Who should regulate Texas Gas Service conservation programs?

Longtime utility critic Paul Robbins has discovered that House Bill 2263, legislation approved by the Texas Legislature this spring, may hamper city efforts to regulate rebates offered by Texas Gas Service. The same would be true of other cities throughout the state that have regulated natural gas utilities.

HB 2263 gives the Texas Railroad Commission exclusive jurisdiction over natural gas energy conservation programs throughout the state. Under its franchise agreement with the city, TGS offers rebates for tankless water heaters, furnaces, clothes dryers and clothes dryer connections. Customers pay for these rebates through a surcharge on their monthly bills. The current charge, called a conservation adjustment, is 74 cents per month.

Customers in other cities in the Austin area, including Lakeway, Cedar Park, Sunset Valley and Dripping Springs, are also eligible for such rebates. However, in the past, the Railroad Commission has not allowed TGS to offer conservation rebates for customers in unincorporated areas.

The sponsors of the bill were Rep. Drew Darby, R-San Angelo, and Sen. Bryan Hughes, R-Mineola, as well as Austin Sen. Sarah Eckhardt, a Democrat. When Robbins tried to find out why Eckhardt sponsored the bill, he got an email from Eckhardt’s chief of staff, Peter Einhorn. According to that email, Eckhardt agreed to carry the bill after being lobbied by the Sierra Club and Environmental Defense Fund.

However, Colin Leyden, Environmental Defense Fund state director for Texas, told the Austin Monitor via email, “This was not a priority bill for EDF and I’m pretty certain (the fog of legislative session) we did not specifically ask Sen. Eckhardt to co-sponsor. We did put in a card of support for the House version of the bill but did not testify.” He suggested that they might have simply been supporting the bill because of a request from the Sierra Club.

In addition, when the Monitor asked Cyrus Reed, conservation director of the Lone Star Chapter of the Sierra Club, why that group supported the legislation, he replied via email: “It was pretty soft support. We thought it made sense for the state of Texas to be able to approve gas conservation programs and a process to do so. The hope is that those companies will have programs that help Texans, particularly low-income Texans, save money on their bills and use less gas.” He said the group “fought to improve the legislation by requiring that the companies have a public outreach and input plan.”

However, Reed concluded, “We are concerned that in the RRC proposed rules there appears to be no standard to make sure programs are cost effective and actually save money and no specific mention of how to oppose any utility’s plan.”

Although Texas Gas Service, along with CenterPoint Energy in Houston, spoke in favor of the bill before legislative committees, there were some other unusual proponents, including Public Citizen and the Sierra Club. Although Public Citizen supported the bill, the group argued that the Railroad Commission’s jurisdiction should not be exclusive but should be shared with local jurisdictions. That argument did not prevail.

Robbins complains that no one from the city of Austin’s Intergovernmental Relations Office opposed the bill even though it appears to be in direct conflict with the franchise agreement between the city and Texas Gas Service. Brie Franco, the city’s intergovernmental relations officer, confirmed that the city took no position on the bill.

The Monitor asked Council Member Leslie Pool, who chairs City Council’s Austin Energy Utility Oversight Committee, whether she heard anything about the bill during the legislative session. She replied via text: “HB 2263 was supported by environmental advocates like the Sierra Club, the US Green Building Council, Environmental Defense Fund, and Public Citizen. Had Austin opposed this legislation, it would have been the only Texas city opposing the bill and would have run counter to the positions taken by our allies in the environment and conservation movement.

“While fighting other major pieces of preemptive legislation aimed directly at cities and specifically Austin, it’s hard to imagine a positive outcome for the City of Austin fighting a bill that was supported by environmentalists, Texas Gas, and cosponsored by Austin’s Senator Sarah Eckhardt (at the request of the environmentalists).”

The franchise agreement also specifies that TGS must report its conservation activities to the Resource Management Commission four times a year. There is no indication that TGS would not be required to do that.

In the meantime, the Railroad Commission is going through the process of setting up rules relating to its new authority over conservation programs. That being the case, the city is still in the driver’s seat for now.

Robbins, as vice chair of the Resource Management Commission, is proposing two resolutions related to Texas Gas Service for next week’s commission meeting. He said commission chair Louis Stone is co-sponsoring both resolutions. The first resolution points out that the Austin City Council has regulated TGS programs since 1985 and that removal from regulation by the city may make the company’s programs less cost effective. If the Resource Management Commission adopts the resolution, the group would ask City Council to petition the Railroad Commission to waive its jurisdiction over those programs and allow the city to continue its regulation.

The second resolution quotes a survey of gas utilities throughout the United States showing that Texas Gas Service’s energy efficiency programs do not conform with national benchmarks. Further, the resolution suggests lowering rebates for clothes dryers, tankless water heaters and furnaces for the 2024 fiscal year. For example, the rebate for a new gas dryer would fall by about two-thirds. If such a waiver is not granted, the resolution says, the city should tell the Railroad Commission that the programs are not cost effective.

The second resolution also states that the city should negotiate with Texas Gas Service to establish that after 2024 the city of Austin would approve and administer gas conservation programs currently operated by the company.

A Texas Gas Service spokesperson released the following statement: “We value the discussions around the governance of a statewide energy efficiency program approved by the state legislature earlier this year. Texas Gas Service will follow the program processes set forth by our regulators. We look forward to the opportunity to offer energy- and cost-saving benefits to the customers we serve.”

The Austin Monitor’s work is made possible by donations from the community. Though our reporting covers donors from time to time, we are careful to keep business and editorial efforts separate while maintaining transparency. A complete list of donors is available here, and our code of ethics is explained here.