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Texas utility battery-contract rule takes effect with a 100 MW program cap

The rule covers distribution reliability contracts, not all Texas batteries. Commission authorization, competitive bidding and separate cost-recovery steps still apply.

By Greener Numbers Editorial Team · Published November 4, 2026 · Updated 11/4/2026

A new Texas rule for utility contracts with battery-storage providers takes effect on November 4, 2026. Section 25.58 of the Public Utility Commission of Texas rules applies to transmission and distribution utilities serving distribution customers in the ERCOT region and the power generation companies that contract with them.

The rule allows a utility to seek storage energy and output capacity for the limited purpose of ensuring reliable service to its distribution customers. It does not authorize the utility to own the storage facility. A utility must receive commission authorization before entering, renewing or extending a covered contract.

Total output capacity reserved under these contracts cannot exceed 100 megawatts. Each utility receives an allocation based on its ERCOT load-ratio share when it files an application. This is a limit on the covered utility contracts, not a cap on all battery storage in Texas.

An application must explain the reliability need and include a cost-benefit analysis comparing a storage contract with constructing or modifying a traditional distribution facility. After authorization, the utility must conduct competitive bidding before entering a contract. These steps remain necessary even though the rule is now effective.

Reasonable and necessary eligible costs may be requested through a Distribution Cost Recovery Factor proceeding or another appropriate ratemaking proceeding. Retail electric providers must receive notice of approved rates at least 45 days before those rates take effect. The rule becoming effective does not itself impose a new charge on every customer today.

A storage provider may offer energy or ancillary services in ERCOT markets only while reserving the contracted capacity. It may discharge to satisfy the utility contract only when directed by the utility. Cost-recovery reconciliation also provides for refunds or offsets when recovered amounts are found unreasonable, unnecessary, imprudent or excessive.