H.B. No. 2712 amends the Water Code to establish new regulations regarding the test years used for ratemaking purposes by water and sewer utilities classified as Class A, B, C, or D. The bill introduces Section 13.1831, which mandates that regulatory authorities set rates based on a test year selected by the utility that can include historic, future, or a combination of both types of data. This test year must begin on the first day of a calendar or fiscal year quarter and span a consecutive 12-month period that starts no later than 18 months after the utility files a statement of intent to change rates and ends no earlier than 18 months before that filing date. Additionally, the bill modifies existing sections to ensure that rates yield a fair return based on test year information and requires utilities using future or combined test years to refund any excess rates collected if found to exceed a fair return.

The bill also includes provisions for the inclusion of projected facilities in the rate base and outlines the responsibilities of utilities in reporting their actual results and data after the test year. It repeals Section 13.002(22) and requires the Public Utility Commission of Texas to adopt necessary rules by September 1, 2026, to implement these changes. The new regulations will apply only to rate proceedings that commence after the effective date of the new rules, while those that begin before will continue under the previous law. The act is set to take effect on September 1, 2025.

Statutes affected:
Introduced: Water Code 13.183, Water Code 13.184, Water Code 13.185, Water Code 13.002 (Water Code 13)
House Committee Report: Water Code 13.183, Water Code 13.184, Water Code 13.185, Water Code 13.002 (Water Code 13)
Engrossed: Water Code 13.183, Water Code 13.184, Water Code 13.185, Water Code 13.002 (Water Code 13)
Senate Committee Report: Water Code 13.183, Water Code 13.184, Water Code 13.185, Water Code 13.002 (Water Code 13)
Enrolled: Water Code 13.183, Water Code 13.184, Water Code 13.185, Water Code 13.002 (Water Code 13)