Part II.
Public Utility Commission of Texas
Chapter 23.
Substantive Rules
Subchapter A. General Rules
16 TAC §23.5
The Public Utility Commission of Texas adopts the repeal
of §23.5 relating to Cost of Copies of Public Records without changes
to the proposed text as published in the March 5, 1999 issue of the
The repeal is necessary to avoid duplicative rule sections. The commission
has adopted §25.6 and §26.6 of this title (relating to Cost of Copies
of Public Information) to replace §23.5. This repeal is adopted under
Project Number 17709.
The commission received no comments on the proposed repeal.
This repeal is adopted under the Public Utility Regulatory Act,
Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA) which provides
the commission with the authority to make and enforce rules reasonably required
in the exercise of its powers and jurisdiction.
Cross-Index to Statutes: Public Utility Regulatory Act §14.002.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on May
7, 1999.
TRD-9902680
Rhonda Dempsey
Rules Coordinator
Public Utility Commission of Texas
Effective date: May 27, 1999
Proposal publication date: March 5, 1999
For further information, please call: (512) 936-7308
16 TAC §23.66
The Public Utility Commission of Texas adopts the repeal
of §23.66, relating to Arrangements Between Qualifying Facilities and
Electric Utilities with no changes to the proposed text as published in the
November 13, 1998,
Texas Register
(23 TexReg
11515). The repeal is necessary to avoid duplicative rule sections. The commission
has adopted §25.242 of this title (relating to Arrangements Between Qualifying
Facilities and Electric Utilities) to replace §23.66. This repeal is
adopted under Project Number 19693.
The commission received no comments on the proposed repeal.
This repeal is adopted under the Public Utility Regulatory Act,
Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA) which provides
the commission with the authority to make and enforce rules reasonably required
in the exercise of its powers and jurisdiction.
Cross-Index to Statutes: Public Utility Regulatory Act §14.002.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on May
4, 1999.
TRD-9902631
Rhonda Dempsey
Rules Coordinator
Public Utility Commission of Texas
Effective date: May 24, 1999
Proposal publication date: November 13, 1998
For further information, please call: (512) 936-7308
Subchapter A. General Provisions
16 TAC §25.6
The Public Utility Commission of Texas (commission) adopts
new §25.6 relating to Cost of Copies of Public Information with changes
to the proposed text as published in the March 5, 1999 issue of the
This section replaces §23.5 of this title (relating to Costs of Copies
of Public Records) and clarifies the cost that will be charged by the commission
for copies of public information. This section is adopted under Project Number
17709.
The Appropriations Act of 1997, House Bill 1, Article IX, §167 (§167)
requires that each state agency review and consider for readoption each rule
adopted by that agency pursuant to the Government Code, Chapter 2001 (Administrative
Procedure Act). Such reviews shall include, at a minimum, an assessment by
the agency as to whether the reason for adopting or readopting the rule continues
to exist. The commission held three workshops to conduct a preliminary review
of its rules. As a result of these workshops, the commission is reorganizing
its current substantive rules located in 16 Texas Administrative Code (TAC)
Chapter 23 to (1) satisfy the requirements of §167; (2) repeal rules
no longer needed; (3) update existing rules to reflect changes in the industries
regulated by the commission; (4) do clean-up amendments made necessary by
changes in law and commission organizational structure and practices; (5)
reorganize rules into new chapters to facilitate future amendments and provide
room for expansion; and (6) reorganize the rules according to the industry
to which they apply. Chapter 25 has been established for all commission substantive
rules applicable to electric service providers.
The commission requested specific comments on the §167 requirement
as to whether the reason for adopting or readopting the rule continues to
exist. The commission received no comments on the §167 requirement or
on the proposed rule. The commission finds that the reason for adopting the
rule continues to exist.
In adopting this section, the commission deletes "as in effect on September
18, 1996" so that the rule will always refer to the most current version of
1 TAC §§111.61-111.70.
This section is adopted under the Public Utility Regulatory Act,
Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA) which provides
the commission with the authority to make and enforce rules reasonably required
in the exercise of its powers and jurisdiction.
Cross-Index to Statutes: Public Utility Regulatory Act §14.002.
§25.6.Cost of Copies of Public Information.
The rules set forth in 1 TAC §§111.61-111.70 (relating to
Costs of Copies of Public Information) will apply to copies of public records
made at the commission.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on May
7, 1999.
TRD-9902678
Rhonda Dempsey
Rules Coordinator
Public Utility Commission of Texas
Effective date: May 27, 1999
Proposal publication date: March 5, 1999
For further information, please call: (512) 936-7308
16 TAC §25.242
The Public Utility Commission of Texas (commission) adopts
new §25.242, relating to Arrangements Between Qualifying Facilities and
Electric Utilities, with changes to the proposed text as published in the
November 13, 1998,
Texas Register
(23 TexReg
11521). The rule is necessary to address federal and state laws relating to
the rights and responsibilities of electric utilities and qualifying facilities
in relation to each other. This new section is adopted under Project Number
19693.
The Appropriation Act of 1997, HB 1, Article IX, Section 167 (Section 167)
requires that each state agency review and consider for readoption each rule
adopted by that agency pursuant to the Government Code, Chapter 2001 (Administrative
Procedure Act). Such reviews shall include, at a minimum, an assessment by
the agency as to whether the reason for adopting or readopting the rule continues
to exist. The commission held three workshops to conduct a preliminary review
of its rules. As a result of these workshops, the commission is reorganizing
its current substantive rules located in 16 Texas Administrative Code (TAC)
Chapter 23 to (1) satisfy the requirements of Section 167; (2) repeal rules
no longer needed; (3) update existing rules to reflect changes in the industries
regulated by the commission; (4) do clean-up amendments made necessary by
changes in law and commission organizational structure and practices; (5)
reorganize rules into new chapters to facilitate future amendments and provide
room for expansion; and (6) reorganize the rules according to the industry
to which they apply. Chapter 25 has been established for all commission substantive
rules applicable to electric service providers.
Qualifying facilities (QFs) are entities created in 1978 by the Public
Utility Regulatory Policies Act (PURPA). PURPA was adopted to encourage the
efficient use of fossil fuels in electric power production through "cogeneration"
(simultaneous generation of electric and steam/heat energy) and through the
use of renewable resources. "Qualifying cogenerators" and "qualifying small
power producers" are defined under federal law. Federal Power Act (16 U.S.C.
§796(18)(C) and §796(17)(D)). Generating facilities meeting the
ownership, operating, and efficiency criteria established by the Federal Regulatory
Energy Commission (FERC) are classified as QFs. PURPA contains several provisions
relating to electric utilities: utilities must interconnect with QFs; utilities
must sell power to QFs; utilities must purchase power from QFs; and utilities
in buying from a QF must pay the utility's incremental or avoided cost of
production of that power.
Comments were filed by Brazos Electric Power Cooperative (Brazos), Central
and South West Corporation (CSW), Certain Independent ERCOT Market Participants
(a joint filing by Dynergy Marketing and Trade, Dynergy Power Services, Inc.,
Calpine Corporation, Enron Corporation, LG&E Energy Marketing, Inc., and
Coral Power L.L.C., herein referred to as Certain Independents), Houston Lighting
and Power Company (HL&P), Occidental Chemical Corporation (Oxychem), a
joint filing on behalf of their members by Public Citizen of Texas, Texas
Fund for Energy and Environmental Education, Texas Communities Project, and
Texas Clean Water Action (herein referred to as Public Citizen), South Texas
Electric Cooperatives and its member distribution cooperatives (STEC), Southwestern
Public Service Company (SPS), Texas Industrial Energy Consumers (TIEC), Texas
Renewable Energy Industries Association (TREIA), and Texas Utilities Electric
Company (TU Electric). HL&P, STEC, Texas Electric Cooperatives, Inc. (TEC),
TIEC, and TREIA filed reply comments.
There were two primary concerns expressed in the comments. First, many
persons stated that the existing regulation has served the affected parties
well and that the proposal inappropriately deletes large portions of the existing
regulations. These persons stated that the subsections proposed for deletion
have provided clear guidance to electric utilities and QFs regarding their
mutual obligations under PURPA, and the deletions would create confusion and
generate litigation. One party succinctly stated that the commission should
"apply a scalpel, not a sword, to rule §23.66." Second, several persons
stated that the proposal appears inconsistent with federal law. These persons
stated that federal law affords QFs certain rights, and that the commission
cannot take those rights away.
The commission has determined that the key issue to be decided in this
proceeding relates to the determination of avoided capacity costs and the
payment of payments for capacity to QFs. The commission has not interpreted
PURPA or §23.66 as requiring a utility to buy power when it was not needed
or from a source that was not the least-cost resource. The Public Utility
Regulatory Act (PURA), Chapter 34, relating to Electrical Planning, and commission
regulations set forth a process for bidding for capacity sales to electric
utilities. Further, the statute establishes a value for capacity from qualifying
facilities that choose not to bid. The changes being adopted here preserve
the obligation of a utility to buy capacity from a QF; however, that obligation
arises only when the QF participates in a resource solicitation that is required
under the commission's rules and is the best resource to meet the utility's
needs.
Discussion of comments on specific sections.
Purpose, proposed §25.242(a).
TU Electric suggested that this section include the concept of complying
with the appropriate federal and state laws. In its reply comments, TIEC agreed
with TU Electric's suggestion.
The commission has modified the statement of purpose to emphasize the State
of Texas goal of promoting wholesale competition while complying with federal
and state law.
Negotiation and filing of rates, proposed §25.242(c)
adopted as §25.242(d).
TIEC agreed with the continuation of this subsection and suggested that
the preamble be changed to explicitly state that nothing in the new regulation
was intended to nullify existing contracts.
The regulations already provide the assurance that TIEC seeks. Section
25.242(d)(1)(B) states that: "Nothing in this section shall affect the validity
of any contract entered into between a qualifying facility and an electric
utility…." The commission takes no action with respect to TIEC's proposal.
Availability of electric utility system cost data,
proposed §25.242(d) adopted as §25.242(e).
§25.242(e)(1): Applicability.
SPS and TU Electric suggested that there is no need for utilities to provide
eleven years of data and suggested a ten-year requirement. SPS noted that
the FERC does not require eleven years of estimated avoided cost information.
TU Electric recommended that the capacity addition plans and other data be
provided for the same time period. CSW stated that the annual filing of avoided
cost information is not necessary to comply with federal law, and should be
replaced with a two-year filing requirement. Further, CSW stated that a biennial
filing should not be required in the year that a utility files its preliminary
integrated resource plan (preliminary IRP). TIEC stated that it does not wish
to require utilities to file redundant cost information; however, it is not
clear that the information filed in a preliminary IRP would be sufficient
to establish a utility's avoided cost. TIEC recommended that the commission
use its discretion to waive the data-filing requirement if the commission
determines that preliminary IRP data is sufficient. TIEC stated that the annual
system cost data filing requirement should be retained. TIEC noted that this
portion of the rule was taken from the FERC regulations and that therefore
the information must be filed. Certain Independents stated that this requirement
should remain. STEC questioned the value of the system cost data required
by this section. STEC stated that utilities are required to conduct a competitive
resource solicitation to make firm energy and capacity additions and that
non-firm energy will be obtained through the ERCOT bulletin board. HL&P
questioned whether the required average price would reasonably approximate
the period avoided costs for a specific utility and it questioned the viability
of the data in light of PURPA's express requirements.
The commission agrees that ten years of data are sufficient and adopts
that change. The commission is interested in reducing the reporting burden
on utilities as requested by CSW, but it is reluctant to adopt a complicated
process that changes which utilities file each year. The commission agrees
with STEC that competitive resource solicitations reduce the need for cost
data reporting. However, the consistent filing of these data is useful. The
commission adopts the subsection with several changes to clarify its meaning.
Small power production load research, proposed
§25.242(d)(2).
TU Electric noted that the small power production reports are required
annually, but that the rule does not explicitly state that the data are for
the previous calendar year. SPS suggested that there is no practical need
to continue to develop and file small power production load research to determine
the quality of firmness of energy and capacity.
The commission agrees with TU Electric's comment on the reporting requirements.
The commission also agrees with SPS that there is no longer a need for research
relating to the quality and firmness of energy and capacity from small power
producers. The firmness and quality of small power producers is now better
understood, and quality and firmness are issues that can be addressed in a
bilateral contract for power. Rather than make the changes to §25.242(d)(2)
proposed by TU Electric and SPS, the commission deletes this paragraph. The
commission is investigating, in Project Number 20363,
Investigation into Distributed Resources in Texas,
whether it would
be useful to obtain information on all interconnected distributed generators,
not just small power producers. While there are no pending plans to adopt
reporting requirements in that project, the commission has requested notification
of requests for interconnection by distributed generators. Persons interested
in small power producer reports may request that the commission require such
reports in Project Number 20363 under its general reporting authority.
Special rules for small electric utilities, proposed
§25.242(d)(3) adopted as §25.242(e)(3).
Brazos stated that proposed §25.242(d)(3)(B) needs clarification with
respect to Brazos and its member distribution cooperatives. Brazos stated
that the commission has previously authorized utilities that are legally obligated
to purchase power from Brazos (that is, Brazos' member distribution cooperatives)
to refer qualifying facilities to Brazos for consideration. Brazos also seeks
clarification regarding whether the rates the member distribution cooperatives
pay to Brazos for power are the appropriate avoided costs for payments to
qualifying facilities.
The commission agrees that it is efficient for qualifying facilities to
work directly with a supplying utility, not the small utility that is legally
obligated to acquire all power from the supply utility. In such instances,
the resource need and the avoided costs of the supplying utility are relevant
to the issue of how much power would be acquired and at what avoided cost.
For a particular small utility the legal and fact issues relating to the utility's
legal obligations to acquire power may be complicated. The commission adopts
paragraph §25.242(e)(3) without modification.
Electric utility obligations, proposed §25.242(e)
adopted as §25.242(f).
Obligation to purchase from qualifying facilities,
proposed §25.242(e)(1) adopted as §25.242(f)(1).
§25.242(f)(1)(A).
TU Electric suggested that it be made explicit in proposed §25.242(e)(1)(A)
that a utility is obligated to purchase electric energy only, and is not obligated
to purchase firm capacity or some other form of energy. TIEC, on the other
hand, commented that the term "capacity" should not be stricken in proposed
§25.242(e)(1)(A) because the obligation under PURPA to purchase capacity
and energy remains unchanged despite any development that may be occurring
in the wholesale market.
The commission believes that the subparagraph is appropriate as written
because there are no references to capacity or firm energy purchase obligations.
§25.242(f)(1)(B).
TU Electric suggested that proposed §25.242(e)(1)(B) be deleted because
it is extraneous to a utility's obligation to purchase electric energy or
capacity.
The commission agrees with TU Electric that proposed §25.242(e)(1)(B),
relating to firm and non-firm power, is unnecessary.
§25.242(f)(1)(C).
TU Electric suggested that the term "and/or capacity" from the last part
of paragraph proposed §25.242(e)(1)(C) be deleted because this provision
applies only to the obligation to purchase energy. TIEC stated that the requirements
in proposed §25.242(e)(1)(C) would allow an electric utility to wait
as long as 90 days to commence the purchase of energy from a QF. TIEC feels
that since many QFs already have interconnection agreements in place, the
90- day requirement should be waived and suggest that a 24 hour notice would
be more appropriate. TIEC also notes that the same interconnection requirements
specified in Subchapter I relating to Transmission and Distribution should
also apply to proposed §25.242(e)(1)(C). Certain Independents stated
that the "90-day rule" is appropriate. Certain Independents further suggested
that the term "capacity" should be retained throughout. HL&P replied that
a drastic reduction in the time allowed for commencing energy sales was unreasonable
because no controversy had arisen for more than a decade. STEC commented that
this section is not consistent with the interconnection timeline set forth
in the commission transmission service regulations. The transmission regulations
allow 60 days. STEC further stated that the timeline should not begin until
a QF shows that it has met all requirements for the interconnection. STEC
urged the commission to retain the rate and metering options currently in
existence.
The commission agrees that the references to capacity should be eliminated.
The commission agrees that the interconnection requirements of Subchapter
I, relating to Transmission and Distribution, should apply to qualifying facilities.
The 60-day transmission rule requirement relates to the performance of a system
security study. An additional facilities study may be required. The 90 days
specified in the proposed rule relates to a purchase of energy. If a QF requires
interconnection, commencement of purchases may take longer, depending on the
outcome of the security and facility studies. The commission agrees with HL&P
that the lack of controversy relating to the timelines set forth in this portion
of the rule provide a good reason for leaving the timelines as they are. No
one has described incidents that would indicate that there is a need to change
these timelines.
§25.242(f)(1)(D).
Proposed §25.242(e)(1)(D) requires utilities to contract for firm
energy and capacity from QFs pursuant to Subchapter H, relating to Electrical
Planning (the IRP process). TU Electric suggests adding a paragraph to explicitly
describe a utility's obligation to purchase firm capacity. Certain Independents
strongly opposed the proposal to purchase QF energy pursuant to the IRP process.
Certain Independents stated that this is an abdication of the commission's
duty to enforce FERC's obligation to purchase requirements and suggest that
the commission should retain the purchase obligations of the proposed rule
as well as the companion provisions of rule 23.66.In reply comments, TIEC
agreed with the comments of the Certain Independents that the commission cannot
eliminate the requirement that utilities purchase capacity from QFs and meet
requirements of federal law. However, TIEC stated that the IRP solicitation
process could be used to establish an avoided cost, but that a reference to
the IRP rule alone is insufficient to accomplish this. Oxychem stated that
proposed §25.242(e)(1)(A) and (D) would eliminate the long-standing PURPA
obligation of electric utilities to purchase capacity from QFs and stated
that this is beyond the commission's authority under the FERC rule. STEC supported
having a utility acquire capacity from a QF under the competitive solicitation
process set out in the IRP rules. STEC also urged the commission to require
that the purchase of energy be market based on the ERCOT bulletin board. TIEC
objected to STEC's suggestion as unworkable because the bulletin board is
currently inactive and because of the existence of considerable non-ERCOT
energy markets. TIEC commented that STEC's proposal assumed the existence
of a unified ERCOT energy market that can establish a single price for energy
in the region. Finally, TIEC stated that the decremental energy methodology
used by the commission to establish avoided energy costs is non-controversial
and is reflected in existing utility tariffs; therefore, there is no need
to alter the current practice at this time. Proposed §25.242(e)(1)(D)
requires the utilities to contract for firm energy and capacity from QFs pursuant
to the planning process. HL&P recommended that this section be revised
so that utilities are not required to contract for QF capacity in excess of
their reasonable requirements. TIEC believes that this reliance on the integrated
resource planning regulations is not well suited to accommodate the special
requirements mandated under PURPA. For example, TIEC notes than the term "qualifying
facility" is not even referenced in Subchapter H. However, because the IRP
rule is not the subject of this rulemaking, TIEC suggests that proposed §25.242(e)(1)(D)
be rewritten to assure that the requirements under PURPA are met. TIEC further
suggests that this subsection be rewritten to require electric utilities to
purchase any ancillary services made available from QFs. HL&P responded
to TIEC's proposed ancillary service revision by asserting that the TIEC proposal
is anti-competitive and should not be countenanced.
In 1995, the Texas Legislature articulated a new goal for the electric
industry, and stated that new rules, policies, and principles must be formulated
and applied to protect the public interest in a more competitive wholesale
marketplace. The commission has responded to this goal by adopting open-access
transmission service regulations for the Electric Reliability Council of Texas
(ERCOT), a registration process for exempt wholesale generators and power
marketers, and rules governing the functioning of an independent system operator
(ISO) for ERCOT.
The commission has adopted an integrated resource planning (IRP) process
that requires utilities to conduct resource solicitations that provide opportunities
to all market participants. The IRP process addresses the service area forecast,
the capacity need of the utility, and the timing of the preliminary IRP filing.
"Qualifying facility" is not referenced in Subchapter H, relating to Electrical
Planning of the commission's rules, because the IRP process is designed to
treat all resources equally. Preferences identified through the public participation
process are the exception, and may result in targeted resource solicitations
that advantage particular resources.
The commission has determined that PURA §34.054, relating to Qualifying
Facility Bids; Avoided Costs, is directive with respect to capacity purchases
from QFs. Section 34.054 is part of the chapter that established the IRP process
and was adopted in 1995 when the commission was directed to open the wholesale
market to competition. Section 34.054 defines the avoided capacity cost as
zero for a qualifying facility that chooses not to bid, or chooses to bid
and loses. When combined with the IRP process, §34.054 contemplates that
qualifying facilities will bid against other market participants in a resource
solicitation. Section 34.054 does not affect the validity of a contract entered
into between an electric utility and a qualifying facility for any purchase,
and does not affect the right of a QF to sell energy to an electric utility.
The commission does not agree that adoption of §25.242(f)(1)(D) is
beyond the commission's authority. In requiring that the purchase of capacity
from qualifying facilities result from Subchapter H, relating to Electrical
Planning, the commission is implementing PURPA in a manner that is consistent
with State laws and policies. The statute and commission regulations relating
to resource planning set forth a process for the approval and issuance of
request for proposals for resources, and all bidders, including qualifying
facilities, must respond in a similar manner. Further, the statute is clear
with respect to the value of capacity from qualifying facilities that choose
not to bid. Prior to 1978, there was not any obligation on the part of a utility
to consider offers from other parties to sell power to the utility. The enactment
of PURPA established a requirement for utilities to consider offers from QFs.
Later, commission rules and the IRP statute permitted entities other than
QFs to submit such bids and required the utility to acquire power that was
offered on the best terms. The commission has not interpreted PURPA or §23.66
as requiring a utility to buy power when it was not needed or from a source
that was not the least-cost resource. The changes being adopted here preserve
the obligation of a utility to buy capacity from a QF, but that obligation
arises only when the QF participates in the solicitation that is required
under the commission's rules and is the best resource to meet the utility's
needs.
§25.242(f)(1)(E).
CSW, TU Electric, and HL&P are uncertain of the need for the priority
queue referenced in proposed §25.242(e)(1)(E) and suggest deleting the
subparagraph. TIEC noted that PURPA obligates utilities to purchase all energy
made available from QFs, and therefore it is unnecessary to prioritize the
selection of QFs by technology. Oxychem and Certain Independents stated that
an order of priority for the purchase of energy is not needed and furthermore
makes no sense and suggest that this subparagraph be deleted. TIEC agreed
in reply comments that the priority queue for QF purchases is unnecessary
and should be eliminated.
The commission agrees that utilities must purchase all the energy made
available from qualifying facilities and agrees that a queue is not necessary
for the capacity purchases from qualifying facilities. The commission will
continue to provide advantages to resources identified through public participation
as appropriate. However, proposed subparagraph §25.242(e)(1)(E) is not
necessary and is eliminated.
Obligation to interconnect, proposed §25.242(e)(3)
adopted as §25.242(f)(3).
Certain Independents support the proposed amendments referencing the commission's
transmission rules with respect to the utility obligations to interconnect
and provide transmission for QFs. STEC commented that the proposed rule should
clarify whether the transmission rule applies to interconnections at the distribution
level between the QF and the electric utility.
Section 25.242(f)(3) refers to Subchapter I, relating to Transmission and
Distribution. Presently, that subchapter does not apply to interconnection
at distribution voltage. Interconnection at distribution voltage has been
addressed through utility practice and on a case- by-case basis by the commission
as the need has arisen. Interconnection of distributed resources was the subject
of a commission investigation in Project Number 19827,
Investigation into the Adequacy of Capacity for 1999 and 2000 Peak Periods,
which resulted in the adoption of "interconnection guidelines" by
the commission on February 4, 1999. The commission is continuing its investigation
of these and related matters in Project Number 20363,
Investigation into Distributed Resources in Texas.
Regulations for
interconnection at distribution voltage would be adopted in Subchapter I,
relating to Transmission and Distribution.
Transmission to other electric utilities, proposed
§25.242(e)(4) adopted as §25.242(f)(4).
TIEC notes that PURPA requires that the rate for purchase of QF energy
shall not include any charges for transmission and that this point should
be clarified either in the rule or the preamble. HL&P responded to TIEC's
comments by stating that the cited rule merely notes that the purchasing utility
may not independently add a transmission charge and that QFs are not exempt
from paying reasonable transmission charges under FERC rules.
The commission has adopted comprehensive rules for transmission service
and the pricing of transmission service. These rules use a "loads pay" philosophy
and apply to all wholesale market participants in ERCOT, including qualifying
facilities. Section 25.242(f)(4) is adopted without change from proposed §25.242(e)(4).
Rates for purchases from a qualifying facility,
proposed §25.242(f) adopted as §25.242(g).
§25.242(g)(2).
Proposed §25.242(f)(2) requires purchases to be made in accordance
with Subchapter H, relating to Electrical Planning (IRP). Brazos stated that
it is bad public policy to perpetuate the IRP process in these regulations
because IRP has been a barrier to the development of a competitive wholesale
power market. CSW stated that avoided capacity and firm energy costs should
be determined through a competitive bidding process. However, CSW also stated
that non-firm energy involves a completely different type of resource. CSW
requested that proposed §25.242(f)(2) be modified to clarify the intent
of the commission to continue to use the actual, historical costs experienced
by the utility during the time of the non-firm energy purchase. CSW also requested
that §23.66(g) of the existing rule be retained in proposed §25.242
to further clarify the intent. Certain Independents did not oppose tying avoided
capacity costs to the price of the capacity offer a utility accepts pursuant
to its most recent resource solicitation. However, Certain Independents stated
that avoided energy cost should not be determined by an IRP solicitation,
but should be determined according to the methodology described in current
23.66(g). TIEC did not object to using a competitive bidding process to determine
avoided cost, however, there is no specific methodology for determining avoided
cost in the IRP rule, and there is no requirement to file the data necessary
to determine avoided cost. Therefore, the methodology for translating the
results of a solicitation into an avoided cost determination needs to be specified
in this subsection. TIEC in reply comments agreed that this rule must clarify
the methodology for determining the avoided costs both in the context of an
IRP solicitation and outside of such a solicitation. STEC commented that the
rule needs to clarify whether the electric utility must purchase all energy,
both firm and non-firm from the QF or whether firm energy and capacity purchases
are made pursuant to the IRP rule. TU Electric suggested that the proposed
revision to this current language is partially duplicative of, as well as
partially contrary to, §34.054 of the Public Utility Regulatory Act.
Additionally, TU Electric suggested that the proposed rule would unnecessarily
and inappropriately delete the very important language that protects cost
recovery for new and existing contracts that are below avoided cost when signed
but that, due to market changes, may be above current avoided cost and current
market prices and suggest that the current rule language be retained.
The commission disagrees with Brazos' contention that IRP is bad public
policy. IRP has eliminated utility construction of rate-based units (such
as those that resulted in above-market costs), and IRP has forced utilities
to use market-based criteria for resource acquisition (including market-based
contracts with qualifying facilities so that QF contracts will not result
in stranded costs). The statute sets forth a detailed IRP process that has
become cumbersome as wholesale markets have rapidly evolved. The commission
disagrees with TU Electric that the avoided costs for a utility that has not
yet submitted its first preliminary IRP to the commission are equal to the
avoided cost in the most-recently approved standard avoided cost calculation.
TU Electric is acquiring power under contracts and TU Electric's avoided costs
are represented in those contracts.
The commission agrees with CSW and Certain Independents that actual, historical
costs experienced by the utility should be used to calculated avoided costs
for non-firm energy purchases. Existing §23.66(g) will be retained in
new §25.242(i) to further clarify the intent as explained below.
The commission does not adopt a "specific methodology for determining avoided
cost in the IRP rule" (noted by TIEC) because none is necessary. Utilities
review the bids and negotiate resource supply contracts with the best bidder(s).
The avoided capacity cost is set forth in the statute using a simple methodology:
§34.054 of PURA, relating to Qualifying Facility Bids; Avoided Costs,
is directive with respect to capacity purchases from QFs and defines the avoided
capacity cost as zero for a qualifying facility that chooses not to bid, or
chooses to bid and loses. As long as the IRP regulations exist firm energy
and capacity purchases under contracts of greater than two years duration
must be made pursuant to the IRP rule. The commission disagrees that a methodology
needs to be specified in this subsection for translating the results of a
solicitation into an avoided cost determination.
The commission agrees with TU Electric that the language that protects
cost recovery for new and existing contracts is necessary. The commission
shall add language from existing §23.66(e)(2) to new §25.242(g)(2)
to make it clear that the value of a purchase may have changed between the
time of contracting and the time of delivery. Commission practice requires
that utilities prudently manage contracts, but does not hold them responsible
for changes that are beyond their control. The commission shall also add a
statement relating to payments that do not exceed avoided costs to make it
clear that such costs shall be found to be just and reasonable operating expenses
of the utility. This addition to §25.242(g)(2) permits the commission
to delete redundant paragraphs as explained below.
Proposed §25.242(f)(4).
Proposed §25.242(f)(4) requires that information concerning a proposal
made to the utility be made available in any proceeding. Brazos stated that
the regulation is too broad and does not take into consideration of the confidential
nature of certain information. Brazos stated that the provision appears in
conflict with the IRP provisions that protect confidential information. TU
Electric finds the language of this section unclear and suggested that it
could be interpreted to mean that such information is to be made publicly
available and cannot be subject to the terms of a protective order. TU Electric
suggested that this paragraph should be modified to explicitly state that
the information is available subject to such protection as may be appropriate
under the commission's procedural rules. In reply comments, TIEC agrees that
the information requested is confidential and highly competitive information
and should be treated as such.
The commission agrees with these comments and deletes proposed §25.242(f)(4).
Proposed §25.242(f)(5).
Proposed §25.242(f)(5) states that rate for purchases satisfies the
requirements of this section if they equal avoided cost. HL&P recommends
changing "equal" to "do not exceed" in §25.242(f)(5) to make it clear
that if a utility and a cogenerator enter into contracts at prices that are
less than full avoided cost these costs are just and reasonable.
The commission agrees and makes that change by adding a sentence to §25.242(g)(2).
Proposed §25.242(f)(5) is no longer necessary and is not adopted.
Proposed §25.242(f)(6).
Proposed §25.242(f)(6) states that payments to QFs in accordance with
this rule shall be considered reasonable and necessary operating expenses.
Brazos stated that PURA still provides for certification of QF contracts,
and that the regulation appears to accomplish by fiat what was previously
considered on a case-by-case basis. Brazos questioned whether the commission
can declare payments made in accordance with paragraphs (1), (2), and (5)
to be reasonable and necessary operating expenses of the utility.
Proposed §25.242(f)(6) does not limit the ability of a utility to
request certification of contracts with qualifying facilities pursuant to
§35.064 of PURA, relating to Certification Standards. This regulation
would establish a standard that would be applied by the commission on a case-by-case
basis. Contract certification has only two requirements under §35.064
of PURA: (1) the contract must be equal to or less the electric utility's
avoided costs, and (2) the electric utility has the right of first refusal
to purchase the facility before it is offered to another purchaser and the
electric utility has assurances of comparable capacity if the facility should
cease to operate. Contract certification reduces regulatory risk for both
the utility and the QF. As a practical matter, avoided costs are determined
through the IRP process, and the commission must apply those criteria in any
certification proceeding regarding a contract for power. With the change adopted
to §25.242(g)(2) and the standards set forth in §35.064 of the statute,
proposed §25.242(f)(3)-(6) are not necessary and are not adopted.
Standard rates for purchases from qualifying facilities
with a design capacity of 100 kilowatts or less, proposed §25.242(g)
adopted as §25.242(h).
§25.242(h)(1)-(6).
Brazos stated that the standard tariffs for purchases from QFs with a design
capacity of less that 100 kW do not provide sufficient basis that the rates
are consistent with subsection (f). Brazos requested clarification with respect
to limitations created by subparagraphs (1)(B) and (C). Brazos also requested
clarification with respect to the nature of the review of the commission of
standard tariffs under proposed §25.242(g)(6). Public Citizen made a
variety of suggestions: paragraph (g)(1) should apply to facilities using
agricultural waste gas as a fuel with a design capacity of one megawatt or
less; language should be added to subparagraph (g)(1)(C) to state that a capacity
payment shall be included in the standard rates; language should be added
to paragraph (g)(2) requiring the commission to develop a model tariff for
all utilities to use; and paragraphs (g)(3) & (4) should link the purchase
price of QF power to the renewable energy sold under §25.251, relating
to Renewable Energy Tariffs.
STEC does not believe it is necessary for the commission to develop a model
tariff that all utilities must use. TREIA suggested changing the term "QF"
to "renewable energy facilities." TREIA stated that renewable production should
be purchased at a rate equal to the annual average embedded cost of generation
for the purchasing utility. TREIA suggested leaving the current language that
allows differentiation among renewable facilities using various technologies.
HL&P responded to Public Citizen's and TREIA's embedded pricing proposal.
HL&P stated that average-embedded-cost pricing contravenes both state
and federal law and public policy. HL&P stated that these proposals would
implicitly require HL&P's other customers to incur both a capacity and
an energy charge for electricity that may be provided on an as available basis
only. HL&P further stated that abandonment of the avoided cost principles
would be unlawful, imprudent and unfair to the rate-paying public. Also in
reply comments, TIEC stated that the embedded cost proposal is likely contrary
to federal law and inconsistent with the calculation of avoided cost. TU Electric
suggested that the word "dispersed" in (g)(1)(B) should be replaced with the
word "distributed" or "multiple."
Paragraph (1)(B) would allow a utility to consider the capacity value of
numerous small (less than 100 kilowatt) qualifying facilities in establishing
rates for the purchase of capacity and energy. Paragraph (1)(C) would allow
the utility to establish different standard rates for wind power and solar
power. Different technologies have different characteristics and provide different
value to the system. Together, subparagraphs (B) and (C) allow a utility to
formulate different standard rates for different technologies. The review
of standard tariffs under §25.242(h)(6) does not change the authority
and responsibility of the commission to review and approve all tariffs under
its jurisdiction.
The commission does not support Public Citizen's recommendation for the
following reasons. It is not appropriate to increase the size of facilities
eligible under paragraph (1) without an analysis of the magnitude of the impact
or a consideration of the economic impact on utilities and their customers.
A capacity payment is already included in the methodology for standard rates
set pursuant to this subsection. The commission could develop a model tariff
for all utilities to use but declines to include that requirement in these
regulations absent a showing that the existing tariffs are inadequate. Finally,
paragraphs (3) & (4) should not be linked to the price of renewable energy
sold under §25.251, relating to Renewable Energy Tariffs. Electric utilities
that develop a tariff under §25.251 should acquire renewable energy in
the most efficient manner. The commission also rejects TREIA's proposal to
expand the application of the rule to renewable resource providers that are
not qualifying small power producers. Renewable energy providers should be
required to satisfy the federal registration requirements to become QFs. The
commission agrees with HL&P and TIEC to the limited extent that it is
inappropriate to expand the average-embedded-cost pricing scheme that the
rule implements.
The commission adopts the wording change recommended by TU Electric.
§25.242(h)(7).
Proposed §25.242(g)(7) requires QFs to have insurance. Brazos stated
that the insurance requirements are unclear. HL&P submitted that the best
way to deal with this issue is on a case- by-case basis. STEC commented that
any small power producer selling power to the electric utility for compensation
is considered by the insurance company to be engaged in a commercial operation
and the small power producer must purchase commercial insurance. TEC responded
in reply comments that paragraph (7) is not entirely clear. TEC stated that
it understands the paragraph to permit electric utilities to establish requirements
for the provision of insurance by a small power producer. TEC stated that
the need for insurance requirements cannot seriously be questioned and that
as long as this type of insurance is available, the form of the policy, whether
it is a homeowners policy or a commercial policy, is not particularly important.
TEC recommended that the commission adopt language that would empower electric
utilities to establish requirements for the provision of liability insurance.
TREIA responded to TEC's reply comments and offered language to make the subparagraph
clearer and also suggested liability limits. TREIA provided additional history
of the issue, including information from a 1995 letter from the Texas Department
of Insurance to the Public Utility Commission of Texas.
The insurance paragraph has been discussed at the commission for many years.
Proposed §25.242(g)(7) is identical to existing §23.66(f)(7) that
has consumed significant resources in commission workshops and hearings. The
parties agree that the existing paragraph is unclear but they disagree over
how to change it. TEC's proposal would give electric utilities the authority
to establish requirements for the provision of liability insurance. TREIA's
proposed changes incorporate many of the solutions set forth in the 1995 letter
from the Texas Department of Insurance. In adopting new §25.242(h)(7),
the commission provides some of the clarity sought by TREIA without making
judgment with regard to the insurance business or the regulation of insurance
companies. The commission declines to set liability limits as suggested by
TREIA. It is not appropriate to empower electric utilities to make these determinations
as suggested by TEC.
§25.242(h)(8)-(9).
Proposed §25.242(g)(8) states that the subsection relating to standard
rates for purchases from qualifying facilities with a design capacity of 100
kilowatts or less will expire on August 31, 2005. Proposed §25.242(g)(9)
requires the utilities to provide notice to QFs regarding expiration of the
subsection. Brazos stated that it is unclear whether the expiration of the
regulations also refers to the expiration of the tariffs implemented pursuant
to such regulations. HL&P questioned whether the year 2005 sunset date
is too far into the future and suggests a date of December 31, 2001. STEC
suggested that the expiration date should be the earlier of August 31, 2005
or the date retail competition becomes available. Public Citizen stated that
the commission should delete the sunset date provision. TU Electric questions
the need for the notice provision since they believe that it is incumbent
upon the small power producers to remain up-to-date on federal and state regulations
under which they operate.
The commission finds that it is appropriate to monitor the development
of renewable energy projects for several more years before determining when
this subsection can be eliminated. The sunset provision and the paragraph
relating to notice are not adopted.
Additional paragraph for this subsection.
Public Citizen recommended the addition of a new paragraph (10) that would
require the utility to develop and send informational brochures to all customers
to assure that all customers are aware of this option. STEC opposed the suggestion
that utilities be required to develop and submit for approval an information
brochure that would be mailed annually to the utility's customers. Such mailing
would add a significant cost that can not be justified.
The commission declines to adopt by rule a customer education requirement.
Rates for sales to qualifying facilities, proposed
§25.242(h) adopted as §25.242(k).
§25.242(k)(1).
Proposed §25.242(h)(1)(A) states, in part, that special equipment
or system modifications shall be required for electric utilities purchasing
from a QF, only when the generating utility demonstrates a need for this equipment.
Brazos stated that it is unclear the level or the form of the demonstration.
SPS suggests that the second and third sentences should be clarified to read
"qualifying facility" rather than "wholesale supplier."
The commission has made the wording change recommended by SPS. The commission
recognizes that the sentence relating to "special equipment or system modification"
is not clear. In the case of transmission-level voltage projects, Subchapter
I, relating to Transmission and Distribution, contain the regulations relating
to interconnection and cost responsibility. The ERCOT ISO is working out additional
parameters. For distributed generation, the commission has recently adopted
interconnection guidelines in Project Number 19827. Future regulations would
be adopted under Subchapter I; therefore, the commission clarifies paragraph
(1)(A) by referring to Subchapter I.
§25.242(k)(2).
Brazos requested clarification on the nature and extent of the process
for obtaining "public comment and commission finding" and whether such comment
and finding are required prior to providing supplemental and backup power.
Both TIEC and Certain Independents oppose the deletion of interruptible service
because it is in direct violation of PURPA. Oxychem and CSW also commented
that the elimination of the interruptible power requirement can only be done
upon a determination requiring such service would impair the electric utility's
ability to render adequate service to its customers or places an undue burden
on the electric utility. TIEC, in reply comments, agrees with the comments
and believe that interruptible power should be retained. STEC supports the
deletion of the requirement to provide interruptible service to QFs.
The commission agrees with Brazos that the reference to public comment
is not clear. As the market becomes more competitive it will be necessary
for the commission to better define the instances, if any, that relieve an
electric utility of its obligation to provide supplementary, backup or maintenance
power to qualifying facilities. As the wholesale market becomes more competitive
others, including non-utilities, may offer these services. The commission
adopts paragraph (2)(B) without the reference to notice and public comment
because these matters will be considered in any commission proceeding initiated
by the utility that does not want to provide these services. The commission
adds interruptible power to the list because federal law requires it.
§25.242(k)(3).
Brazos stated that it is inappropriate to prohibit the assumption that
QF forced outages occur at the same time or during system peak, and Brazos
sought clarification of the provision. TIEC, in reply comments, stated this
language should not be deleted because it comes directly from the FERC regulations.
The paragraph (3)(A) provides guidance to the design of rates for back-up
power and maintenance power and is retained.
Enforcement, proposed §25.242(k) adopted
as §25.242(n).
HL&P suggested that the commission resist any arguments that alternative
dispute resolution (ADR) be mandatory. Certain Independents agreed that QFs
and electric utilities should be encouraged to engage in ADR prior to filing
a complaint with the commission, however, they also opposed mandated ADR.
TU Electric stated that ADR should not be required until a complaint is filed
at the commission. STEC supported subsection (k) as proposed.
The proposed section encourages and does not mandate alternative dispute
resolution prior to the filing of a complaint with the commission. The subsection
is adopted as published.
Other comments on the questions and issues posed
in the preamble.
Some commentors responded to commission questions and on portions of §23.66
not included in proposed §25.242.
Definitions that appear in existing §23.66(a).
HL&P, Certain Independents, Oxychem, and TIEC commented on the deletion
of the definitions that appear in rule §23.66(a). HL&P noted that
only two of the twenty-one terms defined in §23.66(a) are carried forward
in §25.5. All the commentors suggest that the deletion of these definitions
may have the unintended effect of engendering confusion and disrupting established
relationships between QFs and electric utilities and suggest retaining the
definitions in the proposed rule or adding them to the general definitions
section in §25.5. HL&P also suggested including the term "price"
as a component of the term "rate." Because HL&P supports the continued
use of tariffs setting forth the price(s) to be paid for energy purchased
from QFs by utilities, HL&P suggested this expansion of the definition
for rate to include prices for charges for such "purchases."
The commission moves many of the definitions from existing §23.66(a)
to §25.242(c) and has renumbered the other subsections accordingly. The
commission concludes that the definitions for "rate" and "renewable resource(s)"
are already contained in §25.5 and shall not be repeated here. The definition
for "qualifying facility" is not necessary because it will be adopted in §25.5
in a separate rulemaking proceeding. The definition for "interconnection costs"
will not be adopted because it is addressed in Subchapter I. The definition
for "avoided cost" shall be altered to eliminate the reference to "capacity"
to make it consistent with other determinations. The definitions for "avoided
generating unit" and "committed unit basis (CUB)" are unnecessary because
existing §23.66(h) shall not be adopted in §25.242. The definition
for "interruptible power" is not defined in the commission's rules but is
not adopted here because an appropriate definition of interruptible service
will require additional investigation.
Rates for purchases from a qualifying facility
that appears in existing §23.66(e)(4).
Existing §23.66(e)(4) concerns the simultaneous sales and purchases
by QFs. Both Oxychem and TIEC stated that deletion of this paragraph would
be in direct violation of PURPA because the FERC regulations implementing
PURPA include this provision verbatim. HL&P seeks clarification on the
commission's intent in deleting this subsection and question whether the commission
is making a statement that these transactions are viewed unfavorably or is
the commission simply deleting language considered unnecessary. In either
event, they believe the parties would benefit from commission clarification.
The commission deletes existing §23.66(e)(4) because it considers
the language unnecessary. The commission does not view these transactions
unfavorably.
Tariffs setting out the methodologies for purchases
of non-firm power from a qualifying facility that appear in existing §23.66(g).
Existing §23.66(g) requires utilities to file tariffs setting out
the methodologies for purchases of non-firm energy from QFs and prescribes
the approaches that such methodologies should be based on and identifies the
factors to be considered in the calculation of decremental energy. CSW, HL&P,
Certain Independents, Oxychem, and TIEC expressed concern about the proposed
deletion of this subparagraph. They feel that deletion of this subparagraph
will only introduce uncertainty into what QFs will be paid for non-firm energy.
This uncertainty could lead to a new round of contested cases in which QFs
and electric utilities strive to establish reasonable avoided energy costs
in the absence of any criteria in the rules.
The commission retains §23.66(g) as §25.242(i) and renumbers
the subsections accordingly.
Rates for Purchases of Firm Power From QFs that
appear in existing §23.66(h).
Existing §23.66(h) sets out the methodology for the administrative
determination of avoided cost rates for the purchase of firm power. TIEC is
concerned that by eliminating the existing §23.66(h) there will be no
basis for quantifying the rates for purchase of short-term firm power from
a QF. Therefore, they suggest, existing §23.66(h) should be retained
and possibly rewritten to provide a methodology for calculating the avoided
cost associated with the purchase of short-term firm power. They further suggest
that the commission consider holding an informal workshop to develop the avoided
cost methodology for short-term capacity. Certain Independents, on the other
hand, agreed with the proposal to delete this subsection. They stated that
such avoided costs should be set by the market and based on the price of the
capacity bid selected by the utility pursuant to its most recent IRP solicitation.
The commission is required under Chapter 34 of PURA to rely on resource
solicitations for the determination of avoided costs for qualifying facilities,
and to find that the avoided capacity cost is zero for qualifying facilities
that do not bid. Further, the determination of resource need is an IRP issue,
and the commission is reluctant to require utilities to acquire capacity they
do not need. The market for short-term firm power is developing without direct
commission oversight, and the commission does not agree with TIEC that there
is a need for a modified avoided cost calculation methodology.
Periods during which purchases not required that
appear in existing §23.66(i).
HL&P stated that deletion of this section is neither necessary nor
wise. HL&P believes the current rule protects utility ratepayers from
incurring unnecessary cost during those periods when purchases of QF power
or energy would be more expensive than the cost of electricity generated by
the utility itself.
The short-term and non-firm electricity purchase obligations and price
provisions are retained, therefore it is reasonable to retain this subsection
as new §25.242(j).
The commission concludes that the reason for adopting §23.66 remains
valid today and continues to exist in adopting §25.242.
The new section is adopted under the Public Utility Regulatory
Act, Texas Utilities Code Annotated §14.002 (Vernon 1998) (PURA) which
provides the commission with the authority to make and enforce rules reasonably
required in the exercise of its powers and jurisdiction; and specifically,
§34.003, relating to Adoption of a Integrated Resource Planning Process,
§34.054, relating to Qualifying Facility Bids; Avoided Costs, §35.064,
relating to Certification Standards, and §36.208, relating to Payment
to Qualifying Facility.
Cross-Index to Statutes: Public Utility Regulatory Act §14.002 and
§§34.003, 34.054, 35.064, and 36.208.
§25.242.Arrangements Between Qualifying Facilities and Electric Utilities.
(a)
Purpose. The purpose of this section is to regulate the
arrangements between qualifying facilities and electric utilities as required
by federal and state law in a manner consistent with the development of a
competitive wholesale power market.
(b)
Application. This section shall apply to all electric utilities
in Texas. This section shall not apply to municipal utilities.
(c)
Definitions - The following words and terms, when used
in this section, shall have the following meanings, unless the context clearly
indicates otherwise:
(1)
Avoided costs - The incremental costs to an electric utility
of electric energy, which, but for the purchase from the qualifying facility
or qualifying facilities, such utility would generate itself or purchase from
another source.
(2)
Back-up power - Electric energy or capacity supplied
by an electric utility to replace energy or capacity ordinarily generated
by a qualifying facility's own generation equipment during an unscheduled
outage of the qualifying facility.
(3)
Cost of decremental energy - The cost savings to a
utility associated with the utility's ability to back-down some of its units
or to avoid firing units, or to avoid purchases of power from another utility
because of purchases of power from qualifying facilities.
(4)
Firm power - From a qualifying facility, power or
power-producing capacity that is available to the electric utility pursuant
to a legally enforceable obligation for scheduled availability over a specified
term.
(5)
Host utility - The utility with which the qualifying
facility is directly interconnected.
(6)
Maintenance power - Electric energy or capacity supplied
by an electric utility during scheduled outages of the qualifying facility.
(7)
Non-firm power from a qualifying facility - Power
provided under an arrangement that does not guarantee scheduled availability,
but instead provides for delivery as available.
(8)
Parallel operation - A mode of operation which enables
a qualifying facility to export automatically any electric capacity which
is not consumed by the qualifying facility or the user of the qualifying facility's
output. Parallel operation results in three possible states of operation at
any point in time:
(A)
The qualifying facility is generating an amount of capacity
that is less than the customer's load. The customer is therefore a net consumer.
(B)
The qualifying facility is generating an amount of capacity
that is more than the customer's load. The customer is therefore a net producer.
(C)
The qualifying facility is generating an amount of capacity
that is equal to the customer's load. The customer is therefore neither a
net producer nor a net consumer.
(9)
Purchase - The purchase of electric energy or
capacity or both from a qualifying facility by an electric utility.
(10)
Purchasing utility - The utility that is purchasing
a qualifying facility's capacity and/or energy.
(11)
Quality of firmness of a qualifying facility's power
- The degree to which the capacity offered by the qualifying facility is an
equivalent quality substitute for the utility's own generation or firm purchased
power. At a minimum the following factors should be considered in determining
quality of firmness:
(A)
reliability of generation and interconnection;
(B)
forced outage rate;
(C)
availability during peak periods;
(D)
the terms of any contract or other legally enforceable
obligation, including, but not limited to, the duration of the obligation,
performance guarantees, termination notice requirements, and sanctions for
noncompliance;
(E)
maintenance scheduling;
(F)
availability for system emergencies, including the ability
to separate the qualifying facility's load from its generation;
(G)
the individual and aggregate value of energy and capacity
from qualifying facilities on the electric utility's system;
(H)
other dispatch characteristics;
(I)
reliability of primary and secondary fuel supplies used
by the qualifying facility; and
(J)
impact on utility system stability.
(12)
Sale - The sale of electric energy or capacity
or both supplied by an electric utility to a qualifying facility.
(13)
Supplementary power - Electric energy or capacity
supplied by an electric utility, regularly used by a qualifying facility in
addition to that which the facility generates itself.
(14)
System emergency - A condition on a utility's system
that is likely to result in imminent significant disruption of service to
customers or is imminently likely to endanger life or property.
(d)
Negotiation and filing of rates.
(1)
Negotiated rates or terms. Nothing in this section shall:
(A)
limit the authority of any electric utility or any qualifying
facility to agree to a rate for any purchase, or terms or conditions relating
to any purchase, which differs from the rate or terms or conditions that would
otherwise be required by this section; or
(B)
affect the validity of any contract entered into between
a qualifying facility and an electric utility for any purchase before the
adoption of this section.
(2)
Filing of rates. All rates for sales to qualifying
facilities, contractual or otherwise, shall be contained in the schedule of
rates of the electric utility filed with the commission.
(e)
Availability of electric utility system cost data.
(1)
Applicability. Paragraph (2) of this subsection applies
to large electric utilities whose total sales of electric energy for purposes
other than resale exceeded 500 million kilowatt-hours during any calendar
year beginning after December 31, 1975, and before the immediately preceding
calendar year. Paragraph (3) of this subsection applies to all other electric
utilities.
(2)
Data request for large electric utilities. Large utilities
shall file the following data:
(A)
the estimated avoided cost on the electric utility's system,
solely with respect to the energy component, for various levels of purchases
from qualifying facilities. Such levels of purchases shall be stated in blocks
of one, ten and 100 megawatts or not more than 10% of the system peak demand
for systems of less than 1,000 megawatts. The avoided cost shall be stated
on a cents-per-kilowatt-hour basis, during daily and seasonal peak and off-
peak periods, by year, for the current calendar year and each of the next
nine years.
(B)
the electric utility's plan for the addition of capacity
by amount and type, for purchases of firm energy and capacity, and for capacity
retirements for each year during the succeeding nine years.
(C)
for the current year and each of the next nine years, the
estimated capacity costs at completion of the planned capacity additions and
planned capacity purchases, on the basis of dollars-per-kilowatt, and the
associated energy costs of each unit, expressed in cents per kilowatt-hour.
These costs shall be expressed in terms of individual generating units and
of individual planned firm purchases. Such information shall be submitted
in accordance with the Federal Energy Regulatory Commission Regulations, 18
Code of Federal Regulations, §292.302 and shall be sufficient for qualifying
facilities to reasonably estimate the utility's avoided cost. Accompanying
each filing pursuant to this rule shall be a detailed explanation of how the
data was determined, including sources and assumptions employed.
(3)
Special requirements for small electric utilities.
Affected utilities shall, upon request:
(A)
provide to an interested person comparable data to that
required under paragraph (2) of this subsection to enable qualifying facilities
to estimate the electric utility's avoided costs; or
(B)
with regard to an electric utility that is legally obligated
to obtain all its requirements for electric energy and capacity from another
electric utility, provide to an interested person the data of its supplying
utility and the rates at which it currently purchases such energy and capacity.
(4)
Filing date. By February 15 each year, large
electric utilities shall file with the commission and shall maintain for public
inspection the data set forth in paragraph (2) of this subsection.
(f)
Electric utility obligations.
(1)
Obligation to purchase from qualifying facilities.
(A)
In accordance with subsections (f) and (g) of this section,
each electric utility shall purchase any energy that is made available from
a qualifying facility:
(i)
directly to the electric utility; or
(ii)
indirectly to the electric utility in accordance with
paragraph (4) of this subsection.
(B)
Each electric utility shall purchase energy from a qualifying
facility with a design capacity of 100 kilowatts or more within 90 days of
being notified by the qualifying facility that such energy is or will be available,
provided that the electric utility has sufficient interconnection facilities
available. If an agreement to purchase energy is not reached within 90 days
after the qualifying facility provides such notification, the agreement, if
and when achieved, shall bear a retroactive effective date for the purchase
of energy delivered to the electric utility correspondent with the 90th day
following such notice. If the electric utility determines that adequate interconnection
facilities are not available, the electric utility shall inform the qualifying
facility within 30 days after being notified for distribution interconnection,
or within 60 days for transmission interconnection, giving the qualifying
facility a description of the additional facilities required as well as cost
and schedule estimates for construction of such facilities. If an agreement
to purchase energy is not reached upon completion of construction of the interconnection
facilities or 90 days after notification by the qualifying facility that such
energy is or will be available, the agreement, if and when achieved, shall
bear a retroactive effective date for the purchase of energy delivered to
the electric utility correspondent with the time of interconnection or the
90th day, whichever is later. Nothing in this subsection shall be construed
in a manner that would preclude a qualifying facility from notifying and contracting
for energy with a utility for sale of energy prior to 90 days before delivery
of such energy.
(C)
An electric utility is not required to purchase firm capacity
from a qualifying facility unless it wins an integrated resource planning
solicitation pursuant to Subchapter H of this chapter (relating to Electrical
Planning).
(2)
Obligation to sell to qualifying facilities.
In accordance with subsection (k) of this section, each electric utility shall
sell any energy and capacity requested to any qualifying facility located
within the electric utility's service area.
(3)
Obligation to interconnect. The obligation of electric
utilities to interconnect with qualifying facilities is set forth in Subchapter
I of this chapter (relating to Transmission and Distribution).
(4)
Transmission to other electric utilities. Transmission
service provided by an electric utility to a qualifying facility shall be
governed by Subchapter I of this chapter.
(g)
Rates for purchases from a qualifying facility.
(1)
Rates for purchases of energy and capacity from any qualifying
facility shall be just and reasonable to the customers of the electric utility
and in the public interest, and shall not discriminate against qualifying
cogeneration and small power production facilities.
(2)
Rates for purchases of energy and capacity from any
qualifying facility shall not exceed avoided cost. Avoided costs shall be
determined through a competitive bidding process pursuant to Subchapter H
of this chapter, and subject to the limitations of the Public Utility Regulatory
Act (PURA) §34.054 (relating to Qualifying Facility Bids; Avoided Costs).
In the case in which the rates for purchase are based upon a market-based
determination of avoided costs over the specific term of the contract or other
legally enforceable obligation, the rates for such purchase do not violate
this subsection if the rates for such purchase differ from avoided cost at
the time of delivery. Payments which do not exceed avoided cost shall be found
to be just and reasonable operating expenses of the utility.
(h)
Standard rates for purchases from qualifying facilities
with a design capacity of 100 kilowatts or less.
(1)
There shall be included in the tariffs of each electric
utility standard rates for purchases from qualifying facilities with a design
capacity of 100 kilowatts or less. The rates for purchases under this paragraph:
(A)
shall be consistent with subsection (g) of this section,
as it concerns purchases from a qualifying facility;
(B)
shall consider the aggregate capacity value provided by
multiple qualifying facilities with a design capacity of 100 kilowatts or
less; and
(C)
may differentiate among qualifying facilities using various
technologies on the basis of the supply characteristics of the different technologies.
(2)
Terms and conditions unique to qualifying facilities
with a design capacity of 100 kilowatts or less such as metering arrangements,
safety equipment requirements, liability for injury or equipment damage, access
to equipment and additional administrative costs, if any, shall be included
in a standard tariff.
(3)
The standard tariff shall offer at least the following
options:
(A)
parallel operation with interconnection through a single
meter that measures net consumption;
(i)
net consumption for a given billing period shall be billed
in accordance with the standard tariff applicable to the customer class to
which the user of the qualifying facility's output belongs;
(ii)
net production will not be metered or purchased by the
utility and therefore there will be no additional customer charge imposed
on the qualifying facility;
(B)
parallel operation with interconnection through two meters
with one measuring net consumption and the other measuring net production;
(i)
net consumption for a given billing period shall be billed
in accordance with the standard tariff applicable to the customer class to
which the user of the qualifying facility's output belongs;
(ii)
net production for a given billing period shall be purchased
at the standard rate provided for in paragraph (1)(A) and (B) of this subsection;
(C)
interconnection through two meters with one measuring all
consumption by the customer and the other measuring all production by the
qualifying facility;
(i)
all consumption by the customer for a given billing period
shall be billed in accordance with the standard tariff applicable to the customer
class to which the customer would belong in the absence of the qualifying
facility;
(ii)
all production by the qualifying facility for a given
billing period shall be purchased at the standard rate provided for in paragraph
(1)(A) and (B) of this subsection.
(4)
In addition, each electric utility shall
offer qualifying facilities using renewable resources with an aggregate design
capacity of 50 kilowatts or less the option of interconnecting through a single
meter that runs forward and backward.
(A)
Any consumption for a given billing period shall be billed
in accordance with the standard tariff applicable to the customer class to
which the user of the qualifying facility's output belongs.
(B)
Any production for a given billing period shall be purchased
at the standard rate provided for in paragraph (1)(A) of this subsection.
(5)
Interconnection requirements necessary to permit
interconnected operations between the qualifying facility and the utility
and the costs associated with such requirements shall be dealt with in a manner
consistent with Subchapter I of this chapter.
(6)
The rates, terms and conditions contained in the standard
tariff for qualifying facilities with a design capacity of 100 kilowatts or
less shall be subject to review and revision by the commission.
(7)
Requirements for the provision of insurance under
this subsection shall be of a type commonly available from insurance carriers
in the region of the state where the customer is located and for the classification
to which the customer would belong in the absence of the qualifying facility.
An enhancement to a standard homeowner's or farm and ranch owner's policy
containing adequate liability coverage and having the effect of adding the
electric utility as an additional insured or named insured is one means of
satisfying the requirements of this paragraph. Such policies shall in each
instance be on a form approved or promulgated by the Texas Department of Insurance
and issued by a property or casualty insurer licensed to do business in the
State of Texas.
(i)
Tariffs setting out the methodologies for purchases of
nonfirm power from a qualifying facility. Tariffs setting out the methodologies
for purchases of nonfirm power from a qualifying facility shall be filed with
the commission based on one of the following two approaches:
(1)
Rates for purchases of nonfirm power may, by agreement
of both the utility and the qualifying facility, be based on the utility's
average avoided energy costs. Administrative, billing, and metering costs
shall be recovered through a monthly customer charge to the qualifying facility.
(2)
Rates for purchases of nonfirm power may, at the option
of the qualifying facility, be based on the full cost at the time of delivery
of decremental energy that would have been incurred by the utility had the
qualifying facility not been in operation.
(A)
The following factors should be considered in the calculation
of the cost of decremental energy:
(i)
fuel costs;
(ii)
variable operating and maintenance costs;
(iii)
line losses;
(iv)
heat rates;
(v)
cost of purchases from other sources;
(vi)
other energy-related costs;
(vii)
capacity costs, if, as a class, qualifying facilities
providing nonfirm energy offer some predictable capacity; and
(viii)
for short term energy purchases, the time and quantity
of energy furnished.
(B)
If practical, the avoided cost should be determined by
calculating by time period, using the utility's economic dispatch model (or
comparable methodology), the difference between the cost of the total energy
furnished by both the qualifying facility and the utility, computed as though
the energy furnished by the qualifying facility had been furnished by the
utility, and the actual cost of energy furnished by the utility.
(C)
The economic dispatch model should take into consideration
the following factors:
(i)
fuel costs;
(ii)
variable operating and maintenance costs;
(iii)
line losses;
(iv)
heat rates;
(v)
purchased power opportunity;
(vi)
system stability; and
(vii)
operating characteristics.
(D)
Time periods should be hourly if the utility has an automated
economic dispatch model available; otherwise the shortest reasonable time
period for which costs can be determined should be used.
(E)
Administrative, billing, and metering costs shall be recovered
through a monthly customer charge to the qualifying facility.
(j)
Periods during which purchases not required.
(1)
Any electric utility which gives notice to each affected
qualifying facility in time for the qualifying facility to cease delivery
of energy or capacity to the electric utility will not be required to purchase
electric energy or capacity during any period during which, due to operational
circumstances, purchases from qualifying facilities will result in costs greater
than those which the utility would incur if it did not make such purchases,
but instead generated an equivalent amount of energy itself, provided, however,
that this subsection does not override contractual obligations of the electric
utility to purchase from a qualifying facility.
(2)
Any electric utility which fails to give notice to
each affected qualifying facility in time for the qualifying facility to cease
the delivery of energy or capacity to the electric utility will be required
to pay the same rate for such purchase of energy or capacity as would be required
had the period of greater costs not occurred.
(3)
A claim by an electric utility that such a period
has occurred or will occur is subject to such verification by the commission
either before or after the occurrence.
(k)
Rates for sales to qualifying facilities.
(1)
General rules.
(A)
Rates for sales to qualifying facilities shall be just
and reasonable and in the public interest, and shall not discriminate against
any qualifying facility in comparison to rates for sales to other customers
served by the electric utility. Rates for standby or other supplementary service
shall be based on the amount of capacity contracted for between the qualifying
facility and the electric utility, and shall not penalize electric utilities
that also purchase power from qualifying facilities. The need for and cost
responsibility for special equipment or system modifications shall be determined
by application of Subchapter I of this chapter.
(B)
Rates for sales that are based on accurate data and consistent
system-wide costing principles shall not be considered to discriminate against
any qualifying facility to the extent that such rates apply to the electric
utility's other customers with similar load or other cost-related characteristics.
(2)
Additional services to be provided to qualifying
facilities.
(A)
Upon request of a qualifying facility within its service
area, each electric utility shall provide:
(i)
supplementary power;
(ii)
back-up power;
(iii)
maintenance power; and
(iv)
interruptible power.
(B)
An electric utility shall not be required to provide supplementary
power, back-up power, or maintenance power to a qualifying facility if the
commission finds that provision of such power will:
(i)
impair the electric utility's ability to render adequate
service to its customers; or
(ii)
place an undue burden on the electric utility.
(3)
Rates for sales of back-up power and maintenance
power. The rate for sales of back-up power or maintenance power:
(A)
shall not be based upon an assumption (unless supported
by factual data) that forced outages or other reductions in electric output
by all qualifying facilities on an electric utility's system will occur simultaneously,
or during the system peak, or both; and
(B)
shall take into account the extent to which scheduled outages
of the qualifying facilities can be usefully coordinated with scheduled outages
of the utility's facilities.
(l)
Interconnection costs. The establishment and reimbursement
of interconnection costs are set forth in Subchapter I of this chapter.
(m)
System emergencies.
(1)
Qualifying facility obligation to provide power during
system emergencies. A qualifying facility shall be required to provide energy
or capacity to an electric utility during a system emergency only to the extent:
(A)
provided by agreement between such qualifying facility
and electric utility; or
(B)
ordered under the Federal Power Act, §202(c).
(2)
Discontinuance of purchases and sales during
system emergencies. During any system emergency, an electric utility may discontinue:
(A)
purchases from a qualifying facility if such purchases
would contribute to such emergency; and
(B)
sales to a qualifying facility, provided that such discontinuance
is on a nondiscriminatory basis.
(n)
Enforcement. A proceeding to resolve a dispute between
an electric utility and a qualifying facility arising under this section may
be instituted by filing of a petition with the commission. Electric utilities
and qualifying facilities are encouraged to engage in alternative dispute
resolution prior to the filing of a complaint.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on May
4, 1999.
TRD-9902630
Rhonda Dempsey
Rules Coordinator
Public Utility Commission of Texas
Effective date: May 24, 1999
Proposal publication date: November 13, 1998
For further information, please call: (512) 936-7308
Subchapter A. General Provisions
Subchapter F. Quality of Service
Chapter 25.
Substantive Rules Applicable to Electric Service Providers
Subchapter J. Costs, Rates and Tariffs
Chapter 26.
Substantive Rules Applicable to Telecommunications Service Providers