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A BILL TO BE ENTITLED
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AN ACT
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relating to the consideration of the proportion of long-term debt |
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and equity capitalization in establishing the rates of certain |
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electric utilities. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter B, Chapter 36, Utilities Code, is |
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amended by adding Section 36.068 to read as follows: |
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Sec. 36.068. CONSIDERATION OF PROPORTION OF LONG-TERM DEBT |
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AND EQUITY CAPITALIZATION. (a) This section applies only to an |
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electric utility that operates solely within ERCOT. |
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(b) Except as provided by Subsection (c), in considering an |
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electric utility's capitalization ratio when establishing the |
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utility's rates, the regulatory authority shall presume the return |
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on the utility's invested capital is reasonable if calculated: |
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(1) using the utility's actual proportion of long-term |
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debt and equity capitalization as reported on the utility's most |
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recent quarterly financial statement issued before the initiation |
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of the applicable rate proceeding; and |
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(2) in a manner consistent with the methodology |
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included in earnings monitoring reports. |
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(c) If the regulatory authority finds that the |
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capitalization ratio calculated in Subsection (b) is unreasonable, |
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the regulatory authority shall calculate the reasonable return on |
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the utility's invested capital using an equity capitalization ratio |
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equal to the national average for electric utility operating |
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companies. |
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SECTION 2. (a) Section 36.068, Utilities Code, as added by |
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this Act, applies only to a proceeding for the establishment of |
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rates for which the regulatory authority has not issued a final |
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order or decision before the effective date of this Act. |
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(b) A proceeding for which the regulatory authority has |
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issued a final order or decision before the effective date of this |
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Act is governed by the law in effect immediately before that date, |
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and that law is continued in effect for that purpose. |
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SECTION 3. This Act takes effect immediately if it receives |
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a vote of two-thirds of all the members elected to each house, as |
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provided by Section 39, Article III, Texas Constitution. If this |
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Act does not receive the vote necessary for immediate effect, this |
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Act takes effect September 1, 2025. |