87th Legislature – Week 12

Both chambers are expected to pass major legislative responses to Winter Storm Uri this week. Both chambers are scheduled to consider bills filed in response to the power outages last month. As soon as today, the Senate will consider SB 3, an omnibus bill that creates the Texas Energy Reliability Council to ensure the state’s natural gas needs are met, requires the weatherization of all generation, transmission, and natural gas facilities, and prohibits retail electric variable rate plans (among other changes). For a quick summary of the bill’s measures, click here. The full House will consider HB 10 (reforming the ERCOT board), HB 11 (winterization of generation), HB 12 (creating a statewide disaster alert system), and HB 16 (prohibiting retail electric indexed products).

Twinning broadband bills clear committee. Companion bills SB 5 and HB 5 both were favorably voted out of their respective committees this week. The bills are nearly identical and would establish a state broadband office, require a state broadband plan to be created, and create a broadband development incentive program. The incentive program would still require a legislative appropriation. Both bills have significant bipartisan support.

Other major priority bills are moving in both chambers. After progress on major priority bills was delayed for weeks by the fallout from Winter Storm Uri, last week saw major bills voted out of committee (see broadband above) and this coming week will see both chambers take up priority bills. Here’s a sampling of what’s on tap:

• House of Representatives. Several key bills are scheduled for hearing … HB 4 (expanding the use of telemedicine) and HB 6 (election integrity bill). HB 6 was scheduled for a hearing last week before a procedural error forced an abrupt end to the hearing. Last week, House committees also heard bills that would limit the ability of local governments to use lobbyists and a bill designed to punish cities who slash police budgets. The latter bill was heard on the same day as the George Floyd Act, which would ban chokeholds, require officers to intervene if their partner is using excessive force, and limited qualified immunity for police officers (a major sticking point for Republican lawmakers).

• Senate. Committees took testimony and voted out SB 4 (preventing local governments from making financial commitments with professional sports teams unless they commit to play the National Anthem) and SB 7 (election integrity). And other priority bills are eligible to be heard by the full Senate this week: SB 8 (which would ban abortion once a heartbeat can be detected) and SB 9 (which would trigger an outright ban on abortion should Roe v. Wade and related cases are overturned).

COVID vaccines will be available to everyone starting today. The Governor announced last week that every adult would be eligible for a vaccine beginning this week. The announcement comes as the state is set to receive 1 million first doses this week. The state surpassed 10 million vaccines administered last week. New cases have plummeted since January highs as the state nears the 3-week mark since the Governor lifted the mask mandate and reopened business to 100%. A legal battle over the lifting of the mask mandate produced an initial victory for the City of Austin, where a state district judge sided with the City in its efforts to continue to enforce its mask mandate.

The crisis at the border continues. The crisis at the southern border, which has seen a record number of migrants including thousands of unaccompanied children crossing the border, continues to be a major issue with state leaders. Last week, a significant number of Congress visited the border in the Rio Grande Valley. This comes on the heels of several weeks of criticism by Governor Abbott about the lack of preparedness of the Biden Administration for the wave of migrants. Expect this issue to continue to be a major thread in Texas politics.

87th Legislature – Week 10

We decided to hold yesterday’s update pending action yesterday in the Senate on the ERCOT pricing error during Winter Storm Uri (see below). Here’s this week’s update …

“Repricing” the cost of electricity becomes focus of Senate. Following the independent market monitor’s finding that ERCOT mistakenly held electricity prices at the statutory cap for too long, costing ratepayers billions of dollars, both the House and the Senate held further hearings with clear focus on the ability of the Public Utility Commission’s ability to “reprice” this “error.” The hearings came on the heels of a letter – signed by 28 of 31 Senators – to the PUC asking it to reverse the billing error, and the Governor’s decision to make repricing the error a legislative emergency item.

• Lieutenant Governor plays the role of Senator. In a highly unusual step during Chairman D’Andrea’s testimony before Senate Jurisprudence Committee, the Lieutenant Governor joined the Committee to grill the Chairman. The questioning focused on the PUC’s authority to unilaterally fix the error – something the Chairman has denied and also likened to “unscrambling an egg.” The Chairman denied having the ability to unilaterally correct the error.

• Lieutenant Governor and Governor spar with dueling letters. Following the highly unusual move from the Lt. Governor, he sent a letter to the Governor late on Friday afternoon that asked the Governor to intercede and replace Chairman D’Andrea. Within the hour, the Governor rebuffed the Lieutenant Governor, underscoring the PUC’s position that it lacked the authority to fix the error and saying that instead it was Legislature’s prerogative to fix the issue if they wished. Just this morning, the Lt. Governor has requested an opinion of the Office of the Attorney General regarding the PUC’s authority.

• Senate passes bill to give PUC authority to reprice. In response to the action late last week, the Senate filed, referred, passed out of committee, and finally passed a bill that would give the PUC the authority to fix the billing error. The bill would still need to pass the House – something the Speaker has said would require more debate and fact-finding. The House Committee on State Affairs is hearing invited testimony on the bill errors today, Tuesday, March 16.

Griddy files for bankruptcy, offers to forgive customer debt. The financial fallout from the pricing error continues, as Griddy Energy filed for bankruptcy on Monday. Griddy took the remarkable step of offering to forgive the debt of all customers, an unusual plan component in a bankruptcy that still requires court approval. The ultimate consequence of ERCOT’s market intervention meant sky-rocketing electricity bills for ratepayers. Those bills were collected in real-time from retail electric provider Griddy, whose innovative app charges consumers daily for their electricity usage while allowing them to see the real-time price of electricity. Griddy had saved customers money prior to the market intervention, as unlike other retailers it does not mark-up the price of wholesale electricity. The company sells itself as an important tool in balancing the Texas grid by influencing demand or load to lessen in response to price signals. In periods of peak demand, load response is much more elastic than new generation, but consumers often lack the information and incentive to react.

Tensions rise between President Biden and the Governor over the border. The migrant crisis at the border continues to intensify, creating pressure on the Biden Administration from both sides of the political aisle. In response, the Governor has increased both his focus and rhetoric towards the Biden Administration, criticizing the Administration’s “open border” policies for creating the humanitarian crisis and for enriching the cartels who profit off the human trafficking. With border patrol agents foreshadowing that the number of migrants is only going to increase, we expect this to remain a significant point of disagreement between Texas and the Administration.

Gaming bills filed. Long-awaited gaming bills have been filed. The bills include both casino gaming and sports betting. The primary bills to watch, which provide for a ballot resolution to amend the Texas Constitution are: HJR 133 and SJR 49 (casino gambling), SJR 39 and HJR 97 (sports betting)

87th Legislature – Week 9

Here is this week’s update on the legislative session …

Fallout from winter storm power outages continue. Last week saw an acceleration of changes and fallout from the winter storm power outages.

• PUCT Chairwoman resigns, ERCOT CEO terminated. Personnel changes at PUC and ERCOT continued last week. First, on Monday, the PUC chair resigned. Although the PUC does not manage the grid, it does have an oversight role with respect to ERCOT. Moreover, as we mentioned last week, the chair is appointed by the Governor, making the position a partisan football. As we suspected, ERCOT CEO Bill Magness was also terminated last Wednesday. The CEO had refused to step aside so the Board moved forward with termination. Under his contract, Magness would have been entitled to a full year of salary (more than $800,000), but Magness said he would not accept the severance pay.

• ERCOT pricing error caused $16 billion in extra costs to ratepayers. The termination of the ERCOT CEO preceded the revelation on Thursday that ERCOT had incorrectly and artificially held electricity prices at astronomical levels long after any such market intervention could have been justified. The finding came from the state’s independent market monitor. The move likely costs ratepayers an additional $16 billion. Later in the week, the PUC opted not to retroactively correct the move, saying that it would be too difficult to unscramble the effects of the market intervention. As a result, we expect more financial troubles for retail electric providers, as ratepayers are unable to pay the higher prices.

• Brazos Electric Power Cooperative files for bankruptcy. The largest and oldest power cooperative in the state of Texas filed for bankruptcy this past week after notifying ERCOT that it could not pay a $2.1 billion bill from ERCOT. Brazos said the filing was necessary to protect its customers from having to pay these exorbitant costs. Other bankruptcies are expected, especially of retail electric providers (REPs) as they are unable to pass on the exorbitant wholesale prices REPs were forced to pay during the power outages. Relatedly, at least two REPs have been kicked off out of the market. Griddy Energy and Entrust Energy both informed ERCOT they could not make payments to ERCOT and in response they were barred from Texas’ power market.

Governor lifts statewide COVID restrictions; cases decline; vaccinations ramp up. On Tuesday, the Governor announced that he is lifting statewide COVID restrictions, allowing businesses to open 100% and rescinding the mask mandate – both effective this Wednesday, March 10. This comes as new cases and hospitalizations reach their lowest levels in nearly 6 months and vaccinations continue to rise rapidly. Nearly 200k Texans are being vaccinated a day. The state also announced that educators and child care providers would now be eligible for the vaccine.

Texas responds to migrant crisis on southern border. On Saturday, the Governor announced that he was launching Operation Lone Star to combat drug smuggling and human trafficking along the southern border. The Operation will have the Department of Public Safety leveraging the National Guard along the border, hoping to stymie the ability of drug cartels to smuggle drugs and move people across the Texas border. The move comes on the heels of news that illegal migration is surging to record numbers.

U.S. Senate passes COVID relief bill. The Senate narrowly passed a $1.9 trillion COVID relief package, similar to the one passed by the House of representatives last week. The bill includes $350 billion for state and local governments. The House version would have sent nearly $27 billion in state and local government relief to Texas, with $17 billion of that going directly to the state. Allocations based in the Senate version are not yet known, but we do not expect the number to change drastically from the House version. Any difference would arise from emphasizing unemployed workers instead of population. While the relief will certainly ease immediate pressure around the budget, the enormous costs of reforms related to last month’s winter storms add another layer of discussion regarding the use of these funds.

Bill filing deadline this week; Committees begin to heat up. Friday, March 12 will mark the 60th day of the legislative session and is the constitutional deadline for filing bills. With nearly 1500 bills referred in the House committee hearings are finding a regular pace. While fewer have been referred in the Senate, several priorities of the Lt. Governor will be heard this week.

• Nearly 100 bills will receive committee hearings this week. A few major bills will receive hearings this week, including HB 3, which will make changes to how state and local governments respond to pandemic emergencies.

• In the Senate, only 17 bills are currently schedule for a committee hearing, but one is the bill filed by Senator Bryan Hughes aimed at social media outlets. Last week, Senator Hughes and Governor Abbott hosted a press conference about SB 12. Also, two bills aimed at curbing controversial pandemic response measures used by local governments will also be heard in the Senate. Senator Kolkhorst’s SB 25 would allow nursing facility residents to designate at least one family member who has the right to in-person visitation. Senator Paxton’s SB 26 would prevent local officials from using their emergency powers to close places of worship.

• Senate Finance will continue hearings on SB 1, the state’s budget, today at 10 am.