88R3548 CXP-F     By: Schaefer H.B. No. 1412       A BILL TO BE ENTITLED   AN ACT   relating to the resilience of the electric grid and certain   municipalities; authorizing an administrative penalty.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  The legislature finds that:                (1)  electric grid blackouts threaten the lives of the   citizens of this state and pose a disproportionately large risk to:                      (A)  the elderly, vulnerable, and underprivileged   within this state; and                      (B)  communities facing disproportionate   environmental health burdens and population vulnerabilities   relating to facilities such as chemical plants and refineries that   can become environmental disaster areas when taken off-line due to   loss of electricity;                (2)  the 16 critical infrastructures identified in   President Barack Obama's Presidential Policy Directive "Critical   Infrastructure Security and Resilience" (PPD-21) including water   and wastewater systems, food and agriculture, communications   systems, the energy sector including refineries and fuel   distribution systems, chemical plants, the financial sector,   hospitals and health care facilities, law enforcement and   government facilities, nuclear reactors, and other critical   functions depend on the electric grid in this state and make the   grid's protection vital to the economy of this nation and homeland   security;                (3)  the blackout that occurred in this state in   February 2021 caused:                      (A)  death and suffering in this state;                      (B)  economic loss to this state's economy;                      (C)  impacts to all critical infrastructures in   this state;                      (D)  the dispatch of generation units that likely   exceeded limits established by the Environmental Protection Agency   for sulfur dioxide, nitrogen oxide, mercury, and carbon monoxide   emissions and wastewater release limits;                      (E)  radically increased pricing of electricity   that resulted in making electric power bills unaffordable to many   customers across this state; and                      (F)  the exacerbation of the COVID-19 pandemic   risk by forcing many of the state's citizens to consolidate at   warming centers and in other small spaces where warmth for survival   superseded social distancing protocols;                (4)  a previous large-scale blackout occurred in this   state in February 2011 during which 4.4 million customers were   affected;                (5)  this state is uniquely positioned to prevent   blackouts because this state is a net exporter of energy and is the   only state with an electric grid almost exclusively within its   territorial boundaries;                (6)  the 2011 and 2021 blackouts call into question:                      (A)  whether too much risk has been accepted   regarding weatherization of electric generation infrastructure;                      (B)  whether this state lacks the internal   distribution structure and control systems to manage rolling   blackouts; and                      (C)  whether sufficient resources have been   allocated toward overall grid resilience;                (7)  public confidence in the resilience of the   electric grid in this state is essential to ensuring economic   prosperity, domestic tranquility, continuity of government, and   life-sustaining systems;                (8)  a resilient electric grid that offers businesses   in this state continuity of operations in the event of a natural or   man-made disaster will be an unrivaled attraction for businesses to   expand or move their operations to this state and for protecting   what is important to this state, including its military   installations and its environment;                (9)  current market incentives and regulations are not   sufficient for electric utilities to:                      (A)  prioritize grid security and resilience; and                      (B)  protect the grid against hazards;                (10)  protection of the electric grid in this state   against hazards would assure businesses and the citizens of this   state that the "lights will be back on first in Texas" in the event   of a nationwide catastrophe affecting electric infrastructure,   sparing catastrophic societal and environmental consequences for   this state; and                (11)  when this state begins implementation of the plan   for all hazards resilience described by Section 44.007, Utilities   Code, as added by this Act, to protect the electric grid in this   state, short-term and long-term economic benefit will far exceed   even the most optimistic estimates of the conventional economic   incentives provided by tax abatements to attract businesses to this   state.          SECTION 2.  Subtitle B, Title 2, Utilities Code, is amended   by adding Chapter 44 to read as follows:   CHAPTER 44. GRID RESILIENCE          Sec. 44.001.  DEFINITIONS. In this chapter:                (1)  "All hazards" means:                      (A)  terrestrial weather including wind,   hurricanes, tornadoes, flooding, ice storms, extended cold weather   events, heat waves, and wildfires;                      (B)  seismic events including earthquakes and   tsunamis;                      (C)  physical threats including terrorist attacks   with direct fire, drones, explosives, and other methods of physical   sabotage;                      (D)  cyber attacks including malware attacks and   hacking of unprotected or compromised information technology   networks;                      (E)  manipulation of operational technology   devices including sensors, actuators, and drives;                      (F)  electromagnetic threats through man-made   radio frequency weapons, high altitude nuclear electromagnetic   pulse, and naturally occurring geomagnetic disturbances;                      (G)  electric generation supply chain   vulnerabilities including insecure or inadequate fuel   transportation or storage; and                      (H)  insider threats caused by compromised or   hostile personnel working within government or the utility   industry.                (2)  "Micro-grid" means a group of interconnected loads   and distributed energy resources inside clearly defined electrical   boundaries that act as a single controllable entity with respect to   the grid.                (3)  "Security commission" means the Texas Grid   Security Commission.          Sec. 44.002.  TEXAS GRID SECURITY COMMISSION. (a) The Texas   Grid Security Commission is composed of the following members:                (1)  a representative of the Texas Division of   Emergency Management appointed by the chief of that division;                (2)  a representative of the State Office of Risk   Management appointed by the risk management board;                (3)  a representative from the commission appointed by   that commission;                (4)  a representative from the Railroad Commission of   Texas appointed by that commission;                (5)  a representative of the independent organization   certified under Section 39.151 for the ERCOT power region appointed   by the chief executive officer of that organization;                (6)  a representative of the Texas Military Department   appointed by the adjutant general of that department;                (7)  a representative of the Texas Military   Preparedness Commission appointed by that commission;                (8)  a representative of the Office of State-Federal   Relations appointed by the director of that office;                (9)  a representative of the Department of Information   Resources appointed by the executive director of that department;                (10)  a representative of power generation companies   appointed by the chief of the Texas Division of Emergency   Management;                (11)  two representatives of transmission and   distribution utilities appointed by the chief of the Texas Division   of Emergency Management;                (12)  three individuals with expertise in critical   infrastructure protection appointed by the chief of the Texas   Division of Emergency Management, to represent the public interest;                 (13)  one representative appointed by the chief of the   Texas Division of Emergency Management from each of the following   essential services sectors:                      (A)  law enforcement;                      (B)  emergency services;                      (C)  communications;                      (D)  water and sewer services;                      (E)  health care;                      (F)  financial services;                      (G)  food and agriculture;                      (H)  transportation; and                      (I)  energy;                (14)  an expert in the field of higher education   appointed by the chief of the Texas Division of Emergency   Management; and                (15)  an expert in the field of electricity markets and   regulations appointed by the chief of the Texas Division of   Emergency Management.          (b)  The chief of the Texas Division of Emergency Management   may invite members or former members of the United States Air   Force's Electromagnetic Defense Task Force to the membership of the   security commission.          (c)  The Texas Division of Emergency Management shall   designate a member of the security commission to serve as presiding   officer.          (d)  The presiding officer may invite to the membership of   the security commission any person whose expertise the security   commission considers necessary to carry out the purposes of this   chapter.          (e)  The security commission shall convene at the call of the   presiding officer.          (f)  The security commission shall report to the chief of the   Texas Division of Emergency Management.          (g)  A vacancy on the security commission is filled by   appointment for the unexpired term in the same manner as the   original appointment.          (h)  To the extent possible, individuals appointed to the   security commission must be residents of this state.           (i)  The presiding officer of the security commission or the   chief of the Texas Division of Emergency Management may invite   subject matter experts to advise the security commission, including   individuals recognized as experts in the fields of electricity   markets, cybersecurity of grid control systems, electromagnetic   pulse mitigation, terrestrial and solar weather, and micro-grids.   The presiding officer may invite an individual for this purpose   regardless of whether the individual is a resident of this state.           Sec. 44.003.  EXECUTIVE COMMITTEE. (a) The security   commission executive committee is composed of the following   security commission members selected by the presiding officer:                (1)  a representative of the Texas Division of   Emergency Management;                (2)  a representative of the Railroad Commission of   Texas;                (3)  a representative of the commission;                (4)  a representative of the independent organization   certified under Section 39.151 for the ERCOT power region;                (5)  two representatives of transmission and   distribution utilities; and                (6)  a representative of power generation companies or   another member of the security commission with expertise in power   generation.          (b)  If two or more members or former members of the United   States Air Force's Electromagnetic Defense Task Force join the   security commission after being invited under Section 44.002(b),   the presiding officer shall select two of those members to serve on   the executive committee.          (c)  The security commission may not adopt a resilience   standard under Section 44.006 unless the executive committee   approves the standard.          Sec. 44.004.  GRID RESILIENCE INFORMATION. (a)  Each of the   following members of the security commission shall apply for a   secret security clearance or an interim secret security clearance   to be granted by the federal government:                (1)  the representative of the independent   organization certified under Section 39.151 for the ERCOT region;                (2)  the representative of the Texas Division of   Emergency Management; and                (3)  the representative of the State Office of Risk   Management.          (b)  A member of the security commission listed under   Subsection (a) who is granted an applicable security clearance   under that subsection is a member of the information security   working group.          (c)  The information security working group shall determine:                (1)  which information received by the security   commission that is used in determining the vulnerabilities of the   electric grid or that is related to measures to be taken to protect   the grid is confidential and not subject to Chapter 552, Government   Code;                (2)  which members of the security commission may   access which types of information received by the security   commission; and                (3)  which members, other than members of the working   group, should apply for a secret security clearance or interim   clearance granted by the federal government.          (d)  Information that the information security working group   determines is confidential under Subsection (c) shall be stored and   maintained by the independent organization certified under Section   39.151 for the ERCOT power region.          (e)  The security commission must maintain a reasonable   balance between public transparency and security for information   determined to be confidential under Subsection (c).           (f)  Nothing in this section abrogates any rights or remedies   under Chapter 552, Government Code.          Sec. 44.005.  GRID RESILIENCE EVALUATION. (a)  The security   commission shall evaluate, using available information on past   blackouts in ERCOT, all hazards to the ERCOT electric grid,   including threats that can cause future blackouts.  The security   commission shall evaluate the resilience of municipalities in this   state in the following essential areas:                (1)  emergency services;                (2)  communications systems;                (3)  clean water and sewer services;                (4)  health care systems;                (5)  financial services;                (6)  energy systems, including an evaluation of whether   energy, electric power, and fuel supplies are protected and   available for recovery in the event of a catastrophic power outage;   and                (7)  transportation systems.          (b)  The security commission may create groups or teams to   address each hazard as necessary. The security commission must   assess each hazard both on the likelihood of occurrence of the   hazard and the potential consequences of the hazard.          (c)  The security commission shall identify methods by which   this state can support an overall national deterrence policy as   proposed by the Cyberspace Solarium Commission, including by:                (1)  identifying means to ensure that all hazards   resilience for electric utilities supports critical national   security functions in this state; and                 (2)  engaging the Texas National Guard to be trained as   first responders to cybersecurity threats to the ERCOT electric   grid and other critical infrastructure.          (d)  The security commission shall evaluate nuclear   generation sites in this state, the resilience of each nuclear   reactor to all hazards, and the resilience to all hazards of   off-site power for critical safety systems that support the reactor   and spent fuel. The security commission may communicate with the   Nuclear Regulatory Commission to accomplish the evaluation.          (e)  The security commission shall evaluate current Critical   Infrastructure Protection standards established by the North   American Electric Reliability Corporation and standards set by the   National Institute of Standards and Technology to determine the   most appropriate standards for protecting grid infrastructure in   this state.          (f)  The security commission shall investigate the steps   that local communities and other states have taken to address grid   resilience. The security commission may request funding to conduct   site visits to these locations as required.          (g)  The security commission shall identify universities   based in this state that have expertise in cybersecurity and other   matters that can contribute to the security commission's goal of   mitigating all hazards to the grid in this state.          (h)  In carrying out the security commission's duties under   this section, the security commission may solicit information from:                (1)  defense contractors with experience protecting   defense systems from electromagnetic pulse;                (2)  electric utilities that have developed   electromagnetic pulse protections for the utilities' grid assets;                (3)  the United States Department of Homeland Security;   and                (4)  the Commission to Assess the Threat to the United   States from Electromagnetic Pulse (EMP) Attack.          Sec. 44.006.  RESILIENCE STANDARDS.  (a)  Based on the   findings of the evaluations and investigations conducted under   Section 44.005, the security commission shall develop and adopt   resilience standards for municipalities and critical components of   the ERCOT electric grid.          (b)  Standards developed and adopted for energy systems of   municipalities must include provisions to ensure that energy,   electric power, and fuel supplies are protected and available for   recovery in the event of a catastrophic power outage.          Sec. 44.007.  CONTRACTOR SUPPORT FOR CRITICAL SYSTEM AND   COMPONENT RESILIENCE. (a) The State Office of Risk Management,   with assistance from the security commission, shall select   contractors with proven expertise to identify critical systems and   components of the ERCOT electric grid vulnerable to hazards   described by Section 44.005(a) with a specific emphasis on the most   dangerous cyber and electromagnetic threats.           (b)  A contractor selected under Subsection (a) must   identify the critical components, including industrial control   systems, not later than six months after the date the contractor is   engaged.          (c)  Not later than January 1, 2025, an entity that owns or   operates a component identified by a contractor under Subsection   (a) as critical shall upgrade the component as necessary for the   component to meet the applicable standards set by the security   commission under Section 44.006.          (d)  The State Office of Risk Management shall select   contractors with demonstrated expertise to verify whether an entity   with a component identified as critical under Subsection (a) has   upgraded components as required by Subsection (c).          Sec. 44.008.  PLAN FOR ALL HAZARDS RESILIENCE. (a) Not   later than January 1, 2024, the security commission shall prepare   and deliver to the legislature a plan for protecting the ERCOT   electric grid from all hazards, including a catastrophic loss of   power in the state.          (b)  The plan must include:                (1)  weatherizing requirements to prevent blackouts   from extreme cold weather events, an analysis of whether these   requirements would induce cyber vulnerabilities, and an analysis of   the associated costs for these requirements;                (2)  provisions for installing, replacing, or   upgrading industrial control systems and associated networks, or   the use of compensating controls or procedures, in critical   facilities to address cyber vulnerabilities;                (3)  provisions for installing, replacing, or   upgrading extra high-voltage power transformers and supervisory   control and data acquisition systems to withstand 100   kilovolts/meter E1 electromagnetic pulses and 85 volts/kilometer   E3 electromagnetic pulses;                (4)  a timeline for making improvements to remaining   infrastructure to meet resilience standards adopted by the security   commission under Section 44.006;                (5)  long-term resilience provisions for supporting   industries including:                      (A)  nuclear reactors, materials, and waste;                      (B)  fuel supply;                      (C)  health care;                      (D)  communications;                      (E)  water and sewer services;                      (F)  food supply; and                      (G)  transportation; and                (6)  any additional provisions considered necessary by   the security commission.          (c)  The security commission may consult with the Private   Sector Advisory Council in developing the plan.          (d)  The Texas Division of Emergency Management shall   incorporate the plan into the state emergency management plan and   update the state emergency management plan as necessary to   incorporate progressive resilience improvements.          Sec. 44.009.  GRID RESILIENCE REPORT. (a) Not later than   January 1 of each year, the security commission shall prepare and   deliver a nonclassified report to the legislature, the governor,   and the commission assessing natural and man-made threats to the   electric grid and efforts to mitigate the threats.           (b)  The security commission shall make the report available   to the public.           (c)  In preparing the report, the security commission may   hold confidential or classified briefings with federal, state, and   local officials as necessary.          Sec. 44.010.  RESILIENCE COST RECOVERY. A regulatory   authority shall include in establishing the rates of an electric   utility consideration of the costs incurred to install, replace, or   upgrade facilities or equipment to meet a resilience standard   established under this chapter. A regulatory authority shall   presume that costs incurred to meet a resilience standard under   this chapter are reasonable and necessary expenses.          Sec. 44.011.  MICRO-GRIDS. (a) The security commission   shall establish resilience standards for micro-grids and certify a   micro-grid that meets the standards. The standards must be   developed for both alternating current and direct current   micro-grids.          (b)  Except as provided by Subsection (c), a municipality or   other political subdivision may not enact or enforce an ordinance   or other measure that bans, limits, or otherwise regulates inside   the boundaries or extraterritorial jurisdiction of the   municipality or political subdivision a micro-grid that is   certified by the security commission under this section.          (c)  The owner or operator of a micro-grid certified by the   security commission is a power generation company and is required   to register under Section 39.351(a). The owner or operator of the   micro-grid is entitled to:                (1)  interconnect the micro-grid;                (2)  obtain transmission service for the micro-grid;   and                (3)  use the micro-grid to sell electricity and   ancillary services at wholesale in a manner consistent with the   provisions of this title and commission rules applicable to a power   generation company or an exempt wholesale generator.          Sec. 44.012.  COMPLIANCE AND ENFORCEMENT. (a) The   commission by rule shall require entities that the commission   determines operate critical components of the ERCOT electric grid   to comply with resilience standards adopted by the security   commission under this chapter. This subsection applies only to an   entity that is subject to the jurisdiction of the commission under   another provision of this subtitle. The commission may impose an   administrative penalty, in the manner provided by Chapter 15, on an   entity that is subject to the jurisdiction of the commission under   another provision of this subtitle for a violation of a resilience   standard or of Subsection (b).          (b)  The commission by rule shall require each entity   described by Subsection (a) to make publicly available on an   Internet website the entity's compliance status with the resilience   standards.          (c)  The Railroad Commission of Texas by rule shall require   entities that the Railroad Commission of Texas determines operate   critical components of the ERCOT electric grid to comply with   resilience standards adopted by the security commission under this   chapter. This subsection applies only to an entity that is subject   to the jurisdiction of the Railroad Commission of Texas under   Section 81.051, Natural Resources Code. The Railroad Commission of   Texas may impose an administrative penalty, in the manner provided   by Chapter 81, Natural Resources Code, on an entity that is subject   to the jurisdiction of the Railroad Commission of Texas under   Section 81.051, Natural Resources Code, for a violation of a   resilience standard or of Subsection (d).          (d)  The Railroad Commission of Texas by rule shall require   each entity described by Subsection (c) to make publicly available   on an Internet website the entity's compliance status with the   resilience standards.          SECTION 3.  Not later than January 1, 2025, the Texas Grid   Security Commission shall prepare and deliver a report to the   legislature on the progress of implementing resilience standards   adopted and implemented under Sections 44.006 and 44.007, Utilities   Code, as added by this Act.          SECTION 4.  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, 2023.