UTILITIES CODE
CHAPTER 41. ELECTRIC COOPERATIVES AND COMPETITION
SUBCHAPTER A. GENERAL PROVISIONS
§ 41.001. APPLICABLE LAW. Notwithstanding any other
provision of law, except Sections 39.155, 39.157(e), 39.203,
39.903, and 39.904, this chapter governs the transition to and the
establishment of a fully competitive electric power industry for
electric cooperatives. Regarding the regulation of electric
cooperatives, this chapter shall control over any other provision
of this title, except for sections in which the term "electric
cooperative" is specifically used.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.002. DEFINITIONS. In this chapter:
(1) "Board of directors" means the board of directors
of an electric cooperative as described in Section 161.071.
(2) "Rate" includes any compensation, tariff, charge,
fare, toll, rental, or classification that is directly or
indirectly demanded, observed, charged, or collected by an electric
cooperative for any service, product, or commodity and any rule,
practice, or contract affecting the compensation, tariff, charge,
fare, toll, rental, or classification.
(3) "Stranded investment" means:
(A) the excess, if any, of the net book value of
generation assets over the market value of the generation assets;
and
(B) any above market purchased power costs.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.003. SECURITIZATION. (a) Electric cooperatives
may adopt and use securitization provisions having the effect of
the provisions provided by Subchapter G, Chapter 39, to recover
through rates stranded costs at a recovery level deemed appropriate
by the board of directors up to 100 percent, under rules and
procedures that shall be established by the commission.
(b) The rules and procedures for securitization established
under Subsection (a) shall include rules and procedures for the
recovery of stranded costs under the terms of a rate order adopted
by the board of directors of the electric cooperative, which rate
order shall have the effect of a financing order.
(c) The rules and procedures established by the commission
under Subsection (b) shall include rules and procedures for the
issuance of transition bonds issued in a securitized financing
transaction. The issuance of any transition bonds issued in a
securitized financing transaction by an electric cooperative is
expressly authorized and shall be governed by the laws governing
the issuance of bonds or other obligations by the electric
cooperative. Findings made by the board of directors of an electric
cooperative in a rate order issued under the rules and procedures
described by this subsection shall be conclusive, and any
transition charges incorporated in the rate order to recover the
principal, interest, and all reasonable expenses associated with
any securitized financing transaction shall constitute property
rights, as described in Subchapter G, Chapter 39, and shall
otherwise conform in all material respects to the transition
charges provided by Subchapter G, Chapter 39.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.004. JURISDICTION OF COMMISSION. Except as
specifically provided otherwise in this chapter, the commission has
jurisdiction over electric cooperatives only as follows:
(1) to regulate wholesale transmission rates and
service, including terms of access, to the extent provided in
Subchapter A, Chapter 35;
(2) to regulate certification to the extent provided
in Chapter 37;
(3) to establish a code of conduct as provided in
Section 39.157(e) subject to Section 41.054;
(4) to establish terms and conditions, but not rates,
for open access to distribution facilities for electric
cooperatives providing customer choice, as provided in Section
39.203; and
(5) to require reports of electric cooperative
operations only to the extent necessary to:
(A) ensure the public safety;
(B) enable the commission to satisfy its
responsibilities relating to electric cooperatives under this
chapter;
(C) enable the commission to determine the
aggregate electric load and energy requirements in the state and
the resources available to serve that load; or
(D) enable the commission to determine
information relating to market power as provided in Section 39.155.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.005. LIMITATION ON MUNICIPAL
AUTHORITY. Notwithstanding any other provision of this title, a
municipality may not directly or indirectly regulate the rates,
operations, and services of an electric cooperative, except, with
respect to operations, to the extent necessary to protect the
public health, safety, or welfare. This section does not prohibit a
municipality from making a lawful charge for the use of public
rights-of-way within the municipality as provided by Section
182.025, Tax Code, and Section 33.008. An electric cooperative
shall be an electric utility for purposes of Section 182.025, Tax
Code, and Section 33.008.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
SUBCHAPTER B. ELECTRIC COOPERATIVE UTILITY CHOICE
§ 41.051. BOARD DECISION. (a) The board of directors
has the discretion to decide when or if the electric cooperative
will provide customer choice.
(b) Electric cooperatives that choose to participate in
customer choice may do so at any time on or after January 1, 2002, by
adoption of an appropriate resolution of the board of directors.
The decision to participate in customer choice by the adoption of a
resolution may be revoked only if no customer has opted for choice
within four years of the resolution's adoption. An electric
cooperative may initiate a customer choice pilot project at any
time.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.052. ELECTRIC COOPERATIVES NOT OFFERING CUSTOMER
CHOICE. (a) An electric cooperative that chooses not to
participate in customer choice may not offer electric energy at
unregulated prices directly to retail customers outside its
certificated retail service area.
(b) An electric cooperative under Subsection (a) retains
the right to offer and provide a full range of customer service and
pricing programs to the customers within its certificated retail
service area and to purchase and sell electric energy at wholesale
without geographic restriction.
(c) A generation and transmission electric cooperative may
offer electric energy at unregulated prices directly to retail
customers outside of its parent electric cooperatives'
certificated service areas only if a majority of the parent
electric cooperatives of the generation and transmission electric
cooperative have chosen to offer customer choice.
(d) A subsidiary of an electric cooperative may not provide
electric energy at unregulated prices outside of its parent
electric cooperative's certificated retail service area unless the
electric cooperative offers customer choice inside its
certificated retail service area.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.053. RETAIL CUSTOMER RIGHT OF CHOICE. (a) If an
electric cooperative chooses to participate in customer choice,
after that choice, all retail customers within the certificated
service area of the electric cooperative shall have the right of
customer choice, and the electric cooperative shall provide
nondiscriminatory open access for retail service.
(b) Notwithstanding Section 39.107, the metering function
may not be deemed a competitive service for customers of the
electric cooperative within that service area and may, at the
option of the electric cooperative, continue to be offered by the
electric cooperative as sole provider.
(c) On its initiation of customer choice, an electric
cooperative shall designate itself or another entity as the
provider of last resort for retail customers within the electric
cooperative's certificated service area and shall fulfill the role
of default provider of last resort in the event no other entity is
available to act in that capacity.
(d) If a retail electric provider fails to serve a customer
described in Subsection (c), on request by the customer, the
provider of last resort shall offer the customer the standard
retail service package for the appropriate customer class, with no
interruption of service, at a fixed, nondiscountable rate that is
at least sufficient to cover the reasonable costs of providing that
service, as approved by the board of directors.
(e) The board of directors may establish the procedures and
criteria for designating the provider of last resort and may
redesignate the provider of last resort according to a schedule it
considers appropriate.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.054. SERVICE OUTSIDE CERTIFICATED
AREA. (a) Notwithstanding any provisions of Chapter 161:
(1) an electric cooperative participating in customer
choice shall have the right to offer electric energy and related
services at unregulated prices directly to retail customers who
have customer choice without regard to geographic location; and
(2) any person, without restriction, except as may be
provided in the electric cooperative's articles of incorporation
and bylaws, may be a member of an electric cooperative.
(b) In providing service under Subsection (a) to retail
customers outside its certificated service area as that area exists
on the date of adoption of customer choice, an electric cooperative
becomes subject to commission jurisdiction as to the commission's
rules establishing a code of conduct regulating anticompetitive
practices under Section 39.157(e), except to the extent those rules
conflict with this chapter.
(c) For electric cooperatives participating in customer
choice, the commission shall have jurisdiction to establish terms
and conditions, but not rates, for access by other electric
providers to the electric cooperative's distribution facilities.
(d) Notwithstanding Subsections (b) and (c), the commission
shall make accommodation in the code of conduct for specific legal
requirements imposed by state or federal law applicable to electric
cooperatives. The commission shall accommodate the organizational
structures of electric cooperatives and may not prohibit an
electric cooperative and any related entity from sharing officers,
directors, or employees.
(e) The commission does not have jurisdiction to require the
unbundling of services or functions of, or to regulate the recovery
of stranded investment of, an electric cooperative or, except as
provided by this section, jurisdiction with respect to the rates,
terms, and conditions of service for retail customers of an
electric cooperative within the electric cooperative's
certificated service area.
(f) An electric cooperative shall maintain separate books
and records of its operations and the operations of any subsidiary
and shall ensure that the rates charged for provision of electric
service do not include any costs of its subsidiary or any other
costs not related to the provision of electric service.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.055. JURISDICTION OF BOARD OF DIRECTORS. A board
of directors has exclusive jurisdiction to:
(1) set all terms of access, conditions, and rates
applicable to services provided by the electric cooperative, except
as provided by Sections 41.054 and 41.056, including
nondiscriminatory and comparable rates for distribution but
excluding wholesale transmission rates, terms of access, and
conditions for wholesale transmission service set by the commission
under Subchapter A, Chapter 35, provided that the rates for
distribution established by the electric cooperative shall be
comparable to the distribution rates that apply to the electric
cooperative and its subsidiaries;
(2) determine whether to unbundle any energy-related
activities and, if the board of directors chooses to unbundle,
whether to do so structurally or functionally;
(3) reasonably determine the amount of the electric
cooperative's stranded investment;
(4) establish nondiscriminatory transition charges
reasonably designed to recover the stranded investment over an
appropriate period of time;
(5) determine the extent to which the electric
cooperative will provide various customer services, including
nonelectric services, or accept the services from other providers;
(6) manage and operate the electric cooperative's
utility systems, including exercise of control over resource
acquisition and any related expansion programs;
(7) establish and enforce service quality standards,
reliability standards, and consumer safeguards designed to protect
retail electric customers;
(8) determine whether a base rate reduction is
appropriate for the electric cooperative;
(9) determine any other utility matters that the board
of directors believes should be included;
(10) sell electric energy and capacity at wholesale,
regardless of whether the electric cooperative participates in
customer choice; and
(11) make any other decisions affecting the electric
cooperative's method of conducting business that are not
inconsistent with the provisions of this chapter.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.056. ANTICOMPETITIVE ACTIONS. (a) If, after
notice and hearing, the commission finds that an electric
cooperative providing customer choice has engaged in
anticompetitive behavior by not providing other retail electric
providers with nondiscriminatory terms and conditions of access to
distribution facilities or customers within the electric
cooperative's certificated service area that are comparable to the
electric cooperative's and its subsidiaries' terms and conditions
of access to distribution facilities or customers, the commission
shall notify the electric cooperative.
(b) The electric cooperative shall have three months to cure
the anticompetitive or noncompliant behavior described in
Subsection (a). If the behavior is not fully remedied within that
time, the commission may prohibit the electric cooperative or its
subsidiary from providing retail service outside its certificated
retail service area until the behavior is remedied.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.057. BILLING. (a) An electric cooperative that
opts for customer choice may continue to bill directly electric
customers located in its certificated service area for all
transmission and distribution services. The electric cooperative
may also bill directly for generation and customer services
provided by the electric cooperative or its subsidiaries to those
customers.
(b) A customer served by an electric cooperative for
transmission and distribution services and by a retail electric
provider for retail service has the option of being billed directly
by each service provider or receiving a single bill for
distribution, transmission, and generation services from the
electric cooperative.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.058. TARIFFS FOR OPEN ACCESS. An electric
cooperative that owns or operates transmission and distribution
facilities shall file tariffs implementing the open access rules
established by the commission under Section 39.203 with the
appropriate regulatory authorities having jurisdiction over the
transmission and distribution service of the electric cooperative
before the 90th day preceding the date the electric cooperative
offers customer choice.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.059. NO POWER TO AMEND CERTIFICATES. Nothing in
this chapter empowers a board of directors to issue, amend, or
rescind a certificate of public convenience and necessity granted
by the commission.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.060. CUSTOMER SERVICE INFORMATION. (a) The
commission shall keep information submitted by customers and retail
electric providers pertaining to the provision of electric service
by electric cooperatives.
(b) The commission shall notify the appropriate electric
cooperative of information submitted by a customer or retail
electric provider, and the electric cooperative shall respond to
the customer or retail electric provider. The electric cooperative
shall notify the commission of its response.
(c) The commission shall prepare a report for the Sunset
Advisory Commission that includes information submitted and
responses by electric cooperatives in accordance with the Sunset
Advisory Commission's schedule for reviewing the commission.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.061. RETAIL RATE CHANGES BY ELECTRIC
COOPERATIVES. (a) This section shall apply to retail rates of an
electric cooperative that has not adopted customer choice and to
the retail delivery rates of an electric cooperative that has
adopted customer choice. This section may not apply to rates for:
(1) sales of electric energy by an electric
cooperative that has adopted customer choice; or
(2) wholesale sales of electric energy.
(b) An electric cooperative may change its rates by:
(1) adopting a resolution approving the proposed
change;
(2) mailing notice of the proposed change to each
affected customer whose rate would be increased by the proposed
change at least 30 days before implementation of the proposed
change, which notice may be included in a monthly billing; and
(3) holding a meeting to discuss the proposed rate
changes with affected customers, if any change is expected to
increase total system annual revenues by more than $100,000 or one
percent, whichever is greater.
(c) An electric cooperative may implement the proposed
rates on completion of the requirements under Subsection (b), and
those rates shall remain in effect until changed by the electric
cooperative as provided by this section or, for rates other than
retail delivery rates, until this section is no longer applicable
because the electric cooperative adopts customer choice.
(d) The electric cooperative may reconsider a rate change at
any time and adjust the rate by board resolution without additional
notice or meeting of customers if the rate as adjusted is not
expected to increase the revenues from a customer class. However,
if notice is given to a customer class that would receive an
increase as a result of the adjustment, then the rates for the
customer class may be increased without additional meeting of the
customers. A customer may petition to appeal within the time
provided in Subsection (f).
(e) Retail rates set by an electric cooperative that has not
adopted customer choice and retail delivery rates set by an
electric cooperative that has adopted customer choice shall be just
and reasonable, not unreasonably preferential, prejudicial, or
discriminatory; provided, however, if the customer agrees, an
electric cooperative may charge a market-based rate to customers
who have energy supply options if rates are not increased for other
customers as a result.
(f) A customer of the electric cooperative who is adversely
affected by a rate setting resolution of the electric cooperative
is entitled to judicial review. A person initiates judicial review
by filing a petition in the district court of Travis County not
later than the 90th day after the resolution is implemented.
(g) The resolution of the electric cooperative setting
rates, as it may have been amended as described in Subsection (d),
shall be presumed valid, and the burden of showing that the
resolution is invalid rests on the persons challenging the
resolution. A court reviewing a change of a rate or rates by an
electric cooperative may consider any relevant factor including the
cost of providing service.
(h) If the court finds that the electric cooperative's
resolution setting rates violates the standards contained in
Subsection (e), or that the electric cooperative's rate violates
Subsection (e), the court shall enter an order:
(1) stating the specific basis for its determination
that the rates set in the electric cooperative's resolution violate
Subsection (e); and
(2) directing the electric cooperative to:
(A) set, within 60 days, revised retail rates
that do not violate the standards of Subsection (e); and
(B) refund or credit against future bills, at the
electric cooperative's option, revenues collected under the rate
found to violate the standards of Subsection (e) that exceed the
revenues that would have been collected under the revised rates.
The refund or credit shall be made over a period of not more than 12
months, as determined by the court.
(i) The court may not enter an order delaying or prohibiting
implementation of a rate change or set revised rates either for the
period the challenged resolution was in effect or prospectively.
(j) A person having obtained an order of the court requiring
an electric cooperative to set revised retail rates pursuant to
Subsection (h)(2)(A) may, once the order is no longer subject to
appeal, initiate an original proceeding in the district court of
Travis County either to:
(1) seek enforcement of the court's order by writ of
mandamus if the electric cooperative has failed to adopt a
resolution approving revised rates within the time prescribed; or
(2) seek judicial review of the electric cooperative's
most current resolution setting rates as provided in this section,
if the electric cooperative has set revised rates pursuant to the
order of the court within the time prescribed. In the event of such
enforcement proceeding or judicial review the court may, in
addition to the other remedies provided for in this section, award
reasonable costs, including reasonable attorney's fees, to the
party prevailing on the case as a whole. Additionally, if the court
finds that either party has acted in bad faith solely for the
purpose of perpetuating the rate dispute between the parties, the
court may impose sanctions on the offending party in accordance
with the provisions of Subsections (b), (c), and (e), Section
10.004, Civil Practice and Remedies Code.
(k) An electric cooperative that has not adopted customer
choice and that has not changed each of its nonresidential rates
since January 1, 1999, shall, on or before May 1, 2002, adopt a
resolution setting rates. The resolution shall be subject to
judicial review as provided in this section whether or not any rate
is changed. In the event the electric cooperative fails to adopt a
resolution setting rates pursuant to this subsection, a customer
may petition for judicial review of the electric cooperative's
rates. A person initiates judicial review by filing a petition in
the district court of Travis County not later than November 1, 2002.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.062. ALLOCATION OF STRANDED INVESTMENT. Any
competition transition charge shall be allocated among retail
customer classes based on the relevant customer class
characteristics as of the end of the electric cooperative's most
recent fiscal year before implementation of customer choice, in
accordance with the methodology used to allocate the costs of the
underlying assets or expenses in the electric cooperative's most
recent cost of service study certified by a professional engineer
or certified public accountant or approved by the commission. In
multiply certificated areas, a retail customer may not avoid
stranded cost recovery charges by switching to another electric
cooperative, an electric utility, or a municipally owned utility.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
SUBCHAPTER C. RIGHTS NOT AFFECTED
§ 41.101. INTERFERENCE WITH CONTRACT. (a) This
subtitle may not interfere with or abrogate the rights or
obligations of parties, including a retail or wholesale customer,
to a contract with an electric cooperative or its subsidiary.
(b) No provision of this subtitle may interfere with or be
deemed to abrogate the rights or obligations of a party under a
contract or an agreement concerning certificated service areas.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.102. ACCESS TO WHOLESALE MARKET. Nothing in this
subtitle shall limit the access of an electric cooperative or its
subsidiary, either on its own behalf or on behalf of its customers,
to the wholesale electric market.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.103. PROTECTION OF BONDHOLDERS. Nothing in this
subtitle or any rule adopted under this subtitle shall impair
contracts, covenants, or obligations between an electric
cooperative and its lenders and holders of bonds issued on behalf of
or by the electric cooperative.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
§ 41.104. TAX-EXEMPT STATUS. Nothing in this subtitle
may impair the tax-exempt status of electric cooperatives, nor
shall anything in this subtitle compel any electric cooperative to
use its facilities in a manner that violates any contractual
provisions, bond covenants, or other restrictions applicable to
facilities financed by tax-exempt or federally insured or
guaranteed debt.
Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.
