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Bill to cap recoverable legal expenses in rate proceedings draws split testimony; utilities warn of unintended consequences
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Summary
Senate Bill 19 77 would limit the portion of a utility's legal expenses that may be recovered from ratepayers in a rate proceeding. Proponents said caps would protect customers; utilities and industry groups warned caps could chill legal participation, discourage investment, and run counter to the PUC's existing reasonableness review.
Senate Bill 19 77, sponsored by Senator Kolkhorst, would amend the Utilities and Water Codes to limit recovery of legal expenses in rate proceedings. The bill as filed would bar recovery of legal expenses that exceed the greater of $50,000 or 50% of a utility’s total legal expenses in a rate proceeding that commences on or after Sept. 1, 2025.
Benjamin Barclay of the Office of Public Utility Counsel (OPC) described how rate case expenses are currently recovered and noted the problem the bill seeks to address: "Because rates must be just and reasonable, utilities must invest in technical and legal experts ... these costs can significantly impact consumers' monthly electricity bills." Barclay said the PUC has tools to review those costs but suggested a statutory standard could create predictability and encourage settlement in some cases.
Katie Coleman of the Texas Association of Manufacturers noted that, while industry typically pays its own legal costs, the broader question is whether shareholders should bear some litigation costs when rate increases primarily benefit the utility’s investors. She described the bill as initiating a policy conversation about apportioning litigation costs between ratepayers and shareholders.
Utilities and water-sector representatives opposed the bill. Cody Faulk of Texas Association of Water Companies testified that rate cases are expensive, adversarial, and document‑heavy, and that capping recoverable legal fees could chill smaller utilities from securing experienced counsel or discourage filing needed rate cases — which could lead to larger adjustments later. He noted the PUC already reviews rate case expenses for reasonableness under existing rules (citing PUC review processes).
Jason Ryan of CenterPoint Energy said rate-case costs at his company have grown and suggested a spectrum of policy options: from procedural reforms and courtroom-style safeguards to requiring parties to bear their own costs. He said recent rate-case expense totals for his company reached high multi‑million amounts over multiple years and argued the committee should consider options that preserve meaningful participation while reining in unnecessary litigation expense.
Committee members questioned witnesses about typical dollar amounts for water and electric cases; witnesses said class‑A water utility rate-case legal costs typically range in the hundreds of thousands, while some electric proceedings have exceeded several million dollars. The committee left SB 19 77 pending.
