HB4370

Regular Session

Relating to the projects undertaken by a public improvement district, municipal management district, water control and improvement district, fresh water supply district, or municipal utility district.

LowStandard timeline

Low Cost

Effective:2025-06-20

Enforcing Agencies

Fresh Water Supply Districts (FWSDs) • Municipal Management Districts (MMDs) • Municipal Utility Districts (MUDs) • Public Improvement Districts (PIDs) • Public Utility Commission of Texas (PUC) • Water Control and Improvement Districts (WCIDs)

HB4370

Relating to the projects undertaken by a public improvement district, municipal management district, water control and improvement district, fresh wat...

Low Urgency

Unanimous Passage

House Vote138 - 0

YEA

100% in favor138 voting

Senate Vote31 - 0

YEA

100% in favor31 voting

Cost Impact

Low

Effective

2025-06-20

Enforcing Agencies

Fresh Water Supply DistrictsMunicipal Management DistrictsMunicipal Utility DistrictsPublic Improvement Districts+2 more

Primary Author: Rep. William Metcalf

89th Texas Legislature

jdkey.com

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: June 20, 2025 (Immediate effect due to supermajority vote).
Compliance Deadline: Immediate. Districts may begin contracting for geothermal projects and authorizing reimbursements today. There is no grace period for updating relocation reimbursement protocols.
Agency Rulemaking: TCEQ/PUC Regulatory Gap. While the law is effective, the Texas Commission on Environmental Quality (TCEQ) has not yet updated bond application checklists to include geothermal engineering standards. Expect a 6-12 month "gray zone" where applications involving these assets face heightened scrutiny and Requests for Information (RFIs).

Immediate Action Plan

Immediate: Audit active Development Agreements and insert "geothermal water conveyance" into the definition of authorized improvements.
Immediate: Direct accounting teams to create specific General Ledger codes for geothermal infrastructure costs to ensure clean segregation for future bond applications.
Short-Term: For MMDs, review all pending utility relocation orders to ensure the district is prepared to pay relocation costs as now required by law.
Short-Term: Instruct District Engineers to update the Capital Improvement Plan (CIP) to reflect geothermal assets before the next bond election.

Operational Changes Required

Contracts

Reimbursement Agreements: Developers must amend existing agreements with districts to explicitly define "Geothermal Water Conveyance Facilities" as "Qualified Projects" or "Reimbursable Improvements."
Master Service Agreements (MSAs): District operators must update MSAs to include the maintenance and operation of geothermal loops.
Utility Relocation Agreements: For Municipal Management Districts (MMDs), contracts regarding utility relocation must reflect that the District bears the cost of moving geothermal lines, per Section 375.093(c).

Hiring/Training

Engineering Scope: Civil engineering firms must expand Capital Improvement Plan (CIP) scopes to design geothermal conveyance systems that meet public utility standards.
Operator Certification: District operators require training on the specific maintenance protocols for geothermal loops (pressure maintenance, leak detection) distinct from potable water systems.

Reporting & Record-Keeping

Cost Segregation: Accounting teams must track "conveyance" costs (pipes, loops, pumps) separately from "generation" or "end-user equipment" (heat pumps). Only conveyance is explicitly authorized for reimbursement; commingling these costs risks bond application denial.
Asset Conveyance: Deeds and Bills of Sale transferring assets from developer to district must specifically list geothermal infrastructure.

Fees & Costs

Bond Authorization: No new state fees, but District Engineer Reports must now quantify geothermal costs to justify increased bond issuance amounts.
Relocation Reimbursement: MMDs must budget for 100% reimbursement of relocation costs for geothermal lines displaced by district projects.

Strategic Ambiguities & Considerations

"Conveyance" vs. "Equipment": The statute authorizes "conveyance" systems. It does not explicitly authorize the heat exchange units located within private buildings or central generation plants. The TCEQ is likely to interpret this strictly. Strategy: Structure reimbursement requests to isolate the piping/loop infrastructure (the "conveyance") to avoid regulatory rejection of the entire asset bundle.
PUC vs. TCEQ Jurisdiction: Section 2 references projects benefiting entities regulated by the Public Utility Commission (PUC). This creates potential jurisdictional friction regarding which agency's engineering standards apply. Strategy: Adhere to the stricter of the two standards until a Memorandum of Understanding is established between agencies.

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Legislative Timeline

This bill's path through the Texas Legislature

TopicsEnergy Energy--geothermal Special Districts & Authorities Special Districts & Authorities--miscellaneous Special Districts & Authorities--municipal Utility Districts Special Districts & Authorities--water & Utility Special Districts & Authorities--water Control Improve Dist.

Official Analysis

View HRO Analysis View All Bill Documents

House Authors

Rep. William MetcalfRepublican · Primary Author

Joint Authors

Coauthors (3)

Senate Sponsor

Sen. Cesar BlancoDemocrat · Primary Sponsor

Bill Text(with markup)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

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More from Rep. William Metcalf

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Frequently Asked Questions

Common questions about HB4370

What does Texas HB4370 do?

Effective June 20, 2025, HB4370 expands the statutory authority of Texas special districts (MUDs, PIDs, WCIDs, MMDs) to finance, construct, and maintain "geothermal water conveyance systems. " This legislation unlocks tax-exempt bond financing for geothermal infrastructure in real estate developments, allowing developers to treat these energy systems as reimbursable public utilities similar to water and sewer lines. Implementation Timeline Effective Date: June 20, 2025 (Immediate effect due to supermajority vote).

Who authored HB4370?

HB4370 was authored by Texas Representative William Metcalf during the Regular Session.

When was HB4370 signed into law?

HB4370 was signed into law by Governor Greg Abbott on June 20, 2025.

Which agencies enforce HB4370?

HB4370 is enforced by Fresh Water Supply Districts (FWSDs), Municipal Management Districts (MMDs), Municipal Utility Districts (MUDs), Public Improvement Districts (PIDs), Public Utility Commission of Texas (PUC) and Water Control and Improvement Districts (WCIDs).

How urgent is compliance with HB4370?

The compliance urgency for HB4370 is rated as "low". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of HB4370?

The cost impact of HB4370 is estimated as "low". This may vary based on industry and implementation requirements.

What topics does HB4370 address?

HB4370 addresses topics including energy, energy--geothermal, special districts & authorities, special districts & authorities--miscellaneous and special districts & authorities--municipal utility districts.

Legislative data provided by LegiScanLast updated: November 25, 2025

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