Texas Utility Battery Storage Rule Takes Effect November 4: A 100 MW Cap, PUCT Approval First, and Costs Recovered Through Delivery Charges
The PUCT adopted 16 TAC §25.58 on October 15, 2026. Texas TDUs can now contract for, but not own, up to 100 MW of battery storage, and approved costs flow through delivery charges only after the PUCT signs off on a specific contract.
On November 4, 2026, a new Public Utility Commission of Texas (PUCT) rule, 16 TAC §25.58, takes effect and lets Texas transmission and distribution utilities (TDUs) such as Oncor, CenterPoint, AEP Texas and TNMP contract for utility battery storage that someone else owns, under a statewide cap of 100 MW. For commercial electricity buyers, the key fact is where the money goes: approved contract costs are recovered through TDU delivery charges, not through your retail electric provider's energy rate, and nothing reaches a bill until the PUCT approves a specific contract.
Key Takeaways
- The PUCT adopted 16 TAC §25.58 in Project No. 59523 with an order filed October 15, 2026, and the rule takes effect November 4, 2026.
- Texas TDUs may contract for storage capacity from a power generation company but may not own the battery, under PURA §35.153, which Senate Bill 415 added in 2021.
- All contracts combined may reserve no more than 100 MW, about 0.46 percent of the 21,537 MW of installed energy storage on ERCOT's October 2026 fact sheet.
- Approved costs can be recovered through a Distribution Cost Recovery Factor (DCRF) or another ratemaking proceeding, and retail electric providers (REPs) must get at least 45 days of notice before new rates take effect.
What Did the PUCT Adopt on October 15, 2026?
The PUCT adopted new 16 TAC §25.58, Contracts for Electric Energy Storage, in Project No. 59523 with an order filed October 15, 2026. The Texas Register acknowledgment sets the effective date at November 4, 2026. The rule implements PURA §35.153, which took effect September 1, 2021, so the law is five years old and the rule that makes it usable is new. The commission adopted the rule with changes to the version published in the Texas Register on April 17, 2026.
The statute's core sentence is short. A TDU, "with prior approval of the commission, may contract with a power generation company to provide electric energy from an electric energy storage facility to ensure reliable service to distribution customers." The next subsection closes the door utilities once wanted open: "The commission may not authorize ownership of an electric energy storage facility by a transmission and distribution utility."
That ownership fight is older than the statute. In early 2018 the PUCT dismissed AEP Texas's request to install two distribution batteries, citing insufficient information. It then opened Project 48023 to build a framework. In January 2019 the commission told lawmakers that storage ownership had "emerged as an issue that would benefit from legislative clarity," and then-Chairman DeAnn Walker said she was "inclined to let the legislature speak, if they want to." Michael Jewell, an attorney with Jewell & Associates, told Utility Dive the commission had "an opportunity to make a decision" and that he "was not surprised to see the commission defer." Senate Bill 415 settled the question in 2021: contract for storage, do not own it.
The rulemaking drew comments by the May 18, 2026 deadline from Oncor, CenterPoint, AEP Texas, TNMP, ERCOT, the Texas REP Coalition, Sierra Club and the Solar Energy Industries Association. Several members of the public filed on October 15 opposing storage costs on electric bills. Primary sources: the PUCT's Order Adopting New 16 TAC §25.58, ERCOT's October 2026 fact sheet, and Utility Dive's 2019 report on the ownership debate.
| Date | Project No. 59523 step |
|---|---|
| March 18, 2026 | PUCT opens the rulemaking project |
| April 17, 2026 | Proposed rule published in the Texas Register (51 TexReg 2465) |
| May 18, 2026 | Public comment deadline |
| October 15, 2026 | Order adopting 16 TAC §25.58 filed |
| November 4, 2026 | Rule takes effect |
How Does the 100 MW Cap Work?
Every storage contract signed under the rule counts against one statewide ceiling: the total capacity reserved by all contracts may not exceed 100 MW, and each TDU's share follows its ERCOT load ratio share. A single contract also may not reserve more capacity than the utility needs to keep service reliable for its distribution customers.
For scale, ERCOT's October 2026 fact sheet lists 21,537 MW of installed energy storage, so the entire utility contract program is capped at roughly 0.46 percent of the storage already on the grid. In January 2019, when the PUCT deferred the ownership question, Utility Dive counted about 1,800 MW of storage projects waiting in the Texas interconnection queue.
The battery owner keeps a market role. Under §35.153(f), the power generation company may sell energy or ancillary services from the facility only to the extent it keeps the contracted capacity reserved, and under §35.153(g) it may not discharge to satisfy the contract unless the TDU directs it. The contract must also require the owner to reimburse the TDU for any administrative penalty caused by the facility failing to perform.
What Must a TDU Prove Before It Signs a Storage Contract?
A TDU has to clear four gates before any storage contract exists: issue a request for proposals, show that storage beats building or upgrading traditional distribution equipment on cost, win PUCT authorization in advance, and notify retail electric providers. Renewals and extensions need prior authorization too.
- Competitive procurement. §35.153(c) requires a request for proposals before the TDU signs a contract.
- Cost test. §35.153(d) allows a contract "only if use of an electric energy storage facility is more cost-effective than construction or modification of traditional distribution facilities," and the rule requires a cost-benefit analysis in the application.
- Prior approval. The TDU must obtain PUCT authorization before it enters into, renews or extends a contract.
- Notice. The TDU must notify each REP serving its territory within one working day of filing an application, and parties have 45 days from filing to intervene.
What Does the Utility Battery Storage Rule Mean for Texas Commercial Electricity Buyers?
The rule changes nothing on a commercial bill on November 4, but it opens a new, capped path for TDU costs to reach the delivery side of the bill, which REPs generally pass through at PUCT-approved rates. We see three channels worth watching.
Delivery charges, not energy rates. The Distribution Cost Recovery Factor (DCRF) is a PUCT-approved delivery rider that lets a TDU recover distribution investment between base rate cases. Under the new rule, a TDU may seek reasonable and necessary contract costs in a DCRF proceeding or another ratemaking proceeding, and the utility carries the burden of proof. A return on contract payments is allowed only if the contract meets capital lease or finance lease accounting standards. Costs not reviewed earlier are reconciled in the TDU's next base rate case. The DCRF is already a live line on many commercial bills: Oncor's DCRF for Secondary Service of 10 kW or less went from $0 to $0.006208 per kWh on October 4, 2026, as we covered in our Oncor delivery charge breakdown.
Timing and notice. Oncor and AEP Texas have both used the Unified Tracker Mechanism under PURA §36.216, which folds DCRF updates into one annual filing, and CenterPoint's DCRF rose on September 30, 2026, as our CenterPoint DCRF analysis shows. Under the new rule, a TDU must notify REPs no later than 45 days before approved rates take effect, and that window is your REP's chance to tell you.
Scale and contract language. With a 100 MW ceiling shared by every TDU, the program is small by design. Whether you ever see it depends on your contract: a plan that passes TDU charges through moves when the DCRF moves, while a plan that bundles delivery may handle a change under a regulatory change clause. In the plans we track, the TxCP Commercial Rate Index (TCRI) averaged 7.07 cents per kWh across 13,721 active commercial plans from 29 REPs on October 21, 2026. That index measures REP offer prices, not the delivery charges this rule touches.
The TxCP Storage Rider Watch: Three Questions Before Your Delivery Charges Move
Before you sign or renew, run your account through the same three questions we use to read any TDU rate change, so a storage contract filed next year does not surprise you on a plan you thought was locked.
1. Has your TDU filed a storage contract application with the PUCT?
Applications are public, and every REP in the territory gets notice within one working day. Ask your REP to flag any filing under 16 TAC §25.58 for your TDU.
2. Which delivery line would carry the cost, and on what billing unit?
Storage costs would flow through the DCRF or a base rate case. On Oncor, for example, accounts at 10 kW or less pay the DCRF per kWh and larger secondary accounts pay it per kW, so one filing lands differently on different accounts.
3. Does your contract pass TDU charge changes through or hold them fixed?
Read the pass-through and regulatory change clauses in your contract and on your Electricity Facts Label. That language, not the energy price, decides whether a DCRF change reaches your invoice during the term.
What Should Texas Commercial Buyers Do Before November 4?
You do not need to act on the rule itself, but four steps this week will tell you how exposed your account would be when the first storage contract reaches a delivery charge.
- Pull your latest invoice and write down your TDU, your rate class and your current DCRF line.
- Read your contract's TDU pass-through and regulatory change clauses, and note your term end date.
- Ask your REP to forward any TDU rate-change notice it receives, since TDUs must give REPs at least 45 days before approved rates take effect.
- When you renew, compare offers on an all-in basis. See every commercial plan we track in our data download.
Questions to Ask Your REP About Utility Battery Storage Costs
When you call your retail electric provider, these four questions show whether a future storage cost would reach you and how much warning you would get.
- Do you pass TDU delivery charge changes, including DCRF updates, through to customers during the contract term?
- How will you notify customers when their TDU files for a rate change tied to a storage contract under 16 TAC §25.58?
- Is the DCRF billed per kWh or per kW for this account's rate class?
- If TDU charges change mid-term, does any clause allow you to reprice the energy rate too?
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Frequently Asked Questions
When does the Texas utility battery storage rule take effect?
The rule, 16 TAC §25.58, takes effect November 4, 2026. The PUCT adopted it in Project No. 59523 with an order filed October 15, 2026, implementing PURA §35.153 from Senate Bill 415 of 2021.
Can Texas utilities own battery storage?
No. PURA §35.153(b) bars the PUCT from authorizing a transmission and distribution utility to own an electric energy storage facility. A TDU may only contract with a power generation company for storage capacity, with prior PUCT approval.
How much utility battery storage can Texas TDUs contract for?
All contracts combined may reserve no more than 100 MW, split among TDUs by each utility's ERCOT load ratio share. That is about 0.46 percent of the 21,537 MW of installed energy storage on ERCOT's October 2026 fact sheet.
Will utility battery storage raise commercial electricity bills in Texas?
Not on November 4, 2026. A cost can reach a bill only after the PUCT approves a specific contract, and then through TDU delivery charges such as the DCRF, with REPs notified at least 45 days before new rates take effect.