On January 8, 2025, Texas State Senator Perry introduced Senate Bill 740, aimed at reforming the regulatory framework governing water and sewer services in Texas. The bill seeks to enhance the quality, affordability, and reliability of these essential services while promoting regionalization and ensuring the financial stability of utilities.

Key provisions of the bill include amendments to the Water Code, specifically Section 13.183, which allows the Public Utility Commission of Texas (PUC) to adopt alternative ratemaking methodologies. These methodologies are designed to facilitate timely cost recovery for utilities, enabling them to implement system improvement charges that can be adjusted periodically. The bill mandates that the PUC must issue a final order on system improvement charge applications within 60 days, with a possible 15-day extension for good cause. Additionally, the bill stipulates that utilities must provide comprehensive documentation, such as receipts and contracts, to substantiate their claims for eligible costs.

Another significant aspect of SB 740 is the expedited process for acquiring utilities in receivership or under temporary management. This provision aims to streamline the transition of ownership to more stable Class A or Class B utilities, thereby ensuring continued service delivery to customers.

The introduction of this bill has sparked discussions among stakeholders. Proponents argue that the changes will lead to improved infrastructure and service reliability, particularly in underserved areas. However, some critics express concerns about the potential for increased rates under the new ratemaking methodologies, fearing that customers may bear the financial burden of infrastructure investments.

Economically, the bill could have substantial implications for Texas's water and sewer sectors, potentially attracting investment for infrastructure improvements. Socially, it aims to address disparities in service quality across different regions, particularly in rural areas where utilities may struggle financially.

As the legislative session progresses, SB 740 will likely undergo further scrutiny and debate, with stakeholders closely monitoring its impact on Texas's water and sewer services. The bill's future will depend on the balance between ensuring utility sustainability and protecting consumer interests.