SB1963

Regular Session

Relating to a financing mechanism allowing electric utilities to obtain recovery of costs associated with a weather-related event or other natural disaster; granting authority to issue bonds.

ModeratePlan for compliance

High Cost

Effective:2025-09-01

Enforcing Agencies

Public Utility Commission of Texas (PUC)

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: September 1, 2025
Compliance Deadline: Immediate upon filing. Utilities must be prepared to file consolidated applications immediately following a qualifying event to trigger the statutory review clock. Ratepayers will see billing impacts approximately 6–9 months post-event.
Agency Rulemaking: The Public Utility Commission (PUC) must process applications within a strict 150-day statutory deadline. While no specific rulemaking date is set, the PUC will likely issue procedural guidance regarding the "true-up" of estimated costs prior to the first docket filing in late 2025.

Immediate Action Plan

1. Utilities: Immediately implement a "Disaster Accounting Protocol" that triggers when restoration costs hit $40M, ensuring readiness to file once the $50M threshold is crossed.
2. Utilities: Retain bond counsel and financial advisors *now* to draft the template for the consolidated application, ensuring you can meet the 150-day approval window.
3. Commercial Ratepayers: Audit current energy contracts to quantify exposure to regulatory pass-through charges.
4. Commercial Ratepayers: Update financial risk models to include potential 5-10% utility bill surcharges in the fiscal year following predicted major weather events.

Operational Changes Required

Contracts

Commercial Ratepayers: Review energy supply agreements with Retail Electric Providers (REPs). Confirm that "Change in Law" or "Regulatory Pass-Through" clauses cover System Restoration Charges. These are non-bypassable; fixed-rate contracts will not shield you from these surcharges.
Utilities: Amend Master Service Agreements (MSAs) with emergency response vendors. Contracts must mandate granular invoicing that distinguishes capitalizable restoration work from standard O&M to satisfy PUC "true-up" audits.

Hiring/Training

Utilities: Legal and Finance teams require training on the new "consolidated application" process, which combines cost verification and financing authorization into a single 150-day workflow.
Accounts Payable (All Businesses): Train AP staff to identify "System Restoration Charges" as valid regulatory line items, distinct from standard delivery charges, to prevent payment disputes or auditing errors.

Reporting & Record-Keeping

Utilities (The "True-Up" Standard): You are now authorized to securitize *estimated* costs. You must establish a segregated accounting ledger to track *actual* spend against these estimates. Subsection (b-3) mandates a reconciliation process; failure to maintain precise records will result in forced credits to ratepayers or disallowed cost recovery.

Fees & Costs

Ratepayers: Energy Managers must adjust budget forecasting models. Following any hurricane or freeze event causing >$50M in grid damage, anticipate a specific rate surcharge to appear on bills within two fiscal quarters.
Utilities: The bill authorizes recovery of professional fees (legal, financial advisory) associated with the bond issuance. These costs should be capitalized and included in the securitization request.

Strategic Ambiguities & Considerations

Allowable Variance in Estimates: The statute allows securitization of "estimated" costs but requires a reconciliation. It is currently unclear what margin of error the PUC will accept before penalizing a utility for "over-securitizing" to gain cheap cash flow.
Internal Labor vs. External Contractors: The definition of "system restoration costs" is broad. Expect early PUC dockets to aggressively scrutinize whether internal overhead and capitalized interest are eligible for this specific bonding mechanism or if it is restricted strictly to third-party vendor costs.
Interaction with DCRF: The PUC must clarify how these charges interact with the Distribution Cost Recovery Factor (DCRF) to ensure utilities do not double-recover the same assets through both a bond surcharge and a base rate adjustment.

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Legislative Timeline

This bill's path through the Texas Legislature

TopicsDisaster Preparedness & Relief Utilities Utilities--electric Bonds Public Utility Commission

Official Analysis

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BILL ANALYSIS

Senate Research Center	S.B. 1963
89R12142 SCR-F	By: Creighton
	Business & Commerce
	4/1/2025
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

Storm activity continues to create significant costs for utilities, particularly as the state continues to grow, adding residents, businesses, and corresponding utility infrastructure. Each storm is a one-time event that results in calculable costs, making it appropriate to securitize those costs at as low a rate as possible. Securitization benefits consumers by reducing the costs of borrowing needed funds, while providing the necessary cash flow for storm recovery.

S.B. 1963 would treat the lower-cost financing mechanism of securitization for Electric Reliability Council of Texas (ERCOT) utilities in the same manner as is currently authorized for non-ERCOT utilities by utilizing the Texas Electric Utility System Restoration Corporation as the financing entity.

The utility would be allowed to request securitization and issuance of system restoration bonds for costs of $50 million or more in any calendar year. The Public Utility Commission of Texas would issue an order that determines the amount of system restoration costs and authorize the securitization, charges and recovery by the 150th day after an application is filed.

As proposed, S.B. 1963 amends current law relating to a financing mechanism allowing electric utilities to obtain recovery of costs associated with a weather-related event or other natural disaster and grants authority to issue bonds.

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 36.451, Utilities Code, by amending Subsection (b) and adding Subsection (i), as follows:

(b)� Provides that the purpose of Subchapter J (Lower-Cost Financing Mechanism for Securitization For Recovery of System Restoration Costs) is to make available a lower-cost, supplemental financing mechanism to allow an electric utility, rather than an electric utility operating solely outside of the Electric Reliability Council of Texas, to obtain timely recovery of system restoration costs under Subchapter I (Securitization For Recovery of System Restoration Costs) through securitization and the issuance of transition bonds or system restoration bonds by an issuer other than the electric utility or an affiliated special purpose entity.

(i) Authorizes an electric utility, notwithstanding Section 36.403(j) (relating to the recovery of an electric utility's system restoration costs), to apply for securitization and the issuance of system restoration bonds under this subchapter for estimated and actual system restoration costs of $50 million or more in any calendar year.

SECTION 2. Amends Section 36.456, Utilities Code, by adding Subsections (b-1), (b-2), and (b-3), as follows:

(b-1) Authorizes an electric utility, notwithstanding Sections 36.405(c) (relating to requiring the Public Utility Commission of Texas (PUC) to issue an order determining the amount of system restoration costs eligible for recovery and securitization within a certain timeline) and (d) (relating to authorizing an electric utility to file an application for a financing order within a certain timeline and the PUC's required response timeline), to file an application with the PUC under this subchapter for a determination of the amount of estimated and actual system restoration costs eligible for recovery and securitization and a financing order that authorizes the securitization of estimated and actual system restoration costs, the issuance of system restoration bonds, and the creation of system restoration charges for the recovery of qualified costs.

(b-2) Requires the PUC, for an application filed under Subsection (b-1), to issue an order that determines the amount of estimated and actual system restoration costs eligible for recovery and securitization and a financing order that authorizes the securitization of estimated and actual system restoration costs, the issuance of system restoration bonds, and the creation of system restoration charges for the recovery of qualified costs not later than the 150th day after the date the application is filed.

(b-3) Requires that the estimated system restoration costs, for an application filed under Subsection (b-1), be subject to true-up and reconciliation and that system restoration charges be adjusted after the actual system restoration costs are known.

SECTION 3.� Effective date: upon passage or September 1, 2025.

Senate Authors

Sen. Charles CreightonRepublican · Primary Author

House Sponsor

Rep. William MetcalfRepublican · Primary Sponsor

Bill Text(with markup)

S.B. No. 1963

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

	AN ACT
	relating to a financing mechanism allowing electric utilities to
	obtain recovery of costs associated with a weather-related event or
	other natural disaster; granting authority to issue bonds.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1. Section 36.451, Utilities Code, is amended by
	amending Subsection (b) and adding Subsection (i) to read as
	follows:
	(b) The purpose of this subchapter is to make available a
	lower-cost, supplemental financing mechanism to allow an electric
	utility [~~operating solely outside of ERCOT~~] to obtain timely
	recovery of system restoration costs under Subchapter I through
	securitization and the issuance of transition bonds or system
	restoration bonds by an issuer other than the electric utility or an
	affiliated special purpose entity. Financing of system restoration
	costs under this subchapter is a valid and essential public
	purpose.
	(i) Notwithstanding Section 36.403(j), an electric utility
	may apply for securitization and the issuance of system restoration
	bonds under this subchapter for estimated and actual system
	restoration costs of $50 million or more in any calendar year.
	SECTION 2. Section 36.456, Utilities Code, is amended by
	adding Subsections (b-1), (b-2), and (b-3) to read as follows:
	(b-1) Notwithstanding Sections 36.405(c) and (d), an
	electric utility may file an application with the commission under
	this subchapter for:
	(1) a determination of the amount of estimated and
	actual system restoration costs eligible for recovery and
	securitization; and
	(2) a financing order that authorizes the
	securitization of estimated and actual system restoration costs,
	the issuance of system restoration bonds, and the creation of
	system restoration charges for the recovery of qualified costs.
	(b-2) For an application filed under Subsection (b-1), the
	commission shall issue an order that determines the amount of
	estimated and actual system restoration costs eligible for recovery
	and securitization and a financing order that authorizes the
	securitization of estimated and actual system restoration costs,
	the issuance of system restoration bonds, and the creation of
	system restoration charges for the recovery of qualified costs not
	later than the 150th day after the date the application is filed.
	(b-3) For an application filed under Subsection (b-1), the
	estimated system restoration costs shall be subject to true-up and
	reconciliation and system restoration charges shall be adjusted
	after the actual system restoration costs are known.
	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.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION


April 2, 2025

TO:	Honorable Charles Schwertner, Chair, Senate Committee on Business & Commerce

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	SB1963 by Creighton (Relating to a financing mechanism allowing electric utilities to obtain recovery of costs associated with a weather-related event or other natural disaster; granting authority to issue bonds.), As Introduced

Estimated Two-year Net Impact to General Revenue Related Funds for SB1963, As Introduced: a negative impact of ($1,380,770) through the biennium ending August 31, 2027.

The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.

General Revenue-Related Funds, Five- Year Impact:

Fiscal Year	Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2026	($690,385)
2027	($690,385)
2028	($690,385)
2029	($690,385)
2030	($690,385)

All Funds, Five-Year Impact:

Fiscal Year	Probable Savings/(Cost) from General Revenue Fund 1	Change in Number of State Employees from FY 2025
2026	($690,385)	3.0
2027	($690,385)	3.0
2028	($690,385)	3.0
2029	($690,385)	3.0
2030	($690,385)	3.0

Fiscal Analysis

The bill would amend Utilities Code to allow an electric utility to apply for securitization and the issuance of system restoration bond costs of $50 million or more in a calendar year. The Public Utility Commission of Texas (PUC) would be required to issue an order within 150 days after the application is filed.

Methodology

Based on the analysis of the PUC, as the cost to rate payers increases as storm costs continue to rise after each occurrence, more electric utilities will apply for a securitization of system restoration bond. This estimate assumes the agency would require 3.0 additional full time equivalents (FTE) positions to implement the provisions of the billwithin the 150 days of filling. An Attorney III ($115,500 per year with estimated benefits of $32,825) position would be needed for case proceedings. A Financial Examiners IV-V position ($100,000 per year with estimated benefits of $28,420) would be needed for rate regulation pertaining to securitization of a bond. Lastly, an Engineer III-V position ($115,500 per year with estimated benefits of $32,825) would be needed for expertise and knowledge of electric utilities. Other associated costs include $7,215 per year for payroll contributions, travel, and other operating expenses. This estimate also assumes PUC would require $250,000 per year in professional fees and services to hire an outside financial advisor to provide market analysis on bond pricing.

Technology

PUC anticipates information technology expenditures of $8,100 per year.

Local Government Impact

No significant fiscal implication to units of local government is anticipated.

Source Agencies:

304 Comptroller of Public Accounts, 473 Public Utility Commission of Texas

LBB Staff:

JMc, RStu, GDZ, JBel, WP

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Frequently Asked Questions

Common questions about SB1963

What does Texas SB1963 do?

SB1963 expands the "securitization" financing mechanism—previously limited to non-ERCOT utilities—to all Texas electric utilities (including Oncor, CenterPoint, and AEP) for weather-related damages exceeding $50 million. While this provides utilities immediate liquidity through bonds, it guarantees new, non-bypassable "System Restoration Charges" on commercial and industrial energy bills following major weather events. Implementation Timeline Effective Date: September 1, 2025 Compliance Deadline: Immediate upon filing.

Who authored SB1963?

SB1963 was authored by Texas Senator Charles Creighton during the Regular Session.

When was SB1963 signed into law?

SB1963 was signed into law by Governor Greg Abbott on May 19, 2025.

Which agencies enforce SB1963?

SB1963 is enforced by Public Utility Commission of Texas (PUC).

How urgent is compliance with SB1963?

The compliance urgency for SB1963 is rated as "moderate". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of SB1963?

The cost impact of SB1963 is estimated as "high". This may vary based on industry and implementation requirements.

What topics does SB1963 address?

SB1963 addresses topics including disaster preparedness & relief, utilities, utilities--electric, bonds and public utility commission.

Legislative data provided by LegiScanLast updated: November 25, 2025

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