Relating to the legislature's goals for electric generation capacity in this state.

89(R) SB 388 - Engrossed version - Bill Text

By: King, Bettencourt

S.B. No. 388

Kolkhorst

A BILL TO BE ENTITLED

AN ACT

relating to the legislature's goals for electric generation

capacity in this state.

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

SECTION 1. Section 39.9044, Utilities Code, is amended to

read as follows:

Sec. 39.9044. GOAL FOR
DISPATCHABLE GENERATION
[
NATURAL

GAS
]. (a) It is the intent of the legislature that 50 percent of

the megawatts of generating capacity installed in
the ERCOT power

region
[
this state
] after January 1,
2026
[
2000
],
be sourced from

dispatchable generation other than battery energy storage
[
use

natural gas
]. [
To the extent permitted by law, the commission shall

establish a program to encourage utilities to comply with this

section by using natural gas produced in this state as the

preferential fuel. This section does not apply to generating

capacity for renewable energy technologies.
]

(b) The commission shall establish a
dispatchable

generation
[
natural gas energy
] credits trading program. Any power

generation company, municipally owned utility, or electric

cooperative that does not satisfy the requirements of Subsection

(a) by directly owning or purchasing
rights to dispatchable

generation
capacity [
using natural gas technologies
] shall

purchase sufficient
dispatchable generation
[
natural gas energy
]

credits
, from sources other than battery energy storage capacity,

to satisfy the requirements
of this section
[
by holding natural gas

energy credits in lieu of capacity from natural gas energy

technologies
].
A power generation company that exclusively

operates battery energy storage resources is not required to

purchase dispatchable generation credits under this section.

(c)
The
[
Not later than January 1, 2000, the
] commission

shall adopt rules necessary to administer and enforce this section

[
and to perform any necessary studies in cooperation with the

Railroad Commission of Texas
]. At a minimum, the rules
must

[
shall
]:

(1)
describe how the commission will calculate

[
establish
] the [
minimum
] annual
dispatchable
[
natural gas
]

generation requirement for each power generation company,

municipally owned utility, and electric cooperative operating in

the ERCOT power region
[
this state
] in a manner reasonably

calculated by the commission to produce[
, on a statewide basis,
]

compliance with the requirement prescribed by Subsection (a); and

(2) specify reasonable performance standards that all

dispatchable generation
[
natural gas
] capacity additions must meet

to count against the requirement prescribed by Subsection (a) and

that:

(A) are designed and
implemented
[
operated
] so as

to maximize
reliability
[
the energy output from the capacity

additions in accordance with then-current industry standards and

best industry standards
]; and

(B) encourage the development, construction, and

operation of new natural gas energy projects at those sites in
the

ERCOT power region
[
this state
] that have the greatest economic

potential for capture and development of this state's

environmentally beneficial natural gas resources.

(d)
On or before January 1, 2027, the commission shall

activate the dispatchable generation credits trading program

established by this section if the commission determines that

dispatchable generation may provide less than 55 percent of all new

generating capacity installed in the ERCOT power region after

January 1, 2026. Not later than the 180th day after the date of the

program's activation, the commission by rule shall determine the

conditions for compliance and penalties for noncompliance for each

power generation company, municipally owned utility, and electric

cooperative subject to the program. A power generation company

that exclusively operates battery energy storage resources is not

subject to the program.

The commission may adopt rules providing

for alternative compliance payments
[
The commission, with the

assistance of the Railroad Commission of Texas, shall adopt rules

allowing and encouraging retail electric providers and municipally

owned utilities and electric cooperatives that have adopted

customer choice to market electricity generated using natural gas

produced in this state as environmentally beneficial. The rules

shall allow a provider, municipally owned utility, or cooperative

to:

[
(1) emphasize that natural gas produced in this state

is the cleanest-burning fossil fuel; and

[
(2) label the electricity generated using natural gas

produced in this state as "green" electricity
].

(e) In this section,
"dispatchable generation"
[
"natural

gas technology"
] means
generating technologies other than

technologies considered non-dispatchable under Section 39.159(a)

[
any technology that exclusively relies on natural gas as a primary

fuel source
].

(f)

The independent organization certified under Section

39.151 for the ERCOT power region shall establish a tracking system

to award dispatchable generation credits to new dispatchable

generation facilities that meet eligibility requirements

established by the commission. Each megawatt of installed

dispatchable generation capacity energized after January 1, 2026,

is eligible for one dispatchable generation credit.

(g)

For the purposes of this subsection, a compliance

premium is an additional tradable instrument that is equal to one

dispatchable generation credit.

The commission shall require the

independent organization certified under Section 39.151 for the

ERCOT power region to award to a nuclear generation facility

energized after January 1, 2026, one compliance premium in addition

to each dispatchable generation credit awarded to the facility.

(h)

Not later than September 15 of each year, the

independent organization certified under Section 39.151 for the

ERCOT power region shall file with the commission a report on all

generating facilities energized in the ERCOT power region during

the prior year that includes a calculation of whether the prior

year's installed dispatchable generation capacity is in compliance

with this section.

(i)

Not later than January 15 of each year, the commission

shall notify each power generation company, municipally owned

utility, and electric cooperative of the power generation

company's, municipally owned utility's, or electric cooperative's

dispatchable generation credits requirement for the prior year, if

any.

(j)

Each power generation company, municipally owned

utility, or electric cooperative shall retire sufficient

dispatchable generation credits to meet the power generation

company's, municipally owned utility's, or electric cooperative's

dispatchable generation credits requirement not later than an

annual deadline established by the commission.

SECTION 2. Section 40.004, Utilities Code, is amended to

read as follows:

Sec. 40.004. JURISDICTION OF COMMISSION. Except as

specifically otherwise provided in this chapter, the commission has

jurisdiction over municipally owned utilities only for the

following purposes:

(1) to regulate wholesale transmission rates and

service, including terms of access, to the extent provided by

Subchapter A, Chapter 35;

(2) to regulate certification of retail service areas

to the extent provided by Chapter 37;

(3) to regulate rates on appeal under Subchapters D

and E, Chapter 33, subject to Section 40.051(c);

(4) to establish a code of conduct as provided by

Section 39.157(e) applicable to anticompetitive activities and to

affiliate activities limited to structurally unbundled affiliates

of municipally owned utilities, subject to Section 40.054;

(5) to establish terms and conditions for open access

to transmission and distribution facilities for municipally owned

utilities providing customer choice, as provided by Section 39.203;

(6) to administer the
dispatchable generation

[
natural gas energy
] credits
trading
program under Section

39.9044(b);

(7) to require reports of municipally owned utility

operations only to the extent necessary to:

(A) enable the commission to determine the

aggregate load and energy requirements of the state and the

resources available to serve that load; or

(B) enable the commission to determine

information relating to market power as provided by Section 39.155;

and

(8) to evaluate and monitor the cybersecurity

preparedness of a municipally owned utility described by Section

39.1516(a)(3) or (4).

SECTION 3. This Act takes effect September 1, 2025.