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Senate Business & Commerce met on May 4 to discuss a number of bills. This report covers discussions concerning SB 528 (Hughes), SB 1479 (Johnson), SB 1554 (Hinojosa), SB 1999 (Springer), SB 2227 (Hughes), HB 738 (Paul), HB 2090 (Burrows). Part one of the hearing can be found here and part two can be found here.

 

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.

 

Vote Outs

SB 1020 (Hughes) (6-0)

SB 1090 (Buckingham) (6-0)

  • CS clarifies and includes current plumbing standards submitted to the state

SB 1606 (Hall) (6-0)

  • CS removes portions of the bill, includes legislative findings component requirement, weatherization requirements, and sections on regulating microgrids

SB (CS) 2051 (Menendez) (6-0)

  • CS changes “brand name equivalent” to “pharmaceutical equivalent” due to stakeholder input

HB 1363 (Minjarez) (6-0)

HB 1510 (Metcalf) (6-0)

HB (CS) 2533 (Darby) (6-0)

1279 (Hancock) (6-0)

  • CS: Bill Identical to HB 16, CS adds small commercial customers to the prohibition plus other consumer protections left out of HB 16 and needed

CSHB 317 (Murr) (5-0)

CSSB 2122 (Hughes) (5-0)

SB 993 (Hancock) (5-0)

 

 

SB 1999 (Springer) – Relating to the exclusion of broadcasting facilities from load shedding participation during a rolling blackout.

  • Idea stems from broadcasting stations and radio stations after winter storm and blackouts
  • Includes TV and Radio broadcasters in the “critical infrastructure” category that hospitals and emergency services are in, to ensure information is able to be received by the public
  • Campbell – If we keep carving more groups into exemptions, when we need to shed loads there will be no one to shed loads from. Not sure how this helps if residents don’t have power
    • Maybe many people were able to use phones, but many could have gone to battery-powered radios as well

 

Julia Harvey, Texas Electric Cooperatives – On

  • Understand the intent of the bill, due to the need for radio and TV information in rural areas
  • Preserving certain loads makes residential customers more likely to remain shed during load shed
  • Some tradeoffs here, but not necessarily negative

 

Left pending

 

SB 1554 (Hinojosa) {CS} – Relating to energy savings performance contracts.

  • ESPCs are used by governmental entities to contract for energy saving improvements for facilities using money saved through reduced utility expenditures
  • Helps enhance energy efficiency and water usage
  • Some recent ESPCs have been expanded past the intent and scope of the original contract and statute
  • Need transparent and competitive process for procuring public construction contracts
  • Bill aims to prevent ESPCs from being expanded beyond the intent of the original contract
  • CS works out some bill language issues, narrows scope, imposes limits and enforcement language found in other governmental statutes

 

Left pending

 

SB 1479 (Johnson) {CS} – Relating to the participation of distributed energy resources in the ERCOT market.

  • Distributed Energy Resources are co-located with load and generally serve as backup generation for some places – adds additional generation capacity to the grid
  • Theoretically, these DERs could provide ancillary resources, but no current legal or physical infrastructure for this
  • Bill creates statutory framework for DERs to provide ancillary services
  • CS conforms language to ERCOT and PUC language, clarifies duties of ERCOT relating to this program, includes provisions to ensure reliability, and moves back timeline of the provisions for full implementation after consult with ERCOT
  • Will participate no later than 2023
  • Aggregation requires technical upgrades to the grid to include DERs

 

Cyrus Reed, Sierra Club Lone Star Chapter – For

  • ERCOT has already created concept papers and is currently in the process of beginning to expand the infrastructure and protocols for DER light, but this bill is about DER heavy
  • Bill is a market solution, building off current ERCOT planning and action
  • DERs are generally located near loads – helps with power supply and ancillary services
  • Good that bill is technology neutral for DERs, and that ERCOT and PUC have flexibility in determining rules for DERs

 

Joel Yu, Enchanted Rock – For

  • DERs are the best solution for ensuring more reliable and resilient electric service
  • Company provides microgrids and backup generators, and these products can be used for ancillary services as well as for backing up power for businesses
  • DERs could help manage grid intermittency, reduce transmission congestion, and lower market energy prices for customers
  • Currently, DERs have struggled to enter the wholesale market, but this bill changes that

 

Suzanne Bertin, Texas Advanced Energy Business Alliance – For

  • Supports competitive, technology neutral, and market based DERs
  • Texas consumers and businesses are already investing in DER technologies
  • Using just DERs currently installed and integrating them into the grid, it would bring $5.47 billion dollars into the grid
  • Other regional grids across the country are moving to integrate and aggregate DERs
  • Rules and regulations regularly lag behind market forces, so legislature needs to step in to set up the change

 

Michael Jewell, Enel North America – For

  • Enel has significant investment in the ERCOT market
  • DERs allow homes and commercial businesses to remain powered during grid failure
  • More than 1,000 MW installed this year in DERs in ERCOT, plus 500 MW of larger DER – more than a single nuclear power unit
  • ERCOT wants access to these units to aggregate them and help ensure reliability
  • This effort needs to be accelerated, not timeline extended

 

J.P. Urban, AECT – On

  • New electric technologies are coming, want to make sure the right rules are in place to benefit from them
  • Been working with language with Sen. Johnson, only concern is how these new assets will affect distribution and performance of utilities
  • Also some concerns about ancillary services market, and need a better understanding of aggregation plan

 

Kenan Ă–gelman, ERCOT – Resource Witness

  • Legislation lays out a process where distribution resources can participate in ERCOT markets
  • Broadly, aligns with current ERCOT and PUC efforts, and we can implement it
  • Some features will take some time to implement
  • Some difficulties in implementation: ERCOT does not have as much visibility into the distribution system of DERs
  • Requires new rules, new visibility routes, and some distributors may not have constructed their systems to support DERs and costs associated with potential infrastructure additions
  • Communication with DERs is critical as well to ensure reliability
  • Remove barriers to entry for DERs without giving preference over transmission level resources

 

Left pending

 

HB 738 (Paul) {CS} – Relating to the residential and commercial building codes of municipalities.

  • Nichols – Bill seeks to update municipal billing codes to protect health and safety and property during disasters
  • CS amends local government code to update all to 2012 code, prohibiting municipalities from adopting local amendments without hearings first, and prohibits municipalities from requiring sprinklers in residential buildings

 

Cyrus Reed, Sierra Club Lone Star Chapter – For

  • Raising minimum building codes is critical – still refer to 2001/2006 building codes
  • Some cities have updated to 2012 building codes, but we need a uniform policy to protect health and property

 

Ned Muñoz, Texas Association of Builders – For

  • Good because it allows cities some flexibility with amending codes to fit their needs, within reason
  • Allows for some slack with 2012 codes, so that smaller cities will be more up to date without drastic changes
  • Good to remove requirement for fire sprinklers in homes – more water damage from the sprinklers than prevented damage

 

Left pending

 

HB 2090 (Burrows) {CS} – Relating to health care cost disclosures by health benefit plan issuers and third-party administrators.

  • Hancock – Federal rules require healthcare policies to provide cost sharing information to enrollees, bill codifies these rules in Texas statute and provides rulemaking authority
  • Plans now required to disclose pricing information
  • CS creates an all players claim database for information to assess cost of healthcare, improve quality, and reduce costs while improving transparency
  • Database will include a variety of claims, eligibility files, and reported insurer documents open to the public
  • UT Dell Medical will host the database and Center will be required to submit a comprehensive biannual report including recommendations to the legislature concerning the database

 

John Sepehri, Guidestone Insurance – Against

  • Some concerns with language – church plans are generally exempted from the insurance code, but the engrossed version of the bill expressly applies these requirements to church benefit plans
  • Concerned with potential cost associated with requirements in bill
  • Would like to work on language with authors and co-sponsors

 

Charles Miller, Texas 2036 – For

  • Important price transparency tool for patients to get real prices
  • Many Texans delay care due to unknown costs
  • Promise of an all-claims database is not fulfilled under this bill – too much restrictive language, including: health benefit plans driving better outcomes, medical provider quality, which providers offer best value
  • Restrictive language makes it difficult to access data that would really help improve price transparency

 

Daniel Chepkauskas, Patient Choice Coalition of Texas and Oklahoma – For

  • Health care transparency is essential for patients, including with providers and insurance companies reimbursement rates
  • Without this information being made known, people are unable to shop for care that is cost-effective to their situation

 

Cecelia Cazaban, UT Center for Health Care Data – On

  • Changes in health care policy must be fact driven – need access to quality and accurate data to have the facts and make informed decisions
  • This bill will help policymakers and patients address their own and community needs
  • Time is right for this database in Texas – federal funds can support these efforts

 

Carl Isett, Texas Association Third Party Benefit Administrators – For

  • Support bill as written
  • Without commercial data being publicized, the database is “useless”
  • Consider changing language to be less restrictive, to see prices by provider and insurer

 

Left pending

 

SB 528 (Hughes) – Relating to the contractual relationship between a pharmacist or pharmacy and a health benefit plan issuer or pharmacy benefit manager.

  • Pharmacies are penalized for not reaching unrealistic goals set by PBMs
  • Bill would amend chapter 1369 of insurance code by creating subchapter K.
  • PBM can’t place retroactive fees except by a legitimate audit agreed upon by a pharmacy
  • PBM cannot reimburse their pharmacy at a higher rate than others
  • PBM cannot prohibit pharmacy more for delivery service
  • PBM cannot make pharmacy meet accreditation or qualifications more than federal requirements

 

Benjamin McNabb, Texas Pharmacy Association – On

  • Told story of mentally ill person who wanted to give up because of high bills and complicated medications
  • Personally helped him go through all his medications
  • Bill would prevent PBMs from cutting off access to special medication

 

Laurie Van Hughes, Texas Association of Health Plans – On

  • Issue with bill is that it comes into conflict with private contract negotiations
  • 1/3 businesses are struggling due to covid, and many are limiting coverage to mitigate
  • Bill would incentivize managers to provide quality coverage
  • Thinks specialty drugs should be obtain from specially accredited pharmacies
  • Thinks that the agreed to language in the bill should stay
  • If pharmacy is going to act like a mail order pharmacy, then they charge like one
  • While TAHP is against bills that impact their ability to negotiate healthcare costs, thinks it is a good direction for all parties
  • Johnson – Asked about the accreditation process and stakeholders
    • When you go through accreditation, a third party is making sure that you are certified and treating the proper disease state adequately
    • Pharmacy would never have to go through more than 2
  • Nichols – asked about 25% mailing limitation
    • Contracting with mail order pharmacies can be a lower cost
    • As long as they agree not to hit 25% threshold, they could agree not to consider them a mail order pharmacy
    • Could help keep costs down
  • Nichols – Asked if bill would affect a pharmacist in his district that mails about 85% of specific compounds
    • Sounds like they are shipping specialty drugs
    • Just want accreditation for those involved with specialty drugs and to be handling safely
    • Would disclosure during negotiations how they operate as a pharmacy
  • Campbell – The accreditation needs to be on specialty pharmacies that deal with specialty drugs. Doesn’t that put a barrier up to make them to get accredited and by who
    • Bill requires the pharmacy to obtain accreditation to dispense special medications
    • The same creditors that credit TAHP would be doing the accreditations

 

Carter High, TPA and Self – On

  • Bill is a refile from last session, has good intentions
  • Neutral on bill because of a few changes made to a key provision that change the outcome
  • HB 1763 or SB 2195 (Kolkhorst) are companions but loophole for PBMs is excluded
  • As written, bill allows for a loophole for PBMs and claw backs
  • Has issue with mail language about 25% as since covid many people have moved to a mail order preference

 

Steve Hoffhord, Magnolia Pharmacy, American Pharmacies Texas Pharmacy Business Council – For

  • Bill would help him mail specialty drugs to patients that need it and in a larger radius
  • Some PBMs prevent his pharmacy from dispensing some drugs because his pharmacy doesn’t have the accreditations, they require
  • Accreditations are very costly and barley effective
  • Hancock – Asked about 25% threshold and accreditations’ impact on industry
    • All pharmacies without have accreditations have the ability to do compounds
    • Destroys continuity of care
    • Accreditation is lengthy and costly that many cannot afford to go through

 

Melody Shrader, Pharmaceutical Care Management Association – On

  • Was originally opposed to bill but changed mind
  • Mentioned pharmacy in Boston that was not accredited, and 100 people died of meningitis
  • Reason they changed was that several things in bill had been changed and agreed on
  • Hancock – asked about cap to cost of certifications
    • Bill lists 4 options
    • Cannot speak to specific costs
    • Has heard about a graduating number to be able to help smaller pharmacies
  • Campbell – Asked what happens in pharmacy does 65% mail order
    • They would be contracted and charged differently
    • If insurance is going to pay for it directly rather than reimburse, a contract would be needed
  • Johnson – Why 25%? Why not any other rate
    • Negotiated term
    • Would have liked to be a lot lower, like 10%
  • Johnson – What is the concern about higher numbers losing control of process or rate negotiations reach more significance at bigger volumes
    • Want to negotiate better rate if they are in that number
    • Cost of drugs is very expensive

 

Dwayne Gallagher, TPA – On

  • PBMs are using accreditations to promote their own programs
  • Currently in Texas there are currently only 27 pharmacies that meet at least one of the accreditations, but they are all owned by PBMs
  • Think there should be no limit on mail orders
  • Bill equalizes playing field and ensures there is healthy competition
  • Paxton – What is involved with accreditation
    • Main obstacle for most is cost
    • Can reach up to 100,000$ a year, cost of two employees
    • Even those who have them don’t think it has anything to do with quality of care
  • Paxton – Asked about qualifications for accreditation
    • Thinks two full-time employees or having phone answered 24/7
    • Currently 27/8000 pharmacies are accredited
    • Thinks the future is mail order

 

Miguel Rodriguez, TPBC and Self – For

  • Thinks this is a vertically integrated industry
  • Most revenue is from insurers or PBMs that own each other
  • The one setting the standard is the competitor, they have incentivization to protect their market
  • Bill will not bar incentives for good pharmacies it only bars fees
  • Hancock – Is it feasible to have 2 associations that disagree on policy reach agreement on auditing or certification process thought his legislation where they would be doing it for the benefit of their association
    • There have not been a defined set of practices that would require accreditations
    • Because PBMs have control of market they can do whatever they want

 

Left Pending

 

SB 2227 (Hughes) – Relating to securitizing costs associated with electric markets, granting authority to issue bonds.

  • Bill is modeled from framework on SB 1757
  • Difference in two bills is bucket of costs that securitization would cover
  • This bill securitizes a portion of those costs to maintain liability for PUC and ERCOT
  • Is the only measure that will directly help customers
  • Bill addresses electricity pricing
  • Doesn’t want to see prices go up with lack of competition
  • Bill will not undue transactions
  • Hancock – 9 vacate the market, 6 enter the market and 98 options in electric market
  • Johnson – asked about his example of bill, and if the person couldn’t pay their bill what is the ripple effect
    • Looking at whole system here
  • Campbell – Are we paying for competition? Creating this commission to have bonds for businesses, is this protecting the smaller businesses?
    • Committee has looked at securitization system and bill adds onto that
  • Campbell – Is everyone going to have to pay?
    • Would be about 77 cents a month, or more depending on usage
    • Costs would be born through process by everyone
  • Campbell – what are the benefits to the consumer, seems like we are bailing private companies out and paying for competition
    • Can’t enjoy competition
    • Keeps rates consistent and low
  • Hughes – Requires companies to pass whatever relief they get onto their customers

 

Catherine Webking, TEAM – For

  • Think SB 7 was good; many people have benefitted since and want to see them continue to
  • Mentioned Nonmarket risk on invoices after the storm that were created by regulatory activity that raised it during scarcity situations

 

Tom Honey, LCRA – Against

  • Storm resulted in significant loss for their company
  • Concerned this bill will cause a cost shift to help those who were affected differently
  • Bill should include an opt-out option if it would result in negative customer impact
  • Hughes – Asked if LCRA a load serving entity?
    • Sell at wholesale but act as load serving entity for customers
    • Act as LSC for customers through ERCOT
    • Manage their books, minimize costs that go to them, and work with customers
  • Hughes – Do you sell power
    • Not directly
    • Under ERCOT you can contractually provide you load sharing responsibility to another entity
  • Hughes – doesn’t see how this bill applies to LCRA
  • Johnson – Who should be able to opt out
    • Any entity or large customer
    • Anyone who believes they would have more costs than just paying through ERCOT
  • Johnson – Appreciates that LCRA feels obligation to customers, but cannot look though lens and apply principals of market fairness to costs incurred outside of circumstances imagined
  • Hancock – To summarize, LCRA doesn’t mind paying for their end, but doesn’t want to pay for others loss?
    • Correct

 

Cyrus Reed, Lone Star Chapter of the Sierra Club – Against

  • Charges extend to all customers, all who have different fixed costs, would have monthly charges for things that they didn’t use
  • Johnson – No one’s customers made these decisions
    • Correct
    • 30 years of charging to customers
    • We don’t know how much more we are going to have to charge but it seems unfair
  • Johnson – Unfair to those whose providers got lucky or made good management?
    • Just don’t think this is the right approach

 

Shane Kaywood, Hartman Income and Self – For

  • Only bill that both chambers are considering that does anything for Texan rate payers
  • Most large bills won’t come until next March
  • One tenant is going to receive a bill with an additional 140,000$
  • Hancock – asked about consumers not making decisions but companies making plans
    • Their rates went up 400%
  • Hughes – Asked about his statement that he thought bill would help consumers
    • Thinks more people will pay a bit more if it keeps more businesses alive
    • Tenants are billed based on what was budgeted by the previous year and reconcile the differences at the end of the year

 

Mark Grabowski, Austin Energy– Against

  • Support securitization to support the whole ERCOT system
  • But bill requires more money that is needed
  • People will have to pay more than they have to
  • Johnson – Asked if Austin energy had planned for a week of crazy prices
    • Did not, but know they can occur
  • Johnson – Cannot take seriously that any electric provider could have planned for the storm. Agrees that a fair allocation method is needed
    • Played by the market rules
    • When ERCOT put their rules, natural gas was at an all-time high
    • Bill would not allow them to recover costs
  • Hancock – it is the local entities that elect the people who make the decisions

 

David Hogg, Self – For

  • In the last decade, the longest time was 16 hours, so 90 was un-imaginable
  • Has yet to find a single page out of all the videos and available information on electricity, to describe the circumstances were ERCOT can set the cap
  • Hadn’t declared emergency yet, but state capped at 90$
  • Measures need to be in place to make sure this never happens again

 

Brent Bennett, Texas Public Policy Foundation – Against

  • Securitization has been used many times and it a good thing, but this is animalistic
  • Need to consider ripple effect
  • Johnson – do we know what the consequences that we don’t know yet are?
    • Market: What are generators going to do
  • Johnson – Respectfully disagrees that people will be reluctant to invest in electricity market
  • Hughes – in an emergency, producers cannot go offline
    • They are investing in assets ahead of time for scarcity
    • Are we going to change the reward system?
  • Hughes – are you really neutral when it was capped at 90$.
    • That was within the market rules
    • Whether rules are right or wrong is up for debate

 

Shannon McGrith, Texas Energy Professionals Association – For

  • Fully support securitization to stabilize competition and market

 

Tim Morstead, AARP – Against

  • Will definitely increase prices and monetary impact on customers
  • This will socialize losses from business that suffered

 

Katie Coleman, Texas Association of Manufactures and Chemical Council – Against

  • Would charge all customers on kilowatt per hour basis, even if they weren’t involved in February
  • Companies should not have to pay for their competitors
  • People want to pay for their bill and move on rather than having electricity tax
  • Paxton – do you know how many customers effected in ERCOT? What percentage do you think of those were unexposed?
    • All members in ERCOT, doesn’t know number
    • Point of bill Is retail provider who was exposed wants to finance this though customers when they couldn’t do this in the beginning
    • Doesn’t know why you would trade fixed non-bi passable rate for a hypothetical
  • Hancock – customers go into a pool during default and get uplifted into other areas but there is a cap if a new provider picks it up so they are not without power
  • Johnson – Concern for consumer is about 77 cents a month
    • Not sure
    • If term is short
    • Might be more like is 1.5$ but no one knows
  • Johnson – Mentioned possibility of bankruptcy, but they are REPs that won’t pay generators
    • Big bills from February are over
    • Most know what their total cost is already
    • Could be some short-term uplift
  • Campbell – thought it was important to note that this was not a carve out bill, and both residential and commercial customers are affected

 

Cliff Lange, South Texas Electric Coop – Against

  • Will not alleviate short cost in ERCOT of 3 billion
  • Risk should fall on participants not customers
  • Securitization will not benefit consumers on fixed rate, but will work to benefit entities who benefitted from this arrangement
  • Allowing any market entity to take advantage could increase costs overall

 

Brad Jones, ERCOT – Resource Witness

  • Hughes – Does loss of competitiveness increase the price if there is less competition?
    • It could
    • If anyone goes out of business, it should be everyone’s concern
  • Hughes – How many active participants are there?
    • Told its close to 90
    • Doesn’t mean they only industrial or only residential
    • Could be commercial or industrial
  • Hughes – Do you think there is a problem with not finding a solution to securitization? Were any of the ERCOT market rules changes during the storm
    • This bill looks at specifically load serving entities and their ability to operate in market
    • 11 load serving entities that were part of short paid, of those 9 exited the market and the remaining 2 have entered into payment plans
    • No rules were changed, but none were followed
    • Decision was made at beginning of week to hold price at 9,000, overrode ERCOT protocols at that point
  • Hughes – To say that this was within ERCOT rules is not accurate, correct? This is a deviation from normal practice.
    • Correct, this is a deviation from ERCOT rules
  • Hughes – what effect does the securitization of cost on this bill have on the consumers
    • Consumers that are on flexible rate plans not fixed rate are better off on this plan
    • 95% around is fixed rate

 

Laurie Cobus, OPUC – Resource Witness

  • Campbell – appreciates OPUC though all this because they stand for the customers. This bill would be a new assessment on customer bills in order to recover the 5 billion. Asked if this bill would itemize utility bills and if it would look like a new tax
    • Agreed with the first part
    • Their understanding is that it would be a new item on bill
    • It is a required fee
    • At this time, as a consumer, you cannot opt-out
  • Campbell – And depending on bend it could be anywhere from 70 cents to a 1.5$ but for commercial consumers would be a lot more
    • Smaller consumers would not be charged the same way a large user and consumer would
  • Campbell – do you see any other way to protect those companies that were not the REPs that lost
    • Mentioned SB 1750 and SB 1757
    • Need a way to get back the 5 billion that was spent during that time
  • Campbell – There is concern about lack of competition, are there other reps going online?
    • 5 new reps in the last 5 months
    • 6 reps in OPUC certification process
    • 5 reps testing to enter OPUC market
  • Campbell – Asked if they would have to bear the burden of this as well
    • 9 reps are in default
    • According to their research 8 were default or involved in the storm
  • Hancock – Based off the market design, it and competition could balance itself back out
    • According to their research they would agree

 

Left Pending