Legislative Session: 76(R)


SENATE AUTHOR: Sibley et al.



            Senate Bill 7 amends the Utilities Code to provide for the restructuring of the electric utility industry. The act deregulates the electricity generation market to allow for competition in the retail sale of electricity. The act freezes retail base rates until January 1, 2002, and then allows for a six percent reduction in rates, which are then frozen for three years or until a utility has lost 40 percent of its power load to competitors. Competitors entering a power region will have to serve residential as well as business customers and those that do not will have to pay penalties. The Public Utility Commission is authorized to delay competition and set new rates if it determines that a power region is unable to offer fair competition and reliable service to all retail customer classes by January 1, 2002. The act exempts municipally owned utilities and electric cooperatives from the deregulation provisions of the act unless they decide themselves to open up to competition and offer consumer choice.

            Senate Bill 7 provides for the unbundling of services and the transmission of power at rates comparable to what a utility pays to use its own transmission system. The act authorizes the state to sell or convey power directly to public retail customers and prohibits the state from engaging in retail transactions that exceed 2.5 percent of the total power load in an area where customer choice has not been introduced. The act allows an electric utility to recover all its stranded costs, including environmental cleanup costs, and to securitize those stranded costs through the use of bonds secured by a fee collected on monthly electric bills. Utility power plants grandfathered from the Texas Clean Air Act are required to reduce emissions by May 1, 2003, or shut down unless the Texas Natural Resource Conservation Commission finds good cause for an extension.

            Senate Bill 7 requires the Public Utility Commission to implement service quality and reliability standards relating to the delivery of electricity to retail customers and to ensure, before competition begins, that retail customer protections are established that entitle a customer to safe, reliable, and reasonably priced electricity, privacy, clear billing formats, billing options, metering and billing accuracy, and access to certain information. The act also requires the commission to promote customer education and to establish a "no-call" list of customers who do not wish to be contacted by competitors soliciting them for power sales. The commission must also designate a provider of last resort in areas where customer choice is in effect. In addition, the act creates a six member legislative oversight committee, to be abolished September 1, 2005, to monitor the effectiveness of electric utility restructuring.