An electric utility may self-insure certain liabilities and wildfire-related damages, but not damages from a wildfire event it caused intentionally, recklessly, or with gross negligence.
Sec. 36.064. SELF-INSURANCE. (a) An electric utility may self-insure all or part of: (1) the utility's potential liability or catastrophic property loss, including windstorm, fire, wildfire, and explosion losses, that could not have been reasonably anticipated and included under operating and maintenance expenses; and (2) potential damages the utility may be liable for resulting from personal injury or property damage caused by a wildfire. (b) The commission shall approve a self-insurance plan under this section if the commission finds: (1) the coverage is in the public interest; (2) one of the following: (A) the plan, considering all costs, is a lower cost alternative to purchasing commercial insurance; (B) commercial insurance alone is insufficient to cover potential liability, damages, or catastrophic property loss; or (C) the electric utility cannot obtain commercial insurance for a reasonable premium; and (3) ratepayers will receive the benefits of the savings. (c) In computing an electric utility's reasonable and necessary expenses under this subchapter, the regulatory authority, to the extent the regulatory authority finds is in the public interest, shall allow as a necessary expense the money credited to a reserve account for self-insurance. The regulatory authority shall determine reasonableness under this subsection: (1) from information provided at the time the self-insurance plan and reserve account are established; and (2) on the filing of a rate case by an electric utility that has a reserve account. (c-1) In approving a self-insurance plan under this section, the commission shall prioritize the consideration of the presence and potential extent of wildfire losses, including: (1) historical data; (2) actuarial studies and analyses; and (3) the risk of the electric utility's exposure to losses from multiple types of disasters occurring within the utility's service territory. (d) After a reserve account for self-insurance is established, the regulatory authority shall: (1) determine whether the reserve account has a surplus or shortage under Subsection (e); and (2) subtract any surplus from or add any shortage to the utility's rate base. (e) A surplus in the reserve account exists if the charges against the account are less than the money credited to the account. A shortage in the reserve account exists if the charges against the account are greater than the money credited to the account. (f) The allowance for self-insurance under this title for ratemaking purposes is not applicable to nuclear plant investment. (g) The commission shall adopt rules governing self-insurance under this section. (h) Subsection (a)(2) does not authorize an electric utility to self-insure under this section for damages from a wildfire event the utility caused intentionally, recklessly, or with gross negligence. Acts 1997, 75th Leg., ch. 166, Sec. 1, eff. Sept. 1, 1997. Amended by: Acts 2025, 89th Leg., R.S., Ch. 1072 (H.B. 145), Sec. 1, eff. June 20, 2025.