2005 Texas Utilities Code CHAPTER 41. ELECTRIC COOPERATIVES AND COMPETITION

UTILITIES CODE

CHAPTER 41. ELECTRIC COOPERATIVES AND COMPETITION

SUBCHAPTER A. GENERAL PROVISIONS


	§ 41.001. APPLICABLE LAW.  Notwithstanding any other 
provision of law, except Sections 39.155, 39.157(e), 39.203, 
39.903, and 39.904, this chapter governs the transition to and the 
establishment of a fully competitive electric power industry for 
electric cooperatives.  Regarding the regulation of electric 
cooperatives, this chapter shall control over any other provision 
of this title, except for sections in which the term "electric 
cooperative" is specifically used.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.002. DEFINITIONS.  In this chapter:                                    
		(1)  "Board of directors" means the board of directors 
of an electric cooperative as described in Section 161.071.
		(2)  "Rate" includes any compensation, tariff, charge, 
fare, toll, rental, or classification that is directly or 
indirectly demanded, observed, charged, or collected by an electric 
cooperative for any service, product, or commodity and any rule, 
practice, or contract affecting the compensation, tariff, charge, 
fare, toll, rental, or classification.
		(3)  "Stranded investment" means:                                             
			(A)  the excess, if any, of the net book value of 
generation assets over the market value of the generation assets;  
and
			(B)  any above market purchased power costs.                                 

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.003. SECURITIZATION.  (a) Electric cooperatives may 
adopt and use securitization provisions having the effect of the 
provisions provided by Subchapter G, Chapter 39, to recover through 
rates stranded costs at a recovery level deemed appropriate by the 
board of directors up to 100 percent, under rules and procedures 
that shall be established by the commission.
	(b)  The rules and procedures for securitization established 
under Subsection (a) shall include rules and procedures for the 
recovery of stranded costs under the terms of a rate order adopted 
by the board of directors of the electric cooperative, which rate 
order shall have the effect of a financing order.
	(c)  The rules and procedures established by the commission 
under Subsection (b) shall include rules and procedures for the 
issuance of transition bonds issued in a securitized financing 
transaction.  The issuance of any transition bonds issued in a 
securitized financing transaction by an electric cooperative is 
expressly authorized and shall be governed by the laws governing 
the issuance of bonds or other obligations by the electric 
cooperative.  Findings made by the board of directors of an electric 
cooperative in a rate order issued under the rules and procedures 
described by this subsection shall be conclusive, and any 
transition charges incorporated in the rate order to recover the 
principal, interest, and all reasonable expenses associated with 
any securitized financing transaction shall constitute property 
rights, as described in Subchapter G, Chapter 39, and shall 
otherwise conform in all material respects to the transition 
charges provided by Subchapter G, Chapter 39.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.004. JURISDICTION OF COMMISSION.  Except as 
specifically provided otherwise in this chapter, the commission has 
jurisdiction over electric cooperatives only as follows:
		(1)  to regulate wholesale transmission rates and 
service, including terms of access, to the extent provided in 
Subchapter A, Chapter 35;
		(2)  to regulate certification to the extent provided 
in Chapter 37;        
		(3)  to establish a code of conduct as provided in 
Section 39.157(e) subject to Section 41.054;
		(4)  to establish terms and conditions, but not rates, 
for open access to distribution facilities for electric 
cooperatives providing customer choice, as provided in Section 
39.203;  and
		(5)  to require reports of electric cooperative 
operations only to the extent necessary to:
			(A)  ensure the public safety;                                               
			(B)  enable the commission to satisfy its 
responsibilities relating to electric cooperatives under this 
chapter;
			(C)  enable the commission to determine the 
aggregate electric load and energy requirements in the state and 
the resources available to serve that load;  or
			(D)  enable the commission to determine 
information relating to market power as provided in Section 39.155.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.005. LIMITATION ON MUNICIPAL 
AUTHORITY.  Notwithstanding any other provision of this title, a 
municipality may not directly or indirectly regulate the rates, 
operations, and services of an electric cooperative, except, with 
respect to operations, to the extent necessary to protect the 
public health, safety, or welfare.  This section does not prohibit a 
municipality from making a lawful charge for the use of public 
rights-of-way within the municipality as provided by Section 
182.025, Tax Code, and Section 33.008.  An electric cooperative 
shall be an electric utility for purposes of Section 182.025, Tax 
Code, and Section 33.008.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          

SUBCHAPTER B. ELECTRIC COOPERATIVE UTILITY CHOICE


	§ 41.051. BOARD DECISION.  (a) The board of directors has 
the discretion to decide when or if the electric cooperative will 
provide customer choice.
	(b)  Electric cooperatives that choose to participate in 
customer choice may do so at any time on or after January 1, 2002, by 
adoption of an appropriate resolution of the board of directors.  
The decision to participate in customer choice by the adoption of a 
resolution may be revoked only if no customer has opted for choice 
within four years of the resolution's adoption.  An electric 
cooperative may initiate a customer choice pilot project at any 
time.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.052. ELECTRIC COOPERATIVES NOT OFFERING CUSTOMER 
CHOICE.  (a) An electric cooperative that chooses not to 
participate in customer choice may not offer electric energy at 
unregulated prices directly to retail customers outside its 
certificated retail service area.
	(b)  An electric cooperative under Subsection (a) retains 
the right to offer and provide a full range of customer service and 
pricing programs to the customers within its certificated retail 
service area and to purchase and sell electric energy at wholesale 
without geographic restriction.
	(c)  A generation and transmission electric cooperative may 
offer electric energy at unregulated prices directly to retail 
customers outside of its parent electric cooperatives' 
certificated service areas only if a majority of the parent 
electric cooperatives of the generation and transmission electric 
cooperative have chosen to offer customer choice.
	(d)  A subsidiary of an electric cooperative may not provide 
electric energy at unregulated prices outside of its parent 
electric cooperative's certificated retail service area unless the 
electric cooperative offers customer choice inside its 
certificated retail service area.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.053. RETAIL CUSTOMER RIGHT OF CHOICE.  (a) If an 
electric cooperative chooses to participate in customer choice, 
after that choice, all retail customers within the certificated 
service area of the electric cooperative shall have the right of 
customer choice, and the electric cooperative shall provide 
nondiscriminatory open access for retail service.
	(b)  Notwithstanding Section 39.107, the metering function 
may not be deemed a competitive service for customers of the 
electric cooperative within that service area and may, at the 
option of the electric cooperative, continue to be offered by the 
electric cooperative as sole provider.
	(c)  On its initiation of customer choice, an electric 
cooperative shall designate itself or another entity as the 
provider of last resort for retail customers within the electric 
cooperative's certificated service area and shall fulfill the role 
of default provider of last resort in the event no other entity is 
available to act in that capacity.
	(d)  If a retail electric provider fails to serve a customer 
described in Subsection (c), on request by the customer, the 
provider of last resort shall offer the customer the standard 
retail service package for the appropriate customer class, with no 
interruption of service, at a fixed, nondiscountable rate that is 
at least sufficient to cover the reasonable costs of providing that 
service, as approved by the board of directors.
	(e)  The board of directors may establish the procedures and 
criteria for designating the provider of last resort and may 
redesignate the provider of last resort according to a schedule it 
considers appropriate.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.054. SERVICE OUTSIDE CERTIFICATED AREA.  (a) 
Notwithstanding any provisions of Chapter 161:
		(1)  an electric cooperative participating in customer 
choice shall have the right to offer electric energy and related 
services at unregulated prices directly to retail customers who 
have customer choice without regard to geographic location;  and
		(2)  any person, without restriction, except as may be 
provided in the electric cooperative's articles of incorporation 
and bylaws, may be a member of an electric cooperative.
	(b)  In providing service under Subsection (a) to retail 
customers outside its certificated service area as that area exists 
on the date of adoption of customer choice, an electric cooperative 
becomes subject to commission jurisdiction as to the commission's 
rules establishing a code of conduct regulating anticompetitive 
practices under Section 39.157(e), except to the extent those rules 
conflict with this chapter.
	(c)  For electric cooperatives participating in customer 
choice, the commission shall have jurisdiction to establish terms 
and conditions, but not rates, for access by other electric 
providers to the electric cooperative's distribution facilities.
	(d)  Notwithstanding Subsections (b) and (c), the commission 
shall make accommodation in the code of conduct for specific legal 
requirements imposed by state or federal law applicable to electric 
cooperatives.  The commission shall accommodate the organizational 
structures of electric cooperatives and may not prohibit an 
electric cooperative and any related entity from sharing officers, 
directors, or employees.
	(e)  The commission does not have jurisdiction to require the 
unbundling of services or functions of, or to regulate the recovery 
of stranded investment of, an electric cooperative or, except as 
provided by this section, jurisdiction with respect to the rates, 
terms, and conditions of service for retail customers of an 
electric cooperative within the electric cooperative's 
certificated service area.
	(f)  An electric cooperative shall maintain separate books 
and records of its operations and the operations of any subsidiary 
and shall ensure that the rates charged for provision of electric 
service do not include any costs of its subsidiary or any other 
costs not related to the provision of electric service.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.055. JURISDICTION OF BOARD OF DIRECTORS.  A board of 
directors has exclusive jurisdiction to:
		(1)  set all terms of access, conditions, and rates 
applicable to services provided by the electric cooperative, except 
as provided by Sections 41.054 and 41.056, including 
nondiscriminatory and comparable rates for distribution but 
excluding wholesale transmission rates, terms of access, and 
conditions for wholesale transmission service set by the commission 
under Subchapter A, Chapter 35, provided that the rates for 
distribution established by the electric cooperative shall be 
comparable to the distribution rates that apply to the electric 
cooperative and its subsidiaries;
		(2)  determine whether to unbundle any energy-related 
activities and, if the board of directors chooses to unbundle, 
whether to do so structurally or functionally;
		(3)  reasonably determine the amount of the electric 
cooperative's stranded investment;
		(4)  establish nondiscriminatory transition charges 
reasonably designed to recover the stranded investment over an 
appropriate period of time;
		(5)  determine the extent to which the electric 
cooperative will provide various customer services, including 
nonelectric services, or accept the services from other providers;
		(6)  manage and operate the electric cooperative's 
utility systems, including exercise of control over resource 
acquisition and any related expansion programs;
		(7)  establish and enforce service quality standards, 
reliability standards, and consumer safeguards designed to protect 
retail electric customers;
		(8)  determine whether a base rate reduction is 
appropriate for the electric cooperative;
		(9)  determine any other utility matters that the board 
of directors believes should be included;
		(10)  sell electric energy and capacity at wholesale, 
regardless of whether the electric cooperative participates in 
customer choice;  and
		(11)  make any other decisions affecting the electric 
cooperative's method of conducting business that are not 
inconsistent with the provisions of this chapter.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.056. ANTICOMPETITIVE ACTIONS.  (a) If, after notice 
and hearing, the commission finds that an electric cooperative 
providing customer choice has engaged in anticompetitive behavior 
by not providing other retail electric providers with 
nondiscriminatory terms and conditions of access to distribution 
facilities or customers within the electric cooperative's 
certificated service area that are comparable to the electric 
cooperative's and its subsidiaries' terms and conditions of access 
to distribution facilities or customers, the commission shall 
notify the electric cooperative.
	(b)  The electric cooperative shall have three months to cure 
the anticompetitive or noncompliant behavior described in 
Subsection (a).  If the behavior is not fully remedied within that 
time, the commission may prohibit the electric cooperative or its 
subsidiary from providing retail service outside its certificated 
retail service area until the behavior is remedied.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.057. BILLING.  (a) An electric cooperative that opts 
for customer choice may continue to bill directly electric 
customers located in its certificated service area for all 
transmission and distribution services.  The electric cooperative 
may also bill directly for generation and customer services 
provided by the electric cooperative or its subsidiaries to those 
customers.
	(b)  A customer served by an electric cooperative for 
transmission and distribution services and by a retail electric 
provider for retail service has the option of being billed directly 
by each service provider or receiving a single bill for 
distribution, transmission, and generation services from the 
electric cooperative.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.058. TARIFFS FOR OPEN ACCESS.  An electric 
cooperative that owns or operates transmission and distribution 
facilities shall file tariffs implementing the open access rules 
established by the commission under Section 39.203 with the 
appropriate regulatory authorities having jurisdiction over the 
transmission and distribution service of the electric cooperative 
before the 90th day preceding the date the electric cooperative 
offers customer choice.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.059. NO POWER TO AMEND CERTIFICATES.  Nothing in 
this chapter empowers a board of directors to issue, amend, or 
rescind a certificate of public convenience and necessity granted 
by the commission.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.060. CUSTOMER SERVICE INFORMATION.  (a) The 
commission shall keep information submitted by customers and retail 
electric providers pertaining to the provision of electric service 
by electric cooperatives.
	(b)  The commission shall notify the appropriate electric 
cooperative of information submitted by a customer or retail 
electric provider, and the electric cooperative shall respond to 
the customer or retail electric provider.  The electric cooperative 
shall notify the commission of its response.
	(c)  The commission shall prepare a report for the Sunset 
Advisory Commission that includes information submitted and 
responses by electric cooperatives in accordance with the Sunset 
Advisory Commission's schedule for reviewing the commission.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.061. RETAIL RATE CHANGES BY ELECTRIC 
COOPERATIVES.  (a) This section shall apply to retail rates of an 
electric cooperative that has not adopted customer choice and to 
the retail delivery rates of an electric cooperative that has 
adopted customer choice.  This section may not apply to rates for:
		(1)  sales of electric energy by an electric 
cooperative that has adopted customer choice;  or
		(2)  wholesale sales of electric energy.                                      
	(b)  An electric cooperative may change its rates by:                          
		(1)  adopting a resolution approving the proposed 
change;                   
		(2)  mailing notice of the proposed change to each 
affected customer whose rate would be increased by the proposed 
change at least 30 days before implementation of the proposed 
change, which notice may be included in a monthly billing;  and
		(3)  holding a meeting to discuss the proposed rate 
changes with affected customers, if any change is expected to 
increase total system annual revenues by more than $100,000 or one 
percent, whichever is greater.
	(c)  An electric cooperative may implement the proposed 
rates on completion of the requirements under Subsection (b), and 
those rates shall remain in effect until changed by the electric 
cooperative as provided by this section or, for rates other than 
retail delivery rates, until this section is no longer applicable 
because the electric cooperative adopts customer choice.
	(d)  The electric cooperative may reconsider a rate change at 
any time and adjust the rate by board resolution without additional 
notice or meeting of customers if the rate as adjusted is not 
expected to increase the revenues from a customer class.  However, 
if notice is given to a customer class that would receive an 
increase as a result of the adjustment, then the rates for the 
customer class may be increased without additional meeting of the 
customers.  A customer may petition to appeal within the time 
provided in Subsection (f).
	(e)  Retail rates set by an electric cooperative that has not 
adopted customer choice and retail delivery rates set by an 
electric cooperative that has adopted customer choice shall be just 
and reasonable, not unreasonably preferential, prejudicial, or 
discriminatory;  provided, however, if the customer agrees, an 
electric cooperative may charge a market-based rate to customers 
who have energy supply options if rates are not increased for other 
customers as a result.
	(f)  A customer of the electric cooperative who is adversely 
affected by a rate setting resolution of the electric cooperative 
is entitled to judicial review.  A person initiates judicial review 
by filing a petition in the district court of Travis County not 
later than the 90th day after the resolution is implemented.
	(g)  The resolution of the electric cooperative setting 
rates, as it may have been amended as described in Subsection (d), 
shall be presumed valid, and the burden of showing that the 
resolution is invalid rests on the persons challenging the 
resolution.  A court reviewing a change of a rate or rates by an 
electric cooperative may consider any relevant factor including the 
cost of providing service.
	(h)  If the court finds that the electric cooperative's 
resolution setting rates violates the standards contained in 
Subsection (e), or that the electric cooperative's rate violates 
Subsection (e), the court shall enter an order:
		(1)  stating the specific basis for its determination 
that the rates set in the electric cooperative's resolution violate 
Subsection (e);  and
		(2)  directing the electric cooperative to:                                   
			(A)  set, within 60 days, revised retail rates 
that do not violate the standards of Subsection (e);  and
			(B)  refund or credit against future bills, at the 
electric cooperative's option, revenues collected under the rate 
found to violate the standards of Subsection (e) that exceed the 
revenues that would have been collected under the revised rates.  
The refund or credit shall be made over a period of not more than 12 
months, as determined by the court.
	(i)  The court may not enter an order delaying or prohibiting 
implementation of a rate change or set revised rates either for the 
period the challenged resolution was in effect or prospectively.
	(j)  A person having obtained an order of the court requiring 
an electric cooperative to set revised retail rates pursuant to 
Subsection (h)(2)(A) may, once the order is no longer subject to 
appeal, initiate an original proceeding in the district court of 
Travis County either to:
		(1)  seek enforcement of the court's order by writ of 
mandamus if the electric cooperative has failed to adopt a 
resolution approving revised rates within the time prescribed;  or
		(2)  seek judicial review of the electric cooperative's 
most current resolution setting rates as provided in this section, 
if the electric cooperative has set revised rates pursuant to the 
order of the court within the time prescribed.  In the event of such 
enforcement proceeding or judicial review the court may, in 
addition to the other remedies provided for in this section, award 
reasonable costs, including reasonable attorney's fees, to the 
party prevailing on the case as a whole.  Additionally, if the court 
finds that either party has acted in bad faith solely for the 
purpose of perpetuating the rate dispute between the parties, the 
court may impose sanctions on the offending party in accordance 
with the provisions of Subsections (b), (c), and (e), Section 
10.004, Civil Practice and Remedies Code.
	(k)  An electric cooperative that has not adopted customer 
choice and that has not changed each of its nonresidential rates 
since January 1, 1999, shall, on or before May 1, 2002, adopt a 
resolution setting rates.  The resolution shall be subject to 
judicial review as provided in this section whether or not any rate 
is changed.  In the event the electric cooperative fails to adopt a 
resolution setting rates pursuant to this subsection, a customer 
may petition for judicial review of the electric cooperative's 
rates.  A person initiates judicial review by filing a petition in 
the district court of Travis County not later than November 1, 2002.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.062. ALLOCATION OF STRANDED INVESTMENT.  Any 
competition transition charge shall be allocated among retail 
customer classes based on the relevant customer class 
characteristics as of the end of the electric cooperative's most 
recent fiscal year before implementation of customer choice, in 
accordance with the methodology used to allocate the costs of the 
underlying assets or expenses in the electric cooperative's most 
recent cost of service study certified by a professional engineer 
or certified public accountant or approved by the commission.  In 
multiply certificated areas, a retail customer may not avoid 
stranded cost recovery charges by switching to another electric 
cooperative, an electric utility, or a municipally owned utility.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          

SUBCHAPTER C. RIGHTS NOT AFFECTED


	§ 41.101. INTERFERENCE WITH CONTRACT.  (a) This subtitle 
may not interfere with or abrogate the rights or obligations of 
parties, including a retail or wholesale customer, to a contract 
with an electric cooperative or its subsidiary.
	(b)  No provision of this subtitle may interfere with or be 
deemed to abrogate the rights or obligations of a party under a 
contract or an agreement concerning certificated service areas.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.102. ACCESS TO WHOLESALE MARKET.  Nothing in this 
subtitle shall limit the access of an electric cooperative or its 
subsidiary, either on its own behalf or on behalf of its customers, 
to the wholesale electric market.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.103. PROTECTION OF BONDHOLDERS.  Nothing in this 
subtitle or any rule adopted under this subtitle shall impair 
contracts, covenants, or obligations between an electric 
cooperative and its lenders and holders of bonds issued on behalf of 
or by the electric cooperative.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.          


	§ 41.104. TAX-EXEMPT STATUS.  Nothing in this subtitle 
may impair the tax-exempt status of electric cooperatives, nor 
shall anything in this subtitle compel any electric cooperative to 
use its facilities in a manner that violates any contractual 
provisions, bond covenants, or other restrictions applicable to 
facilities financed by tax-exempt or federally insured or 
guaranteed debt.

Added by Acts 1999, 76th Leg., ch. 405, § 39, eff. Sept. 1, 1999.