According to the Legislative Budget Board (LBB), the Committee Substitute for HB 3896 is not expected to have a significant fiscal impact on the State of Texas. The bill enables certain water supply and sewer service corporations to generate electric power primarily for internal operations and, under specific conditions, sell excess power into the ERCOT market. Although this may result in increased administrative activity for relevant regulatory bodies such as the Public Utility Commission (PUC), the LBB assumes that any additional costs associated with the implementation of this bill can be absorbed using existing resources.

At the local government level, the bill is also projected to have no significant fiscal impact. The corporations affected by this bill are nonprofit water supply or sewer service entities, many of which serve rural communities. These organizations already maintain infrastructure that would be eligible for energy generation under the bill. Therefore, any additional activities, such as registration as a power generation company or the accounting of power sale revenues, are not expected to impose significant new costs on local units of government.

The absence of fiscal impact does not preclude potential economic benefits, however. Corporations that generate and sell excess electricity could experience revenue gains, which may reduce operational costs and stabilize service rates for their members. Yet, those benefits accrue to the corporations themselves and not to state or local government budgets, which is why the fiscal note remains neutral from a governmental budgeting standpoint.

HB 3896 is a focused and pragmatic response to a growing challenge in rural Texas: the limited availability of electric power necessary for water and sewer infrastructure. As outlined in the bill analysis, many water supply corporations are forced to self-generate electricity due to insufficient grid capacity, particularly in unincorporated or underserved regions. However, under current law, these corporations lack the authority to sell excess electricity back into the ERCOT grid, which limits their ability to offset operational costs. The Committee Substitute version of the bill directly addresses this issue by permitting such corporations to generate electricity for their own use and, under limited conditions, sell surplus power, providing a revenue stream that can help stabilize utility rates for rural customers.

The substitute version of the bill significantly narrows the scope of the originally filed version. It confines electric generation strictly to operational uses, powering water well pumps and treatment infrastructure, and allows sales to ERCOT only in counties with populations under 350,000. This change ensures the bill targets rural utilities without inadvertently enabling large-scale commercial power generation by water corporations. Furthermore, the bill imposes financial safeguards by requiring that any revenue from power sales be used in accordance with both the Texas Non-Profit Corporation Act and Water Code provisions, further reinforcing responsible governance and fiscal discipline.

Given these features, the bill aligns well with core liberty principles: it enhances operational autonomy (individual liberty), supports market participation in a regulated and limited way (free enterprise), and avoids expanding state bureaucracy (limited government). It does not impose mandates or costs on local governments, nor does it create new criminal penalties or regulatory burdens. Instead, it empowers local utility cooperatives to generate additional revenue streams, improve resiliency, and potentially reduce utility rates. As such, this legislation is both practically beneficial and ideologically consistent with principles of decentralized governance and self-reliance.

Based on the structure, intent, and fiscal neutrality of the bill, Texas Policy Research recommends that lawmakers vote YES on HB 3896.

• Individual Liberty: The bill enhances the operational independence of rural water supply and sewer service corporations by allowing them to generate their own electricity. In areas where grid reliability is inadequate, this reduces dependence on external utility providers and empowers local systems to maintain essential services. By granting these nonprofit, member-owned corporations greater control over their operations, the bill affirms the liberty of local communities to manage their own utilities without interference or excessive regulation.
• Personal Responsibility: While the bill does not directly address personal decision-making, it indirectly reinforces the principle of responsibility at the organizational level. Water supply corporations are entrusted with the ability to manage power generation and use any revenue responsibly, in compliance with the Texas Non-Profit Corporation Act and Water Code §67.004. By placing these decisions and fiduciary duties in the hands of locally governed entities, the bill supports a culture of self-governance and accountability.
• Free Enterprise: The bill upholds free market principles by allowing eligible corporations to sell excess electricity into the ERCOT market, Texas's deregulated wholesale electric power system. This limited entry into energy markets does not include subsidies or mandates but simply removes a legal barrier, allowing corporations to compete and participate like other registered power generation entities. It balances market access with reasonable constraints, ensuring the bill serves public interest without distorting the competitive landscape.
• Private Property Rights: The bill neither expands nor restricts private property rights in a negative way. It preserves the right of water supply corporations, many of which operate as cooperatives or mutual associations, to generate power using their own infrastructure and land. This respects the principle that property owners and associations should be able to make productive use of their assets, especially when serving a public or communal purpose.
• Limited Government: Importantly, the bill does not expand the size or scope of government. It imposes no new regulatory burdens, does not create any new government entities or programs, and does not authorize any additional rulemaking power. Instead, it works within existing legal frameworks (e.g., Utilities Code §39.351) and explicitly limits the use of revenue to existing statutory purposes. It empowers local organizations rather than expanding state control, aligning directly with the principle of limited, accountable government.

• SB 2327 (Same As)