The bill aims to enhance oversight and safety for electric utility infrastructure in Texas.
Requires electric cooperatives, investor-owned utilities, and municipal utilities to submit comprehensive management and inspection plans for distribution poles to the Public Utility Commission (PUC).
Establishes requirements for the content of each plan and mandates regular reporting obligations.
Directs the PUC to review, approve, modify, or reject plans within 180 days.
Purpose is to proactively identify and address infrastructure vulnerabilities before they cause service disruptions or safety hazards.
Public testimony was opened with four witnesses called: Beamon Floyd, Mark Bell, Julia Harvey, and Taylor Kilroy.
Mark Bell testified on behalf of AECT, supporting House Bill 144.
Utilities in Texas manage over 1 million miles of distribution lines.
House Bill 144 aligns with current utility pole inspection programs and enhances grid safety.
The bill promotes distribution system resiliency and provides the Public Utility Commission (PUC) with greater insights into pole inspection processes.
The bill offers clarity on prudent investments for inspection efforts.
Concerns were raised regarding Section 2 and Subsection E of the bill.
AECT suggests focusing on utility processes over reported activities in plan submissions.
Recommendation for quarterly updates on pole inspection progress instead of monthly updates to avoid administrative burdens.
Highlighted the importance of PUC oversight due to frequent wildfires and weather challenges in Texas.
Mark Bell testified on behalf of AECT in support of House Bill 145.
HB145 aims to provide transparency in utility wildfire mitigation planning at the PUC.
The bill includes utility risk assessment processes, restoration strategies, and community outreach.
Improved mitigation plans may help utilities in fire-prone areas reduce insurance costs.
HB145 allows utilities to seek self-insurance if commercial insurance is insufficient or costly.
The AECT has concerns with certain sections of the bill that could increase consumer costs.
Recommendations include removing Section 38.081(c) of the , modifying the reference to the National Electrical Safety Code, and adding a good cause exception for supply chain challenges.
Zach Stephenson from Texas Electric Cooperatives (TEC) testified regarding HB 145.
TEC represents rural electric cooperatives in Texas and supports the goals of the bill to prevent and mitigate wildfire risks. TEC has two main concerns with the bill:
The bill mandates that TEC members file a wildfire mitigation plan, unlike MOUs and river authorities for whom filing is optional. TEC seeks optional filing to learn from larger investor-owned utilities' plans.
The amended bill’s section 38.081(c) allows a court to find a plan deficient if it doesn’t meet NESC and other undefined standards, potentially creating a loophole for liability protections.
TEC suggests once the Public Utility Commission (PUC) approves a plan, it should not be subject to further judicial review, which might lack PUC's expertise.
Ward Tisdale, representing the National Association of Mutual Insurance Companies, testified against HB145.
Tisdale supports the bill's provision allowing self-insurance for wildfire risk but suggests involving the Texas Department of Insurance for their expertise.
NAMIC supports the concept of mitigation plans, emphasizing proactive steps for wildfire prevention.
The primary concern is the raised hurdle for claiming damages from utility-caused wildfires, potentially affecting uninsured and underinsured property owners.
Due to the complications the bill introduces, NAMIC opposes HB145.
▶️Senator Schwertner to Ward Tisdale, HB145 - Wildfire Liability Concerns
Senator Schwertner expressed concerns about insurance related to wildfires and utilities receiving liability protection.
Individuals harmed by utility-caused wildfires may face legal challenges if the utility has a mitigation plan, especially if they are uninsured.
There was mention of subrogation issues, where a policyholder's claim would transfer to the insurer.
The concept of providing immunity to utilities is being explored in various states, with no universal standard.
In other states like Oklahoma and New Mexico, legislation on affirmative defense related to this issue is either underway or has been delayed for further review.
A proposal was made to conduct an interim study and involve stakeholders to develop a viable solution.
▶️Senator Middleton to Mark Bell, HB145 - Self Insurance and Insurance Availability
Discussion on self-insurance prohibition for intentional, reckless or gross negligence activities.
Question raised about the ability to get insurance coverage for these excluded activities.
Mark Bell expressed uncertainty about current insurance options for such activities and plans to provide a follow-up response.
Senator highlighted concerns about cost recoupment due to the prohibition of self-insurance, emphasizing that costs might be passed to rate payers.
Viewpoint on how utilities are currently able to self-insure for other risks if insurance premiums are not reasonable or if coverage is lacking, specifically mentioning wildfires.
Query about what happens if there is no coverage option available and self-insurance is prohibited.
Discussion involving Senator Schwertner about the inclusion of co-ops and river authorities in insurance provisions.
Clarification was requested on why river authorities and MOUs were not treated similarly to electric co-ops in this bill, noting a traditional alignment in state statutes.
Public testimony on House Bill 145 was closed and left pending.
Matt Henry, representing Oncor Electric, supports the bill to address financial strain due to a disconnect between capital plans and cost recovery.
Oncor plans a capital investment of $36.2 billion over five years, with an additional $12 billion planned, which has led to negative watch from S&P and Moody's due to regulatory lag and wildfire risks.
The bill aims to strengthen Oncor's financial position and address concerns raised by rating agencies.
For the Public Utility Commission (PUC), the bill reduces six proceedings annually to one for qualifying utilities and extends review times.
It benefits residential and small commercial customers by adjusting cost allocation annually, removing unintentional subsidies.
The bill accelerates development in the Permian Basin, benefiting large C&I customers.
Jason Ryan from CenterPoint Energy addressed the meeting, representing CenterPoint Energy.
The bill introduces significant changes to the regulatory process for utilities at a necessary time.
Houston is excluded from certain policies within the bill, but ERCOT-wide policy is favored by CenterPoint.
There are ongoing discussions about potential amendments that would include utilities like CenterPoint in the bill.
CenterPoint meets the required capital spend ratio but is not building infrastructure in the Permian Basin.
Houston is a major energy export region due to Permian Basin energy contributions.
Concerns presented about exclusion leading to increased transmission project costs without offsetting benefits, affecting Houston's financial contributions to ERCOT projects.
▶️Committee to Katie Coleman, HB5247 - Clarification on Regional Scope of the Bill
Bill applies to Permian Basin or ERCOT region providers.
In ERCOT, utilities solve problems with transmission, not generation.
Non-ERCOT areas most often solve load growth through generation and have a generation rider.
Non-ERCOT utilities can put assets in rates on day one due to existing riders.
Temporary issues in the ERCOT region need addressing.
Problem of capital to depreciation ratio of 300% in the bill.
The 300% ratio allows utilities to use the system for a period before terminating.
Ratio compares capital expenditures to depreciation annually.
Utilities benefit from unreflected depreciation until the next rate case.
Interim rate updates required to adjust investments in rates.
The current situation has capital expenditure outstripping depreciation.
Utilities meeting the bracket have low risk of over-earning.
▶️Senator Johnson to Panel, HB5247 - Credit Downgrade Risks
Historical ROI is dropping below expected levels, which concerns rating agencies.
Earnings Monitor Report filed a 7.26% ROE against a statutory cap of 9.7%.
The company has not hit the statutory cap in the past seven years.
There is public skepticism about measures for TDUs to get paid faster, questioning if it benefits the companies more.
Credit downgrade risks affect borrowing costs and potential purchasers of debt.
Increased debt costs could potentially be passed onto customers, but customers might pay less in the long term.
Katie Coleman clarifies that debt costs typically range from 4-5%, while returns on equity range from 9-10%.
Credit ratings downgrades might sometimes be tolerable for consumers as it might save more than the cost increase.
The hypergrowth dynamic is used to push significant rate-making proposals.
A targeted solution is considered more fair than allowing utilities to set their own capital structure.
▶️Senator Johnson to Panel, HB5247 - Frequency of Rate Making Process on Consumers
Discussion of shifting fiscal burden from small to large electrical consumers due to the four-year rate making process.
Current transmission rates in Texas are determined by how customer classes use the system, based on a 4CP basis.
Large commercial and industrial customers have become a bigger part of the 4CP pie, leading to potential subsidies from residential customers.
Proposed more frequent rate adjustments to ensure fair share payments by all customer classes.
Frequent adjustments could prevent large billing adjustments every four years.
Clients prefer rates to track actual demand and remain stable rather than fluctuating significantly every four years.
Overall rates may increase with frequent adjustments, though considered more equitable.
▶️Senator Schwertner to Panel, HB5247 - Sunset Provision
Mention of the revision of the 4CP methodology included in SB6.
No sunset provision currently exists, but discussions suggest a build-out timeframe of less than a decade.
Consideration for a sunset provision by 2035 is supported by Katie Coleman and Jason Ryan.
Growth period expected to plateau, potentially returning to normal processes.
A 2035 sunset provision is viewed positively as a backstop.
The 300% threshold is also recognized as a type of sunset.
If spending reaches 300% of collected rates, there will be changes to the capital spend curve.
Agreement that a 10-year sunset may outlast the relevance of the 300% threshold.
▶️Senator Campbell to Panel, HB5247 - Consolidating Rate Proceedings
Senator Campbell raised concerns about frequent rate assessments affecting credit ratings due to higher capital expenditures.
The proposal to decrease rate hearings aims to address PUC's capacity and workload issues.
Consolidating proceedings into a single annual event could help PUC manage resources better.
Senator Campbell expressed concerns about decreased oversight and transparency if meetings are reduced.
The methodology introduced is new and intended to improve regulatory efficiency.
Current multiple annual rate updates are difficult for both consumers and the PUC to monitor.
Consolidation allows for more effective resource allocation and broader reviews in proceedings.
PUC staff appear supportive of the consolidation idea, as per discussions with the representatives.
Anna Givens, Director of Financial Review at the Public Utility Commission (PUC), attended the meeting as a resource witness.
The discussion focused on the balance between oversight and meeting frequency, with concerns about decreased meetings leading to decreased oversight and transparency.
Anna Givens clarified that the oversight process remains robust, with a 60-day notice required from utilities choosing the interim mechanism for rate adjustments, followed by a 120-day review process.
The entire review process spans approximately 180 days, comparable to the time taken for a comprehensive base rate proceeding.
The interim mechanism does not eliminate the PUC's ability to assess prudence and reasonableness in future comprehensive proceedings.
There was discussion on the practical benefits of having fewer, consolidated rate proceedings to streamline processes and reduce costs, potentially benefiting rate payers.
The decrease in proceedings from more than six to two annually was debated for its impact on financial efficiency and rate stability for consumers.
Concerns were raised about monetary implications, citing a major investment project at the Permian Basin.
The meeting concluded with no additional public testimony on HB5247, and the bill was left pending.
