According to the Legislative Budget Board (LBB), SB 1789 is expected to have a negative fiscal impact on the state’s General Revenue Fund, with an estimated cost of $1.8 million over the FY 2026–2027 biennium. The cost arises primarily from the administrative and enforcement responsibilities placed on the Public Utility Commission of Texas (PUC), which would be required to implement and oversee new rules for electric infrastructure inspection, maintenance, and reporting.

To meet these responsibilities, the PUC anticipates the need for 4.5 new full-time equivalent (FTE) positions. These include attorneys to handle legal rulemaking and enforcement, engineers to provide technical expertise and oversight, and investigators to ensure compliance with the new structural integrity standards for transmission and distribution poles. Salaries and benefits for these staff positions represent a significant portion of the projected cost.

The bill also contemplates contracting services to review approximately 165 annual utility reports, which would require an additional $250,000 per year. Minor technology costs, estimated at $12,150 annually, are anticipated to support data collection and analysis. Notably, the bill does not have a significant fiscal impact on local governments.

Overall, the fiscal burden results from the need to develop and enforce a regulatory framework for electric utility pole standards, enhance grid reliability, and hold utilities accountable for system failures tied to noncompliance. While these costs are not offset in the short term, the bill aims to promote long-term savings and resiliency by reducing infrastructure-related service disruptions.

SB 1789 is well-intentioned in its aim to improve electric grid reliability through infrastructure standards and oversight. However, while the goal of safeguarding the grid is laudable, the bill in its current form raises several significant concerns that warrant a No; Amend position. The legislation expands the scope of the Public Utility Commission of Texas (PUC) by granting it broad rulemaking authority to impose structural integrity standards on electric utilities, municipal utilities, and cooperatives. These standards include mandatory inspections, remediation schedules, and detailed annual reporting requirements, all of which represent a substantial increase in state regulatory power.

This expansion of regulatory oversight comes with a clear fiscal impact. The Legislative Budget Board estimates nearly $1.8 million in new general revenue spending over the next biennium to support additional PUC staff and contractors. While this spending supports the implementation of new oversight functions, it represents a permanent expansion of the size and cost of government without adequate cost-containment or sunset provisions. At a time when the principles of limited government and fiscal restraint are especially critical, this type of long-term growth in state bureaucracy raises red flags.

Moreover, the bill imposes a significant compliance burden on utilities across the state—including smaller municipal and cooperative entities—without accounting for differences in scale, capacity, or regional needs. The risk of unintended consequences, such as discouraging investment or disproportionately impacting smaller providers, is heightened by the bill’s grant of discretionary enforcement authority to the PUC, including the ability to reduce a utility’s return on equity. Without clear limitations or guardrails, this discretion opens the door to unpredictable regulatory actions that may affect rate stability and market competitiveness.

Suggested Amendments:

• Limit PUC Discretion: Narrow the discretionary power granted to the Public Utility Commission (PUC) to reduce a utility’s return on equity. This could be achieved by establishing clear, objective criteria and metrics—for example, a defined threshold for “reasonably anticipated” weather-related damages—beyond which any rate adjustments are permitted.
• Tiered Regulatory Framework: Introduce a tiered or scaled approach based on utility size and type. Smaller municipal or cooperative utilities should face less burdensome compliance requirements or longer compliance timelines to avoid disproportionate impacts compared to large, investor-owned utilities.
• Phased Compliance and Transitional Provisions: Include provisions that allow utilities with legacy infrastructure more time to meet the new inspection and reporting standards. Phased implementation would help prevent sudden disruptions and give utilities a reasonable period to align their maintenance practices with the new rules.
• Periodic Review and Sunset Clauses: Add language that mandates a periodic review (for example, every five years) of the established standards and enforcement actions. Including sunset clauses or predetermined reauthorization periods can help ensure that expanded regulatory authority does not become permanent if market conditions change.
• Enhanced Oversight and Appeal Procedures: Incorporate an appellate or administrative review process for enforcement actions. This would allow utilities to contest penalties or rate adjustments imposed by the PUC, providing a safeguard against regulatory overreach.
• Cost-Containment Measures: Require the PUC to conduct regular cost–benefit analyses concerning the new rulemaking and reporting requirements. This should include provisions to control the ongoing fiscal impact on the General Revenue Fund, ensuring that taxpayer burdens are minimized.

In summary, while SB 1789 addresses an important public policy issue, its current structure expands government power, increases taxpayer costs, and imposes a heavy-handed regulatory framework without adequate protections. For these reasons, Texas Policy Research recommends that lawmakers vote NO on SB 1789 unless amended as described above to align with core principles of limited government, fiscal responsibility, and regulatory proportionality.

• Individual Liberty: The bill does not directly regulate individuals or infringe on civil liberties, but it expands state regulatory authority in a way that could have downstream effects on individual ratepayers. If utilities pass compliance costs or penalties onto consumers via rate adjustments, Texans may bear indirect financial consequences from rules imposed without direct voter consent. Additionally, the PUC’s broad discretionary powers, including the ability to alter utility returns, raise questions about transparency and predictability in regulatory enforcement—areas closely tied to individual liberty and due process principles.
• Personal Responsibility: The bill reinforces the principle of personal (or institutional) responsibility by requiring utilities to proactively maintain their infrastructure, inspect their equipment, and address known risks before they lead to outages or public harm. By holding utilities accountable for neglect or deferred maintenance—especially if it contributes to avoidable service failures—the bill affirms the concept that entities entrusted with critical services must act responsibly.
• Free Enterprise: The bill poses concerns for free enterprise by imposing a uniform regulatory framework across diverse utility types, potentially discouraging investment and innovation. The possibility of having a utility’s return on equity reduced due to PUC-determined compliance failures could introduce financial uncertainty into the utility market. Without clear and objective enforcement standards, this discretion could deter private capital investment, especially in hard-to-serve or high-risk areas, limiting the flexibility that characterizes a healthy free market.
• Private Property Rights: By aiming to reduce service disruptions through better maintenance of the electric grid, the bill indirectly supports private property rights. Reliable electric service is foundational to the use and enjoyment of property—residential, commercial, or agricultural. Ensuring that transmission and distribution infrastructure is safe and maintained protects properties from outages, fires, or equipment damage caused by failing utility infrastructure.
• Limited Government: The bill most clearly conflicts with this principle. It expands the regulatory scope and staffing of the Public Utility Commission, imposes new mandates on private and public utilities, and results in recurring taxpayer costs to sustain this expansion. The absence of statutory guardrails around discretionary enforcement, the lack of a sunset or review mechanism, and the fiscal note’s call for more personnel and contracts reflect an ongoing growth in the size and cost of state government—all contrary to the principle of minimal, accountable governance.

Senate Bill 1789 aims to strengthen Texas’s electric grid reliability by mandating structural integrity standards for transmission and distribution poles and authorizing the Public Utility Commission (PUC) to take enforcement action, including rate penalties, against utilities that fail to comply. While the goal of enhancing infrastructure oversight is well-meaning in the wake of recent weather-related disasters, the bill continues to present unresolved structural, fiscal, and regulatory concerns that conflict with core principles of limited government, regulatory restraint, and equitable treatment across utility types.

One of the most pressing issues is the bill’s expansion of PUC authority. The House version retains the Senate’s authorization for the PUC to reduce a utility’s return on equity if it fails to meet inspection and maintenance standards and then experiences damage during a weather event. This broad discretionary power is granted without clear, objective thresholds for determining what constitutes a “reasonably anticipated” disaster or what level of noncompliance warrants a financial penalty. Such ambiguity not only undermines rate predictability for utilities but also creates significant risks of arbitrary enforcement. This could ultimately deter investment in grid upgrades, especially in high-risk or rural areas, and introduce uncertainty into the regulatory environment.

Equally concerning is the ongoing fiscal impact. The Legislative Budget Board projects nearly $1.8 million in additional general revenue spending in the next biennium to fund new PUC staff and contractors. This expansion of government functions is not offset by meaningful cost-containment provisions or a sunset review mechanism. The bill imposes a permanent growth in state bureaucracy at a time when fiscal restraint is critical. Without a statutory requirement for cost–benefit analyses or periodic reassessment of the rules’ effectiveness, the state is committing to a long-term regulatory burden without assurances of commensurate public value.

Moreover, the compliance framework is imposed uniformly across all electric utilities, from large investor-owned corporations to small municipally owned and cooperative entities. This “one-size-fits-all” model fails to account for the significant disparities in resources, operational scope, and service territories among different types of providers. Smaller rural cooperatives, already stretched thin, may struggle to meet the same inspection and reporting demands placed on multi-billion-dollar utilities. The absence of a tiered compliance model or scalable mandates risks unintended consequences, such as service disruptions or rate increases in low-income and underserved areas.

The bill also lowers the SAIDI/SAIFI outage performance threshold from 300% to 200% over a two-year period, which may trigger enforcement actions in communities where geographic or environmental factors naturally result in more outages. Without sufficient contextual adjustments or exemptions, this creates another layer of disproportionate risk for utilities in more remote or disaster-prone areas. This not only undermines the principles of fairness and local flexibility but could also penalize providers for conditions largely outside their control.

• In light of these concerns, the following amendments remain necessary to align the bill with sound public policy and foundational liberty principles:
• Limit PUC Discretion: Define objective criteria for equity penalties to prevent regulatory overreach.
• Create a Tiered Compliance Framework: Scale inspection and reporting mandates based on utility size and service characteristics.
• Phase-In Implementation: Establish generous transitional periods and legacy exemptions for existing infrastructure.
• Add Sunset and Review Provisions: Require periodic legislative review of standards, costs, and enforcement actions.
• Incorporate Appeal Mechanisms: Allow utilities formal recourse to contest rate penalties or compliance determinations.
• Mandate Cost–Benefit Analysis: Ensure regulatory burdens are economically justified and that taxpayer impact is minimized.

In summary, while S.B. 1789 addresses real and important challenges related to electric infrastructure reliability, the current structure continues to favor a top-down, punitive regulatory model that increases the size of government, imposes significant fiscal costs, and fails to adequately protect smaller or vulnerable utilities. It lacks critical safeguards to ensure proportionality, fairness, and economic sustainability. For these reasons, a firm NO; Amend position is recommended until meaningful changes are adopted to bring the bill in line with the principles of limited government, free enterprise, and fiscal discipline.

• Individual Liberty: While the bill does not directly regulate individuals, it expands the power of the Public Utility Commission (PUC) in ways that could have indirect downstream effects on Texans. For instance, if utilities incur compliance costs or penalties under the new standards, those costs may be passed on to ratepayers in the form of higher electric bills. This form of indirect economic impact, arising from opaque or discretionary regulatory enforcement, raises concerns about due process and transparency. Moreover, the potential for utilities to see reduced returns on equity due to subjective determinations (e.g., whether damage from a storm was “reasonably anticipated”) increases regulatory uncertainty and could affect service reliability and affordability for end users, thereby touching on liberty interests.
• Personal Responsibility: The bill supports the principle of institutional responsibility by holding utilities accountable for maintaining safe, functional infrastructure. It requires utilities to conduct regular inspections, keep records, and proactively address structural risks. In this sense, the bill enforces a regime where providers of essential services must take reasonable steps to mitigate avoidable disruptions, especially during extreme weather events. This reinforces the idea that those entrusted with serving the public should act prudently and preventively.
• Free Enterprise: The bill raises red flags with respect to free enterprise by layering a uniform regulatory framework across a highly diverse utility sector. By empowering the PUC to reduce a utility’s return on equity during a rate proceeding due to noncompliance, without clearly defined, objective criteria, the bill introduces market uncertainty and threatens investor confidence. Capital-intensive sectors like energy infrastructure rely heavily on predictable returns. Regulatory uncertainty, especially regarding financial penalties and maintenance mandates, can dampen innovation, discourage long-term investment, and increase barriers to entry, particularly in rural or high-risk service areas. These are substantial concerns for a free-market economy.
• Private Property Rights: While the bill doesn’t directly alter property rights, it indirectly supports them by aiming to reduce power outages, infrastructure failures, and the resulting damages to homes, businesses, and agricultural properties. By enforcing utility accountability, the bill seeks to protect property owners’ reliance on stable electric service, an essential component of modern life and commerce. In this respect, it contributes to the security and usability of private property by seeking to prevent harms caused by neglected or deteriorating infrastructure.
• Limited Government: The most significant area of conflict lies in the principle of limited government. The bill substantially expands the PUC’s regulatory authority, including discretionary enforcement mechanisms and ongoing rulemaking capacity. It imposes new mandates across all utility types and requires recurring reporting and oversight functions, which are funded by nearly $1.8 million in new general revenue expenditures over the biennium. This expansion of state authority is not accompanied by sunset provisions, cost-control mechanisms, or limits on regulatory scope, making it a durable increase in government size and influence. The lack of tailored provisions for smaller utilities and the absence of periodic review further erode accountability and reinforce long-term government growth.

• HB 4627 (Same As)