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House State Affairs met on March 4 to hold an organizational hearing and hear from invited testimony only.

This report is intended to give you an overview and highlight of the discussions on the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.

Public Utility Commission

Arthur D’Andrea, Chair PUC

  • Updates on implementation of legislation from last session:
  • SB 64 and SB 196 created a voluntary cybersecurity program; 54 out of 116 utilities have signed up, will help prevent things that happened during the winter storm
  • HB 853, HB 954, and HB 965 allowed utilities to have advanced metering
  • SB 1497; electricity brokers now register with the commission
  • HB 4150 electric lines safety bill establishes reporting requirements for utilities; reads the bill as giving the PUC enforcement authority
  • Hunter – PUC has been silent on hurricane issues; notes he wants to have a close relationship with them, but is it true the ERCOT head resigned?
    • Board terminated his contract, but he did want that
  • Hunter – How much are they paying a search firm to fill this position?
    • Does not know, will find out; they did
  • Hunter – Was his salary $803,000, did he have additional benefits?
    • He used to get bonuses, but does not
  • Hunter – Salaries are paid by customers?
    • Everything ERCOT spends is paid by the customer
  • Hunter – In the last year, how much have the customers paid ERCOT?
    • Thomas Gleeson, Executive Director PUC – $270 to $280 million
  • Hunter – Want to know a salary breakdown of ERCOT; needs to
  • Hunter – You need to try to have a relationship with the legislature; as of now, communication is the same as it was before
  • P King – What is the PUC and you as chairman trying to accomplish in the near future?
    • Short term, need to monitor the liquidity problems in the ERCOT market and ensure it does not hurt customers; Griddy customers and some municipal utilities may be/have exposed customers to wholesale prices
    • Longer term, priority is to ensure we are working with the legislature to ensure what happened during the winter storm does not happen again
  • P King – Have you considered bringing someone in to be a PUC representative for the search to fill Magnus’ position, like Pat Wood; PUC needs to oversee ERCOT right now
    • Yes, have been looking for a representative; Peter Lake has been serving a similar role
  • Lucio – Last week, everyone who testified are stakeholders in this process, so there was no third-party voices; looking for that input in order to get a full idea of what happened
  • Lucio – PUC rules that require power generators to have Emergency Operations Plans, but is clear that they were not followed; somehow ERCOT has the responsibility to spot check them
  • Lucio – Need to start with this after-action report to determine if anyone had/followed their Emergency Operations Plan
    • Have failed in the Emergency Operations Plans; have relied too much on ERCOT
  • Lucio – 700 employees? What percentage of the $280 million
    • Thomas Gleeson, Executive Director PUC – 600-800 depending on the time of year; two largest expenditures are salary and IT
  • Lucio – Notes a letter he sent out for what information he is looking for
    • Looking to revise the rule that only allows them to provide a summary of their Emergency Operations Plans
  • Raymond – Have to deal with those who will have high bills, wholesale market price was raised by the PUC during the emergency?
    • It was raised by the PUC, the ones that were exposed to the wholesale prices are the Griddy Contracts which is about 40,000; most would be in Dallas and Houston
    • Raising of the wholesale price is to punish generators who do not show up; that is why Brazos is bankrupt now
  • Raymond – Do you know in advance the price is passed on to consumer?
    • It should not be, the Griddy contracts will be delt with, but none of the customers will
    • The companies either go bankrupt or “eat it” system was designed that way
    • Companies who did not go bankrupt will be tempted to raise rates; there is competition in the market, so there will be a negative effect to raising rates
    • PUC has a duty to inform the customers; push our website in the community
    • Have disclosures before customers sign up for a plan; looking into revising that
  • Raymond – How much are Griddy customers paying?
    • One customer had a $15,000 bill; a lot of stories about people severely conserving power, but are still getting a $300 bill
  • Raymond – Asks to have them on as resource witnesses the next could hearings
  • Hernandez – 40,000 Griddy customers, what advise do you give them? What do you do if they have a pending bill?
    • Have a department for those complaints; are pursuing a complaint for the whole group
    • Complaint depends on if they really understood the plan; hearing now that Griddy’s advertising may have been misleading
    • Thomas Gleeson, Executive Director PUC – Setting up a separate process for these calls, are deceptive trade act actions, so are pursing with the AG’s office
  • Hernandez – Are calling back certain payments to generators?
    • Are clearing all the payments in the ERCOT market; are auditing where the money went, and some generators were paid for ancillary services where they did not provide any
    • Will be $100s of millions that PUC will recover
  • Hernandez – 54 of the 116 are enrolled in the cybersecurity program, would like to see more aggressive outreach to get more participation
    • Are working on this, and will step this up; right now, is the little guys who are having trouble signing up and they are the most vulnerable
  • Howard – Wholesale market is supposed to work, but only happens if they are producing; market design itself was not effective when we needed it to be
    • Those who believe in this market system are in shock; yes, market design has major failures we need to fix
  • Howard – Winterization is the issue here? Heard last week it should not be mandated
    • Yes; we just say it needs to be mandated
  • Howard – In the analysis of following the money, will follow to the gas market and the electric?
    • Yes, gas prices were also astronomical
  • Howard – How much was plants not getting the electricity, or was it winterization issues? RRC said it was electric issues, but need third-party investigations on this
    • That sounds like finger pointing to me, was wrong that certain ones were not designated as critical infrastructure, but plenty of well heads froze and are other contributions
  • Howard – Need technical evaluation of the decisions made at ERCOT
  • Shaheen – Cybersecurity study scope? Do you receive data from the power generation entities? Why do you need legislation for cybersecurity? Am highly concerned that it is optional
    • Yes, we receive data from power generators, but the bill was for all the utilities on the grid; was not for generators and IT system
    • Do not have authority over municipals and co-ops
  • Shaheen – Significant failure was those Emergency Operations Plans; shocked that PUC only a summary report, is a failure from a regulatory standpoint
    • Rule reads they can file a summary with us, but full report is for ERCOT and they audit about 10% a year
  • Shaheen – Asks to talk to their lead cybersecurity person
  • Deshotel – Investigation into the market, how will you notify those Griddy customers?
    • Every commitment the former chair made, will follow up on
  • Deshotel – How much did the communication’s limited communication effect this situation?
    • Limited communication is difficult, but usually know how to navigate it
  • Deshotel – Retail electric providers and competition, but is a provision in their contracts of a penalty for early termination?
    • Is regulated by the PUC, but should not affect the customers because there is a contract that locks in their bill fees
  • Deshotel – Concerning electric providers’ applications, PUC only looks at their financial history rather than if their plans are deceptive
    • Do look at financial history, only policed who can put their company on the PUC website, but should now look at plans more actively when they apply
  • Raymond – Reads a section from an article about the PUC’s decision to keep wholesale prices raised for multiple days; why did they remain high even though it was not working?
    • Looked like it was staying flat, but people were going on and off the whole time; if we had let that price go low, then would all drop off
  • Raymond – Why did you rescind that price and when?
    • Rescinded Friday morning because Thursday was the last night; left it raised because were afraid of more blackouts
  • Slawson – Severance package about the past ERCOT head?
    • Is one year salary, is $803,000
  • Paddie – Is there education aimed at those who were in Griddy contracts?
    • Plans like that are bad, and PUC negotiates with bigger providers to voluntarily take those on these plans on
    • Thomas Gleeson, Executive Director PUC – V-rep polar providers assured us that they would only charge market rates
  • Paddie – Emergency Operations Plans, are skeptical in light of the regulations created in HB 4150; what are you doing for those who have not submitted a report?
    • Are compiling who did not, will do enforcement actions and post those online
  • Paddie – Why do we need these reports?
    • Need to make those lines safer; is dangerous infrastructure and need to treat it that way
  • Paddie – Is there an intention to take the data analysis and turn this into actionable things?
    • Agrees, talked to lawyers and are now convinced we have regulatory authority
  • Paddie – Says the PUC “shall” fully fund USF, is there anything ambiguous about that?
    • Does read it that way; had some concerns with whether the money was spent on things the legislature wants us to spend it on
    • That program was designed to subsidize landlines, and no one is using those anymore; the legislature should address exactly where we should spend if they want us to spend on broadband
  • Paddie – This is concerning for a lot of members, 55% of the geography of providers depend on the solvency of that fund; agrees some work needs to be done long term
  • Paddie – In January, some were cut up 70%; what is the effect of that? Did staff recommend an increase in fees in June?
    • Have been in contact with them, and yes they did and the PUC declined to raise fees
    • Paddie – Now a lawsuit is pending, cannot imagine how you intend to win that lawsuit; need to address this in the near term
    • Is a conversation to have with the AG

ERCOT; Office of Public Utility Counsel

Lori Cobos, Counsel for OPUC

  • Not a state regulatory body; are the voice for residential and smaller commercial consumers
  • FY 2020 $1.1 billion in savings through litigation of water and utility cases at the PUC
  • Litigate cases in the electricity industry, and are the sole litigators for water utility rate cases
  • Involved in 26 rulemaking processes at the PUC
  • Represent smaller commercial consumers on the ERCOT board of directors
  • Since 2013, have been busy with water utility legislation
  • Are going to be more involved in policy participation, will be heavily involved in winter storm power outage investigations
  • Are statutorily charged with resolving consumer complaints and continue to hear complaints from the winter storm
  • Hunter – You are the consumer voice? Have heard complaints the public does not feel included; have learned ERCOT is going to get severance packages at the taxpayers’ expense
    • Yes, noted they abstained from voting due to concerns about the termination terms
  • Hunter – Who was the other abstention?
    • The CEO himself
  • Hunter – Public getting ready, or has already, to receive exorbitant bills; what are you going to do about these bills?
    • Have sent out press release for consumer information, some have been auto drafted; advised consumers to review the bill and rate plan and file a complaint at the PUC
    • Complaint is important and can document the issue to see what leadership is going to do to address these bills
  • Lucio – Said you were heavily involved in legislation; do you mean implementation or suggestions to the legislature? Need to have your recommendations now
    • Are a resource for the legislature, can make recommendations; recognize that we are going to be at the table during the ERCOT review
  • Lucio – Are ERCOT board members compensated? Are paid $100,000? Is ERCOT subject to open records requests?
    • Some are and some are not; 5 unaffiliated board members are compensated
    • Are paid $99,000; and 4 of them have resigned
    • They are a nonprofit, but have tried to align themselves to the Texas Open Records Act
  • Lucio – Have they not stated they are not subject to the open meetings or open records act? Not an agency, but are not a contractor?
    • Not aware of what they have said, but they are technically a non-profit
  • Lucio – They are a state contractor, and they are a creature of this body; do we need clarification they are subject to the open meetings and open records act?
    • ERCOT currently shares data with the PUC and in PUC rule, that data is confidential; believes ERCOT should be sharing information with our agency
    • Would be a statutory change
  • Lucio – Notes it is hard to reconcile being counsel and being a representative for the consumer; if there is ambiguity in your position, then it was not intended
  • Lucio – If you do not have the tools you need, we want to give it to you; need to provide some category of communication in order for the public to clearly understand what situation we are in
    • Agrees, communication procedures are currently set up by ERCOT and they are the main source of communication; should be changed to better communicate with the public
  • Lucio – Who voted against the termination of ERCOT’s CEO?
    • Believe it was the representative from Tenaska

Texas Ethics Commission

Anne Peters, Executive Director Texas Ethics Commission

  • Overviews Texas Ethics’ duties and scope of jurisdiction
  • Was not legislation from the 87th that cased major changes to the commission; overviews bills that created changes
  • Commission has begun adjusting reporting and registration thresholds; rebuilt filing software and now will make annual changes to guidance and applications
  • Asking the legislature to clarify confidentiality statue; currently prohibits commission staff from disclosing about sworn complaints; permits to work with law enforcement?
  • Asking the legislature to consider the issue of the statue that asks to adjust thresholds to the nearest multiple of ten
  • Asking for cost saving and clarification
  • Have procured a complaint management system and replaced network switches
  • Raymond – Are complaints from candidates who call the Ethics Commission for guidance and the lawyers disclaim you cannot use what they tell you
  • Raymond – Too late to write a bill about this, but should consider an amendment that makes this an affirmative defense
    • Agrees this needs to be addressed in statute
  • Paddie – Are there any other common complaints? Are there trends that necessitate anything the legislature needs to do?
    • Seems to be an issue how much someone can do and not use public resources for campaign purposes; commission keeps going back to this
    • Does not know complaints are usually straight forward or are incredibly unique cases; maybe notices about sworn complaints would be good

Office of the Governor; Regulatory Compliance Division

Erin Bennett, Director of the Regulatory Compliance Division

  • Scope is fairly limited; conducts an independent review of certain state licensing agencies’ proposed rules that affect market competition
  • Overviews the process of reviewing a proposed rule; vast majority of rules have been approved
  • Paddie – Creation of this division was a result of Birdwell and my experience on Sunset; reiterates the process of their review
    • Correct, just note if they are consistent with statute and provide them with information on how to be compliant
  • Paddie – Within a year, 94 submitted, 81 have completed reviews, and disputed 7?
    • Correct

Texas Facilities Commission

Mike Novak, Executive Director Texas Facilities Commission

  • Provides an overview of the Commission’s duties; build, support, and maintain agency offices
    • Do not do hospitals, TxDOT facilities, among others
  • Overviews bills last session relating to selling or vacating government facilities; was prompted by the Sutton Building in San Antonio which has been demolished and turned over to the GLO
    • Now can dispose of underperforming assets without carrying a bill
  • Capitol Complex renovations are funded through Phase 2, Phase 3 is not funded yet; highlights projects in progress
  • Raymond – Asks staff to send on update on TFC facilities in Laredo; did we pass a bill that give you authority to move on issues?
    • Do have that authority, bill was passed last session
    • Richard Glancey, Government Relations – Are a number of gauges including informing the representatives in that area, not just complete authority
  • Raymond – A lot of us are from the private sector, we do not like bureaucracy either
  • Raymond – Mentions previous bills, did we give default to cities or counties to have the first chance at the building/properties
    • We usually try to; there are issues when public housing is at play
    • Raymond – Maybe need to give ability to assess and to have a more cooperative agreement with localities
  • Raymond – TFC could look outside of Austin to build future facilities, that would save millions; notes Conroe and other cities would be better sites
    • You are right, that is something we are looking at

Sunset Commission

Jennifer Jones, Executive Director Sunset Commission

  • Overviews criteria the Commission uses and the types of recommendations provided
  • Interim reports were finished in January and are working on drafting those Sunset bills
  • Recommendations include:
    • Abolishing the State Anatomical and move duties to the Funeral Commission
    • TDLR eliminating 37 unneeded licenses
    • Establishing blue ribbon to significantly improve law enforcement in the Texas Law Enforcement Commission
  • Metcalf – How has this past year impacted your team’s ability to perform?
    • Closed March 18 and had finished the first round of reviews; purchased a subscription meeting service and conducted staff meetings/reviews
  • Metcalf – Travelling issues?
    • For smaller ones, not travel necessary; for larger ones we travel as much as can afford
    • Metcalf – Were not able to do so for San Jacinto River Authority?
    • Correct
  • Metcalf – Have been having issues with the San Jacinto River Authority, thousands of people have raised complaints; believes they have not had a proper review
    • Will be more opportunities to raise concerns throughout the legislative process
  • Hunter – Public input with this review and in the legislature has been greatly impacted, goes through the list of those who are under review
    • I would agree that comprehensive input has not been given
  • Hunter – Concerned about Christmas tree bills that impact communities like the ones served by San Jacinto River Authority, we should look at how Sunset has been impacted by this environment and the rush of legislation that is going to occur
    • Would be happy to work with members to reduce the Christmas tree effect
  • Lucio – Notes it is very difficult to get public input right now, may need a safety net bill
  • Raymond – If we passed a safety net for all of them early in the session, and then passed Sunset bills for some of them later, could that happen?
    • Yes
    • Raymond – Notes this could avoid Christmas tree bills
  • Representative – How do you review licenses?
    • Looking at outdated requirements, looking to see how long the agency takes to process the license, and look for efficiencies
  • Representative – Have you looked at the inefficiencies for the TWC, DPS, and DMV? Where is the ball being dropped in terms of resolving these issues?
    • Sunset has noted inefficiencies with the DMV particularly the DL process; for any recommendations adopted by the Sunset, follow up on it two years later
    • For DLs when followed up on, they did not agree on metrics, so that pushed the study back further
  • Representative – Do you hire third parties, or is it all Sunset staff?
    • All staff now, but have contracted out when working with the LBB
  • P King – With law enforcement being such an issue this session, worried the public has not engaged in that they way they want to; if we postponed some of the bills, will that adversely affect Sunset staff?
    • Have 27 coming up next cycle, so when talking about putting it off, want to take something off the upcoming schedule
  • Paddie – Am sensing there is a considerable concern about public input; have concerns the capacity these bills will take up in the legislative process relative to other bills this session
  • Paddie – Would need to schedule to manage that workload along with the safety net bill; hopes to pass as many of these as we can
  • Paddie – Law Enforcement and Jail Standards may be ones we need to review longer
  • Paddie – In some cases, it is not just the agency, the act itself? Need to be careful about this
    • After the plumbing board bill last session have looked into it, and in some cases if the bill is not passed, the entire regulation goes away

Texas Department of Information Resources

Amanda Crawford, Executive Director DIR

  • Provides an overview of DIR’s functions; one of the main focuses is IT procurement
  • Cloud Storage requires several layers of protection, which comes at great cost; state has negotiated a competitive market rate
  • Overviews technology bills this session: SB 475, HB 1380, SB 538; will be an additional technology-related bill filed this week
  • Highlights technology bills from last session; have seen struggles with reporting compliance with cybersecurity training with local entities
  • Raymond – Did not mention HB 2160, relating to requiring DIR to conduct a study concerning the cybersecurity of small businesses, are you aware of that bill? That bill is one of the most important this session
    • Yes, typically all DIR bills go through state affairs
  • Raymond – Can you speak on the cyber-attack in Texas?
    • August 2019 23 local entities were hit by the same cyber-attack; group went through a service provider, was the first time the cybersecurity annex plan was used
    • DIR responded successfully, within 7 days were able to close out all issues and move them into a rebuilding process
    • Numbers are more difficult, but can get you a run down; essentially hit day-to-day individuals and businesses
    • Raymond – Have to help the private sector and smaller businesses with this
  • Raymond – What are penalties for these crimes?
    • Are federal and state penalties that have been looked at, but is not the DIR’s jurisdiction
    • Often bad actors are not based closely, so is difficult to catch them
  • Hunter – Recognizes DIR for reaching out to his office
  • Shaheen – You run state data centers, do purchasing, and application development?
    • Yes, but only run the application systems; application development is a third party
    • Only certain agencies are
    • Yes, but are mainly a contracting agency
  • Shaheen – Have concerns about vendor management; are we tracking vendor failures?
    • DIR’s role in that is to monitor and manage those; if an agency contracted with a vendor, DIR does not have oversight over that
    • Shaheen – Comptroller has a vendor performance tracking system, is everyone reporting to it? Like the HHSC or the AG’s office?
    • Yes, they should be; may be ambiguity of when you report into that system
  • Shaheen – Seems really decentralized, would like to meet with you and your cybersecurity head
    • Planning, guidance, administrative response, and rulemaking
    • Provide blocking on state agency network and other cybersecurity services
  • Shaheen – What about for those outside of the DIR’s purview?
    • Do not provide services outside DIR’s purview
  • Paddie – Regional working groups from HB 475?
    • Are important, need to band together as a whole
  • Paddie – Can you explain the benefits in SB 538 and HB 1380 to smaller entities?
    • DIR is authorized to do bulk purchasing; any eligible customer in Texas would be able to buy off of those contracts
    • Current issue is that it is limited to state agency need, would open up to local governments