Texas Legislature Enrolls Market Power Disgorgement Bill

May 30, 2011
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The Texas legislature has enrolled and sent to the governor HB 2133 which requires the PUCT to order the disgorgement of all excess revenue resulting from a violation of Section 39.157 of PURA, relating to market power.

For any other violation of statute, rule, or protocols relating to wholesale electric markets, HB 2133 also grants the Commission the authority, and discretion, to order disgorgement of all excess revenue resulting from the violation in addition to the assessment of a penalty.

HB 2133 also provides that, "[t]he commission and a person may develop and enter into a voluntary mitigation plan relating to a violation of Section 39.157 or rules adopted by the commission under that section. If the commission and a person enter into a voluntary mitigation plan, adherence to the plan constitutes an absolute defense against an alleged violation with respect to activities covered by the plan."

Any disgorged revenues are to be returned to affected wholesale electric market participants to be used to reduce costs or fees incurred by retail electric customers. The bill directs the Commission to adopt rules regarding allocation of such disgorged revenues.

The bill limits the parties to a disgorgement proceeding to the respondent and the PUCT, including the independent market monitor.

PURA 39.157 describes market power abuses as, "practices by persons possessing market power that are unreasonably discriminatory or tend to unreasonably restrict, impair, or reduce the level of competition, including practices that tie unregulated products or services to regulated products or services or unreasonably discriminate in the provision of regulated services."

PURA 39.157 further defines "market power abuses" as, "includ[ing] predatory pricing, withholding of production, precluding entry, and collusion." Additionally, PURA 39.157 contains utility code of conduct regulations, and a violation of such code of conduct provisions which, "materially impairs the ability of a person to compete in a competitive market shall be deemed to be an abuse of market power."

"The possession of a high market share in a market open to competition may not, of itself, be deemed to be an abuse of market power," under PURA 39.157.

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