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Signed Into Law
Signed June 20, 2025Effective 2025-09-01
SB740

Regular Session

Relating to certain proceedings by the Public Utility Commission of Texas regarding water or sewer service.

Government Affairs & Regulatory Compliance Analysis

SB740: Government Affairs Overview

SB740 bifurcates regulatory burdens: it significantly streamlines the acquisition process for troubled water/sewer systems by Class A/B utilities and municipalities, while simultaneously imposing stricter, invoice-level evidentiary standards for System Improvement Charge (SIC) applications. Entities must prepare for reduced barriers to M&A activity effective immediately upon enactment, but face a higher documentation threshold for rate recovery filings starting in 2026.

Sen. Charles Perry·Senate Bill·Regular Session

Moderate
Low Cost
Effective:2025-09-01
Enforcing Agencies

Office of Public Utility Counsel (OPUC) • Public Utility Commission of Texas (PUC)

Business Impact

Who SB740 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.

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Water

Affected business types:

  • Water utilities
  • Wastewater treatment facilities
  • Municipal water districts
  • Agricultural water users
View all water legislation

Key Operational Considerations

  • 1Action: Legal teams must review existing inter-local agreements immediately. Dispute resolution clauses relying on PUC appeals are now void; amend contracts to specify arbitration or judicial relief.
  • 2Staff responsible for capital project tracking must be retrained. Estimates are no longer sufficient for SIC recovery.
  • 3Workflows must ensure that every eligible project cost is immediately paired with a retrievable invoice, receipt, or executed contract to meet the 2026 evidentiary standard.
  • 4Mandatory Service: You must serve a copy of the SIC application to the Office of Public Utility Counsel (OPUC) simultaneous with the PUC filing.

Estimated Cost Impact

lowMinimal cost impact anticipated.

Enforcing Agencies

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SB740
Moderate
Relating to certain proceedings by the Public Utility Commission of Texas regarding water or sewer service.
Moderate Compliance Urgency
Requires near-term attention
Cost Impact
Low
Effective
2025-09-01
Enforcing Agencies
OPUCPUC
Primary Author: Sen. Charles Perry
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: September 1, 2026 (New evidentiary standards for SIC applications apply to filings on/after this date).
  • Agency Rulemaking: The PUC must adopt rules establishing standard forms and information requirements for SIC applications by September 1, 2026. Watch for draft rules regarding the "periodic filing" schedule for base rate reviews.

Immediate Action Plan

  • Audit Wholesale Contracts: If you are a municipality buying/selling to another municipality, amend dispute clauses to remove PUC references before Sept 1, 2025.
  • Update Capital Accounting: Configure financial systems to tag and store individual invoices by project code to satisfy the Sec. 13.183(c-2) requirements.
  • Strategic Filing Review: Evaluate current capital improvement plans. If you have an SIC filing imminent, prioritize filing before September 1, 2026, to utilize the current, less burdensome evidentiary rules.
  • M&A Playbook Update: If acquiring a troubled system as a receiver, remove the "proof of financial/technical capability" step from your application checklist; your appointment now satisfies this legal requirement.

Operational Changes Required

Contracts

Municipal Wholesale Agreements: The PUC no longer has appellate jurisdiction over wholesale water/sewer rates charged by one municipality to another.

  • Action: Legal teams must review existing inter-local agreements immediately. Dispute resolution clauses relying on PUC appeals are now void; amend contracts to specify arbitration or judicial relief.

Hiring/Training

Accounting & Project Management:

  • Staff responsible for capital project tracking must be retrained. Estimates are no longer sufficient for SIC recovery.
  • Workflows must ensure that every eligible project cost is immediately paired with a retrievable invoice, receipt, or executed contract to meet the 2026 evidentiary standard.

Reporting & Record-Keeping

SIC Application Protocol (Post-Sept 1, 2026):

  • Mandatory Service: You must serve a copy of the SIC application to the Office of Public Utility Counsel (OPUC) simultaneous with the PUC filing.
  • Completeness Check: The 60-day approval clock does not start until the application is deemed administratively complete (30 days post-filing).
  • Evidence: Filings must include actual invoices and receipts.

Fees & Costs

Troubled System Acquisitions:

  • Cost Recovery: If appointed as a temporary manager, your O&M and capital expenditures are now legally classified as "regulatory assets." This guarantees recovery in future rate proceedings, reducing the financial risk of intervention.

Strategic Ambiguities & Considerations

  • "Periodic Filings" Schedule: The law mandates the PUC to set a schedule for utilities with an SIC to review base rates, but does not specify the frequency (e.g., 3 vs. 5 years). This will be determined in rulemaking and will dictate your long-term rate case strategy.
  • "Good Cause" Extensions: The PUC may extend the 60-day SIC ruling deadline by 15 days for "good cause." The agency has not yet defined the threshold for this delay, creating a potential for routine schedule slippage.

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JD Key Consulting specializes in Texas regulatory compliance strategy. Work directly with James Dickey—former Chairman of the Republican Party of Texas—to understand this bill's impact on your operations and develop an actionable compliance plan.

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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.

02

Legislative Timeline

This bill's path through the Texas Legislature

Filed
Jan 8, 2025
Passed Senate
Mar 24, 2025
Passed House
May 22, 2025
Signed
Jun 20, 2025
Effective
Sep 1, 2025
TopicsUtilitiesUtilities--generalUtilities--water & SewerWater & Sewer ServiceEnvironmental Quality, Texas Commission OnPublic Utility Commission
03

Senate Authors

Sen. Charles PerryRepublican · Primary Author
Coauthors (2)

House Sponsor

Rep. David SpillerRepublican · Primary Sponsor

Bill Text(with markup)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

Related Legislation

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More from Sen. Charles Perry

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Related by Topic

View more Utilities legislation
Quick Reference

Frequently Asked Questions

Common questions about SB740

Q

What does Texas SB740 do?

SB740 bifurcates regulatory burdens: it significantly streamlines the acquisition process for troubled water/sewer systems by Class A/B utilities and municipalities, while simultaneously imposing stricter, invoice-level evidentiary standards for System Improvement Charge (SIC) applications. Entities must prepare for reduced barriers to M&A activity effective immediately upon enactment, but face a higher documentation threshold for rate recovery filings starting in 2026.

Q

Who authored SB740?

SB740 was authored by Texas Senator Charles Perry during the Regular Session.

Q

When was SB740 signed into law?

SB740 was signed into law by Governor Greg Abbott on June 20, 2025.

Q

Which agencies enforce SB740?

SB740 is enforced by Office of Public Utility Counsel (OPUC) and Public Utility Commission of Texas (PUC).

Q

How significant are the changes in SB740?

The regulatory priority for SB740 is rated as "moderate". Businesses and organizations should review the legislation to understand potential impacts.

Q

What is the cost impact of SB740?

The cost impact of SB740 is estimated as "low". This may vary based on industry and implementation requirements.

Q

What topics does SB740 address?

SB740 addresses topics including utilities, utilities--general, utilities--water & sewer, water & sewer service and environmental quality, texas commission on.

Q

What are the key dates for SB740?

Key dates for SB740: Effective date is 2025-09-01. Rulemaking: Adopt rules establishing required information and standard forms for System Improvement Charge (SIC) applications (Sec. 13.183(c-1)). (2026-09-01); Adopt/update rules for the expedited acquisition process for troubled utilities by Class A/B utilities and public entities (Sec. 13.301(l) and Sec. 13.3021). (No specific statutory deadline

Q

Which Texas businesses are affected by SB740?

SB740 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