to each transmission utility. The utilities ultimately recover the costs from distribution service providers and large loads in accordance with the energy consumers’ consumption during the 4CP intervals. The goal is to evaluate whether the 4CP approach is outdated and potentially inequitable.

HB 5247 by Rep. Charlie Geren – This bill creates an alternative and expedited capital cost recovery process for electric utilities serving the fast-growing Permian Basin. The legislation is of limited duration and excludes projects outside the Permian Basin.

SB 231 by Sen. Phil King – In light of CenterPoint Energy’s failure to deploy certain mobile generation units during Hurricane Beryl, this legislation imposes additional guardrails for transmission and distribution utilities leasing and deploying temporary emergency electric energy facilities, known as “TEEEF.” The units must be mobile and capable of generating electric energy within three hours after connecting to a demand source. The bill also adds new requirements for what must be reviewed and approved by the PUCT before a utility can enter into a lease for TEEEF, such as establishing the specific functions for which the utility may lease the facilities.

HB 144 by Rep. Ken King – Electric utilities will now be required to file and seek PUCT approval of plans and processes for the management and inspection of distribution poles.

SB 1789 by Sen. Charles Schwertner – Under this bill, the PUCT will implement certain structural integrity standards for transmission and distribution poles. The PUCT then has the authority to reduce an electric utility’s return on equity if the utility fails to comply with the set standards and the utility’s system is damaged in a weather event or natural disaster as a result of such noncompliance.

HB 1584 by Rep. Lacey Hull – This bill seeks to improve electric service delivery and mitigate outages by establishing a system for utilities to designate and maintain a list of facilities that receive priority status during emergencies.

HB 1606 by Rep. Will Metcalf – This change requires customer notification of the procedures for requesting vegetation management near transmission and distribution lines.

HB 4384 by Rep. Drew Darby – Gas utilities will now have an additional means for seeking recovery of infrastructure costs that are not already included in rates. The Railroad Commission of Texas (RRC) will then review the costs in a later base rate proceeding.

SB 1664 by Sen. Charles Schwertner – This legislation will require specific disclosures when a transmission and distribution utility files a base rate application at the PUCT and again when rates are ultimately set. The goal is to enhance transparency and clarity in information like the revenue the utility is seeking and the specific impacts on customer rates.

Unsuccessful Bills

Certain other bills related to utility ratemaking structures and curbing renewable energy did not make it across the finish line:

HB 3157 by Rep. Drew Darby and its companion SB 1837 by Sen. Bryan Hughes would have allowed electric utilities to implement interim rates prior to the conclusion of a rate case.

HB 4302 by Rep. Will Metcalf and SB 1022 by Sen. Lois Kolkhorst were designed to create an additional ratemaking mechanism for electric utilities to recover vegetation management costs.

Some bills related to renewables and electric generation received Senate approval but did not clear House hurdles. For example, SB 715 by Sen. Sparks and companion HB 3356 by Rep. Patterson related to reliability requirements for electric generation facilities in ERCOT. And SB 388 by Sen. Phil King would have created a dispatchable generation credit program.

Next Steps

For many of the new laws that passed, the focus now shifts to regulators like the PUCT and the RRC to implement corresponding procedures and requirements through rulemakings. But the story doesn’t stop there—we can expect legislators to continue evaluating these and additional utility issues in committee as state leadership formulates its interim priorities leading up to the 90th session.

Roslyn Warner and Rick Arnett are Associates in the Firm’s Energy and Utility Practice Group. Jake Dyer is a Policy Analyst in the Firm’s Energy and Utility Practice Group. If you would like additional information or have questions related to this article or other energy and utility matters, please contact Roslyn at 512.322.5802 or rwarner@lglawfirm.com, or Rick at 512.322.5855 or rarnett@lglawfirm.com, or Jake at 512.322.5898 or jdyer@lglawfirm.com.