The Texas Legislature concluded its 87th regular session on May 31, 2021. The session produced a number of new laws that will affect the Texas electric power industry, both directly and indirectly. All of the new laws have been signed by Governor Abbott—the last one having been signed on June 18, 2021—and are either in effect already or will take effect on September 1, 2021. Most of the new laws are targeted at the Public Utility Commission of Texas (“PUC”), Electric Reliability Council of Texas (“ERCOT”), Texas Railroad Commission (“RRC”), and Division of Emergency Management (“DEM”), but reach (and create) other agencies and groups as well.

Rather than describing individual bills, and rather than describing every bill that touches the energy industry, Baker Botts developed a summary that describes four key areas of legislative focus driven by the February 2021 winter storm as outlined below:

Part 1: Changes to the governance structure overseeing the electric market

• Overhaul of ERCOT board selection and composition
• Establishment of ERCOT Board Selection Committee
• Changes to PUC board composition and eligibility
• Creation of lobbying restrictions by former PUC members
• Creation of Texas Energy Reliability Council (“TERC”)
• Creation of Texas Electricity Supply Chain Security and Mapping Committee
• Creation of State Energy Plan Advisory Committee

Part 2: Changes to the structure of the electric market itself

• Amendment of the transmission planning and approval process
• Changes to the procurement and pricing of wholesale energy and reliability products
• Prohibition of certain retail electric products

Part 3: Changes to reduce the risk of future electric system disruptions

• Mandatory biennial grid reliability assessment
• Requirement that the TERC gather utility information related to disasters
• Designation and regulation of critical gas supply chain infrastructure and consumers
• Requirement for weatherization and emergency preparedness for electric generation and utilities
• Strengthening of PUC and RRC penalty authority
• Clarification of critical customer status
• Imposition of new load shedding rules
• Authority for securitization of going-forward weatherization costs

Part 4: Changes to address the costs of the February 2021 winter storm

• Process for securitization of weatherization, storm hardening, and system restoration costs for non-ERCOT utilities
• Process for securitization of electric cooperatives’ ERCOT default amounts
• Process for the use of “rainy day” funds to finance non-electric cooperative ERCOT default amounts
• Process for financing extraordinary uplift costs imposed on load serving entities
• Process for securitization of extraordinary gas utility costs

Many of the new laws will require rulemakings at one or more agencies to determine the details of their implementation. Clients should strongly consider whether participation in such rulemakings may be advisable to protect their interests.

A full discussion of the legislative efforts to address the winter storm, including links to key legislation and other helpful documents, can be found here.

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