The bill, 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. It introduces Section 13.1831, which mandates that a regulatory authority must set rates based on a test year selected by the utility. This test year can include historic, future, or a combination of both types of data, must start at the beginning of a calendar or fiscal year quarter, and should be a consecutive 12-month period that begins 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.

Additionally, the bill modifies existing sections of the Water Code to clarify that rates must be based on test year information, ensuring that utilities have a reasonable opportunity to earn a return on their invested capital while preserving their financial integrity. It also allows for the inclusion of projected facilities in the rate base if they are expected to be in service by the end of the test year. The bill repeals a specific definition in Section 13.002(22) and specifies that the changes will only apply to rate proceedings that commence on or after the effective date of the Act, which is set for 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)