Relating to energy efficiency goals and programs, public information regarding energy efficiency programs, and the participation of loads in certain energy markets.

89(R) SB 2994 - Engrossed version - Bill Text

By: Johnson, Blanco

S.B. No. 2994

Zaffirini

A BILL TO BE ENTITLED

AN ACT

relating to energy efficiency goals and programs, public

information regarding energy efficiency programs, and the

participation of loads in certain energy markets.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 39.905, Utilities Code, is amended by

amending Subsections (a), (b), (e), (f), (g), (h), (i), and (j) and

adding Subsections (a-1), (a-2), (a-3), (f-1), (i-1), (i-2), and

(l) to read as follows:

(a)
The commission shall ensure
[
It is the goal of the

legislature
] that:

(1) electric utilities [
will
] administer energy

efficiency incentive programs in a market-neutral,

nondiscriminatory manner but will not offer underlying competitive

services;

(2) all customers, in all customer classes, [
will
]

have a choice of and access to energy efficiency alternatives and

other choices from the market that allow each customer to reduce

energy consumption, summer and winter peak demand,
summer and

winter peak net demand,
or energy costs;

(3)
each electric utility administers energy

efficiency programs that:

(A)

cause the utility's portfolio of programs to

be cost-effective;

(B)

for an electric utility operating in an area

open to competition, acquire the following minimum quantifiable

reductions in demand annually without the inclusion of demand

reduction achieved through load management programs:

(i)

2,500 kilowatts for utilities with an

average of less than 300,000 total eligible residential and

commercial customers in the previous five years;

(ii)

7,500 kilowatts for utilities with an

average of greater than 300,000 but less than 750,000 total

eligible residential and commercial customers in the previous five

years;

(iii)

12,500 kilowatts for utilities with

an average of greater than 750,000 but less than 1.5 million total

eligible residential and commercial customers in the previous five

years;

(iv)

37,500 kilowatts for utilities with an

average of greater than 1.5 million but less than 3 million total

eligible residential and commercial customers in the previous five

years;

(v)

50,000 kilowatts for utilities with an

average of greater than 3 million but less than 5 million total

eligible residential and commercial customers in the previous five

years; or

(vi)

62,500 kilowatts for utilities with an

average of greater than 5 million total eligible residential and

commercial customers in the previous five years;

(C)

for an electric utility operating in an area

not open to competition, include demand response programs and

acquire the following minimum quantifiable reductions in demand

annually:

(i)

5,000 kilowatts for utilities with an

average of less than 300,000 total eligible residential and

commercial customers in the previous five years;

(ii)

15,000 kilowatts for utilities with an

average of greater than 300,000 but less than 750,000 total

eligible residential and commercial customers in the previous five

years;

(iii)

25,000 kilowatts for utilities with

an average of greater than 750,000 but less than 1.5 million total

eligible residential and commercial customers in the previous five

years;

(iv)

75,000 kilowatts for utilities with an

average of greater than 1.5 million but less than 3 million total

eligible residential and commercial customers in the previous five

years;

(v)

100,000 kilowatts for utilities with an

average of greater than 3 million but less than 5 million total

eligible residential and commercial customers in the previous five

years; or

(vi)

125,000 kilowatts for utilities with

an average of greater than 5 million total eligible residential and

commercial customers in the previous five years; and

(D)

acquire annual energy savings of no less than

75 percent of what the utility achieved in energy savings in 2024 as

previously reported by the utility to the commission;

(4)
each electric utility annually
provides
[
will

provide
], through market-based standard offer programs or through

targeted market-transformation programs, incentives sufficient for

retail electric providers and competitive energy service providers

to acquire additional cost-effective energy efficiency, subject to

cost ceilings established by the commission, for the utility's

residential and commercial customers
; and

(5)
[
equivalent to:

[
(A) not less than:

[
(i)

30 percent of the electric utility's

annual growth in demand of residential and commercial customers by

December 31 of each year beginning with the 2013 calendar year; and

[
(ii)

the amount of energy efficiency to be

acquired for the utility's residential and commercial customers for

the most recent preceding year; and

[
(B)

for an electric utility whose amount of

energy efficiency to be acquired under this subsection is

equivalent to at least four-tenths of one percent of the electric

utility's summer weather-adjusted peak demand for residential and

commercial customers in the previous calendar year, not less than:

[
(i)

four-tenths of one percent of the

utility's summer weather-adjusted peak demand for residential and

commercial customers by December 31 of each subsequent year; and

[
(ii)

the amount of energy efficiency to be

acquired for the utility's residential and commercial customers for

the most recent preceding year;

[
(4)
] each electric utility in the ERCOT region
uses

[
shall use
] its best efforts to encourage and facilitate the

involvement of the region's retail electric providers in the

delivery of efficiency programs [
and demand response programs
]

under this section, including programs for demand-side renewable

energy systems that[
:

[
(A)

use distributed renewable generation, as

defined by Section 39.916; or

[
(B)
] reduce the need for energy consumption by

using a renewable energy technology, a geothermal
technology
[
heat

pump
], a solar water heater, or another natural mechanism of the

environment[
;

[
(5)

retail electric providers in the ERCOT region,

and electric utilities outside of the ERCOT region, shall provide

customers with energy efficiency educational materials; and

[
(6)

notwithstanding Subsection (a)(3), electric

utilities shall continue to make available, at 2007 funding and

participation levels, any load management standard offer programs

developed for industrial customers and implemented prior to May 1,

2007
].

(a-1)

Beginning with the 2027 calendar year, the minimum

goals in Subsections (a)(3)(B), (C), and (D) are increased by 2.5

percent each year through 2030.

Beginning with the 2031 calendar

year, the commission shall update the minimum goals with

appropriate demand reductions and energy savings.

(a-2) The commission shall:

(1)

allow an electric utility operating in an area

open to competition to claim energy savings and demand reduction

for energy efficiency incentive programs supporting the

requirements of Section 39.919(b)(9); and

(2)

by rule establish a deemed savings and avoided

demand per device to be used for the purposes of Subdivision (1).

(a-3)

The commission may not allow an electric utility

operating in an area open to competition to claim energy savings and

demand reduction from demand response programs offered by a retail

electric provider.

(b) The commission shall provide oversight and adopt rules

and procedures to ensure that the utilities can achieve the
goals

[
goal
] of this section, including:

(1) establishing an energy efficiency cost recovery

factor for ensuring timely and reasonable cost recovery for utility

expenditures made to satisfy the
goals
[
goal
] of this section;

(2) establishing an incentive under Section 36.204 to

reward utilities administering programs under this section that

exceed the minimum goals established by this section;

(3)

providing that an incentive achieved under this

section:

(A)

may not be included in an electric utility's

revenues or net income for the purposes of establishing a utility's

rates or the utility's earnings monitoring report under Section

36.157, 36.210, or 36.212; and

(B)

entitles the electric utility to receive an

amount equal to the net benefits realized in meeting the applicable

demand reduction and energy savings goals, provided that:

(i)

the net benefits must be calculated by

subtracting the total program costs from the total of the avoided

costs associated with the portfolio of programs administered by the

utility; and

(ii)

a utility that exceeds its demand

reduction and energy savings goals through energy efficiency

programs is entitled to receive an incentive equal to one percent of

the net benefits for every two percent that the energy savings goal

has been exceeded, with a maximum of 20 percent of the utility's

total net benefits, except that the commission will establish a

secondary ceiling of up to 30 percent of the utility's overall

spending on program costs, evaluation, measurement, and

verification costs, and calculated performance bonus and rate case

costs;

(4)
[
(3)
] providing a utility that is unable to

establish an energy efficiency cost recovery factor in a timely

manner due to a rate freeze with a mechanism to enable the utility

to:

(A) defer the costs of complying with this

section; and

(B) recover the deferred costs through an energy

efficiency cost recovery factor on the expiration of the rate

freeze period;

(5)
[
(4)
] ensuring that the costs associated with

programs provided under this section [
and any shareholder bonus

awarded
] are borne by the customer classes that receive the

services under the programs;

(6)

establishing cost ceilings that allow electric

utilities to meet the goals of this section;

(7)
[
(5)
] ensuring the program rules encourage the

value of the incentives to be passed on to the end-use customer;

(8)
[
(6)
] ensuring that programs are evaluated,

measured, and verified using a framework established by the

commission that promotes effective program design and consistent

and streamlined reporting; and

(9)
[
(7)
] ensuring that an independent organization

certified under Section 39.151 allows load participation in all

energy markets for residential, commercial, and industrial

customer classes, either directly or through
retail electric

providers or aggregations as authorized by commission rule or the

independent organization
[
aggregators of retail customers
], to the

extent that load participation by each of those customer classes

complies with reasonable requirements adopted by the organization

relating to the reliability and adequacy of the regional electric

network and in a manner that will increase market efficiency,

competition, and customer benefits.

(e) An electric utility may use money approved by the

commission for energy efficiency programs to perform necessary

energy efficiency research and development to foster continuous

improvement and innovation in the application of energy efficiency

technology and energy efficiency program design and

implementation. Money the utility uses under this subsection may

not exceed 10 percent of the greater of:

(1) the amount the commission approved for energy

efficiency programs in the utility's most recent [
full rate
]

proceeding
in which an energy efficiency cost recovery factor is

set
; or

(2) the commission-approved expenditures by the

utility for energy efficiency in the previous year.

(f) Each
electric
[
unbundled transmission and distribution
]

utility
operating in an area open to competition
shall include in

its energy efficiency plan a [
targeted
] low-income energy

efficiency program, and the savings achieved by the program shall

count toward the [
transmission and distribution
] utility's energy

efficiency goal. The commission shall
ensure that, for each

program year, not less than 15 percent of the total energy

efficiency budget of each electric utility operating in an area

open to competition is dedicated to low-income energy efficiency

programs.

The commission may determine that a higher level of

funding above the minimum requirement should
[
determine the

appropriate level of funding to
] be allocated to [
both targeted and

standard offer
] low-income energy efficiency programs in each

utility's
[
unbundled transmission and distribution utility
]

service area. The level of funding for low-income energy

efficiency programs shall be provided from money approved by the

commission for the [
transmission and distribution
] utility's

energy efficiency programs. [
The commission shall ensure that

annual expenditures for the targeted low-income energy efficiency

programs of each unbundled transmission and distribution utility

are not less than 10 percent of the transmission and distribution

utility's energy efficiency budget for the year. A targeted

low-income energy efficiency program must comply with the same

audit requirements that apply to federal weatherization

subrecipients.
] In an energy efficiency cost recovery factor

proceeding related to expenditures under this subsection, the

commission shall make findings of fact regarding whether the

utility meets requirements imposed under this subsection.
A

low-income energy efficiency program administered under this

section is not required to meet minimum cost-effectiveness

standards, but the commission shall evaluate the program for

opportunities to improve cost-effectiveness while delivering

services to low-income customers. A utility may use the customer

identification process established under Section 17.007 to

validate customer eligibility.
[
The state agency that administers

the federal weatherization assistance program shall participate in

energy efficiency cost recovery factor proceedings related to

expenditures under this subsection to ensure that targeted

low-income weatherization programs are consistent with federal

weatherization programs and adequately funded.
]

(f-1)

Notwithstanding Subsection (f), an electric utility

operating in an area open to competition may request that the

commission grant an exemption for good cause for a program year to

allow the utility to dedicate not less than 10 percent of the total

energy efficiency budget of the utility to low-income energy

efficiency programs.

(g) The commission may provide for a good cause exemption to

a utility's liability for an administrative penalty or other

sanction if the utility fails to meet a goal for energy efficiency

under this section and the utility's failure to meet the goal is

caused by one or more factors outside of the utility's control,

including:

(1)
limitations caused by the imposition of cost

ceilings on the energy efficiency cost recovery factor;

(2)
insufficient demand [
by retail electric providers

and competitive energy service providers
] for program incentive

funds made available by the utility through its programs;

(3)
[
(2)
] changes in building energy codes; [
and
]

(4)
[
(3)
] changes in government-imposed appliance or

equipment efficiency standards
; or

(5) interruptions in the supply chain
.

(h) For an electric utility operating in an area not open to

competition, the utility may achieve the goal of this section by:

(1) providing rebate or incentive funds directly to

customers to promote or facilitate the success of programs

implemented under this section; or

(2) developing, subject to commission approval, new

programs other than standard offer programs and market

transformation programs,
provided
[
to the extent
] that the new

programs
do not render the portfolio of programs no longer

cost-effective
[
satisfy the same cost-effectiveness requirements

as standard offer programs and market transformation programs
].

(i) For an electric utility operating in an area open to

competition
that provides
[
, on demonstration
] to the commission

notice, sufficient under commission rules or determined to be

sufficient by the commission
, [
after a contested case hearing,
]

that the requirements under Subsection (a) cannot be met in

hard-to-reach areas
[
a rural area
] through retail electric

providers or competitive energy service providers, the utility may

achieve the goal of this section by providing rebate or incentive

funds directly to customers in
those areas
[
the rural area
] to

promote or facilitate the success of programs implemented under

this section.
A notice provided under this section expires on the

second anniversary of the date the notice was provided.

The

commission by rule shall define a hard-to-reach area for the

purposes of this subsection.

(i-1)

The commission shall provide an opportunity for a

hearing for a person to contest an electric utility notice provided

under Subsection (i).

The person who contests the notice has the

burden of proving to the commission that the requirements of

Subsection (a) can be met through retail electric providers or

competitive energy service providers in hard-to-reach areas.

(i-2)

An electric utility that provides a notice under

Subsection (i) may use the customer identification process

established under Section 17.007 for the purposes of Subsection

(i).

Each electric utility that submits a request to the commission

or the Health and Human Services Commission to receive customer

information must reimburse the appropriate agency for the prorated

cost of the development of the low-income electric customer

matching service on terms agreed to by the agency and the low-income

electric customer list administrator. An electric utility that

receives information under this subsection may use the information

only to implement a program adopted under this section and may not

share or disclose the information to an affiliate or third party

unrelated to that purpose.

(j) An electric utility may use energy audit programs to

achieve the goal of this section if[
:

[
(1)

the programs do not constitute more than three

percent of total program costs under this section; and

[
(2)
] the addition of the programs does not cause a

utility's portfolio of programs to no longer be cost-effective.

(l)

A municipally owned utility subject to Section 39.9051

or an electric cooperative may offer programs described by this

section but is not subject to the requirements of this section.

SECTION 2. The Public Utility Commission of Texas shall

adopt rules to implement Section 39.905, Utilities Code, as amended

by this Act, not later than March 1, 2027.

SECTION 3. This Act takes effect immediately if it receives

a vote of two-thirds of all the members elected to each house, as

provided by Section 39, Article III, Texas Constitution. If this

Act does not receive the vote necessary for immediate effect, this

Act takes effect September 1, 2025.