SB 1856

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