According to the Legislative Budget Board (LBB), the bill would result in a projected negative impact of approximately $1.8 million to the General Revenue Fund over the 2026–2027 biennium, and this cost would continue at approximately $907,655 annually through fiscal year 2030​.

To meet the expanded regulatory and oversight duties mandated by the bill, the PUC would require an additional 4.5 full-time equivalent (FTE) positions. These would include two Attorney III positions to support rulemaking and enforcement, 1.5 Engineers (III–IV level) to provide technical expertise and manage annual report reviews, and one Investigator to assist with compliance monitoring and enforcement actions. Together, the salaries, benefits, and operational support for these roles account for a large portion of the ongoing costs.

In addition to staffing, the PUC anticipates needing $250,000 per year for a contractor to review approximately 165 annual maintenance and inspection reports submitted by utilities. The fiscal analysis also accounts for information technology upgrades and support totaling $12,150 annually, alongside other operating expenses such as travel and payroll contributions.

No significant fiscal impact is expected for local governments, as the implementation duties fall entirely within state-level regulatory functions. However, regulated utilities, including municipally owned utilities and cooperatives, may incur indirect compliance costs depending on the extent of remediation and documentation required under the new standards. Overall, while the bill does not make a direct appropriation, it clearly sets the legal framework for increased state expenditures and regulatory activity over the long term.

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.

• HB 4627 (Same As)