The bill, H.B. No. 2868, introduces a new section, 36.068, to the Utilities Code, which mandates the consideration of the proportion of long-term debt and equity capitalization when establishing rates for electric utilities operating solely within the Electric Reliability Council of Texas (ERCOT). The regulatory authority is required to presume that the return on a utility's invested capital is reasonable if it is calculated using the utility's actual proportion of long-term debt and equity as reported in its most recent quarterly financial statement. Additionally, the calculation must align with the methodology used in earnings monitoring reports. If the regulatory authority deems the calculated capitalization ratio unreasonable, it must instead use an equity capitalization ratio that reflects the national average for electric utility operating companies.

The provisions of this new section apply only to rate establishment proceedings initiated after the effective date of the Act, while proceedings with final orders issued prior to this date will continue to be governed by the previous law. The Act is set to take effect immediately upon receiving a two-thirds vote from both houses of the legislature; otherwise, it will take effect on September 1, 2025.

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