Meeting Summary - 05/15/2025 Senate Business & Commerce

▶️1* - HB106 King et al. SP: Schwertner

• Senator Schwertner presented HB106, introduced by the Chair.
• The bill arises from findings by the House investigative committee on the Panhandle wildfires.
• It addresses a regulatory gap between utility meters and well sites which increases wildfire risks.
• HB106 mandates oil and gas operators to maintain overhead electrical lines they own or control related to development and production operations.
• Aims to clarify responsibility for preventing hazardous electrical conditions.
• No questions were asked by members and no public testimony was provided.
• The bill was left pending.

▶️2* - HB144 King SP: Schwertner

• Senator Schwertner explained House Bill 144.
• 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.

▶️Julia Harvey, TEC - HB144

• Julia Harvey represented Texas Electric Cooperatives, a statewide association of 76 co-ops in Texas.
• Electric cooperatives are not-for-profit, member-owned, and governed entities largely serving rural areas.
• Co-ops serve about six meters per mile of distribution line.
• Gratitude was expressed to Chairman King for working with electric co-ops on HB144.
• Support was shown for increased transparency and information around distribution pole maintenance and inspections.
• Concern was raised about the burden of monthly reporting under the bill, totaling approximately 1,600 filings over two years.
• A request was made for no financial penalties for missing reporting deadlines.
• Appreciation was expressed for Section F of the bill, which maintains co-ops' autonomy from PUC jurisdiction.
• Julia Harvey is open to answering questions from the panel.

▶️Mark Bell, AECT - HB144

• 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.

▶️Beaman Floyd, TCAIS - HB144

• Beaman Floyd represented the Texas Coalition for Affordable Insurance Solutions.
• Expressed support for House Bill 144.
• Framed the bill as addressing a system resiliency and risk mitigation issue on a statewide level.
• Referenced previous committee discussions on the importance of risk mitigation as a financial concern for insurance.

▶️Taylor Kilroy, TPPA - HB144

• Taylor Kilroy, Executive Director of the Texas Public Power Association (TPPA), testified on House Bill 144.
• TPPA represents 72 municipally owned electric utilities (MOUs) that serve over 5,000,000 Texans.
• MOUs are community owned and directly accountable to their customers.
• TPPA agrees utilities need robust standards and plans for pole inspections.
• TPPA supports assisting the Public Utility Commission (PUC) in developing rules during the interim period.
• They emphasized that local regulatory authorities traditionally oversee municipal distribution systems and budgets, not the PUC.
• TPPA suggests the bill should maintain local oversight while ensuring statewide accountability.
• Kilroy expressed willingness to answer questions following the testimony.

▶️Senator Schwertner to Panel, HB144 - Bill Language

• The oversight regarding electric co-ops and the language concerning jurisdiction is specific only to the co-ops and not to the MOU.
• Plans need to be approved by the PUC through a process which might not be directly spelled out in the bill.
• The approval process might not necessarily involve a contested case or an appeal process.
• Monthly updates are required for the first twenty-four months before transitioning to a yearly update cycle.
• Public testimony on HB144 was closed and the bill was left pending.

▶️3* - HB145 King SP: Schwertner

• House bill 145 addresses wildfire risks involving Texas electric utilities.
• Requires utilities to create and submit a wildfire mitigation plan to the Public Utility Commission.
• Plans must detail inspection procedures, system management strategies, and coordination with first responders.
• Allows utilities to self-insure when commercial insurance is unavailable or cost prohibitive.
• Self-insurance covers losses and liabilities from wildfires unless the utility acted intentionally, recklessly, or with gross negligence.
• Provides an affirmative defense for utilities that submit proper plans if action is brought against them.
• Emphasizes proactive planning, accountability, and collaboration while allowing financial management flexibility.
• Public testimony included witnesses from Association Electric Companies, Association of Mutual Insurance, and Texas Electric Cooperatives.

▶️Mark Bell, AECT - HB145

• 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.
• Questions were deferred to the full panel.

▶️Zach Stephenson, TEC - HB145

• 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, NAMIC - HB145

• 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.

▶️19* - HB5247 Geren SP: Schwertner

• Chair introduces HB5247; Senator Schwertner explains the bill.
• Focus on transmission distribution utilities in the Permian Basin region to manage significant transmission expansion.
• Bill introduces an alternative capital recovery mechanism for utilities with capital expenditures exceeding 300% of annual depreciation.
• Guardrails include documentation requirements, PUC approval, ongoing eligibility, and notification of disqualification.
• Utilities exceeding allowed return on investment must apply over earnings to regulatory asset balance.
• Bill aims to encourage infrastructure development and offer utility predictability and stability in capital investment recovery.
• Discussion on process similarity to the 'file and use' model used in insurance; confirmation that it streamlines and expedites utility cost recovery.
• Public testimony opened with representatives from Oncor, Texas Association of Manufacturers, and Centerpoint.

▶️Katie Coleman, TAM - HB5247

• Katie Coleman from the Texas Association of Manufacturers spoke in support of HB5247.
• The bill provides a temporary and targeted solution to a problem without permanently shifting risk and cost to customers.
• In ERCOT, there were significant restrictions on utilities forecasting business load growth, which has since been changed by previous legislation.
• Utilities are currently behind in building infrastructure, causing high capital expenditure to depreciation numbers.
• The bill is seen as a balance between providing utilities with credit support and being fair to customers.
• There are protections against over-earning and requirements for asset service timelines, with penalties for non-compliance.
• Overall, the bill is considered a fair solution by the Texas Association of Manufacturers.

▶️Matt Henry, Oncor - HB5247

• 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, CenterPoint - HB5247

• 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, PUC - Resource Witness

• 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.