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TexasHB 271289th Legislature Regular SessionHouse

Relating to test years used for ratemaking purposes by certain water and sewer utilities.

Sponsored By: Drew Darby, Charles Perry (Republican)

Became Law

Utilities--Water & Sewer

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Bill Overview

Analyzed Economic Effects

3 provisions identified: 1 benefits, 0 costs, 2 mixed.

Water customers gain excess charge refunds

Texas water and sewer customers must receive refunds when future or combined test-year information causes rates to earn more than a fair return. Regulators make that finding in the utility’s next rate case; refunds cover excess collections throughout the period those rates applied. Utilities using qualifying fully projected test years must file actual results and data showing estimate accuracy within 30 days after year-end. They must serve rate-case parties; if information is unavailable, they must notify the regulator and parties when it is expected, then file as soon as possible after it becomes available. These protections cover rate cases started on or after the Commission’s implementing rules take effect.

Water project costs face billing limits

For covered Texas water and sewer rate cases, investment costs reflect original cost, less depreciation, for property used and useful during the test year. Facilities expected in service by year-end also count, which can bring project costs into bills sooner. Unfinished construction counts only when needed for financial health, with clear and convincing evidence that inclusion serves customers’ best interests. Major projects cannot count to the extent planning or management was inefficient or imprudent; customer-funded property is excluded from invested capital. Service costs include depreciation—the cost of assets wearing out—on all utility-owned depreciable property, including developer or government gifts, but exclude property supplied through explicit customer agreements or construction contributions. These rules cover cases started on or after the Commission’s implementing rules take effect.

Water utilities choose past or future costs

Texas Class A–D water and sewer utilities choose a 12-month period, called a test year, using past, projected, or combined data. It starts on a calendar or fiscal quarter’s first day, no later than 18 months after filing to change rates. It must end no earlier than 18 months before that filing. Regulators use test-year revenues and reasonable, necessary expenses to allow a reasonable return and protect financial health, while limiting excess returns. This replaces past expenses adjusted for known changes; municipal regulators can adopt authorized alternate methods. Projected costs can reach bills sooner, while fair-return limits protect customers. The law takes effect September 1, 2025; the Public Utility Commission of Texas must adopt rules by September 1, 2026. The changes cover rate cases started on or after those rules take effect; earlier cases stay under prior law.

Sponsors & Cosponsors

Sponsors

  • Drew Darby

    House

  • Charles Perry

    Republican • Senate

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 360 • No: 71

House vote • 5/28/2025

Record vote

Yes: 101 • No: 38

Senate vote • 5/23/2025

Record vote

Yes: 26 • No: 5

Senate vote • 5/23/2025

Record vote

Yes: 26 • No: 5

Senate vote • 5/23/2025

Record vote

Yes: 26 • No: 5

Senate vote • 5/23/2025

Record vote

Yes: 26 • No: 5

House vote • 5/6/2025

Record vote

Yes: 135 • No: 13

House vote • Unknown

Committee vote: Natural Resources

Yes: 12 • No: 0

Senate vote • Unknown

Committee vote: Water, Agriculture and Rural Affairs

Yes: 8 • No: 0

Actions Timeline

  1. Effective on 9/1/25

    6/20/2025House

  2. Filed without the Governor's signature

    6/20/2025House

  3. Sent to the Governor

    5/31/2025House

  4. Signed in the Senate

    5/31/2025Senate

  5. Signed in the House

    5/30/2025House

  6. Reported enrolled

    5/29/2025House

  7. House concurs in Senate amendment(s)-reported

    5/28/2025Senate

  8. Text of Senate Amendment(s)

    5/28/2025House

  9. Statement(s) of vote recorded in Journal

    5/28/2025House

  10. Record vote (RV#3955)

    5/28/2025House

  11. House concurs in Senate amendment(s)

    5/28/2025House

  12. Senate Amendments Analysis distributed

    5/24/2025House

  13. Senate Amendments distributed

    5/24/2025House

  14. Senate passage as amended reported

    5/24/2025House

  15. Record vote

    5/23/2025Senate

  16. Passed

    5/23/2025Senate

  17. Read 3rd time

    5/23/2025Senate

  18. Record vote

    5/23/2025Senate

  19. Three day rule suspended

    5/23/2025Senate

  20. Record vote

    5/23/2025Senate

  21. Passed to 3rd reading as amended

    5/23/2025Senate

  22. Vote recorded in Journal

    5/23/2025Senate

  23. Amended

    5/23/2025Senate

  24. Amendment(s) offered (FA1 Kolkhorst)

    5/23/2025Senate

  25. Read 2nd time

    5/23/2025Senate

Bill Text

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