Hochul Signs Limits on AI Companion Features for Minors; Texas Moves to Stop Taxing Health Records Software and Opens Utility Storage Deals

The bottom line today

Twelve hours. Under the law Gov. Hochul signed on October 28, that is how long a chatbot may hold on to what a user said about their health or personal life before using it again, unless the operator has first established the user is an adult [2]. The same law treats flattery and opinions as unsafe features for minors [2]. New York has written a design code for consumer AI and made age checks the price of a normal product. Texas, meanwhile, offers relief: the comptroller wants to stop taxing the records software every hospital and physician practice runs [4].

NY New York S9051B / A10379C: limits on AI companion features for minors

What it does. The law adds Article 48 to the General Business Law [2]. It covers any “covered AI companion,” defined as a generative AI system with a natural language interface that gives ongoing, adaptive responses, which “includes but is not limited to” the AI companions New York already regulates [2]. An operator may not provide “unsafe AI companion features” to a New York user unless the operator has used age-assurance methods permitted under the SAFE for Kids Act and its rules to determine the user is not a minor [2].

The list of unsafe features runs to twelve. It includes outputs suggesting the system is human or has feelings, outputs framed as its own opinions, flattery or sycophancy, unprompted emotional questions, and use of personal or health information gathered more than twelve hours earlier or in a prior session [2]. It also covers outputs promoting suicide, self-harm or disordered eating, encouragement to keep secrets from adults, and sexually explicit content [2].

Until the attorney general writes rules, operators must use a “reasonable age assurance method” that resists circumvention, offer more than one method, and include at least one that does not rely on government ID [2]. Self-declaration counts only when a user says they are a minor [2]. Age data must be deleted after use [2].

Three uses are exempt: customer service or product information, efficiency and research tools, and a business’s internal systems. The first two qualify only if the bot is “unable to respond on topics outside of the specified purpose” [2].

Where it stands. The Senate passed it 60-0 on June 4; the Assembly passed it June 5 [2]. Hochul signed it October 28 as Chapter 368, with approval memo No. 6 [2]. The bill text sets an effective date of January 1, 2027 [2].

Pratt’s read. The sponsor, Sen. Kristen Gonzalez, argues that chatbots have encouraged self-harm in minors and pushed sexual content on them, and the governor’s office cites Common Sense Media survey figures that 72% of teens have tried an AI companion [1, 2]. The ban on self-harm promotion and sexual content for children is hard to argue with, and no business should want to.

Credit where due. The bill as introduced let any injured individual sue for actual and punitive damages, with a rebuttable presumption that the chatbot caused the harm [2]. The enacted version drops all of it and leaves enforcement to the attorney general [2]. That removes the largest litigation cost.

What remains is still heavy. The definition reaches general-purpose assistants, not only companion apps. Memory and a conversational personality are features adults pay for, and the law makes every operator choose between verifying all New York users or degrading the product for everyone [2]. The customer service exemption is narrow: a retailer’s shopping assistant that answers a stray question about the weather is no longer exempt on the text [2]. Penalties reach $25,000 per violation, plus destruction of data and “any algorithm trained in such data” [2]. Hochul put the state’s position plainly: “if you want to do business in our state, you need to put the safety of our kids first” [1]. The open question is what the approval memo changes before January.

As this release noted on July 30, the SAFE for Kids rules already require annual certification of age-check methods. Chatbot operators now inherit that system.

NY New York A5175A / S9508: security features and labels for baby monitors

What it does. New section 399-iii bars the manufacture or sale of new internet-connected baby monitors unless they include security features against unauthorized viewing or listening and a warning label, on the box or with the device, in at least 12-point type [3]. Manufacturers are responsible for compliance [3]. Phones, security cameras and other multi-function devices are excluded [3].

Where it stands. Signed October 28 as Chapter 367; it takes effect 90 days after signing, which this column counts as January 26, 2027 [3].

Pratt’s read. The governor’s office cites Rapid7 testing in which eight of nine monitors received an “F” for security [1]. A password and a label are cheap. The fines are $250 and $500, but any municipal consumer affairs office or city counsel may enforce, and the locality keeps the money [3]. That is many enforcers for one sticker.

TX Texas comptroller rule 34 TAC §3.342: no sales tax on health records systems

What it does. The comptroller proposes treating electronic health record and electronic medical record systems sold to a healthcare provider as nontaxable information services, and removing them from taxable data processing [4]. “Healthcare provider” means a hospital or a listed licensed professional, from physicians and dentists to physical therapists and veterinarians, including the entities they practice through [4]. Sharing records with patients, other providers or payors does not count as a resale [4].

Where it stands. Published October 30; comments are due within 30 days, and the earliest adoption date is November 29 [4]. The notice calls it “a prospective policy change,” and no refunds will be paid for earlier charges [4].

Pratt’s read. This is good news for healthcare. The comptroller’s own estimate is a General Revenue loss of $18,248,000 in fiscal 2027, rising to $23,224,000 in fiscal 2032, and $5,270,000 for local governments in the first year [4]. That money stays with clinics and hospitals. The notice says the change would benefit the public “by reducing costs and uncertainty for businesses” [4].

Two limits. The provider list does not name pharmacists, nursing facilities or home health agencies, which buy the same software [4]. And because the change rests on a rule rather than a statute, it can be reversed the same way. The 2027 Legislature could make it permanent.

TX Texas PUC rule 16 TAC §25.58: utilities may contract for battery storage

What it does. The rule implements a 2021 law, SB 415, letting a distribution utility in ERCOT contract with a power generation company for battery capacity to keep distribution service reliable [5]. Utilities may not own the batteries, and contracts across all utilities are capped at 100 MW, split by load share [5]. A utility needs commission approval first, with a cost-benefit analysis showing savings against building or upgrading conventional facilities, and must bid the contract competitively [5]. The battery owner may sell unreserved capacity into ERCOT’s markets [5].

Where it stands. Adopted with changes; effective November 4 [5].

Pratt’s read. Paying for a battery only where it beats a new feeder is sound. So is keeping the cost off transmission-voltage customers and barring per-kilowatt-hour charges for classes with demand charges [5]. Large industrial sites are spared, and commercial customers pay on demand.

The weak point is timing. Sierra Club, Texas Electric Cooperatives and the City of Houston asked that these costs be reviewed only in full rate cases; the commission sided with CenterPoint, AEP and others and allowed interim recovery through the distribution cost recovery factor [5]. Businesses on the distribution system will pay temporary rates first, with prudence tested later and refunds owed if costs fail [5]. ERCOT asked for a delay until market protocols are written; the commission declined, saying its approach leaves “flexibility for ERCOT stakeholders” [5].

On the calendar

The Texas PUC storage rule takes effect November 4 [5]. Comments on the comptroller’s EHR rule close in late November, and adoption could come November 29 [4]. New York’s AI companion law is set for January 1, 2027, subject to whatever the approval memo yields, and the baby monitor law follows January 26 by this column’s count [2, 3].