Legislative Blog
J.B. Williams, J.D.
Grants and loans for electric facilities SB2627
A Blog about 88th Legislature Laws
A Bit of Background
The following backgrounds help summarize the author's views on both the general topic: Texas and more specifically 88th Legislature Laws as it relates to that topic.
Brief Summary of Texas
Texas is truly a Republic. There are a multitude of items that to modify the state constitution must be modified. So there are times when Constitutional amendments are on the voting ballots. While I sometimes abhor the wording, the concept that all of those legally able to vote in Texas must vote on the change is a good one. And bills in Texas are generally short, making it easier for everyone to understand.
Summary of 88th Legislature Laws
The blogs here will discuss the laws passed by Congress and signed into law, as well as those, passed by Congress and approved by the voters to become law. There are a multitude of laws and each time I post blogs I will notate here the current effective date if it is different from prior blogs. I am currently posting bills that took effect immediately - those bills total 336. I am currently posting regarding larger bills, so each blog covers a single bill.
Blog Summary
Grants and loans for electric facilities that are considered dispatchable. In other words, ones that can be increased or decreased in capacity by human control.Grants and loans for electric facilities SB2627
Published: 2024-08-06
SB 2627
Funding mechanism to support the construction, maintenance, modernization, and operation of electric generating facilities
The Texas Energy fund is established separate from the general revenue fund for the purposes of this bill. The funds may be used for grants outside the ERCOT power region, but within Texas, for the following purposes.
- facility modernization;
- facility weatherization;
- reliability and resiliency facility enhancements; or
- vegetation management
These funds may be used to finance upgrades to existing dispatchable electric generating facilities that provide power for the ERCOT power region, as long as they result in at least 100 megawatts of capacity or the construction of a dispatchable facility that has at least 100 megawatts. A dispatchable facility is one where output is under human control. The construction must not meet the planning model requirements necessary to be included in the Capacity Demand and Reserve Reports for ERCOT before 6/1/23, does not exceed 60% of the cost of the facility, and it must be senior debt.
Each application shall be evaluated on the following:
-
the applicant's
- quality of services and management;
- efficiency of operations;
- history of electricity generation in Texas and the US;
- resource operation attributes;
- ability to address regional and reliability needs;
- access to resources essential for operating the facility, including land, water, and reliable infrastructure;
- evidence of creditworthiness
- generation capacity and estimated costs of project;
- any other factors the commission considers appropriate
The loan must be a 20 year term, payable starting on the 3rd anniversary of operation, and bear an interest rate of 3%. A deposit of 3% of the total project cost must be placed in escrow before loan funds are given. All loans must be disbursed on or before 12/31/2025. This loan/grant section expires on 9/1/2050.
The commission can provide completion bonus grants. An eligible project must provide dispatchable electric generating facility in the ERCOT power region and may not be an energy storage facility. The amount of the grant would be based upon the megawatts of capacity. To be eligible it must generate at least 100 megawatts and not meet the planning model requirements to be included in the Capacity Demand and Reserve Report for ERCOT before 6/1/23.
Each application shall be evaluated on the following:
-
the applicant's
- quality of services and management;
- efficiency of operations;
- history of electricity generation in Texas and the US;
- resource operation attributes;
- ability to address regional and reliability needs;
- access to resources essential for operating the facility, including land, water, and reliable infrastructure;
- generation capacity and estimated costs of project;
- any other factors the commission considers appropriate
The grants may not be more than $120,000 per megawatt of capacity if connected before 6/2/2026; or $80,000 per megawatt of capacity if connected on or after 6/1/2026 but before 6/2/2029. No grants for interconnectivity after 6/1/2029. Grants are disbursed in equal annual payments over a 10 year period to begin on the first anniversary after commercial operations begin. The commission shall set standards which must be met for reliability. Failure to meet them may result in no grant disbursement or reduced disbursement.
This section expires 12/1/2040.
If there are more than 4 pending applications for loans, then the loan amount awarded may not exceed 25% of the fund balance. Loans may not be awarded for a facility that is primarily industrial or private use. And loans may not be issued for construction or operation of natural gas transmission pipeline.
Any facility getting a loan or grant must participate in the ERCOT wholesale electricity market.
There are guidelines set out for the trust account in which the funds are to be held prior to disbursing, and where the funds are placed when receiving payments on loans. Further rules are set out for the event of a defaulting facility to ensure that the State of Texas gains control through court receivership and management.
The Texas Energy Fund Advisory Committee is made of 3 members of the senate appointed by the lieutenant governor. Included must be a member of the committee of the senate having primary jurisdiction over electricity generation; a member of the senate committee having primary jurisdiction over finance. There are also 3 members of the house of representatives appointed by the speaker of the house. Included must be a member of the house committee having primary jurisdiction over electricity generation; and a member of the house committee having primary jurisdiction over finance.
The Texas Energy Fund Advisory Committee may hold public hearings, formal meetings and work sessions. They may not take formal action at a public hearing, formal meeting or work session unless a quorum of the committee is present. The members are not entitled to compensation or reimbursement beyond what they are entitled to for their legislative service.
The committee may provide comments and recommendations for rules regarding the use of funds; and they shall review the operation, function and structure of the fund at least semiannually.
The Texas backup power package is a stand-alone, behind-the-meter, multiday backup power source that can be used for islanding. A microgrid design to analyze critical facility characteristics and requirements to establish specifications for various sizes that can serve most critical facilities and have standard interconnection, communications and controls.
Grants may be given but may not exceed $500 per kilowatt of capacity. They must be be for commercial energy system, private school, or a for-profit entity that does not serve public safety and human health. And it must follow the Texas backup power package design and use standards. They must be in the ERCOT system.
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