This section defines system restoration costs and tells the commission how to treat them in utility recovery and later rate proceedings.
Sec. 36.402. SYSTEM RESTORATION COSTS; STANDARDS AND DEFINITIONS. (a) In this subchapter, "system restoration costs" means reasonable and necessary costs, including costs expensed, charged to self-insurance reserves, deferred, capitalized, or otherwise financed, that are incurred by an electric utility due to any activity or activities conducted by or on behalf of the electric utility in connection with the restoration of service and infrastructure associated with electric power outages affecting customers of the electric utility as the result of any tropical storm or hurricane, ice or snow storm, flood, or other weather-related event or natural disaster that occurred in calendar year 2008 or thereafter. System restoration costs include mobilization, staging, and construction, reconstruction, replacement, or repair of electric generation, transmission, distribution, or general plant facilities. System restoration costs shall include reasonable estimates of the costs of an activity or activities conducted or expected to be conducted by or on behalf of the electric utility in connection with the restoration of service or infrastructure associated with electric power outages, but such estimates shall be subject to true-up and reconciliation after the actual costs are known. System restoration costs include reasonable and necessary weatherization and storm-hardening costs incurred, as well as reasonable estimates of costs to be incurred, by the electric utility, but such estimates shall be subject to true-up and reconciliation after the actual costs are known. (b) System restoration costs shall include carrying costs at the electric utility's weighted average cost of capital as last approved by the commission in a general rate proceeding from the date on which the system restoration costs were incurred until the date that transition bonds are issued or until system restoration costs are otherwise recovered pursuant to the provisions of this subchapter. (b-1) Notwithstanding Subsection (b), if an electric utility fails to comply with the standards required by Section 38.006 and the utility's system is damaged by a weather-related event or natural disaster, the commission may at the utility's next rate proceeding reduce the utility's return on equity for infrastructure used or installed to repair or replace the damaged portion of the system. (c) To the extent a utility subject to this subchapter receives insurance proceeds, governmental grants, or any other source of funding that compensate it for system restoration costs, those amounts shall be used to reduce the utility's system restoration costs recoverable from customers. If the timing of a utility's receipt of those amounts prevents their inclusion as a reduction to the system restoration costs that are securitized, or the commission later determines as a result of the true-up and reconciliation provided for in Subsection (a) that the actual costs incurred are less than estimated costs included in the determination of system restoration costs, the commission shall take those amounts into account in: (1) the utility's next base rate proceeding; or (2) any subsequent proceeding, other than a true-up proceeding under Section 39.307, in which the commission considers system restoration costs. (d) If the commission determines that the insurance proceeds, governmental grants, or other sources of funding that compensate the electric utility for system restoration costs, or the amount resulting from a true-up of estimated system restoration costs are of a magnitude to justify a separate tariff rider, the commission may establish a tariff rider to credit such amounts against charges, other than transition charges or system restoration charges as defined in Section 36.403, being collected from customers. (e) To the extent that the electric utility receives insurance proceeds, governmental grants, or any other source of funding that is used to reduce system restoration costs, the commission shall impute interest on those amounts at the same cost of capital included in the utility's system restoration costs until the date that those amounts are used to reduce the amount of system restoration costs that are securitized or otherwise reflected in the rates of the utility. Added by Acts 2009, 81st Leg., R.S., Ch. 1 (S.B. 769), Sec. 1, eff. April 16, 2009. Amended by: Acts 2021, 87th Leg., R.S., Ch. 198 (H.B. 1510), Sec. 1, eff. June 1, 2021. Acts 2025, 89th Leg., R.S., Ch. 856 (S.B. 1789), Sec. 1, eff. September 1, 2025.