CHAPTER 41. ELECTRIC COOPERATIVES AND COMPETITION
UTILITIES CODE
TITLE 2. PUBLIC UTILITY REGULATORY ACT
SUBTITLE B. ELECTRIC UTILITIES
CHAPTER 41. ELECTRIC COOPERATIVES AND COMPETITION
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
SUBCHAPTER B. ELECTRIC COOPERATIVE UTILITY CHOICE
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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;
(11) determine the extent to which the electric cooperative
offers energy efficiency programs and how the programs are
administered by the electric cooperative; and
(12) 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, Sec. 39, eff. Sept. 1,
1999.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
939, Sec. 28, eff. September 1, 2007.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
SUBCHAPTER C. RIGHTS NOT AFFECTED
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.
Sec. 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, Sec. 39, eff. Sept. 1,
1999.