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The House Committee on State Affairs met on May 8, 2019 to take up a number of bills. This report covers SB 65 (Nelson), SB 702 (Bettencourt), and SB 2232 (Hancock).

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. It is not a verbatim transcript of the hearing 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.

 

SB 65 (Nelson) (Committee Sub) – Relating to oversight of and requirements applicable to state agency contracting and procurement.

  • Geren – This is another state contracting cleanup.
  • Despite contracting reforms in the last two sessions, the past biennium saw contracting mishaps at major state agencies, including OAG, HHSC, and TEA.
  • Ensures safeguards and consistent contracting practices are in place to ensure best value for every state procurement.
  • Allocates resources so riskiest contracts receive the most review and low-risk contracts are streamlined.
  • Changes made by the CS bring the contracting reassignment provisions in line with SB 1067. Also makes a technical correction to keep TRS under the same contracting laws.

 

SB 65 left pending.

SB 702 (Bettencourt) (Committee Sub) – Relating to the authorization and reporting of expenditures for lobbying activities by certain political subdivisions and other public entities.

  • Harless – Bill allows lobbying by a political subdivision only if the subdivision takes a vote in a public meeting as a standalone agenda item.
  • Currently political subdivisions are not required to report expenditures on hired lobbyists.
  • Texas Ethics Commission estimated that $32m were spent on lobbyists in 2018.
  • It is nearly impossible to distinguish lobbying from consulting or legal counsel in financial records of local governments.
  • Bill will require disclosure of a public funds spent on lobbying activity and allow easy access to that information by the public.

 

Roger Harmon, Johnson County Judge – Against

  • Bill would limit county judges’ ability to communicate with state representatives and senators.
  • This would harm both county judges and state representatives and senators.

 

Adam Haynes, Conference of Urban Counties – Against

  • Opposing the bill due to some of the technical aspects of the bill.
  • This would not be good government and would not be in the best interests of the counties.
  • Judges would have difficulties staying overnight in Austin if they need to speak with members of the legislature.
  • This would prevent counties from working together with the Legislature.
  • Guerra – Father was a judge and relied on individuals in the Legislature. It concerns me that judges would have difficulty staying overnight, can you expand on that?
    • Haynes – If the goal of this is to put the information out because it is not as transparent as it could be, we already feel like there is a lot of information out there, although it could be better.
    • Guerra – Expand on the transparency issue?
    • Haynes – As counties grow exponentially, county judges become essentially CEOs of entities that would be on the Fortune 50 list. These are highly complex entities.
    • Guerra – To Judge Harmon, is the money spent to come to Austin is available to the public?
    • Harmon – Yes.
  • Harless – You guys have to come here to tell us your needs, and we covered some of those concerns in the CS.
    • Harmon – Hope that county judges should be able to work with the Legislature.
    • Harless – That is why we put the CS in, because we want to be able to work with you.
    • Harmon – 702 would limit the ability to communicate.
    • Harless – That is why we have the CS.
  • Guerra – Appreciate Harless trying to build that in as a CS.
  • Haynes – The language that we have concerns with seems to be still in the CS.
    • Harless – The way I understand it is that is for the expenditures when you initially hire a lobbyist but not for hotels.
    • Haynes – Will look more closely at the CS.

 

Bill Kelly, Director of Government Relations for Mayor of Houston – Against

  • Against the Senate version, have not had a chance to look at the CS.
  • Support the provisions concerning lobby contracts.
  • The membership fees portion of the bill is a bit “non-sensical” and in a City the size of Houston it would be difficult to do.
  • Mayor Turner supports transparency.

 

Glenn Whitley, Tarrant County Judge – On

  • In favor of the transparency part of the bill.
  • Not sure to what level of detail on expenditures we are getting to. County budgets are approved already with an expected amount that will be spent going to Austin, etc.
  • Need to know what kind of detail is wanted when reports are ultimately made.

 

James Quintero, Texas Public Policy Foundation – For

  • Taxpayer-funded lobbying is a conflict of interest and transparency reforms are necessary.
  • All of the people who testified against this bill in the Senate Committee were either local officials or taxpayer-funded lobbyists.
  • Rodriguez – Would you support charter schools being included?
    • Quintero – Yes.

 

Harless closing comments

  • Would be happy to talk about the CS with anyone.

 

SB 702 left pending.

 

SB 2232 (Hancock) (Committee Sub) – Relating to a study of the elimination of the effects of federal renewable energy subsidies.

  • King – This market is unique because it is a real-time energy-only electric market
  • Requires participants to rely entirely on the price of energy to bid into the market
  • Makes ERCOT sensitive to out-of-market actions and policies, including the Federal Production Tax credit
  • Committee substitute directs ERCOT to study effects on federal subsidies and study ways that policies can account for pricing and reliability in the market

 

Jean Ryle, American Wind Energy Association – Against

  • AWEA supports the ERCOT energy-only market design
  • We believe the design is good for consumers
  • In a competitive market, newer and cleaner generation technology always has the potential to replace older technology
  • All types of energy today receive some type of subsidies that lead to innovative technology development
  • These subsidies can cause price distortion in the energy market
  • This bill proposes studying the effects of renewable energy, singling out one particular resource while ignoring other energy sources that are also subsidized at a federal level
  • It would be impossible to understand one subsidy on the market without studying them all
  • Deshotel – I understand you’re not opposed to studying the issue of subsidies on pricing, but you think it should study subsidies throughout the energy sector on prices?
    • That’s correct
    • To avoid unintentionally singling out one type of commodity, it’s important to look at the aspects of subsidies across the board, and the consequences of having those subsidies
  • Deshotel – I can understand that. If you study just one facet, and not consider subsidies on others, it’s probably going to be highly unfair to the industry that’s being propped up while no one else is getting any assistance.
    • That’s true. We also have to consider that consumers ultimately pay the price for the market. It’s important to understand how things are integrated from the standpoint of anything studied in a singular outcome

 

Jeffrey Clark, Advanced Powerlines – Against

  • We think that a study that looks at one incentive that belongs to a market full of others is not sound reasoning
  • Looking at a single incentive in this market without weighing what the impacts are across the whole board will ultimately produce a product that will not be helpful to you, at the taxpayers’ expense
  • This study would look at an incentive that is set to expire; that would produce a negative outcome
  • If you’re going to study an incentive, you should look at everything about it; this bill says look at only one aspect

 

Bill Peacock, Texas Public Policy Foundation – Support

  • Data as recent as 2019 shows that over 80% of all subsidies go to renewable energy
  • Economists have seen subsidized wind energy is not only increasing the frequency of negative prices in ERCOT, it is decreasing prices in every hour that wind farms are generating
  • What we need to do is to look at the harm caused by these renewable energy subsidies, and assign those costs to those who are benefitting from those subsidies as well
  • Our research shows the need for this bill
  • Deshotel – If you feel that wind is a detriment to the entire industry, why not support studying the entire industry?
    • There are already studies showing wind is a problem here. What we need is a study to identify those exact costs and assign who’s going to pay for those costs.
  • Deshotel – How do you know that if you’ve only studied one sector?
    • We know that because we have already seen studies that show wind is the culprit here.
  • Hunter – If we really believe in fairness, not special interests, why aren’t we studying everything? Why is wind a ‘culprit,’ and why are we spending tax payer money focused just on them and not on other areas?
    • The reason we would be focused on this is because $36 billion of tax payer money is being spent on wind. That’s a lot of money to take away from consumers and give to corporations. I think it’s worth spending a little bit of those taxpayer dollars to see what we can do to address that imbalance.
    • It’s not the industry itself that’s a culprit, it’s the subsidies that are culprits
    • Jeffrey Clark, Advanced Powerlines – Wind is saving over a billion dollars a year. A transmission line that facilitates bringing a billion dollars in wind saving energy is not a subsidy, but a superb investment. If everyone is so certain that there are no subsidies for fossil fuels, then what’s the fear in studying them all?
  • Springer – You keep saying subsidies, but I want to say let’s look at the total cost for constituents who wonder where their taxes go, their subsidies go, and is that money being well spent.
    • Well, this bill focuses on federal subsidies, which are over 80% towards wind. If you want to look at all those costs, you will have to change the nature of this bill to look at both federal and state subsides.
  • Guerra – On that same note, what concerns me is how the scope of the study is so narrow.
    • I think if you want to expand the scope, that would be the legislature’s prerogative. The results would be the same, however.

 

Michele Gregg, Texas Competitive Power Advocates – Support

  • Our concern has been the production-based tax credit
  • That tax credit has often exceeded the value of the energy that’s being produced, and has dragged down energy prices
  • While it’s being phased out at the end of the year, it will continue to affect the market for another ten years
  • In our energy-only market, that rush combined with the negative bid incentive, brings new and less reliable generation to the market
  • More than ¾ of the generation and interconnection queue to come online is renewable, which is going to exacerbate our resource adequacy issue
  • We see this study as a much needed step towards understanding the impact this is having on the market and prices, as well as the reliability of our grid
  • King – Could you talk a little bit more on the schedule of elimination of the tax credit?
    • It is scheduled to be eliminated at the end of this year for new credits, but will continue for the next ten years to be given to those who have been approved to the end of the year

 

Cyrus Reed, Sierra Club – Against

  • I don’t believe this bill is needed
  • We already have a robust stakeholder process at the PUC
  • We already do an annual reliability study, the most recent of which just came out
  • Our reliability study does say there are some reliability issues, which are issues we do need to deal with, but this study won’t resolve those issues
  • What we need is new technologies to deal with our reliability issues
  • If we were to go forward with this bill, then I would be in favor of studying all aspects
  • King – What this bill is about is the effect of the elimination of the renewable energy subsidies. Generally, we don’t think of natural gas or coal as being renewable energy. I’m just concerned we’re getting off the true subject of the bill.
    • That’s still relevant to my last point, which is to study them all.

 

Katie Coleman, Texas Association of Manufacturers – Support

  • In terms of subsidies, it is indisputable that no other subsidies have the same effect on the electric market as the production tax credit
  • If you’re talking of impacts to the whole sale electric market, we would be fine studying everything that gets a subsidy
  • Our primary concern on the production tax credit is that it is incentivized the overdevelopment of wind, to the point that we are now relying on wind in some areas to serve load
  • Because wind is intermittent, regulators have had concerns on our reliance on it
  • We have seen things that have attempted to solve that reliance, such as across-the-board price increases, which harms customers and fails to get to the true source of the problem
  • We hope to see a better identification of the reliability impacts that the PTC has created, and more targeted ways of approaching that which won’t involve customers serving as collateral damage
  • Hunter – In your association, how many wind companies are involved?
    • I don’t know the exact number.
  • Hunter – Do they agree with you to single them out in this study?
    • I have no knowledge of what our individual members’ positions are.
  • Hunter – So, there could be a conflict within your association if they’re against, while you are for this bill?
    • Hypothetically, yes.

 

Closing statements – King

  • This bill is specific to wind energy
  • Sometimes it’s good to have less of what you tax, and more of what you subsidize
  • If anyone thinks the bill should be revised, I am free to discuss that

 

SB 2232 is left pending.