| 1 | 1 | | 89R6164 SCR-F |
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| 2 | 2 | | By: Metcalf H.B. No. 2868 |
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| 3 | 3 | | |
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| 4 | 4 | | |
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| 5 | 5 | | |
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| 6 | 6 | | |
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| 7 | 7 | | A BILL TO BE ENTITLED |
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| 8 | 8 | | AN ACT |
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| 9 | 9 | | relating to the consideration of the proportion of long-term debt |
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| 10 | 10 | | and equity capitalization in establishing the rates of certain |
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| 11 | 11 | | electric utilities. |
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| 12 | 12 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 13 | 13 | | SECTION 1. Subchapter B, Chapter 36, Utilities Code, is |
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| 14 | 14 | | amended by adding Section 36.068 to read as follows: |
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| 15 | 15 | | Sec. 36.068. CONSIDERATION OF PROPORTION OF LONG-TERM DEBT |
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| 16 | 16 | | AND EQUITY CAPITALIZATION. (a) This section applies only to an |
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| 17 | 17 | | electric utility that operates solely within ERCOT. |
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| 18 | 18 | | (b) Except as provided by Subsection (c), in considering an |
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| 19 | 19 | | electric utility's capitalization ratio when establishing the |
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| 20 | 20 | | utility's rates, the regulatory authority shall presume the return |
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| 21 | 21 | | on the utility's invested capital is reasonable if calculated: |
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| 22 | 22 | | (1) using the utility's actual proportion of long-term |
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| 23 | 23 | | debt and equity capitalization as reported on the utility's most |
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| 24 | 24 | | recent quarterly financial statement issued before the initiation |
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| 25 | 25 | | of the applicable rate proceeding; and |
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| 26 | 26 | | (2) in a manner consistent with the methodology |
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| 27 | 27 | | included in earnings monitoring reports. |
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| 28 | 28 | | (c) If the regulatory authority finds that the |
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| 29 | 29 | | capitalization ratio calculated in Subsection (b) is unreasonable, |
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| 30 | 30 | | the regulatory authority shall calculate the reasonable return on |
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| 31 | 31 | | the utility's invested capital using an equity capitalization ratio |
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| 32 | 32 | | equal to the national average for electric utility operating |
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| 33 | 33 | | companies. |
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| 34 | 34 | | SECTION 2. (a) Section 36.068, Utilities Code, as added by |
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| 35 | 35 | | this Act, applies only to a proceeding for the establishment of |
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| 36 | 36 | | rates for which the regulatory authority has not issued a final |
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| 37 | 37 | | order or decision before the effective date of this Act. |
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| 38 | 38 | | (b) A proceeding for which the regulatory authority has |
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| 39 | 39 | | issued a final order or decision before the effective date of this |
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| 40 | 40 | | Act is governed by the law in effect immediately before that date, |
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| 41 | 41 | | and that law is continued in effect for that purpose. |
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| 42 | 42 | | SECTION 3. This Act takes effect immediately if it receives |
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| 43 | 43 | | a vote of two-thirds of all the members elected to each house, as |
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| 44 | 44 | | provided by Section 39, Article III, Texas Constitution. If this |
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| 45 | 45 | | Act does not receive the vote necessary for immediate effect, this |
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| 46 | 46 | | Act takes effect September 1, 2025. |
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