Relating to an alternative capital recovery process for certain utilities.

Faster utility cost recovery with customer safeguards

The law gives certain Texas electric utilities a faster process to recover power-line and distribution costs through nonfuel rates. This can raise customer bills sooner. Eligible utilities must operate only within ERCOT, Texas’s main power grid, and cannot be river authorities. State utility regulators must also name them as builders under the approved Permian Basin reliability plan. A utility can elect this process in the calendar year after regulators determine its capital spending exceeded 300% of annual depreciation. It can seek one annual, system-wide rate adjustment instead of using specified separate adjustment processes. The law bars a second election under this section. Utilities can set aside unrecovered investment costs, including depreciation and financing costs, for collection through rates. Regulators must include this balance in rates, normally spreading recovery over no more than 18 months. Longer recovery is allowed only to prevent earnings above the utility’s allowed return. Excess earnings during recovery must reduce the unpaid balance. Cost allocations among customer groups must reflect customer growth and weather-adjusted changes in energy use and demand. Utilities must give regulators notice and supporting spending records at least 60 days before filing. Regulators must approve the adjustment within 120 days after filing. Retail electric providers must receive at least 45 days’ notice before approved rates start. If regulators miss the deadline and required notices were given, requested temporary rates can start no earlier than day 165. Any overcollection must be refunded or credited to customers with interest after the final order. Regulators can account for financial risk when setting allowed returns and later review whether investment costs were reasonable and necessary. They retain authority to order refunds, including improper equity-related financing charges. Utility-caused, unreasonable project delays beyond December 31, 2030, are excused only with records made at the time showing the delay was necessary to maximize other transmission projects’ ability to serve demand. The process ends when a utility loses eligibility, but existing rates remain until changed. Other recovery options remain available after eligibility ends. Existing financing orders, commission jurisdiction limits, and municipal authority remain unchanged. Regulators must adopt implementing rules. The mechanism expires December 31, 2035.