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BLOG: Wrap-Up from the 85th Texas Legislature

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The 85th Regular Session of the Texas Legislature adjourned sine die on May 29, 2017. Just below we describe a number of bills we were following, as well as their ultimate fate during the session.

 

HB 931

House Bill 931 will help expand the state’s network of hike-and-bike trails, but at virtually no cost to political subdivisions for the underlying land.  This is because the legislation responsibly waives some of the legal liability that utilities would otherwise face for allowing their land to be used for public recreational purposes. The legislation has been adopted by both the House and Senate and signed by the governor.

 

SB 735

Senate Bill 735 would require the Public Utility Commission to establish a schedule under which it periodically reviews the fairness of electric utility rates. It also includes other changes to rate-setting procedures that, taken collectively, would be something of a mixed bag for consumers. Gov. Greg Abbott signed SB 735 into law on May 27.

 

SB 83

Senate Bill 83, by state Sen. Bob Hall, calls for the creation of a task force to review potential risks to the state’s electric grid infrastructure from cyber and electro-magnetic attacks. The legislation has been approved by the full Senate, but then stalled in the House. House Bill 787, which is similar to SB 83, has been adopted by the Texas House, but then stalled in the Senate. Both bills failed.

 

SB 1976

Senate Bill 1976 would ensure the continuation of a process whereby the Public Utility Commission identifies low-income electric and telecommunications ratepayers. This is important because such customers are eligible for various customer protection benefits. Gov. Greg Abbott signed this bill into law on May 19.

 

HB 1427

House Bill 1427, by Rep. Pat Fallon, would have clarified the proposition that a city’s zoning authority extends over electric cooperatives just as it would for any other business operating within city limits. This legislation was adopted by the House Urban Affairs Committee, but then stalled and died.

HB 237

 

Several bills, including House Bill 237 by Rep. Rafael Anchia and House Bill 642 by Rep. Larry Phillips, had called for a name change for the Texas Railroad Commission. This would have helped to clear up public confusion about the agency, which does not have responsibility for overseeing railroads but does oversee gas utility rates. These bills failed to get traction during the session, and were not adopted.

 

HB 1818

House Bill 1818, by state Rep. Larry Gonzales, is the Railroad Commission “Sunset” bill. That is, the bill authorizes the continuation of the agency for several more years, and also spells out various adjustments to the agency’s operations. However, House Bill 1818 does not include several recommended reforms — such as the use of independent administrative law judges for the adjudication of gas utility cases — that were included in versions of this bill during previous legislative sessions. HB 1818 was adopted by both the Texas House and Texas Senate and signed by the governor.

 

— R.A. Dyer

Report: Even With Excessive Profits, Gas Utilities Still Hike Rates

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For utility customers, the result has been a steady uptick in the cost of natural gas delivery, which has cut into savings from historically low natural gas prices.

In Texas, gas utilities already reporting excessive profits frequently seek permission to charge their customers even more.

But rather than rejecting those requests outright, regulators often green light them with almost no questions asked.

That dramatic finding, included in recent reports by the Houston Chronicle, raises new questions about the fairness of a controversial program at the Texas Railroad Commission known as the Gas Reliability Infrastructure Program.  Under it, gas utilities regularly seek and receive permission to hike rates — but without first proving the prudence of their expenditures.

Reporter Ryan Handy

Reporter Ryan Handy examined GRIP cases going back about 10 years, comparing the outcomes in those cases with rate-of-return profit levels also reported by the utilities. She focused on GRIP cases filed by two of the state’s largest gas monopolies: CenterPoint Energy serving Houston and Beaumont, and Atmos serving North, Central and West Texas.

She found that “Atmos earned above the allowable level in 2013 and 2015 … and both times the Railroad Commission allowed the company to raise rates with few questions asked.”  A similar pattern emerged for CenterPoint. The Texas Railroad Commission authorized three GRIP increases during just four years for divisions of that utility, even though they were reporting higher-than-authorized rates of return.

“For the company’s 1 million Houston-area customers, the result has been a steady uptick in the cost of natural gas delivery, which has cut into savings from the lowest natural gas prices in nearly two decades,” reported Handy.

Because gas utilities are public monopolies, it’s the job of regulators to ensure they do not over charge customers.  During traditional rate reviews the Texas Railroad Commission will consider utility operating and capital costs, and it also will authorize a “rate of return” for company investors.

But in GRIP proceedings, the agency considers only infrastructure expenditures, without consideration of off-setting revenue increases or utility savings that could eliminate the need for rate hikes. Neither can city groups or ratepayer organizations challenge the prudence of utility expenditures during the GRIP process.

As a consequence, GRIP  has come under fire from consumer groups and others, who say it has led to frequent and unwarranted rate hikes. The Atmos Cities Steering Committee has called for the elimination or reform of the GRIP program, which was created by statute.

Handy also examined electric transmission and distribution cases, which are overseen by the Texas Public Utility Commission. She reported that the PUC has closely monitored the earnings of Centerpoint’s electric utility, and even clawed back nearly $70 million in excess profits for customers in 2005.

“Inconsistencies in regulatory policy are quite evident,” said Geoffrey Gay, an Austin lawyer who serves as general counsel for the Atmos Cities Steering Committee and other city coalitions. “There are just too few cases that come to the Railroad Commission. They are not handled as carefully as they would be (at the PUC).”

Handy’s report appeared in the May 31 edition of the newspaper. She also authored a June 2 follow-up article. They can be found here and here.

For more about the GRIP program, check out this 2010 report from the Atmos Cities Steering Committee.

— R.A. Dyer

BLOG: Update from the 85th Texas Legislature

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Lawmakers in Austin have filed more than 100 bills relating to gas and electric utility customers this session — and some of these bills already have made it to the governor. Others, however, remain pending and more than a few have died outright. The 85th Texas Legislature adjourns sine die in just a few weeks. Here’s a quick round-up of some of the bills we’ve been following, whether live, dead or in between.

 

  • House Bill 1818, by state Rep. Larry Gonzales, is the Railroad Commission “Sunset” bill. That is, the bill authorizes the continuation of the agency for several more years, and also spells out various adjustments to the agency’s operations. However, House Bill 1818 does not include several recommended reforms — such as the use of independent administrative law judges for the adjudication of gas utility cases — that were included in versions of this bill during previous legislative sessions. HB 1818 was adopted by both the Texas House and Texas Senate and sent to the governor.

 

  • Several bills, including House Bill 237 by Rep. Rafael Anchia and House Bill 642 by Rep. Larry Phillips, had called for a name change for the Texas Railroad Commission. This would have helped to clear up public confusion about the agency, which does not have responsibility for overseeing railroads but does oversee gas utility rates. These bills failed to get traction during the session and are now considered dead.

 

  • Senate Bill 735 would require the Public Utility Commission to establish a schedule under which it periodically reviews the fairness of electric utility rates. It also includes other changes to rate-setting procedures that, taken collectively, would be something of a mixed bag for consumers. Senate Bill 735 has been passed by both the House and Senate and sent to the governor.

 

  • Senate Bill 83, by state Sen. Bob Hall, calls for the creation of a task force to review potential risks to the state’s electric grid infrastructure from cyber and electro-magnetic attacks. The legislation has been approved by the full Senate and referred to the House Committee on State Affairs. House Bill 787, which is similar to SB 83, has been adopted by the Texas House and referred to the Senate Business and Commerce committee.

 

  • Senate Bill 1976 would ensure the continuation of a process whereby the Public Utility Commission identifies low-income electric and telecommunications ratepayers. This is important because such customers are eligible for various customer protections. This bill has been approved by both the House and Senate and sent to the governor. The Texas Coalition for Affordable Power supports this bill.

 

  • House Bill 1427, by Rep. Pat Fallon, would have clarified the proposition that a city’s zoning authority extends over electric cooperatives just as it would for any other business operating within city limits. HB 1427 would be unnecessary except for a recent legal challenge mounted by two electric cooperatives to a zoning decision in North Texas. HB 1427 was adopted by the House Urban Affairs Committee, but then stalled.  This bill is now dead.

 

— R.A. Dyer

 

BLOG: 3rd Time the Charm for RRC Sunset Bill?

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It looks increasingly likely that after two previous failed attempts, the Texas Legislature this year will adopt far-reaching “Sunset” legislation for the Texas Railroad Commission.

The 125-year-old state agency oversees gas utility rates and the state’s petrochemical industries. House Bill 1818, a “Sunset” bill sponsored jointly by state Rep. Larry Gonzales and state Sen. Van Taylor, will be considered within days on the Senate floor. From there it then either goes to conference committee, where the House and Senate sponsors can iron out differences in the legislation, or it goes directly to Gov. Greg Abbott.

If finally approved, HB 1818 would authorize the Railroad Commission’s continued operations and would assign to it new responsibilities, including greater authority over interstate pipelines and new authority to create a pipeline permit fee.  It also includes other changes to agency operations, although more major reforms have been left out. For instance, although the Railroad Commission has no authority over railroads, HB 1818 does not rename the agency to better reflect its actual responsibilities.

The Texas House of Representatives approved its version of House Bill 1818 on March 28, and then the Senate committee on Natural Resources and Economic Development gave its OK on May 4.  Next week HB 1818 likely goes before the full Senate, which also could consider amending the bill.

Although state agencies typically undergo Sunset reauthorization review only once every 11 years, this is the third for the Railroad Commission since 2010. Two previous Railroad Commission re-authorization bills failed in 2011 and 2013 — largely stymied by industry opposition to recommendations pertaining to the agency’s governance, its use of internal hearing examiners and previous proposals to change its name.

HB 1818, if it becomes law, would authorize the continued operations of the Railroad Commission for another 12 years. You can read more about the legislation here.

BLOG: Update from the 85th Texas Legislature

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We’re now beyond the halfway mark in the 85th Texas Legislature. More than 100 energy-related bills have been filed, and many of them — if adopted — could impact your home utility rates. Some important energy bills have come up in legislative committees, and others have begun to bubble up to the full House or Senate.

Here are a few bills we have our eyes on, plus projections as to their chances to eventually become law:

• Several bills, including House Bill 237 by Rep. Rafael Anchia and House Bill 642 by Rep. Larry Phillips, call for changing the name of the Texas Railroad Commission. This would clear up public confusion about the agency, which does not have responsibility for overseeing railroads. Instead, the commission regulates gas utility rates. It also has responsibility for other energy issues. None of the Railroad Commission name-change bills have been voted on in committee, and the Telicon service puts their chances at success at no more than 32 percent.

House Bill 1818, by state Rep. Larry Gonzales, is the Railroad Commission “Sunset” bill. That is, the bill authorizes the continuation of the agency for several more years, and also spells out various adjustments to the agency’s operations. However, House Bill 1818 does not include several recommended reforms — such as the use of independent administrative law judges for the adjudication of gas utility cases — that were included in versions of this bill during previous legislative sessions. HB 1818 has been adopted in the Texas House and has been referred to the Senate Committee on Natural Resources and Economic Development. The Telicon service puts its chances at 70 percent.

Senate Bill 735, by Sen. Kelly Hancock of North Richland Hills, would require the Public Utility Commission to establish a schedule under which it would periodically review the fairness of electric utility rates. It also includes other changes to rate-setting procedures that, taken collectively, would be something of a mixed bag for consumers. Senate Bill 735 has been approved in the Senate Business and Commerce Committee, but it has not yet been taken up on the Senate floor. The Telicon legislative tracking service gives SB 735 a 58 percent chance of ultimate success.

House Bill 2576, by state Rep. Senfronia Thompson, removes an expiration date from current law under which the PUC has authorization to consider certain sorts of electric rate cases. Although this change seems arcane, it nonetheless is important because it could keep the door open to a steady stream of rate hikes in the future. This bill is scheduled to be considered in the House State Affairs committee on April 19th. Currently, the Telicon service gives SB 2576 a 34 percent chance of success.

Senate Bill 83, by state Sen. Bob Hall, spells out a number of potentially expensive measures to strengthen the grid against cyber and electro-magnetic attacks. The Senate Business and Commerce considered this bill during a public hearing on April 11, but so far has not voted on it. Telicon gives this bill a 32 chance of ultimate success.

Senate Bill 1976 would ensure the continuation of a process whereby the Public Utility Commission identifies low-income customers. This is important because low-income customers are eligible for various customer protections. The Senate Business and Commerce committee considered this bill during a public hearing on April 11, but so far has not voted on it. Telicon gives SB 1976 a 32 chance of ultimate success.

Senate Bill 947, by state Sen. Lois Kolkorst, facilitates the creation of municipal hike-and-bike trails on utility rights of way — but at little or no cost to cities for the underlying land. Senate Bill 947 accomplishes this by lifting some liability exposure for the electric utilities that own the land. The Senate Business and Commerce committee unanimously approved this legislation on March 14, but it so far has not been considered by the full Senate. The Telicon bill tracking service puts this bill’s chances at 45 percent.

BLOG: Paying More with the GRIP Program

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The Gas Reliability Infrastructure Program, or GRIP, allows monopoly gas utilities to hike rates even if the company’s overall expenditures are on the decline, or even if its revenues are increasing. Under the rules of GRIP, a utility need only claim extra investment associated with one part of its business — capital costs associated with infrastructure — and then it can obtain a rate hike.

Railroad Commissioners grant these hikes as a ministerial act without consideration of the utility’s overall revenues, without consideration of offsetting savings in other areas of the utility’s business or even whether the infrastructure investments are prudent. Unlike a more traditional rate case, there is no avenue in a GRIP case to prevent a utility from charging ratepayers for imprudent utility expenditures.

GRIP, which was created in 2003 by the Texas Legislature, allows gas utilities to hike rates in this fashion once a year, for up to six years. At the end of that period, the utility is required to submit to a comprehensive rate case. What does this mean for ratepayers? Consider that Atmos Pipeline has employed the GRIP statute to increase rates 6 times since 2011, increasing rates cumulatively by more than $507 million.

A similar pattern can be found with other Texas gas utilities. For instance, GRIP hikes have contributed to nearly $25 million in added costs since 2011 for the Beaumont/East Texas customers of CenterPoint Gas.

On average, Texans found themselves paying more for gas utility service in 2015 than they did in 2004, despite a precipitous drop in natural gas commodity costs. Frequent rate hikes associated with GRIP have contributed to these higher-than-necessary bills.

— R.A. Dyer

 

BLOG: State Lawmakers Reject Key Railroad Commission Reforms

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RRCSeveral key reforms for the Texas Railroad Commission that would have helped gas utility ratepayers were removed Thursday from a 2017 legislative package.

The rejected reforms included a proposal to change the agency’s name to one that better reflect its responsibilities, a proposal to transfer administrative law cases to an independent agency, and a proposal to transfer gas utility cases to the Texas Public Utility Commission.

The Texas Railroad Commission is the 125-year-old state agency that oversees the Texas oil and gas industry. The Commission also decides gas rate cases. The changes rejected Thursday had been proposed by staff at the Sunset Advisory Commission, which is a legislative panel that periodically reviews and re-authorizes state governmental agencies.

Meeting at the Capitol, Texas House and Senate lawmakers on the Sunset Advisory panel accepted a number of staff recommendations, but removed those pertaining to gas utility ratemaking. Each of the rejected recommendations had been endorsed by city and consumer groups.

The rejected proposals include:

  • Sunset staff had recommended changing the name of the Texas Railroad Commission. Sunset staff concluded that the agency’s current name misleads the public and impedes transparency. Staff recommended instead “Texas Energy Resources Commission” as a name that better reflects the agency’s modern-day mission.
  • Sunset staff found that contested hearings and gas utility oversight are not core functions of the Railroad Commission, and therefore should be transferred to other agencies. Sunset staff said this would promote efficiency, transparency and fairness. Specifically, it recommended that hearing examiners from the independent State Office of Administrative Hearings replace the Railroad Commission’s internal hearing examiners.
  • Sunset staff also recommended that the Public Utility Commission assume responsibility for gas utility rate cases. The PUC already handles electric utility cases and has a structure that has evolved over time to promote fairness in decision making, according to Sunset staff.

However the Sunset Commission lawmakers adopted a number of other recommendations, including those designed to improve monitoring of the oil and gas industry, to authorize the creation of pipeline permit fees, and to direct the Railroad Commission to incorporate findings from a seismic monitoring program into its disposal well guidelines. These proposed Railroad Commission reforms and others will become the basis for “Sunset” legislation to be taken up during the 85th Texas Legislature, in 2017.

Although state agencies typically undergo a Sunset review only once every 11 years, this is the third for the Railroad Commission since 2010. Two previous Railroad Commission re-authorization bills failed in 2011 and 2013 — largely stymied by industry opposition to recommendations pertaining to the agency’s governance and its use of internal hearing examiners.

— R.A. Dyer

 

BLOG: With Gas Down, Why Aren’t Bills Lower?

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Natural gas commodity prices are half what they were in 2004. And yet, average home gas bills haven’t budged.

In fact, average gas utility bills in Texas were slightly higher in 2015 than they were in 2004 — despite a dramatic drop in the cost of natural gas over that same period.

mrmoneybagsHow can this be? Why aren’t Texans enjoying real savings in their gas utility bills?

The answer relates to pipeline and distribution charges, which are little known components of home utility bills that nonetheless can make big differences over time.

Because gas utilities are monopolies (think Atmos Energy in the DFW area or CenterPoint Energy in Houston), the rates they charge to deliver gas to Texas homes and businesses are set by state regulators. Every home gas utility bill includes these regulated pipeline and distribution charges along with a charge reflecting natural gas commodity costs.

It’s the regular increases in these regulated delivery charges that have consumed much of the savings that Texans should have expected in their home gas utility bills. To make matters worse, controversial “alternative” ratemaking schemes allow monopoly utilities to frequently hike rates without substantive regulatory review.

Let’s look at the numbers.

According to the United States Energy Information Administration, the average annual commodity (Henry Hub) price for natural gas declined by 55.5 percent from 2004 through 2015. At the same time, average overall natural gas prices for Texas home consumers (delivery charges, plus those commodity costs)  increased by nearly 3 percent — from an average of $10.37 (per thousand cubic feet) to $10.65.

And Texans served by monopoly gas utilities during this period have endured a constant uptick in distribution and pipeline charges. Take, for instance, Atmos Energy, which is one of the state’s largest gas utilities. Atmos has three utility divisions in Texas — Atmos Pipeline, Atmos Mid Tex and Atmos West Texas — and serves millions of customers.

According to regulatory filings, the Atmos Pipeline Texas division increased its rates 19 times since 2004. Again, that’s 19 times. Meanwhile, Atmos Mid Tex increased rates 16 times and Atmos West Texas increased rates 11 times.

Because of alternative rate-making rules such as those included in the “Gas Reliability Infrastructure Program” (adopted in 2003 by the Texas atmosLegislature) most of these increases have been implemented without substantive regulatory review. All told, the three Atmos divisions increased rates by a combined $347 million since their last fully-reviewed rate cases.

But Atmos customers are by no means alone. The Gas Reliability Infrastructure Program and other alternative ratemaking schemes also have contributed to millions of dollars in rate hikes by other major Texas utilities over the last decade.

City and consumer coalitions have called for the end of the Gas Reliability Infrastructure Program, as well as for the transfer of gas rate regulation from its current home, the Texas Railroad Commission, to the Texas Public Utility Commission that currently oversees electric and water rates.

Those issues and more may arise during a top-to-bottom review of the Texas Railroad Commission, when the legislative Sunset Advisory Commission examines the regulatory agency in 2017.

— R.A. Dyer