S.B. No. 1856 introduces a new section, Section 36.216, to the Utilities Code, which establishes a capacity cost recovery rider specifically for electric utilities operating outside of the Electric Reliability Council of Texas (ERCOT) in areas governed by the Southeastern Electric Reliability Council. The bill aims to ensure that changes in capacity-related costs and revenues, resulting from wholesale rate decisions or federal agency determinations, are promptly reflected in the utility's rates. The Public Utility Commission of Texas is tasked with establishing and annually updating this rider upon application from eligible utilities, allowing them to recover certain costs and return revenues to ratepayers.

The bill outlines the criteria for eligible costs and revenues, which must be associated with the utility's participation in multi-state capacity auctions. It also mandates that amounts recovered through the rider be reconciled in the utility's next base rate proceeding to ensure that only reasonable and prudently incurred costs are recovered. Additionally, the bill specifies the timeline for applications and the commission's review process, with a provision for the rider to remain effective until September 1, 2035. The act will take effect immediately if it receives a two-thirds vote from both houses; otherwise, it will take effect on September 1, 2025.

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