By: Creighton  S.B. No. 1856          (In the Senate - Filed March 4, 2025; March 17, 2025, read   first time and referred to Committee on Business & Commerce;   April 28, 2025, reported adversely, with favorable Committee   Substitute by the following vote:  Yeas 11, Nays 0; April 28, 2025,   sent to printer.)Click here to see the committee vote     COMMITTEE SUBSTITUTE FOR S.B. No. 1856 By:  Creighton     A BILL TO BE ENTITLED   AN ACT     relating to a capacity cost recovery rider for certain electric   utilities.          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 certain changes   to the level of an electric utility's capacity-related costs and   capacity-related revenues due to wholesale rate decisions and   determinations by a federal agency or a regional transmission   organization subject to federal jurisdiction should be timely   reflected in the utility's rates.          (c)  On application by an electric utility that has not   exceeded the utility's authorized return on equity as shown in the   utility's most recent earnings monitoring report at the time of the   application, the commission shall establish a capacity cost   recovery rider that must be annually updated and that allows:                (1)  recovery of the utility's costs that are eligible   as provided by Subsection (d); and                (2)  return to ratepayers of the utility's revenues   that are eligible as provided by Subsection (d).          (d)  In this section, eligible costs and revenues are   capacity-related 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   Commission, to the extent the costs and revenues are not already   being recovered through the utility's base rates.          (e)  Amounts recovered through a capacity cost recovery   rider are subject to reconciliation in the next base rate   proceeding for the electric utility. As part of the   reconciliation, the commission shall review the costs and revenues   to determine if they were reasonable and prudently incurred and to   ensure the electric utility is only recovering costs allocable to   retail customers in this state and is not over-recovering costs.  In   each base rate proceeding following the establishment of a capacity   cost recovery rider, the commission shall remove from the electric   utility's base rates all cost and revenue items eligible for   recovery through the electric utility's capacity cost recovery   rider.          (f)  The annual revenue requirement and rates for a proposed   capacity cost recovery rider must include:                (1)  the electric utility's calculated costs and   revenues for the upcoming year beginning on the June 1 associated   with the utility's participation in a multi-state capacity auction;   and                (2)  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   proposed rider, plus:                      (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   settlement statement; or                            (ii)  were directed by a Federal Energy   Regulatory Commission order issued in the preceding 12-month   period.          (g)  The capacity cost recovery rider charges must be derived   using:                (1)  the same production demand allocation factors   approved in the electric utility's most recent base rate case; and                (2)  the projected billing determinants for the rate   effective period.          (h)  The billing determinants must be derived using each   customer class's projected kilowatt-hour usage, except for   customer classes with demand meters for which the billing   determinants must be derived using each customer class's projected   kilowatt billing demand.          (i)  Until the time the electric utility removes from base   rates the costs eligible for rider recovery under Subsection (d),   and the costs eligible for rider recovery described in Subsection   (g)(2), and these costs are recovered solely through the capacity   cost recovery rider, the calculation of the capacity cost recovery   rider must include a load growth adjustment to take into account   changes in the number of the utility's customers and the effects, on   a weather-normalized basis, that energy consumption and energy   demand have on the amount of revenue recovered through the   utility's base rates.          (j)  The commission shall process an application to   establish or update a capacity cost recovery rider in accordance   with Subsections (k)-(o).          (k)  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   than:                (1)  May 15 of that year; or                (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   published.          (l)  The application must be fully documented, including   testimony and all supporting work papers in native format.          (m)  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 15th day after the   date of the utility's filing; and                (2)  may address only whether the application conforms   with any rule the commission adopts to implement this section and   the mathematical accuracy of the utility's proposed capacity cost   recovery rider revenue requirement and rates.          (n)  Any other inaccuracy identified under Subsection (m)(2)   may be addressed only in the electric utility's next capacity cost   recovery rider application.          (o)  The commission may review costs and revenues and shall   issue an order approving, modifying, or denying an electric   utility's proposed or updated capacity cost recovery rider not   later than the 60th day after the date the application is filed.          (p)  This section expires September 1, 2035.          SECTION 2.  An electric utility to which Section 36.216,   Utilities Code, as added by this Act, applies may file an   application with the Public Utility Commission of Texas 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 commission has adopted any rules   regarding capacity cost recovery riders. Not later than the 60th   day after the date the application is filed, the commission shall   issue an order approving, modifying, or denying the proposed or   updated capacity cost recovery rider.  The electric utility shall   begin imposing the rates approved by the commission 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.     * * * * *