BILL ANALYSIS Senate Research Center C.S.S.B. 1977 89R22000 CXP-D By: Kolkhorst Business & Commerce 4/3/2025 Committee Report (Substituted) AUTHOR'S / SPONSOR'S STATEMENT OF INTENT S.B. 1977 amends the Utilities Code and the Water Code to regulate the recovery of legal expenses by electric and water utilities during rate proceedings. Specifically, it introduces a new provision in Section 36.061 that prohibits regulatory authorities from allowing legal expenses exceeding the greater of $50,000 or 50 percent of the total legal expenses incurred by an electric utility in a rate proceeding. Additionally, it modifies Section 13.185(h) of the Water Code to include similar restrictions on legal expenses for water and sewer utilities, while also removing references to certain legal expenses that were previously included in the list of costs not allowed for ratemaking purposes. The changes outlined in this bill will only apply to rate proceedings that commence on or after the effective date of September 1, 2025. Rate proceedings that begin before this date will continue to be governed by the existing laws in effect at that time. This legislation aims to ensure that utilities do not incur excessive legal costs that could ultimately impact consumer rates. The committee substitute raises minimum ratepayer reimbursements for electric utilities in Section 36.061 and water utilities in Section 13.185 to $500,000 and then 50 percent of legal expenses incurred in a rate proceeding. The committee substitute also establishes procedural standards in statute for both utilities and city intervenors, tied to reimbursement, to discourage frivolous or groundless discovery or acts that are intended to harass, delay, or needlessly increase the expense of the proceeding. These changes are made by amending Sections 33.023 and 36.061 of the Utilities Code and Sections 13.084 and 13.185 of the Water Code. C.S.S.B. 1977 amends current law relating to the recovery and reimbursement of certain expenses by an electric utility or a water and sewer utility in a rate proceeding. RULEMAKING AUTHORITY This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 33.023, Utilities Code, by adding Subsection (c), as follows: (c) Authorizes the electric utility in the ratemaking proceeding, for purposes of Subsection (b) (relating to requiring the electric utility to reimburse the governing body of the municipality for the reasonable cost of the services), to not reimburse the governing body of a municipality for any legal expenses that the regulatory authority determines were incurred due to the municipality filing a frivolous or groundless discovery motion, or engaging in an act intended to harass, delay, or needlessly increase the expense incurred for participating in the proceeding or conduct not in the public interest. SECTION 2. Amends Section 36.061, Utilities Code, by adding Subsection (b-1), (b-2), and (b-3), as follows: (b-1) Prohibits the regulatory authority, for purposes of Subsection (b)(2) (relating to authorizing the regulatory authority to allow certain reasonable costs or expenses), from allowing as a cost or expense legal expenses incurred by an electric utility for participating in a rate proceeding under Title 2 (Public Utility Regulatory Act) that exceed a total of $500,000 and 50 percent of the total legal expenses incurred by the electric utility to participate in the proceeding that exceed $500,000. (b-2) Prohibits the regulatory authority, for purposes of Subsection (b)(2), from allowing as a cost or expense legal expenses incurred by an electric utility for participating in a rate proceeding under this title that the regulatory authority determines are attributable to the utility filing a frivolous or groundless discovery motion or engaging in an act intended to harass, delay, or needlessly increase the expense incurred for participating in the proceeding or conduct not in the public interest. (b-3) Requires the regulatory authority, notwithstanding Subsection (b-1), to allow as a cost or expense legal expenses incurred by an electric utility in a rate proceeding under this title in any amount if the expenses were attributable to conduct described by Subsection (b-2) by a party to the rate proceeding who was a non-utility intervenor and reasonable. SECTION 3. Amends Section 13.084, Water Code, as follows: Sec. 13.084. AUTHORITY OF GOVERNING BODY; COST REIMBURSEMENT. (a) Creates this subsection from existing text and makes no further changes. (b) Prohibits the water and sewer utility, for purposes of Subsection (a) (relating to requiring the governing body of an affected county to have the right to select and engage certain professionals for certain purposes), from reimbursing the governing body of a municipality for any legal expense that the regulatory authority determines were incurred due to the municipality filing a frivolous or groundless discovery motion, or engaging in an act intended to harass, delay, or needlessly increase the expense incurred for participating in the proceeding or conduct not in the public interest. SECTION 4. Amends Section 13.185, Water Code, by amending Subsection (h) and adding Subsections (h-1) and (h-2), as follows: (h) Prohibits the regulatory authority from including for ratemaking purposes certain costs or expenses, including legal expenses for a rate proceeding found to be unreasonable, unnecessary, or not in the public interest or that exceed a total of $500,000 or 50 percent of the total legal expenses incurred by the utility for the proceeding that exceed $500,000. Makes nonsubstantive changes. (h-1) Provides that an expense is not considered to be in the public interest under Subsection (h)(4) (relating to prohibiting the regulatory from including certain costs or expenses, including certain legal expenses, for ratemaking purposes) if the expense is attributable to the utility filing a frivolous or groundless discovery motion or engaging in an act intended to harass, delay, or needlessly increase the expense incurred for participating in the ratemaking process. (h-2) Requires the regulatory authority, notwithstanding Subsection (h)(4), to allow for ratemaking purposes expenses incurred by a utility in a ratemaking proceeding in any amount if the expenses were attributable to conduct described by Subsection (h-1) by a party to the rate proceeding who was a non-utility intervenor and if the expenses were reasonable. SECTION 5. Makes application of this Act prospective. SECTION 6. Effective date: September 1, 2025.
BILL ANALYSIS
Senate Research Center C.S.S.B. 1977
89R22000 CXP-D By: Kolkhorst
Business & Commerce
4/3/2025
Committee Report (Substituted)
Senate Research Center
C.S.S.B. 1977
89R22000 CXP-D
By: Kolkhorst
Business & Commerce
4/3/2025
Committee Report (Substituted)
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
S.B. 1977 amends the Utilities Code and the Water Code to regulate the recovery of legal expenses by electric and water utilities during rate proceedings. Specifically, it introduces a new provision in Section 36.061 that prohibits regulatory authorities from allowing legal expenses exceeding the greater of $50,000 or 50 percent of the total legal expenses incurred by an electric utility in a rate proceeding. Additionally, it modifies Section 13.185(h) of the Water Code to include similar restrictions on legal expenses for water and sewer utilities, while also removing references to certain legal expenses that were previously included in the list of costs not allowed for ratemaking purposes. The changes outlined in this bill will only apply to rate proceedings that commence on or after the effective date of September 1, 2025. Rate proceedings that begin before this date will continue to be governed by the existing laws in effect at that time. This legislation aims to ensure that utilities do not incur excessive legal costs that could ultimately impact consumer rates. The committee substitute raises minimum ratepayer reimbursements for electric utilities in Section 36.061 and water utilities in Section 13.185 to $500,000 and then 50 percent of legal expenses incurred in a rate proceeding. The committee substitute also establishes procedural standards in statute for both utilities and city intervenors, tied to reimbursement, to discourage frivolous or groundless discovery or acts that are intended to harass, delay, or needlessly increase the expense of the proceeding. These changes are made by amending Sections 33.023 and 36.061 of the Utilities Code and Sections 13.084 and 13.185 of the Water Code.
S.B. 1977 amends the Utilities Code and the Water Code to regulate the recovery of legal expenses by electric and water utilities during rate proceedings. Specifically, it introduces a new provision in Section 36.061 that prohibits regulatory authorities from allowing legal expenses exceeding the greater of $50,000 or 50 percent of the total legal expenses incurred by an electric utility in a rate proceeding. Additionally, it modifies Section 13.185(h) of the Water Code to include similar restrictions on legal expenses for water and sewer utilities, while also removing references to certain legal expenses that were previously included in the list of costs not allowed for ratemaking purposes. The changes outlined in this bill will only apply to rate proceedings that commence on or after the effective date of September 1, 2025. Rate proceedings that begin before this date will continue to be governed by the existing laws in effect at that time. This legislation aims to ensure that utilities do not incur excessive legal costs that could ultimately impact consumer rates.
The committee substitute raises minimum ratepayer reimbursements for electric utilities in Section 36.061 and water utilities in Section 13.185 to $500,000 and then 50 percent of legal expenses incurred in a rate proceeding.
The committee substitute also establishes procedural standards in statute for both utilities and city intervenors, tied to reimbursement, to discourage frivolous or groundless discovery or acts that are intended to harass, delay, or needlessly increase the expense of the proceeding. These changes are made by amending Sections 33.023 and 36.061 of the Utilities Code and Sections 13.084 and 13.185 of the Water Code.
C.S.S.B. 1977 amends current law relating to the recovery and reimbursement of certain expenses by an electric utility or a water and sewer utility in a rate proceeding.
RULEMAKING AUTHORITY
This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 33.023, Utilities Code, by adding Subsection (c), as follows:
(c) Authorizes the electric utility in the ratemaking proceeding, for purposes of Subsection (b) (relating to requiring the electric utility to reimburse the governing body of the municipality for the reasonable cost of the services), to not reimburse the governing body of a municipality for any legal expenses that the regulatory authority determines were incurred due to the municipality filing a frivolous or groundless discovery motion, or engaging in an act intended to harass, delay, or needlessly increase the expense incurred for participating in the proceeding or conduct not in the public interest.
SECTION 2. Amends Section 36.061, Utilities Code, by adding Subsection (b-1), (b-2), and (b-3), as follows:
(b-1) Prohibits the regulatory authority, for purposes of Subsection (b)(2) (relating to authorizing the regulatory authority to allow certain reasonable costs or expenses), from allowing as a cost or expense legal expenses incurred by an electric utility for participating in a rate proceeding under Title 2 (Public Utility Regulatory Act) that exceed a total of $500,000 and 50 percent of the total legal expenses incurred by the electric utility to participate in the proceeding that exceed $500,000.
(b-2) Prohibits the regulatory authority, for purposes of Subsection (b)(2), from allowing as a cost or expense legal expenses incurred by an electric utility for participating in a rate proceeding under this title that the regulatory authority determines are attributable to the utility filing a frivolous or groundless discovery motion or engaging in an act intended to harass, delay, or needlessly increase the expense incurred for participating in the proceeding or conduct not in the public interest.
(b-3) Requires the regulatory authority, notwithstanding Subsection (b-1), to allow as a cost or expense legal expenses incurred by an electric utility in a rate proceeding under this title in any amount if the expenses were attributable to conduct described by Subsection (b-2) by a party to the rate proceeding who was a non-utility intervenor and reasonable.
SECTION 3. Amends Section 13.084, Water Code, as follows:
Sec. 13.084. AUTHORITY OF GOVERNING BODY; COST REIMBURSEMENT. (a) Creates this subsection from existing text and makes no further changes.
(b) Prohibits the water and sewer utility, for purposes of Subsection (a) (relating to requiring the governing body of an affected county to have the right to select and engage certain professionals for certain purposes), from reimbursing the governing body of a municipality for any legal expense that the regulatory authority determines were incurred due to the municipality filing a frivolous or groundless discovery motion, or engaging in an act intended to harass, delay, or needlessly increase the expense incurred for participating in the proceeding or conduct not in the public interest.
SECTION 4. Amends Section 13.185, Water Code, by amending Subsection (h) and adding Subsections (h-1) and (h-2), as follows:
(h) Prohibits the regulatory authority from including for ratemaking purposes certain costs or expenses, including legal expenses for a rate proceeding found to be unreasonable, unnecessary, or not in the public interest or that exceed a total of $500,000 or 50 percent of the total legal expenses incurred by the utility for the proceeding that exceed $500,000. Makes nonsubstantive changes.
(h-1) Provides that an expense is not considered to be in the public interest under Subsection (h)(4) (relating to prohibiting the regulatory from including certain costs or expenses, including certain legal expenses, for ratemaking purposes) if the expense is attributable to the utility filing a frivolous or groundless discovery motion or engaging in an act intended to harass, delay, or needlessly increase the expense incurred for participating in the ratemaking process.
(h-2) Requires the regulatory authority, notwithstanding Subsection (h)(4), to allow for ratemaking purposes expenses incurred by a utility in a ratemaking proceeding in any amount if the expenses were attributable to conduct described by Subsection (h-1) by a party to the rate proceeding who was a non-utility intervenor and if the expenses were reasonable.
SECTION 5. Makes application of this Act prospective.
SECTION 6. Effective date: September 1, 2025.