89R6409 JXC-F

By: Creighton S.B. No. 1856

A BILL TO BE ENTITLED

AN ACT

relating to a capacity cost recovery rider for certain electric utilities.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter E, Chapter 36, Utilities Code, is amended by adding Section 36.216 to read as follows:

Sec. 36.216. RECOVERY OF ANNUAL CAPACITY-RELATED COSTS. (a) This section applies only to an electric utility that operates solely outside of ERCOT in areas of this state included in the Southeastern Electric Reliability Council.

(b) It is the intent of the legislature that:

(1) an electric utility's recovery of capacity-related costs and return of capacity-related revenues, which may fluctuate, should be accomplished as contemporaneously as possible with the incurrence of those costs and the receipt of those revenues; and

(2) a regulatory authority should presume to be just and reasonable capacity-related costs incurred or capacity-related revenues received through an electric utility's participation in a multi-state auction operated by a regional transmission organization or independent system organization authorized by the Federal Energy Regulatory Commission, as well as those costs and revenues incurred or received under a power purchase agreement under the jurisdiction of the Federal Energy Regulatory Commission, and any associated refund or surcharge.

(c) On application by an electric utility, the commission shall establish a capacity cost recovery rider that can be updated at least annually and that ensures timely:

(1) recovery of the utility's costs that are eligible as provided by Subsection (d); and

(2) return of the utility's revenues that are eligible as provided by Subsection (d).

(d) In this section, eligible costs and revenues include:

(1) costs and revenues associated with the electric utility's participation in a multi-state capacity auction operated by a regional transmission organization or independent system organization authorized by the Federal Energy Regulatory Commission; and

(2) capacity-related costs and revenues associated with the utility's participation in power purchase agreements under the jurisdiction of the Federal Energy Regulatory Commission, including associated refunds and surcharges ordered by the Federal Energy Regulatory Commission, to the extent the costs and revenues are not included in the utility's base rates.

(e) In each base rate proceeding following the establishment of a capacity cost recovery rider, the regulatory authority shall adjust the revenue requirement and rates of the electric utility's capacity cost recovery rider to include all eligible costs and revenues. The electric utility may not continue to include eligible costs or revenues in the utility's base rates unless the utility seeks and the commission approves termination of the utility's capacity cost recovery rider in a subsequent base rate proceeding.

(f) The annual revenue requirement and rates for a proposed capacity cost recovery rider must include:

(1) the electric utility's calculated costs or revenues for the upcoming year beginning on the June 1 associated with the utility's participation in a multi-state capacity auction;

(2) the utility's costs or revenues for the upcoming year beginning on the June 1 associated with any power purchase agreements under the jurisdiction of the Federal Energy Regulatory Commission, including any associated refunds or surcharges required by a Federal Energy Regulatory Commission order issued in the previous 12-month period; and

(3) a true-up amount that accounts for any difference between the utility's actual eligible costs and revenues and the utility's actual collections under any capacity cost recovery rider put into effect two years before the proposed effective date of the proposed rider, plus:

(A) an amount to account for any mathematical error identified in the utility's most recent capacity cost recovery rider application proceeding; and

(B) an amount to account for any refunds or surcharges ordered by the Federal Energy Regulatory Commission or by a regional transmission organization or independent system organization related to a previous year's capacity auction that:

(i) are identified on a regional transmission organization or independent system operator settlement statement; or

(ii) were directed by a Federal Energy Regulatory Commission order issued in the previous 12-month period.

(g) The commission shall process an application to establish or update a capacity cost recovery rider in accordance with Subsections (h)-(k).

(h) For a capacity cost recovery rider that will include an electric utility's costs to be incurred beginning on June 1 of a given year, the utility must submit the rider application not later than:

(1) May 15 of that year; or

(2) if the regional transmission organization or independent system operator publishes its capacity auction cost results after the 20th business day of April of that year, a date that is the same number of days after May 15 of that year as the number of days after the 20th business day of April the results were published.

(i) A response to the electric utility's filing that is made by commission staff or an intervenor:

(1) must be filed not later than the seventh day after the date of the utility's filing; and

(2) may address only the mathematical accuracy of the utility's proposed capacity cost recovery rider revenue requirement and rates.

(j) An inaccuracy identified under Subsection (i)(2) may be addressed only in the electric utility's next capacity cost recovery rider application.

(k) The regulatory authority shall issue an order approving an electric utility's proposed capacity cost recovery rider not later than the 10th day after receipt of the utility's application. The electric utility may begin billing the rates proposed in the approved application for service rendered after the May 31 after the application is filed.

SECTION 2. An electric utility to which Section 36.216, Utilities Code, as added by this Act, applies may file an application with a regulatory authority to recover eligible costs described by Section 36.216(d), Utilities Code, as added by this Act, to be incurred before September 1, 2026, regardless of whether the Public Utility Commission of Texas has adopted any rules regarding capacity cost recovery riders. Not later than the 10th date after the date the application is filed, the regulatory authority shall issue an order authorizing the electric utility to begin imposing the rates proposed in the application for service rendered during or after the first billing cycle of the month following the issuance of the order.

SECTION 3. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2025.