Texas 2025 - 89th Regular

Texas Senate Bill SB1891 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	89R7774 JXC-F
2	2	By: Perry S.B. No. 1891
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7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to test years used for ratemaking purposes by certain
10	10	water and sewer utilities.
11	11	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
12	12	SECTION 1. Subchapter F, Chapter 13, Water Code, is amended
13	13	by adding Section 13.1831 to read as follows:
14	14	Sec. 13.1831. TEST YEAR. A regulatory authority shall fix
15	15	rates for water and sewer services for a Class A, B, C, or D utility
16	16	based on a test year the utility selects that:
17	17	(1) includes historic, future, or combined historic
18	18	and future data;
19	19	(2) begins on the first day of a calendar or fiscal
20	20	year quarter; and
21	21	(3) is a consecutive 12-month period that:
22	22	(A) begins not later than 18 months after the
23	23	date the utility files the statement of intent to change rates; and
24	24	(B) ends not earlier than 18 months before the
25	25	date the utility files the statement of intent to change rates.
26	26	SECTION 2. Section 13.183(a), Water Code, is amended to
27	27	read as follows:
28	28	(a) In fixing the rates for water and sewer services, the
29	29	regulatory authority shall fix its overall revenues at a level that
30	30	will:
31	31	(1) permit the utility a reasonable opportunity to
32	32	earn a reasonable return on its invested capital used and useful in
33	33	rendering service to the public, based on test year information,
34	34	over and above its reasonable and necessary operating expenses; and
35	35	(2) preserve the financial integrity of the utility.
36	36	SECTION 3. Section 13.184(a), Water Code, is amended to
37	37	read as follows:
38	38	(a) Unless the utility commission establishes alternate
39	39	rate methodologies in accordance with Section 13.183(c), the
40	40	utility commission may not prescribe any rate that will yield more
41	41	than a fair return on the invested capital used and useful in
42	42	rendering service to the public based on test year information. The
43	43	governing body of a municipality exercising its original
44	44	jurisdiction over rates and services may use alternate ratemaking
45	45	methodologies established by ordinance or by utility commission
46	46	rule in accordance with Section 13.183(c). Unless the municipal
47	47	regulatory authority uses alternate ratemaking methodologies
48	48	established by ordinance or by utility commission rule in
49	49	accordance with Section 13.183(c), it may not prescribe any rate
50	50	that will yield more than a fair return on the invested capital used
51	51	and useful in rendering service to the public based on test year
52	52	information.
53	53	SECTION 4. Section 13.185, Water Code, is amended by
54	54	amending Subsections (b), (d), and (j) and adding Subsection (k) to
55	55	read as follows:
56	56	(b) Utility rates shall be based on the original cost of
57	57	property used by and useful to the utility during the test year in
58	58	providing service, including, if necessary to the financial
59	59	integrity of the utility, construction work in progress at cost as
60	60	recorded on the books of the utility. The inclusion of construction
61	61	work in progress is an exceptional form of rate relief to be granted
62	62	only on the demonstration by the utility by clear and convincing
63	63	evidence that the inclusion is in the ratepayers' best interest and
64	64	is necessary to the financial integrity of the utility.
65	65	Construction work in progress may not be included in the rate base
66	66	for major projects under construction to the extent that those
67	67	projects have been inefficiently or imprudently planned or managed.
68	68	Original cost is the actual money cost or the actual money value of
69	69	any consideration paid, other than money, of the property at the
70	70	time it shall have been dedicated to public use, whether by the
71	71	utility that is the present owner or by a predecessor, less
72	72	depreciation. Utility property funded by explicit customer
73	73	agreements or customer contributions in aid of construction such as
74	74	surcharges may not be included in invested capital.
75	75	(d) Net income is the total revenues of the utility less all
76	76	reasonable and necessary expenses as determined by the regulatory
77	77	authority. The regulatory authority shall:
78	78	(1) base a utility's expenses on [historic] test year
79	79	information [adjusted for known and measurable changes], as
80	80	determined by utility commission rules; and
81	81	(2) determine expenses and revenues in a manner
82	82	consistent with Subsections (e) through (h) of this section.
83	83	(j) Depreciation expense included in the cost of service
84	84	includes depreciation on all [currently used,] depreciable utility
85	85	property owned by the utility except for property provided by
86	86	explicit customer agreements or funded by customer contributions in
87	87	aid of construction. Depreciation on all [currently used and
88	88	useful] developer or governmental entity contributed property
89	89	shall be allowed in the cost of service.
90	90	(k) Notwithstanding Subsection (b), the regulatory
91	91	authority shall allow inclusion in the rate base of facilities
92	92	projected to be in service through the end of the test year.
93	93	SECTION 5. Section 13.002(22), Water Code, is repealed.
94	94	SECTION 6. The changes in law made by this Act apply only to
95	95	a rate proceeding that commences on or after the effective date of
96	96	this Act. A rate proceeding that commenced before the effective
97	97	date of this Act is governed by the law in effect on the date the
98	98	proceeding commenced, and that law is continued in effect for that
99	99	purpose.
100	100	SECTION 7. This Act takes effect September 1, 2025.