SB 2021

relating to the interconnection and integration of distributed
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1.  Section 31.002, Utilities Code, is amended by
adding Subdivisions (2-a) and (4-c) and amending Subdivision (10)
(2-a)  "Aggregated distributed energy resource" means
a group of distributed energy resources joined together to be
operated as a single distributed energy resource, where each
individual resource in the aggregation produces not more than 1.5
megawatts of electricity, subject to an increase or decrease by
commission rule if the commission determines that a different
capacity size limit is appropriate and does not adversely affect
the ERCOT power region or distribution system reliability.
(4-c)  "Distributed energy resource" means a source of
electricity connected at a voltage less than 60 kilovolts,
including electric energy storage, distributed generation,
distributed natural gas generation, or electric vehicles that
provide electricity onto the distribution system.  The term does
not include a facility that provides temporary emergency electric
(10)  "Power generation company" means a person[,
including a person who owns or operates a distributed natural gas
(A)  generates electricity that is intended to be
sold at wholesale, including the owner or operator of electric
energy storage equipment or facilities to which Subchapter E,
(B)  does not own a transmission or distribution
facility in this state other than an essential interconnecting
facility, a facility not dedicated to public use, or a facility
otherwise excluded from the definition of "electric utility" under
(C)  does not have a certificated service area,
although its affiliated electric utility or transmission and
distribution utility may have a certificated service area.
SECTION 2.  Section 39.351(a), Utilities Code, is amended to
(a)  A person may not generate electricity unless:
(1)  the person is registered with the commission as a
power generation company in accordance with this section; or
(2)  the electricity is generated as part of a
registered aggregated [aggregate] distributed energy resource
SECTION 3.  Subchapter H, Chapter 39, Utilities Code, is
amended by adding Section 39.3514 to read as follows:
Sec. 39.3514.  REGISTRATION OF DISTRIBUTED ENERGY
RESOURCES.  An owner or operator of a distributed energy resource
may provide energy or ancillary services in the wholesale market in
the ERCOT power region through generating electricity and providing
that electricity onto a distribution system only if:
(1)  the owner or operator is registered with the
commission as a power generation company under Section 39.351 and
authorized by the independent organization certified under Section
39.151 for the ERCOT power region; or
(2)  the distributed energy resource:
(A)  is part of an aggregated distributed energy
(i)  included in the registration of a power
generation company under Section 39.351 and the independent
organization certified under Section 39.151 for the ERCOT power
(ii)  authorized by the commission and
registered under Section 39.3515; and
(B)  has complied with the interconnection
requirements of the interconnecting transmission and distribution
SECTION 4.  Chapter 39, Utilities Code, is amended by adding
Subchapter O to read as follows:
SUBCHAPTER O.  INTERCONNECTION OF DISTRIBUTED ENERGY RESOURCES
Sec. 39.701.  INTEGRATION AND COST RECOVERY.  (a)  The
commission by rule shall establish for the ERCOT power region:
(1)  requirements for the dispatchability,
reliability, and other characteristics of each type or
classification of distributed energy resource;
(2)  appropriate disclosure requirements and other
customer protections for residential and small commercial
customers of providers of aggregated distributed energy services;
(3)  information an owner or operator of a distributed
energy resource must provide to the interconnecting transmission
and distribution utility to ensure the resource will not adversely
affect the transmission or distribution system;
(4)  interconnection guidelines that address:
(A)  the determination of whether a given
interconnection or combination of interconnections would exceed a
transmission and distribution utility's system capacity in a
(B)  considerations for feeder locations related
to distributed energy resources;
(C)  considerations of the size or capacity of a
(D)  the assessment by the interconnecting
transmission and distribution utility of potential impacts to other
customers in the area of the distributed energy resource; and
(E)  other operating parameters necessary for the
transmission and distribution utility's reliable operation of its
transmission and distribution system;
(5)  a methodology for the appropriate allocation and
recovery of the transmission and distribution utility's costs to
interconnect a distributed energy resource; and
(6)  requirements for the independent organization
certified under Section 39.151 for the ERCOT power region to report
to the commission periodically:
(A)  the categories and generation levels of
distributed energy resources allowed to participate in the ERCOT
(B)  the categories and megawatt levels of
aggregated distributed energy resources allowed to participate in
(C)  performance metrics for distributed energy
resources allowed to participate in the ERCOT wholesale market; and
(D)  other information the commission may
(b)  The commission shall authorize a transmission and
(1)  defer for recovery in a later ratemaking
proceeding the incremental operations and maintenance expenses, or
other expenses, and the return, not otherwise recovered in a rate
proceeding, associated with the installation, modification,
upgrade, or maintenance of its transmission or distribution
facilities required by an interconnection with a distributed energy
(2)  request recovery of the costs associated with an
interconnection with a distributed energy resource, including any
deferred expenses, through a proceeding under Section 35.004 or
36.210 or in another ratemaking proceeding regardless of whether
the utility or cooperative first requested recovery in a base-rate
(1)  require or authorize a distribution service
provider to procure distributed energy resource services to enable
the operation of the distribution system;
(2)  require a distribution service provider to
disclose to any third party, except as required by the independent
system operator, the provider's system planning information,
studies, models, critical infrastructure information, or other
(3)  diminish a distribution service provider's rights
or obligations to own or operate its distribution system and
provide electric delivery service to retail customers in the
provider's certificated service area;
(4)  obligate a distribution service provider to
interconnect a distributed energy resource with a capacity equal to
or greater than 10 megawatts; or
(5)  prohibit an interconnecting distribution service
provider from shedding a distributed energy resource, or otherwise
obligate an interconnecting distribution service provider to
provide preferential treatment to feeders with distributed energy
resources or prevent a transmission and distribution utility from
fulfilling its load shedding obligations during an involuntary load
shedding event initiated by the independent system operator or a
planned or unplanned outage of the distribution system.
Sec. 39.702.  LIABILITY.  An interconnecting transmission
and distribution utility or retail electric provider providing
service to a distributed energy resource to which this subchapter
(1)  a violation of reliability or service metrics
caused by distributed energy resource operations that violate its
(2)  a distributed energy resource's inability or
failure to provide services that violate its interconnection
agreement or a penalty for such inability or failure.
SECTION 5.  Subchapter Z, Chapter 39, Utilities Code, is
amended by adding Section 39.9166 to read as follows:
Sec. 39.9166.  DISTRIBUTED ENERGY RESOURCES.  (a)  A
customer who purchases or leases a distributed energy resource or
enters into a power purchase agreement for a distributed energy
resource in the ERCOT power region is entitled to the information
and disclosures required under Chapter 115, Business & Commerce
Code, and is entitled to protection from fraudulent, unfair,
misleading, or deceptive practices.
(b)  An owner or operator of a distributed energy resource
may provide energy or ancillary services in the wholesale market in
(c)  A person who owns or operates a distributed energy
resource in an area in which customer choice has been introduced and
is part of an aggregated distributed energy resource, or has not
individually registered with the commission as its own power
generation company, may only sell the surplus electricity that is
produced by the distributed energy resource and not consumed by the
owner's premise to the retail electric provider that serves the
premise's load at a value agreed to between the distributed energy
resource owner and the retail electric provider that serves the
premise's load.  The value may be an agreed value based on the
clearing price of energy or ancillary service at the time of day
that the electricity is made available to the grid.
(d)  A person who operates an aggregated distributed energy
resource in an area in which customer choice has been introduced is
subject to customer protection rules established by the commission
under Chapter 17 and this chapter.
(e)  The independent organization certified under Section
39.151 for the ERCOT power region shall adopt procedures to ensure
that the amount of electricity purchased from a distributed energy
resource owner under this section is accounted for when settling
the total load served by the retail electric provider that serves
(f)  A distributed energy resource owner that requests net
metering services for purposes of this section must have metering
devices capable of providing measurements consistent with the
independent organization's settlement requirements.
(g)  A transmission and distribution utility may provide to
customers educational information regarding the technical
requirements for the interconnection of distributed energy
resources to the distribution system.  The provision of information
under this subsection is not considered a competitive energy
(h)  This section does not apply to a purchase or agreement
entered into under Section 39.914 or 39.916.
SECTION 6.  As soon as practicable after the effective date
of this Act, the Public Utility Commission of Texas shall adopt
rules necessary to implement the changes in law made by this Act.
SECTION 7.  This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution.  If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2025.