SB1856

Narrow eligibility: the law applies only to an electric utility operating solely outside ERCOT in Texas areas included in the Southeastern Electric Reliability Council. To apply, the utility must not have exceeded its authorized return on equity according to its most recent earnings-monitoring report. The Public Utility Commission must establish the annual adjustment, called a capacity cost recovery rider, for a qualifying application. Final law, Section 36.216(a)–(c).

What goes into it: eligible costs and revenues come from participation in a multistate capacity auction run by a regional transmission or independent system organization authorized by the Federal Energy Regulatory Commission, and only to the extent they are not already recovered in base rates. The annual calculation includes the upcoming auction year beginning June 1; a correction comparing actual eligible costs and revenues with collections under a rider put into effect two years before the proposed rider; mathematical-error corrections; and specified prior-auction refunds or surcharges shown in settlement statements or directed by federal orders issued in the preceding 12 months. Final law, subsections (d) and (f).

Customer allocation and checks: charges use the production-demand allocation factors from the latest base-rate case and projected billing quantities. Classes without demand meters use projected kilowatt-hour consumption; demand-meter classes use projected kilowatt billing demand. A weather-normalized load-growth adjustment accounts for customer, consumption and demand changes while the specified eligible costs remain in base rates. In the next base-rate proceeding, the commission reconciles the rider, checks reasonable and prudent costs, limits recovery to Texas retail customers and guards against over-recovery. Eligible cost and revenue items must be removed from base rates in subsequent base-rate proceedings. Final law, subsections (e) and (g)–(i).

Filing and review: the usual application deadline is May 15 for costs beginning June 1. If auction results are published after the 20th business day of April, that deadline shifts by the specified number of days. Applications must include testimony and supporting work papers in their native format. Commission staff and intervenors have 15 days to respond, limited to compliance with implementing rules and mathematical accuracy. The act directs that other inaccuracies identified under that response provision be addressed in the next rider application. The commission may review costs and revenues and must approve, modify or deny the request within 60 days; broader prudence reconciliation occurs in the base-rate case. Final law, subsections (j)–(o).

Startup and sunset: for eligible costs incurred before September 1, 2026, the utility could apply even before implementing rules were adopted. The commission still had a 60-day decision deadline, and approved rates applied from the first billing cycle of the month after the order. The new statutory section expires September 1, 2035. This briefing does not establish that a particular rider was approved or calculate a customer’s bill. Final law, subsection (p) and Section 2.

Changes during passage: the introduced proposal also covered federally regulated power-purchase agreements, stated a presumption that specified costs were reasonable, allowed only seven days for responses and called for approval within 10 days. The Senate substitute removed that broader agreement category and presumption, added the earnings limit, reconciliation and customer-allocation safeguards, required documented filings, allowed rule-compliance responses within 15 days, and provided 60 days to approve, modify or deny. It also added the 2035 sunset. The substitute’s operative wording survived unchanged in the Senate-passed, House committee and final versions; no floor amendments are indexed. Introduced; Senate substitute; Senate-passed; House committee; Final law; Version index; Amendment index.

Compare the published text versions in the official text index. A change is not attributed to a specific amendment here without a verified record.

An eligible utility gains a faster annual route to recover qualifying auction costs rather than waiting solely for a base-rate case. Its Texas retail customers can bear those costs but also receive eligible revenues and reconciliation adjustments. Restricted response issues and short deadlines matter for customer representatives; the law also preserves later prudence and over-recovery review. It supplies no fixed cents-per-kilowatt-hour charge or guaranteed net benefit. Final law.

The April 24 fiscal note anticipates no significant state or local-government fiscal implication and assumes implementation costs can be absorbed with existing resources. The March 22 note reached the same government-budget conclusion for the introduced bill. Neither is an estimate that customer electric bills will be unchanged; the law concerns utility rates and does not itself appropriate state money. Substitute fiscal note; Introduced fiscal note; Final law.