In response to billing disputes between cities and electric and/or telecommunications companies, the Public Utility Commission has adopted rules governing utility payment overdue dates. The rules, found in 16 Texas Administrative Code Sections 25.33, 25.482, and 26.33, attempt to clarify that a bill submitted to a governmental entity by an electric utility, an electric aggregator, a retail electric provider, or a certified telecommunications utility is subject to the Texas Prompt Payment Act.

The Texas Prompt Payment Act, found in Chapter 2251 of the Texas Government Code, provides a framework under which governmental entities – including cities – must make payments to vendors. The law generally requires that a payment made by a governmental entity is overdue on the 31st day after the later of: (1) the date the governmental entity receives the goods under the contract; (2) the date the performance of the service under the contract is completed; or (3) the date the governmental entity receives an invoice for the goods or service. (If a governmental body meets only once a month or less frequently, a payment becomes overdue after the 46th day.) A governmental entity may be subject to interest and other penalties and/or remedies if a payment to a vendor becomes overdue.

If there is a bona fide dispute between the governmental entity and a vendor about the goods delivered or the service performed that causes the payment to be late, the payment is not considered overdue. However, to avail itself of the protections provided pursuant to a dispute, a governmental entity must notify a vendor of an error in an invoice not later than the 21st day after the date the entity receives the invoice. That short dispute period may limit the ability of cities to audit their utility bills. Apparently, a city may not be able to dispute a billing error discovered after the deadline.

The new rules require the affected vendors to provide written notice of the applicability of the Prompt Payment Act to all of their non-residential customers within six months. City officials may want to review their payment policies to ensure compliance with the new rules and the Prompt Payment Act.

TML member cities may use the material herein for any purpose.
No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the
Texas Municipal League.

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