Water Code § 13.183

Sec. 13.183. FIXING OVERALL REVENUES. (a) In fixing the rates for water and sewer services, the regulatory authority shall fix its overall revenues at a level that will: (1) permit the utility a reasonable opportunity to earn a reasonable return on its invested capital used and useful in rendering service to the public, based on test year information, over and above its reasonable and necessary operating expenses; and (2) preserve the financial integrity of the utility. (b) In a rate proceeding, the regulatory authority may authorize collection of additional revenues from the customers to provide funds for capital improvements necessary to provide facilities capable of providing adequate and continuous utility service if an accurate accounting of the collection and use of those funds is provided to the regulatory authority. A facility constructed with surcharge funds is considered customer contributed capital or contributions in aid of construction and may not be included in invested capital, and depreciation expense is not allowed. (c) To ensure that retail customers receive a higher quality, more affordable, or more reliable water or sewer service, to encourage regionalization, or to maintain financially stable and technically sound utilities, the regulatory authority, by rule or ordinance, as appropriate, may adopt specific alternative ratemaking methodologies for water or sewer rates to allow for more timely and efficient cost recovery. Appropriate alternative ratemaking methodologies are the introduction of new customer classes, the cash needs method, and phased and multi-step rate changes. The regulatory authority may also adopt system improvement charges that may be periodically adjusted to ensure timely recovery of infrastructure investment. If the utility commission is the appropriate regulatory authority, the utility commission shall enter a final order on a request for a system improvement charge under this subsection not later than the 60th day after the date the utility commission determines that a complete application for a system improvement charge has been filed. The utility commission may extend the deadline for not more than 15 days for good cause. The utility commission by rule shall establish a schedule that requires all utilities that have implemented a system improvement charge approved by the utility commission to make periodic filings with the utility commission to modify or review base rates charged by the utility. Overall revenues determined according to an alternative ratemaking methodology adopted under this section must provide revenues to the utility that satisfy the requirements of Subsection (a). The regulatory authority may not approve rates under an alternative ratemaking methodology unless the regulatory authority adopts the methodology before the date the rate application was administratively complete. (c-1) The utility commission shall by rule: (1) establish the information required for an application for a system improvement charge to be considered complete by the utility commission under this section, which must include the documentation listed in Subsection (c-2); and (2) prescribe a standard form for an application to the utility commission for a system improvement charge under Subsection (c). (c-2) An application for a system improvement charge under Subsection (c) may not be considered complete by the utility commission unless, to substantiate each claimed eligible cost of a utility's eligible plant that is not already included in the applying utility's rates, the application includes: (1) receipts; (2) invoices; (3) contracts; or (4) other documentation of eligible costs. (c-3) An application for a system improvement charge under Subsection (c) may not be considered complete by the utility commission before the 30th day after the date the application is filed with the utility commission. (c-4) At the time an applicant files an application for a system improvement charge under Subsection (c) with the utility commission, the applicant shall provide a copy of the application to the Office of Public Utility Counsel. The utility commission shall allow the office to comment on the application not later than the 30th day after the date the application is filed. The utility commission shall provide to the office, at no cost and in electronic form, any data related to the application held by the commission. Information provided to the office under this subsection that is confidential and not subject to disclosure by the utility commission under Chapter 552, Government Code, or other law is confidential and not subject to disclosure by the office. (d) A regulatory authority other than the utility commission may not approve an acquisition adjustment for a system purchased before the effective date of an ordinance authorizing acquisition adjustments. (e) In determining to use an alternative ratemaking methodology, the regulatory authority shall assure that rates, operations, and services are just and reasonable to the consumers and to the utilities. Added by Acts 1985, 69th Leg., ch. 795, Sec. 3.005, eff. Sept. 1, 1985. Amended by Acts 1987, 70th Leg., ch. 539, Sec. 9, eff. Sept. 1, 1987; Acts 1989, 71st Leg., ch. 567, Sec. 17, eff. Sept. 1, 1989; Acts 1997, 75th Leg., ch. 1010, Sec. 6.04, eff. Sept. 1, 1997; Acts 2001, 77th Leg., ch. 966, Sec. 10.05, eff. Sept. 1, 2001. Amended by: Acts 2013, 83rd Leg., R.S., Ch. 170 (H.B. 1600), Sec. 2.36, eff. September 1, 2013. Acts 2013, 83rd Leg., R.S., Ch. 171 (S.B. 567), Sec. 36, eff. September 1, 2013. Acts 2019, 86th Leg., R.S., Ch. 967 (S.B. 700), Sec. 4, eff. September 1, 2019. Acts 2025, 89th Leg., R.S., Ch. 521 (H.B. 2712), Sec. 2, eff. September 1, 2025. Acts 2025, 89th Leg., R.S., Ch. 776 (S.B. 740), Sec. 4, eff. September 1, 2025.