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Signed Into Law
Signed May 19, 2025Effective 2025-09-01
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.

Government Affairs & Regulatory Compliance Analysis

SB1963: Government Affairs Overview

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.

Sen. Charles Creighton·Senate Bill·Regular Session

Moderate
High Cost
Effective:2025-09-01
Business Impact

Who SB1963 Affects

This legislation has regulatory implications for the following Texas businesses and organizations:

Regulatory Priority: moderate

Notable regulatory updates (effective 2025-09-01). Consider how these changes may affect your operations.

⚡

Energy

Affected business types:

  • Power generators
  • Electric utilities
  • Renewable energy developers
  • Battery storage operators
View all energy legislation

Key Operational Considerations

  • 1Utilities: 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.

Estimated Cost Impact

highSignificant operational investment may be required.

Enforcing Agencies

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SB1963
Moderate
Relating to a financing mechanism allowing electric utilities to obtain recovery of costs associated with a weather-related event or other natural dis...
Moderate Compliance Urgency
Requires near-term attention
Cost Impact
High
Effective
2025-09-01
Enforcing Agencies
PUC
Primary Author: Sen. Charles Creighton
89th Texas Legislature
jdkey.com
01

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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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.

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Legislative Timeline

This bill's path through the Texas Legislature

Filed
Mar 5, 2025
Passed Senate
Apr 23, 2025
Passed House
May 2, 2025
Signed
May 19, 2025
Effective
Sep 1, 2025
TopicsDisaster Preparedness & ReliefUtilitiesUtilities--electricBondsPublic Utility Commission
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Senate Authors

Sen. Charles CreightonRepublican · Primary Author

House Sponsor

Rep. William MetcalfRepublican · Primary Sponsor

Bill Text(with markup)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

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More from Sen. Charles Creighton

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Related by Topic

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Quick Reference

Frequently Asked Questions

Common questions about SB1963

Q

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.

Q

Who authored SB1963?

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

Q

When was SB1963 signed into law?

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

Q

Which agencies enforce SB1963?

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

Q

How significant are the changes in SB1963?

The regulatory priority for SB1963 is rated as "moderate". Businesses and organizations should review the legislation to understand potential impacts.

Q

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.

Q

What topics does SB1963 address?

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

Q

What are the key dates for SB1963?

Key dates for SB1963: Effective date is 2025-09-01. Consult with legal counsel regarding applicability.

Q

Which Texas businesses are affected by SB1963?

SB1963 primarily affects utility companies and energy providers. These businesses should review the legislation with their legal and compliance teams to understand potential impacts.

Need Strategic Guidance on This Legislation?

JD Key Consulting is an Austin, Texas-based government affairs firm led by James Dickey, former Chairman of the Republican Party of Texas. We specialize in Texas regulatory compliance and legislative strategy for data centers, energy, banking, and manufacturing.

Legislative data provided by LegiScanLast updated: January 11, 2026