BILL ANALYSIS

C.S.H.B. 3896

By: Raymond

State Affairs

Committee Report (Substituted)

BACKGROUND AND PURPOSE

The bill author has informed the committee that many water supply corporations located in and providing water and sewer services to rural areas do not have sufficient electric power available to properly operate or expand water and sewer systems, and that a lack of grid capacity or electric power availability results in non-profit water supply corporations having to establish power generation facilities to generate the primary power needed to operate well pumps, treatment systems, and related infrastructure. The bill author has further informed the committee that the design and construction of these power generation facilities can increase customer costs for water and sewer service to an unaffordable level, and although water supply corporations are authorized to self-generate electric power for their own needs, they are not currently authorized to perform generation for sale to the ERCOT grid. C.S.H.B. 3896 seeks to address these issues, allow water supply corporations to provide sewer and water services at lower rates, and help achieve electric grid reliability in rural areas of Texas by authorizing water supply corporations to generate electric power and by providing for the generation of excess electric power and the limited sale of that power.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 3896 amends the Water Code to authorize a water supply or sewer service corporation (WSC) to generate electric power for use in the WSC's operations, but limits that power to the following uses:

· powering water well pumps, service pumps, and other equipment for the production, treatment, and transportation of raw water; and

· powering infrastructure for the treatment and delivery of potable drinking water.

The bill authorizes a WSC operating solely as a wholesale water supplier or sewer service in a county with a population of less than 350,000 to generate excess electric power in conjunction with those limited uses for sale in the ERCOT power region to provide revenue for the WSC only if the WSC primarily generates electric power solely for those limited uses and registers as a power generation company under the Public Utility Regulatory Act.

C.S.H.B. 3896 requires such a WSC that generates excess electric power for sale to account for and use the revenue from those sales in a manner that complies with the Texas Non-Profit Corporation Act as it applies to a WSC. The revenue that accrues from those sales of electric power may be used by the WSC only for the following purposes:

· the corporation's costs of producing and selling electric power, including administration, employees, equipment, fuel, and maintenance;

· providing water supply, sewer service, or both for a municipality, a private corporation, an individual, or a military camp or base; or

· providing flood control and a drainage system for a political subdivision, a private corporation, or another person.

EFFECTIVE DATE

September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 3896 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

Whereas the introduced authorized a WSC operating in ERCOT to register as a power generation company under the Public Utility Regulatory Act and authorized WSCs registered as such to generate electric power for sale in the ERCOT power region to provide revenue for the WSC, the substitute does the following:

· authorizes a WSC to generate electric power for specified limited uses in the WSC's operations as follows:

o powering water well pumps, service pumps, and other equipment for the production, treatment, and transportation of raw water; and

o powering infrastructure for the treatment and delivery of potable drinking water; and

· authorizes a WSC operating solely as a wholesale water supplier or sewer service in a county with a population of less than 350,000 that meets the following criteria to generate excess electric power in conjunction with those limited uses for sale in the ERCOT power region to provide revenue for the WSC:

o primarily generates electric power solely for those limited uses; and

o registers as a power generation company under the Public Utility Regulatory Act.

The substitute includes a requirement absent from the introduced for such a WSC that generates electric power for sale to account for and use the revenue from those sales in a manner that complies with the Texas Non-Profit Corporation Act as it applies to a WSC.