Proposed Rules Title 16

TITLE 16. ECONOMIC REGULATION

PART 2. PUBLIC UTILITY COMMISSION OF TEXAS

The Public Utility Commission of Texas (commission) proposes amendments to 16 Texas Administrative Code (TAC) §22.123, relating to Appeal of an Interim Order and Motions for Reconsideration of Interim Order Issued by the Commission; §22.181, relating to Dismissal of a Proceeding; and §22.262, relating to Commission Action After a Proposal for Decision.

The proposed amendments to §22.123 clarify that appeals for evidentiary rulings are prohibited and replacing service for an appeal or motion of reconsideration from facsimile transmission to service by electronic mail. The proposed amendments to §22.123 also increase the time period before an appeal or motion for reconsideration is denied if not placed on an open meeting agenda from ten days to 20 days.

The proposed amendments to §22.181 specify that the 20-day default timeline to respond to a motion to dismiss may be revised by the presiding officer and add failure to prosecute or failure to amend an application as grounds for an administrative law judge to dismiss a proceeding without issuing a proposal for decision. The proposed amendments also clarify that an order from an administrative law judge dismissing a proceeding under the revised provisions is a final order of the commission and is subject to motions for rehearing under §22.264 of this title, relating to Rehearing, and clarifies the authority of the presiding officer to grant a request to withdraw an application in certain instances.

The proposed amendments to §22.262 specify that a request for oral argument must be filed no later than seven days - as opposed to seven working days - before the open meeting at which the commission is scheduled to consider the case, and that two days prior to an open meeting, the Office of Policy and Docket Management will file a notice to the parties regarding whether the request for oral argument has been granted.

The proposed amendments also revise all instances of "Policy Development Division" to properly refer to the "Office of Policy and Docket Management" in each rule as well as make minor and conforming changes consistent with the commission"s current drafting practices.

Growth Impact Statement

The agency provides the following governmental growth impact statement for the proposed rules, as required by Texas Government Code §2001.0221. The agency has determined that for each year of the first five years that the proposed rules are in effect, the following statements will apply:

(1) the proposed rules will not create a government program and will not eliminate a government program;

(2) implementation of the proposed rules will not require the creation of new employee positions and will not require the elimination of existing employee positions;

(3) implementation of the proposed rules will not require an increase and will not require a decrease in future legislative appropriations to the agency;

(4) the proposed rules will not require an increase and will not require a decrease in fees paid to the agency;

(5) the proposed rules will not create a new regulation;

(6) the proposed rules will expand, limit, or repeal an existing regulation;

(7) the proposed rules will not change the number of individuals subject to the rule's applicability; and

(8) the proposed rules will not affect this state"s economy.

Fiscal Impact on Small and Micro-Businesses and Rural Communities

There is no adverse economic effect anticipated for small businesses, micro-businesses, or rural communities as a result of implementing the proposed rules. Accordingly, no economic impact statement or regulatory flexibility analysis is required under Texas Government Code §2006.002(c).

Takings Impact Analysis

The commission has determined that the proposed rules will not be a taking of private property as defined in Texas Government Code chapter 2007.

Fiscal Impact on State and Local Government

David Hrncir, Assistant Commission Counsel, Office of Policy and Docket Management has determined that for the first five-year period the proposed rules are in effect, there will be no fiscal implications for the state or for units of local government under Texas Government Code §2001.024(a)(4) as a result of enforcing or administering the sections.

Public Benefits

Mr. Hrncir has determined that for each year of the first five years the proposed sections are in effect the public benefit anticipated as a result of enforcing the sections will be enhancing the efficiency of processing commission dockets. There will not be any probable economic costs to persons required to comply with the rules under Texas Government Code §2001.024(a)(5).

Local Employment Impact Statement

For each year of the first five years the proposed sections are in effect, there should be no effect on a local economy; therefore, no local employment impact statement is required under Texas Government Code §2001.022.

Costs to Regulated Persons

Texas Government Code §2001.0045(b) does not apply to this rulemaking because the commission is expressly excluded under §2001.0045(c)(7).

Public Hearing

The commission will conduct a public hearing on this rulemaking if requested in accordance with Texas Government Code §2001.029. The request for a public hearing must be received by July 25, 2024. If a request for public hearing is received, commission staff will file in this project a notice of hearing.

Public Comments

Interested persons may file comments electronically through the interchange on the commission"s website. Comments must be filed by July 25, 2024. Comments should be organized in a manner consistent with the organization of the proposed rules. The commission invites specific comments regarding the costs associated with, and benefits that will be gained by, implementation of the proposed rules. The commission will consider the costs and benefits in deciding whether to modify the proposed rules on adoption. All comments should refer to Project Number 56705.

Each set of comments should include a standalone executive summary as the last page of the filing. This executive summary must be clearly labeled with the submitting entity's name and should include a bulleted list covering each substantive recommendation made in the comments.

SUBCHAPTER G. PREHEARING PROCEEDINGS

16 TAC §22.123

Statutory Authority

The amendments are proposed under Public Utility Regulatory Act (PURA) §14.001, which grants the commission the general power to regulate and supervise the business of each public utility within its jurisdiction and to do anything specifically designated or implied by this title that is necessary and convenient to the exercise of that power and jurisdiction; §14.002, which authorizes the commission to adopt and enforce rules reasonably required in the exercise of its powers and jurisdiction; §14.052, which requires the commission shall adopt and enforce rules governing practice and procedure before the commission and, as applicable, practice and procedure before the State Office of Administrative Hearings.

Cross Reference to Statute: Public Utility Regulatory Act §§ 14.001, 14.002, 14.052.

§22.123.Appeal of an Interim Order and Motions for Reconsideration of Interim Order Issued by the Commission.

(a) Appeal of an interim order.

(1) Availability of appeal. Appeals are available for any interim order of the presiding officer that immediately prejudices a substantial or material right of a party[,] or materially affects the course of the hearing. Appeals are not available for[~~, other than~~] evidentiary rulings. Interim orders are not [~~shall not be~~] subject to exceptions or motions [~~application~~] for rehearing [~~prior to issuance of a proposal for decision~~].

(2) Procedure for appeal. If the presiding officer intends to reduce an oral ruling to a written order, the presiding officer must [~~shall~~] so indicate on the record at the time of the oral ruling and must [~~shall~~] promptly issue the written order. Any appeal to the commission from an interim order must [~~shall~~] be filed within ten days of the issuance of the written order or the appealable oral ruling when no written order is to be issued. The appeal must [~~shall~~] be served on all parties by hand delivery, electronic mail [~~facsimile transmission~~], or by overnight courier delivery.

(3) Contents. An appeal must [~~shall~~] specify the reasons why the interim order is unjustified or[,] improper and how it[~~, or~~] immediately prejudices a substantial or material right of a party or materially affects the course of the hearing.

(4) Responses. Any response to an appeal must [~~shall~~] be filed within five working days of the filing of the appeal.

(5) Motion for stay. Pending a ruling by the commissioners, the presiding officer may, upon motion, grant a stay of the interim order. A motion for a stay must [~~shall~~] specify the basis for a stay. Good cause must [~~shall~~] be shown for granting a stay. The mere filing of an appeal does [~~shall~~] not stay the interim order or any applicable [~~the~~] procedural schedule.

(6) Agenda ballot. Upon the filing of an appeal, the Office of Policy and Docket Management must [~~Policy Development Division shall~~] send a separate ballot [~~ballots~~] to each commissioner to determine whether the commission [~~they~~] will consider the appeal at an open meeting. Untimely motions will not be balloted. The Office of Policy and Docket Management must [~~The Policy Development Division shall~~] notify the parties [~~by letter~~] whether a commissioner by individual ballot has added the appeal to an open meeting agenda[,] but will not identify the requesting commissioner or commissioners [~~commissioner(s)~~].

(7) Denial or granting of appeal.

(A) If [~~after ten days of the filing of an appeal,~~] no commissioner has[~~, by agenda ballot,~~] placed an [~~the~~] appeal on the agenda of an open meeting by agenda ballot within 20 days after the filing of an appeal, the appeal is deemed denied.

(B) If any commissioner has voted by agenda ballot [~~balloted~~] in favor of considering the appeal, the appeal will [~~it shall~~] be placed on the agenda of the next regularly scheduled open meeting or such other meeting as the commissioner may direct by the agenda ballot. If [~~In the event~~] two or more commissioners vote to consider the appeal, but differ as to the date the appeal shall be heard, the appeal must [~~shall~~] be placed on the latest of the dates specified by the ballots. [~~The time for ruling on the appeal shall expire three days after the date of the meeting, unless extended by action of the commission.~~]

(8) Reconsideration of appeal by presiding officer. The presiding officer may treat an appeal as a motion for reconsideration and may withdraw or modify the order under appeal before [~~prior to~~] a commission decision on the appeal. The presiding officer must [~~shall~~] notify the commission of its decision to treat the appeal as a motion for reconsideration.

(b) Motion for reconsideration of interim order issued by the commission.

(1) Availability of motion for reconsideration. Motions for reconsideration are available for any interim order of the commission that immediately prejudices a substantial or material right of a party[,] or materially affects the course of the hearing. Motions for reconsideration may only be filed by a party to the proceeding and are not available for[~~, other than~~] evidentiary rulings. Interim orders are [~~shall~~] not [be ]subject to exceptions [~~prior to issuance of a proposal for decision~~] or motions for rehearing [~~prior to the issuance of a final order~~].

(2) Procedure for motion for reconsideration. If the commission does not intend to reduce an oral ruling to a written order, the commission will [~~shall~~] so indicate on the record at the time of the oral ruling. A motion for reconsideration of an interim order issued by the commission must [~~shall~~] be filed within five workings days of the issuance of the written interim order or the oral interim ruling. The motion for reconsideration must [~~shall~~] be served on all parties by [~~hand~~] delivery, electronic mail [~~facsimile transmission~~], or by overnight courier delivery.

(3) Content. A motion for reconsideration must [~~shall~~] specify the reasons why the interim order is unjustified or improper.

(4) Responses. Any response to a motion for reconsideration must [~~shall~~] be filed within five [~~three~~ ] working days of the filing of the motion.

(5) Agenda ballot. Upon the filing of a motion for reconsideration, the Office of Policy and Docket Management must [~~Policy Development Division shall~~] send a separate ballot to each commissioner to determine whether the commission [~~they~~] will consider the motion at an open meeting. The Office of Policy and Docket Management must [~~Policy Development Division shall~~] notify the parties [~~by letter~~] whether a commissioner by individual ballot has added the motion to an open meeting agenda[,] but will not identify the requesting commissioner or commissioners [~~commissioner(s)~~].

(6) Denial or granting of motion.

(A) If [~~after five working days of the filing of a motion~~ ] no commissioner has[~~, by agenda ballot,~~] placed a[~~the~~] motion for reconsideration on the agenda for an open meeting by agenda ballot within 20 days after the filing of the motion, the motion is deemed denied.

(B) If any commissioner has voted by agenda ballot [~~balloted~~] in favor of considering the motion, the motion will [~~it shall~~] be placed on the agenda for the next regularly scheduled open meeting or such other meeting as the commissioner may direct by the agenda ballot. If [~~In the event~~] two or more commissioners vote to consider the motion, but differ as to the date the motion shall be heard, the motion must [~~shall~~] be placed on the latest of the dates specified by the ballots. [~~The time for ruling on the motion shall expire three days after the open meeting, unless extended by action of the commission.~~]

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 13, 2024.

TRD-202402610

Adriana Gonzales

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: July 28, 2024

For further information, please call: (512) 936-7322

SUBCHAPTER J. SUMMARY PROCEEDINGS

16 TAC §22.181

Statutory Authority

Cross Reference to Statute: Public Utility Regulatory Act §§ 14.001, 14.002, 14.052.

§22.181.Dismissal of a Proceeding.

(a) - (d) (No change.)

(e) Motion for dismissal, responses, and replies. Dismissal of a proceeding or one or more issues within a proceeding may be made upon the motion of the presiding officer or the motion of any party.

(1) A party's motion for dismissal must specify at least one of the grounds for dismissal identified in subsection (d) of this section. The motion must include a statement that explains the basis for the dismissal and if necessary:

(A) - (B) (No change.)

(2) A presiding officer's motion must [~~shall~~ ] be provided by written order or stated in the record and must specify one or more grounds for dismissal identified in subsection (d) of this section and a clear and concise statement of the material facts supporting the dismissal.

(3) The party that initiated the proceeding and [or] any other [~~affected~~] party has [~~shall have~~] 20 days from the date of receipt to respond to a motion to dismiss unless the presiding officer specifies otherwise. The response must contain a statement of reasons the party contends the motion to dismiss should not be granted, and if necessary

(A) - (B) (No change.)

(4) (No change.)

(f) Action on a motion to dismiss. Action on a motion to dismiss must [~~shall~~] conform to this subsection.

(1) If a hearing on the motion to dismiss is held, that hearing must [~~shall~~] be confined to the issues raised by the motion to dismiss.

(2) If the administrative law judge determines that all issues within a proceeding should be dismissed, the administrative law judge must prepare a proposal for decision in accordance with §22.261 of this title (relating to Proposals for Decision) to that effect, unless the reason for dismissal is solely one of the following:

(A) the withdrawal of an application under subsection (g)(1), [or] (2), or (3) of this section; or

(B) either failure to prosecute under subsection (d)(6) of this section or failure to amend an application under subsection (d)(7) of this section, or both, and the dismissal is without prejudice.

(3) For dismissal under paragraphs (2)(A) and (2)(B) of this subsection,[ ~~in which case~~] the administrative law judge may issue an order dismissing the proceeding. An order issued under this paragraph is a final order of the commission and is subject to motions for rehearing under §22.264 of this title (relating to Rehearing).

(4) The commission will [~~shall~~] consider a [~~the~~] proposal for decision recommending [~~or motion for rehearing on an order of~~] dismissal as soon as is practicable.

(5) [~~(3)~~] If the commission determines that all issues within a proceeding should be dismissed, the commission will issue an order subject to motions for rehearing under §22.264 of this title [~~(relating to Rehearing)~~].

(6) [~~(4)~~] If the administrative law judge determines that one or more, but not all, issues within a proceeding should be dismissed, the administrative law judge may issue a proposal for interim decision or an interim order dismissing such issues. An interim order issued by the administrative law judge resulting in partial dismissal is subject to appeal or reconsideration under §22.123 of this title (relating to Appeal of an Interim Order and Motions for Reconsideration of Interim Order Issued by the Commission). If the commission determines that one or more, but not all, issues within a proceeding should be dismissed, the commission may issue an interim order dismissing such issues. An interim order issued by the commission resulting in partial dismissal is subject to appeal or reconsideration under §22.123 of this title. [An order of the administrative law judge dismissing a proceeding under paragraph (2) of this subsection based solely upon the withdrawal of an application under subsection (g)(1) or (2) of this section is the final order of the commission and is subject to motions for rehearing under §22.264 of this title.]

(g) Withdrawal of application. An application may be withdrawn only in accordance with this subsection.

(1) - (2) (No change.)

(3) The presiding officer may grant a request to withdraw an application with or without prejudice after a proposed order or proposal for decision has been issued if the request to withdraw is filed by the applicant and the applicant's application would be granted by the proposed order or proposal for decision.

(4) [~~(3)~~] A request to withdraw an application with or without prejudice after a proposed order or proposal for decision has been issued that is filed by an applicant to whom the result of the proposed order or proposal for decision is adverse[,] may be granted only upon a finding of good cause by the commission. In ruling on the request, the commission will weigh the importance of the matter being addressed to the jurisprudence of the commission and the public interest.

(5) [~~(4)~~] A request to withdraw an application with or without prejudice after the application has been placed on an open meeting agenda for consideration of an appeal of an interim order, a request for certified issues, or a preliminary order with threshold legal or policy issues may be granted only upon a finding of good cause by the commission. In ruling on the request, the commission will weigh the importance of the matter being addressed to the jurisprudence of the commission and the public interest.

(6) [~~(5)~~] If a request to withdraw an application is granted, the presiding officer must [~~shall~~ ] issue an order of dismissal stating whether the dismissal is with or without prejudice. If the presiding officer finds good cause, the order of dismissal under this paragraph must [~~shall~~] not be with prejudice, unless the applicant requests dismissal with prejudice. Such order must, if applicable, specify the facts on which good cause is based and the basis of the dismissal and is the final order of the commission subject to motions for rehearing under §22.264 of this title.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 13, 2024.

TRD-202402611

Adriana Gonzales

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: July 28, 2024

For further information, please call: (512) 936-7322

SUBCHAPTER N. DECISION AND ORDERS

16 TAC §22.262

Statutory Authority

Cross Reference to Statute: Public Utility Regulatory Act §§ 14.001, 14.002, 14.052.

§22.262.Commission Action After a Proposal for Decision.

(a) (No change.)

(b) Reasons to Be in Writing. The commission will [~~shall~~] state in writing the specific reason and legal basis for its determination under subsection (a) of this section.

(1) (No change.)

(2) If[~~, on remand,~~] additional evidence is admitted on remand that results in a substantial revision of the proposed decision or the underlying facts, an amended or supplemental proposal for decision or proposed order must be filed [~~shall be prepared~~]. If an amended or supplemental proposal for decision is filed [~~prepared~~], the provisions of §22.261(d) of this title (relating to Proposal for Decision) apply. Exceptions and replies must [~~shall~~] be limited to discussions, proposals, and recommendations in the supplemental proposal for decision.

(d) Oral Argument Before the Commission.

(1) Any party may request oral argument before the commission before [~~prior to~~] the final disposition of any proceeding.

(2) Oral argument may [~~shall~~] be allowed at the commission's discretion [~~of the commission~~]. The commission may limit the scope and duration of oral argument. The party bearing the burden of proof has the right to open and close oral argument.

(3) A request for oral argument must [~~shall~~ ] be filed as [~~made in~~] a separate written pleading[~~, filed with the commission's filing clerk~~]. The request must [~~shall~~] be filed no later than 3:00 p.m. seven days before the open meeting at [ ~~on the seventh working day~~] which the commission is scheduled to consider the case.

(4) Upon the filing of a motion for oral argument, the Office of Policy and Docket Management must [~~Policy Development Division shall~~] send a separate ballot [~~ballots~~] to each commissioner to determine whether the commission will hear oral argument at an open meeting. An affirmative vote by one commissioner is required to grant oral argument. Two [~~Not more than two~~] days before the commission is scheduled to consider the case, the Office of Policy and Docket Management will file a notice to the parties regarding [~~parties may contact the Policy Development Division to determine~~] whether a request for oral argument has been granted.

(5) The absence or denial of a request for oral argument does [~~shall~~] not preclude the commissioners from asking questions of any party present at the open meeting.

(e) (No change.)

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 13, 2024.

TRD-202402612

Adriana Gonzales

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: July 28, 2024

For further information, please call: (512) 936-7322

CHAPTER 24. SUBSTANTIVE RULES APPLICABLE TO WATER AND SEWER SERVICE PROVIDERS

The Public Utility Commission of Texas (commission) proposes amendments to 16 Texas Administrative Code (TAC) §24.25, relating to Form and Filing of Tariffs, and §24.238, relating to Fair Market Valuation.

This proposed amendment to §24.25 implements House Bill (HB) 2373, passed during the Texas 88th Regular Legislative Session. HB 2373 repealed Texas Water Code (TWC) §13.145. The amendment allows water and sewage utilities to consolidate its tariff and rate design for more than one system without the need to meet the "substantially similar" systems requirement and regardless of whether the tariff provides for rates that promote water conservation for single-family residences and landscape irrigation.

The proposed amendment to §24.238 removes language referencing §24.25(k), which related to "multiple system consolidation."

Growth Impact Statement

(1) the proposed rules will not create a government program and will not eliminate a government program;

(2) implementation of the proposed rules will not require the creation of new employee positions and will not require the elimination of existing employee positions;

(3) implementation of the proposed rules will not require an increase and will not require a decrease in future legislative appropriations to the agency;

(4) the proposed rules will not require an increase and will not require a decrease in fees paid to the agency;

(5) the proposed rules will not create a new regulation;

(6) the proposed rules will expand, limit, or repeal an existing regulation;

(7) the proposed rules will not change the number of individuals subject to the rule's applicability; and

(8) the proposed rules will not affect this state's economy.

Fiscal Impact on Small and Micro-Businesses and Rural Communities

Takings Impact Analysis

The commission has determined that the proposed rules will not be a taking of private property as defined in Texas Government Code chapter 2007.

Fiscal Impact on State and Local Government

Tammy Benter, Division Director, Division of Utility Outreach, has determined that for the first five-year period the proposed rules are in effect, there will be no fiscal implications for the state or for units of local government under Texas Government Code §2001.024(a)(4) as a result of enforcing or administering the sections.

Public Benefits

Ms. Benter has determined that for each year of the first five years the proposed sections are in effect the public benefit anticipated as a result of enforcing the sections will be more efficient consolidation of water and sewage utility systems. There will not be any probable economic costs to persons required to comply with the rules under Texas Government Code §2001.024(a)(5).

Local Employment Impact Statement

Costs to Regulated Persons

Texas Government Code §2001.0045(b) does not apply to this rulemaking because the commission is expressly excluded under §2001.0045(c)(7).

Public Hearing

Public Comments

Interested persons may file comments electronically through the interchange on the commission's website. Comments must be filed by July 25, 2024. Comments should be organized in a manner consistent with the organization of the proposed rules. The commission invites specific comments regarding the costs associated with, and benefits that will be gained by, implementation of the proposed rules. The commission will consider the costs and benefits in deciding whether to modify the proposed rules on adoption. All comments should refer to Project Number 56691.

SUBCHAPTER B. RATES AND TARIFFS

16 TAC §24.25

Statutory Authority

Texas Water Code §13.041(a), which provides the commission the general power to regulate and supervise the business of each public utility within its jurisdiction and to do anything specifically designated or implied by the Texas Water Code that is necessary and convenient to the exercise of that power and jurisdiction; Texas Water Code §13.041(b), which provides the commission with the authority to adopt and enforce rules reasonably required in the exercise of its powers and jurisdiction; Texas Water Code §13.136(b), which provides the commission with the authority to specify the form in which utility reports are filed to properly monitor state utilities; Texas Water Code §13.301, which governs the reporting of sales, acquisitions, leases, rentals, mergers, or consolidations of a utility, water supply corporation, or sewer service corporation; Texas Water Code §13.305, which establishes the requirements for voluntarily determining the fair market value associated with a utility.

Cross Reference to Statute: Texas Water Code §§13.041(a) and (b), 13.136(b), 13.301, and 13.305.

§24.25.Form and Filing of Tariffs.

(a) - (j) (No change.)

~~[(k) Multiple system consolidation. Except as otherwise provided in subsection (m) of this section, a utility may consolidate its tariff and rate design for more than one system if:]~~

~~[(1) the systems included in the tariff are substantially similar in terms of facilities, quality of service, and cost of service; and]~~

~~[(2) the tariff provides for rates that promote water conservation for single-family residences and landscape irrigation.]~~

(k) [~~(l)~~] Regional rates. The regulatory authority, where practicable, will consolidate the rates by region for applications submitted by a Class A, B, or C utility, or a Class D utility filing under TWC §13.1872(c)(2), with a consolidated tariff and rate design for more than one system.

~~[(m) Exemption. Subsection (k) of this section does not apply to a utility that provided service in only 24 counties on January 1, 2003.]~~

(l) [~~(n)~~] Energy cost adjustment clause.

(1) A utility that purchases energy (electricity or natural gas) that is necessary for the provision of retail water or sewer service may request the inclusion of an energy cost adjustment clause in its tariff to allow the utility to adjust its rates to reflect increases and decreases in documented energy costs.

(2) A utility that requests the inclusion of an energy cost adjustment clause in its tariff must file a request with the commission. The utility must also give notice of the proposed energy cost adjustment clause by mail, either separately or accompanying customer billings, by e-mail, or by hand delivery to all affected utility customers at least 60 days prior to the proposed effective date. Proof of notice in the form of an affidavit stating that proper notice was delivered to affected customers and stating the date of such delivery must be filed with the commission by the utility as part of the request. Notice must be provided on a form prescribed by the commission and must contain the following information:

(A) the utility name and address, a description of how the increase or decrease in energy costs will be calculated, the effective date of the proposed change, and the classes of utility customers affected. The effective date of the proposed energy cost adjustment clause must be the first day of a billing period, which should correspond to the day of the month when meters are typically read, and the clause may not apply to service received before the effective date of the clause;

(B) information on how to submit comments regarding the energy cost adjustment clause, the address of the commission, and the time frame for comments; and

(3) The commission's review of the utility's request is not subject to a contested case hearing. However, the commission will hold a public meeting if requested by a member of the legislature who represents an area served by the utility or if the commission determines that there is substantial public interest in the matter.

(4) Once an energy cost adjustment clause has been approved, documented changes in energy costs must be passed through to the utility's customers within a reasonable time. The pass-through, whether an increase or decrease, must be implemented on at least an annual basis, unless the commission determines otherwise. Before making a change to the energy cost adjustment clause, notice must be provided as required by paragraph (5) of this subsection. Copies of notices to customers must be filed with the commission.

(5) Before a utility implements a change in its energy cost adjustment clause as required by paragraph (4) of this subsection, the utility must take the following actions prior to the beginning of the billing period in which the implementation takes effect:

(A) submit written notice to the commission, which must include a copy of the notice sent to the customers, proof that the documented energy costs have changed by the stated amount; and

(B) e-mail, if the customer has agreed to receive communications electronically, mail, either separately or accompanying customer billings, or hand deliver notice to the utility's affected customers. Notice must contain the effective date of change and the increase or decrease in charges to the utility for documented energy costs. The notice must include the following language: "This tariff change is being implemented in accordance with the utility's approved energy cost adjustment clause to recognize (increases) (decreases) in the documented energy costs. The cost of these charges to customers will not exceed the (increase) (decrease) in documented energy costs."

(6) The commission may suspend the adoption or implementation of an energy cost adjustment clause if the utility has failed to properly file the request or has failed to comply with the notice requirements or proof of notice requirements. If the utility cannot clearly demonstrate how the clause is calculated, the increase or decrease in documented energy costs or how the increase or decrease in documented energy costs will affect rates, the commission may suspend the adoption or implementation of the clause until the utility provides additional documentation requested by the commission. If the commission suspends the adoption or implementation of the clause, the adoption or implementation will be effective on the date specified by the commission.

(7) Energy cost adjustment clauses may not apply to contracts or transactions between affiliated interests.

(8) A proceeding under this subsection is not a rate case under TWC §§13.187, 13.1871, 13.18715, or 13.1872.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 13, 2024.

TRD-202402608

Adriana Gonzales

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: July 28, 2024

For further information, please call: (512) 936-7322

SUBCHAPTER H. CERTIFICATES OF CONVENIENCE AND NECESSITY

16 TAC §24.238

Statutory Authority

Cross Reference to Statute: Texas Water Code §§13.041(a) and (b), 13.136(b), 13.301, and 13.305.

§24.238.Fair Market Valuation.

(a) - (d) (No change.)

(e) Selection of utility valuation experts.

(1) - (3) (No change.)

(4) The acquiring utility must contract directly with the selected utility valuation experts and the commission will not be a party to the contract. Subsection (k)(2) of this section, which limits the amount of transaction and closing costs that may be recovered in rates, does not apply to the fees for service agreed to in the contract. If the acquiring utility and any of the utility valuation experts selected under subsection (e)(1) of this section [~~subsection~~] are unable to reach agreement on the terms and conditions for performing the appraisal, including the amount of the service fee, the acquiring utility or utility valuation expert may submit a request for selection of a different utility valuation expert under the control number designated for that purpose. If the commission's executive director or the executive director's designee selects a different utility valuation expert, the time period for all utility valuation experts [~~expert~~] to submit a report under subsection (f)(5) of this section begins when the different utility valuation expert is selected.

(f) Determination of fair market value.

(1) - (5) (No change.)

(6) The ratemaking rate base established under this section will be the rate base for the system or facilities acquired in the transaction. [~~Nothing in this section alters the requirements for multiple system consolidation in §24.25(k) of this title, relating to Form and Filing of Tariffs.~~]

(g) - (k) (No change.)

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 13, 2024.

TRD-202402609

Adriana Gonzales

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: July 28, 2024

For further information, please call: (512) 936-7322

CHAPTER 25. SUBSTANTIVE RULES APPLICABLE TO ELECTRIC SERVICE PROVIDERS

SUBCHAPTER C. INFRASTRUCTURE AND RELIABILITY

16 TAC §25.56, §25.59

The Public Utility Commission of Texas (commission) proposes new §25.56, relating to Temporary Emergency Electric Energy Facilities (TEEEF), and §25.59, relating to Long Lead-Time Facilities. The proposed rules implement Public Utility Regulatory Act (PURA) §39.918 as enacted by House Bill (HB) 2483 from the 87th Texas Legislature (R.S.) and as amended by HB 1500 from the 88th Texas Legislature (R.S.). Proposed §25.56 establishes a process to allow a transmission and distribution utility (TDU) to lease and operate TEEEF to aid in restoring power to the utility's distribution customers during a significant power outage. Proposed §25.59 establishes a process for a TDU to procure, own, and operate, or enter into a cooperative agreement with other TDUs to procure, own, and jointly operate, long lead-time transmission and distribution facilities that will aid in restoring power to the utility's distribution customers following a significant power outage. The proposed rules also provide for the recovery of costs associated with TEEEF and long lead-time facilities.

Growth Impact Statement

The agency provides the following governmental growth impact statement for the proposed rules, as required by Texas Government Code §2001.0221. The agency has determined that for each year of the first five years that the proposed new rules are in effect, the following statements will apply:

(1) the proposed rules will not create a government program and will not eliminate a government program;

(2) implementation of the proposed rules will not require the creation of new employee positions and will not require the elimination of existing employee positions;

(3) implementation of the proposed rules will not require an increase and will not require a decrease in future legislative appropriations to the agency;

(4) the proposed rules will not require an increase and will not require a decrease in fees paid to the agency;

(5) the proposed rules will create new regulations;

(6) the proposed rules will not expand, limit, or repeal an existing regulation;

(7) the proposed rules will not change the number of individuals subject to the rules' applicability, because the rules did not previously exist; and

(6) the proposed rules will not affect this state's economy.

Fiscal Impact on Small and Micro-Businesses and Rural Communities

Takings Impact Analysis

The commission has determined that the proposed rules will not be a taking of private property as defined in chapter 2007 of the Texas Government Code.

Fiscal Impact on State and Local Government

Zachary Dollar, Market Economist, Market Analysis Division, has determined that for the first five-year period the proposed rules are in effect, there will be no fiscal implications for the state or for units of local government under Texas Government Code §2001.024(a)(4) as a result of enforcing or administering the sections.

Public Benefits

Mr. Dollar has determined that for each year of the first five years the proposed sections are in effect the public benefit anticipated as a result of enforcing the sections will be providing greater reliability of electricity service to the distribution customers of TDUs operating in the ERCOT region in the event of significant power outages. There will be no probable economic cost to persons required to comply with the rules under Texas Government Code §2001.024(a)(5).

Local Employment Impact Statement

Costs to Regulated Persons

Texas Government Code §2001.0045(b) does not apply to this rulemaking because the commission is expressly excluded under §2001.0045(c)(7).

Public Hearing

The commission staff will conduct a public hearing on this rulemaking if requested in accordance with Texas Government Code §2001.029. The request for a public hearing must be received by July 18, 2024. Interested persons may contact Julie Blocker (at julie.blocker@puc.texas.gov) and Zachary Dollar (at zachary.dollar@puc.texas.gov) prior to requesting a public hearing to discuss the purpose and scope of a public hearing on the proposed rules. If a hearing is scheduled, commission staff will file in this project a notice of hearing.

Public Comments

Interested persons may file comments electronically through the interchange on the commission's website. Comments must be filed by July 18, 2024. Comments should be organized in a manner consistent with the organization of the proposed rules. The commission invites specific comments regarding the costs associated with, and benefits that will be gained by, implementation of the proposed rules. All comments should refer to Project Number 53404.

The commission also requests comments on the following issues:

1. The commission's current precedent in distributed cost recovery factor proceedings addressing TEEEF costs is that "[a]bsent any applicable [c]ommission rule that provides otherwise, the determination of reasonableness and necessity must be made at the time the [c]ommission approves the [TEEEF] costs." (See Docket No. 53442, Item 166). The proposed rule, instead, requires a TDU to obtain preapproval for the amount of TEEEF generating capacity the TDU seeks to lease and defers the commission's evaluation of the reasonableness and necessity of the TDU's TEEEF costs to the TDU's next comprehensive base rate case.

The commission requests comments on the legal support and policy benefits for each of these approaches and on any process efficiencies either of these approaches will provide.

2. Proposed §25.56(c) requires a TDU to obtain commission approval for the amount of TEEEF generating capacity the TDU seeks to lease.

a. Should a TDU be required to obtain commission approval before entering into, renewing, or extending a lease involving a TEEEF? What are the advantages and disadvantages of such a requirement?

b. If the rule should contain a pre-approval process, what is the appropriate level of granularity for the commission's review? For example, should the commission pre-approve the sizes and types of units the TDU seeks to lease?

3. Proposed §25.56(f)(9) requires a TDU to file an after-action report with the commission following each TEEEF deployment. The commission requests comments on the proposed required contents of these after-action reports. Specifically, should the TDU be required to provide more granularity on the size and types of units deployed? Conversely, should the TDU be required to provide information on any leased TEEEF that was not deployed, and why?

Statutory Authority

The new sections are proposed under the following provisions of PURA: §14.001, which grants the commission the general power to regulate and supervise the business of each public utility within its jurisdiction and to do anything specifically designated or implied by this title that is necessary and convenient to the exercise of that power and jurisdiction; §14.002, which authorizes the commission to adopt and enforce rules reasonably required in the exercise of its powers and jurisdiction; and §39.918, which directs the commission to allow TDUs to lease and operate TEEEF to aid in restoring power to a utility's distribution customers during a significant power outage, and to allow TDUs to procure, own, and operate, or enter into a cooperative agreement with other TDUs to procure, own, and operate jointly, long lead-time transmission and distribution facilities that will aid in restoring power to a utility's distribution customers following a significant power outage.

Cross Reference to Statutes: Public Utility Regulatory Act §§14.001; 14.002; and 39.918.

§25.56.Temporary Emergency Electric Energy Facilities (TEEEF).

(a) Applicability. This section establishes the requirements for a transmission and distribution utility (TDU) to lease, operate, and recover costs associated with a temporary emergency electric energy facility (TEEEF). This section applies to a TDU, other than a river authority, that operates distribution facilities in the Electric Reliability Council of Texas (ERCOT) region to serve distribution customers.

(b) Definitions. The following terms, when used in this section, have the following meanings unless the context indicates otherwise.

(1) Significant power outage--an event that:

(A) causes the independent organization certified under Public Utility Regulatory Act (PURA) §39.151 for the ERCOT region to order a TDU to shed load;

(B) the Texas Division of Emergency Management, the independent organization certified under PURA §39.151 for the ERCOT region, or the executive director of the commission determines is a significant power outage; or

(i) affects a significant number of a TDU's distribution customers, and has lasted, or is expected to last, for at least six hours;

(ii) affects distribution customers of a TDU in an area for which the governor has issued a disaster or emergency declaration;

(iii) affects distribution customers served by a radial transmission or distribution facility, creates a risk to public health or safety, and has lasted, or is expected to last for, at least 12 hours; or

(iv) creates a risk to public health or safety because it affects a critical infrastructure facility that serves the public such as a hospital, health care facility, law enforcement facility, fire station, or water or wastewater facility.

(2) Temporary Emergency Electric Energy Facility (TEEEF)--a facility that provides electric energy to distribution customers on a temporary basis.

(c) Commission review and approval of TEEEF generating capacity. Except as authorized under this section, before entering into, renewing, or extending any lease involving a TEEEF, a TDU must receive commission approval in a contested case proceeding for the amount of TEEEF generating capacity the TDU seeks to lease.

(1) A TDU must file an application for commission approval for the amount of TEEEF generating capacity the TDU seeks to lease. The application must include the following:

(A) An explanation of all factors that support the reasonableness and necessity of the amount of TEEEF generating capacity requested.

(B) Supporting documentation that demonstrates the reasonableness and necessity of the amount of TEEEF generating capacity requested. This supporting documentation may include historical data on:

(i) the dates and descriptions of events that resulted in a significant power outage;

(ii) the number of affected distribution customers and amount of load, in megawatts, that have experienced a significant power outage in the TDU's service territory; and

(iii) the number of critical load and critical care customers, as defined in §25.497 of this title (relating to Critical Load Industrial Customers, Critical Load Public Safety Customers, Critical Care Residential Customers, and Chronic Condition Residential Customers) affected by a significant power outage. Provide details on the magnitude and a description of the type of affected critical load or critical care customers.

(C) The number of megawatts of TEEEF generating capacity the TDU has under lease at the time of the TDU's application and any relevant information concerning the TDU's existing leases, such as term lengths and types of TEEEF.

(D) Data must be filed with or submitted to the commission in a format native to Microsoft Excel and must permit basic data manipulation functions, such as copying and pasting of data.

(2) The proceeding in which a TDU's application is reviewed will proceed on the following timeline.

(A) Within 35 days of the TDU filing its application, commission staff will file a recommendation on administrative completeness of the application.

(B) Within 42 days of the TDU filing its application, the presiding officer will make a determination on administrative completeness.

(i) If the application is deemed administratively incomplete, the TDU will have 30 days to cure the insufficiency. If the TDU does not cure the insufficiency within 30 days, then the presiding officer will dismiss the application, without prejudice.

(ii) If the application is deemed administratively complete, within 120 days of the TDU filing its administratively complete application, commission staff must file a recommendation on the reasonableness and necessity of the TDU's requested amount of TEEEF generating capacity.

(C) The commission will issue an order addressing the reasonableness and necessity of the TDU's requested amount of TEEEF generating capacity and include the number of years that the TDU is eligible to lease the requested amount of TEEEF generating capacity.

(d) Emergency Procurement of TEEEF.

(1) A TDU may enter into a lease for TEEEF without prior commission approval if the TDU lacks the leased TEEEF generating capacity necessary to aid in restoring power, consistent with subsection (f) of this section.

(2) The amount of TEEEF generating capacity leased by a TDU under this subsection must not significantly exceed the amount of megawatts necessary to restore electric service to the TDU's distribution customers.

(3) The TDU must provide sufficient documentation to support the amount of TEEEF generating capacity leased by a TDU under this subsection during the TDU's next comprehensive base rate proceeding.

(e) Competitive bidding process. A TDU must, when reasonably practicable, use a competitive bidding process to lease TEEEF under this section.

(1) In any proceeding in which the commission is reviewing the reasonableness or necessity of the costs associated with leasing a TEEEF under this section, the commission may also consider whether the contracts the TDU entered into to lease TEEEF were reasonable relative to other contracts that were available to the TDU.

(2) In any proceeding in which a TDU is requesting recovery of costs associated with leasing a TEEEF that was not procured using a competitive bidding process, the TDU must demonstrate that it was not reasonably practicable to use a competitive bidding process.

(f) Deployment of TEEEF.

(1) A TDU may deploy TEEEF to aid in restoring power to its distribution customers during an event that a TDU reasonably determines is a significant power outage in which:

(A) the independent organization certified under PURA §39.151 for the ERCOT region has ordered the TDU to shed load; or

(B) the TDU's distribution facilities are not being fully served by the bulk power system under normal operations.

(2) A TDU that leases a TEEEF must not sell energy or ancillary services from the facility.

(3) A TEEEF must:

(A) be operated in isolation from the bulk power system; and

(B) not be included in locational marginal pricing calculations, pricing, or reliability models developed by the independent organization certified under PURA §39.151 for the ERCOT region.

(4) A TDU must notify the independent organization certified under PURA §39.151 for the ERCOT region and all operators of affected generators or load resources at least 10 minutes prior to isolation of the affected area from the bulk power system, immediately upon isolation of the affected area from the bulk power system, at least 10 minutes prior to the reconnection of the affected area to the bulk power system, and after the reconnection has been completed.

(A) For the purposes of this subsection, affected generators or load resources include only those generators and load resources that:

(i) are registered with the independent organization certified under PURA §39.151 for the ERCOT region for purposes of settlement; and

(ii) are located within the portion of the grid that will be isolated from the bulk power system while a TEEEF is energized.

(B) Notices prior to isolation of the affected area from the bulk power system must include:

(i) identification of each substation and modeled load associated with customer load that will be served by the TEEEF;

(ii) the total amount of load expected to be served by the TEEEF;

(iii) the time the affected area is anticipated to be isolated from the bulk power system;

(iv) the time the affected area is anticipated to be reconnected to the bulk power system;

(v) identification of each affected generator or load resource that is located within the portion of the grid that will be isolated from the bulk power system; and

(vi) a statement that any energy produced by an affected generator during the time it is isolated from the bulk power will not be settled through the independent organization certified under PURA §39.151 for the ERCOT region's systems.

(C) The notice prior to reconnection of the affected area to the bulk power system must state the anticipated time that the affected area will be reconnected to the bulk power system.

(D) After the affected area has been isolated from or reconnected to the bulk power system, the TDU's notice must state the time the isolation from or reconnection to the bulk power system was completed.

(E) Except for an isolation of load from the bulk power system due to circumstances beyond the TDU's control, a TDU's isolation or reconnection of load associated with any energization of a TEEEF that occurs outside of an energy emergency declared by the independent organization certified under PURA §39.151 for the ERCOT region must be coordinated with the independent organization certified under PURA §39.151 for the ERCOT region if the total amount of load at any single substation that would be isolated or reconnected within a period of 10 minutes exceeds 20 megawatts. If the TDU has provided notice of an anticipated isolation or reconnection as required by this paragraph, and coordination with the independent organization certified under PURA §39.151 for the ERCOT region results in a delay in the anticipated time of isolation or reconnection, the TDU must notify operators of affected generators and load resources of such delay.

(5) Upon receiving notice from a TDU that an area served by a TEEEF will be disconnected from the bulk power system, an operator of an affected generator or load resource that is required by ERCOT protocols to provide status telemetry to ERCOT must, at the expected time of the disconnection indicated in the TDU's notice, update its real-time status telemetry and current operating plan information to reflect that the generator or load resource is disconnected from the ERCOT system and is unavailable for dispatch by ERCOT and will be unavailable for dispatch by ERCOT for the time period specified by the TDU in its notice. Upon receiving notice that the affected area has been reconnected to the bulk power system, the operator of the affected generator or load resource must update the telemetry to reflect the appropriate status of the generator or load resource.

(6) A TDU's liability related to the provision of service using a TEEEF is governed by §25.214 of this title (relating to Terms and Conditions of Retail Delivery Service Provided by Investor-Owned Transmission and Distribution Utilities).

(7) A TDU will ensure, to the extent reasonably practicable, that:

(A) a retail distribution customer's usage during the TDU's operation of a TEEEF is excluded from the electric usage reported to the independent organization certified under PURA §39.151 for the ERCOT region for settlement and to retail electric providers (REPs) for customer billing; and

(B) Energy generated in an area isolated from the bulk power system during operation of the TEEEF, including any energy generated by an affected generator, is excluded from the generation reported to the independent organization certified under PURA §39.151 for the ERCOT region for settlement purposes.

(8) During an energy emergency declared by the independent organization certified under PURA §39.151 for the ERCOT region, the amount of any load shed by a TDU for the area operated in isolation from the bulk power system during operation of a TEEEF must be accounted for net of any generation in the affected area that was online and producing before the area was isolated from the bulk power system.

(9) Following all deployments of a TEEEF by a TDU, the TDU must file a report with the commission. The report must include:

(A) The date and time TEEEF was deployed;

(B) The duration that the affected area was isolated from the bulk power system;

(D) The number and capacity of generators or load resources that were affected by TEEEF deployment, if any;

(E) The number and type of critical load, critical care customers, or other critical infrastructure facilities impacted by a significant power outage, if any;

(F) Details explaining if a significant power outage affected critical load, critical care customers, or other critical infrastructure facilities as described in subparagraph (E) of this paragraph. If available, the TDU may also provide details on whether such customers had generation or load resources installed behind the meter at the time of the significant power outage; and

(G) If applicable, the number of megawatts of additional TEEEF generating capacity that were procured under subsection (d) of this section and an explanation for the necessity of the emergency procurement.

(g) Emergency operations annex. A TDU that leases TEEEF under this section must include a detailed plan on the use of the TDU's leased TEEEF in the TDU's emergency operations plan filed with the commission, as required by §25.53 of this title (relating to Electric Service Emergency Operations Plans), that is updated, as necessary, on an ongoing basis. The TDU's plan must include a sufficient level of detail such that the independent organization certified under PURA §39.151 for the ERCOT region can use the information for system restoration planning.

(h) Eligible costs.

(1) Costs to obtain, maintain, and operate a TEEEF. Reasonable and necessary costs of leasing, maintaining, and operating a TEEEF, including the present value of future payments required under the lease, are eligible for recovery under this section. A lease involving a TEEEF must be treated as a capital lease or finance lease for ratemaking purposes, regardless of its classification under generally accepted accounting principles or other accounting frameworks.

(2) Return. Reasonable and necessary costs under this section include a return on investment using the rate of return on investment established in the commission's final order in a TDU's most recent comprehensive base rate proceeding. The return must be applied beginning on the date that a TEEEF is available for service.

(i) Deferred recovery of certain eligible costs. A TDU may create a regulatory asset to defer the following for recovery in a future ratemaking proceeding:

(1) The reasonable and necessary incremental operations and maintenance expenses; and

(2) The return, not otherwise recovered in a ratemaking proceeding.

(j) Cost recovery. Eligible costs under this section may be recovered as follows.

(1) Ratemaking proceedings. A TDU may request recovery of eligible costs, including any deferred expenses, through a standalone TEEEF rider proceeding, a proceeding under §25.243 of this title (relating to Distribution Cost Recovery Factor (DCRF)), or in another ratemaking proceeding where it is appropriate to recover distribution-invested capital and associated costs.

(A) A TDU must provide notice to REPs 45 days prior to the effective date of a new rate.

(B) TEEEF costs must not be allocated to, or collected from, retail transmission service customers.

(C) Notwithstanding the provisions of §25.243 of this title, an allocation of TEEEF costs among distribution-level rate classes, based on substation-level class non-coincident peak demand from the TDU's current or most recent base rate proceeding, is presumed to be reasonable.

(D) TEEEF rates may not be established on a per-kilowatt-hour basis for any customer class that includes demand charges.

(E) Upon any amendment to a lease under this section that would reduce the rate of cost recovery necessary for a TEEEF, a TDU must submit an application to reflect the reduced rate of cost recovery necessary, in order to ensure that the benefit of such reduced costs are reflected in rates as soon as is reasonably practicable.

(F) All TEEEF costs must be reviewed and included in any proceeding in which TEEEF cost recovery is established or revised.

(2) Notice. The notice for any ratemaking proceeding in which eligible TEEEF costs are sought must specifically identify those eligible costs.

(3) Affiliate contracts. For any contract between a TDU and an affiliate, the TDU bears the burden of proof to show that the terms to the TDU were reasonable and necessary and did not exceed the prices charged by the supplying affiliate to its other affiliates or divisions or to unaffiliated persons within the same market area or having the same market conditions. In addition, all affiliate payments must comply with the requirements of PURA §36.058.

(4) Temporary rates and reconciliation. If eligible costs are not reviewed for reasonableness and necessity, the rates to recover those costs are temporary rates that must be reconciled in the TDU's next comprehensive base rate proceeding, including to determine whether the costs are reasonable and necessary. Any over-recovery must be returned to customers with interest at the TDU's weighted average cost of capital most recently approved for the TDU during the time the over-recovery occurred and during the time the refund is in effect.

(k) Grandfathering of previously leased TEEEF.

(1) Subject to paragraph (2) of this subsection, any lease for a TEEEF that a TDU entered into before the effective date of this rule is exempt from subsection (c) of this section.

(2) Any lease for a TEEEF that a TDU entered into before the effective date of this rule that is amended, renewed, or extended after the effective date of this rule must comply with the requirements of subsection (c) of this section.

(3) Any costs associated with a TEEEF that were deemed reasonable and necessary in a proceeding under §25.243 of this title prior to the effective date of this rule are not required to be reviewed for reasonableness and necessity in the TDU's next comprehensive base rate case.

§25.59.Long Lead-Time Facilities.

(a) Applicability. This section provides that a transmission and distribution utility (TDU) may procure, own, operate, and recover costs of long lead-time facilities. This section applies to a TDU, other than a river authority, that operates distribution facilities in the Electric Reliability Council of Texas (ERCOT) region to serve distribution customers.

(b) Definitions. The following terms, when used in this section, have the following meanings unless the context indicates otherwise.

(1) Long lead-time facilities--transmission and distribution facilities that would aid in restoring power to the TDU's distribution customers following a significant power outage and require at least six months to obtain. These facilities may not include energy storage equipment or facilities as described under Public Utility Regulatory Act (PURA), Chapter 35, Subchapter E.

(2) Significant power outage--an event that:

(A) causes the independent organization certified under PURA §39.151 for the ERCOT region to order a TDU to shed load;

(i) affects a significant number of a TDU's distribution customers and has lasted, or is expected to last, for at least six hours;

(ii) affects a TDU's distribution customers in an area for which the governor has issued a disaster or emergency declaration;

(iii) affects a TDU's distribution customers served by a radial transmission or distribution facility, creates a risk to public health or safety, and has lasted, or is expected to last, for at least 12 hours; or

(c) Contracts for long lead-time facilities. A TDU may enter into contracts to procure long lead-time facilities. Such contractual arrangements may include cooperative agreements with another TDU or procurement subscriptions with a transmission and distribution equipment supply service company or other third party as described under this section.

(1) Cooperative agreements. A TDU may enter into a cooperative agreement with another TDU to:

(A) jointly procure, own, and operate long lead-time facilities;

(B) maintain inventories of long lead-time transmission and distribution equipment; or

(2) Procurement subscriptions. A TDU may subscribe with a transmission and distribution equipment supply service to access and utilize an inventory of transmission and distribution equipment for the construction, modification, or operation of long lead-time facilities.

(d) Emergency operations annex. A TDU that procures, owns, and operates long lead-time facilities under this section must include these facilities in the TDU's emergency operations plan filed with the commission, as required by §25.53 of this title (relating to Electric Service Emergency Operations Plans), on an ongoing basis.

(e) Eligible costs.

(1) Costs to procure, own, maintain, and operate long lead-time facilities. Reasonable and necessary costs of procuring, owning, maintaining, and operating long lead-time facilities, including costs incurred under a cooperative agreement or procurement subscription, are eligible for recovery under this section. These costs may be recovered beginning on the date that a long lead-time facility is procured.

(2) Return. Reasonable and necessary costs under this section include a return on investment using the rate of return on investment established in the commission's final order in the TDU's most recent comprehensive ratemaking proceeding. The return may be applied beginning on the date that a long lead-time facility is placed into service.

(f) Deferred recovery of certain eligible costs. A TDU may defer to a future ratemaking proceeding the recovery of incremental operations and maintenance expenses and the return, not otherwise recovered in a rate proceeding, associated with the procurement, ownership, maintenance, and operation of long lead-time facilities.

(g) Cost recovery. Eligible costs under this section may be recovered as follows.

(1) Ratemaking proceedings. A TDU may request recovery of eligible costs, including any deferred expenses, pertaining to distribution invested capital and its associated costs through a proceeding under §25.243 of this title (relating to Distribution Cost Recovery Factor (DCRF)), or in another ratemaking proceeding appropriate to recover distribution-invested capital and its associated costs. A TDU may request recovery of eligible costs under this section, including any deferred expenses, pertaining to transmission-invested capital and its associated costs through a proceeding under §25.192(h) of this title (relating to Interim Update of Transmission Rates) or in another ratemaking proceeding appropriate to recover transmission-invested capital and its associated costs.

(2) Notice. The notice for any ratemaking proceeding in which eligible costs addressed in this section are sought must specifically identify those eligible costs.

(3) Affiliate contracts. For any contract between the TDU and an affiliate, the TDU bears the burden of proof that the terms to the TDU were reasonable, necessary, prudent, and did not exceed the prices charged by the supplying affiliate to its other affiliates or divisions or to unaffiliated persons within the same market area or having the same market condition. In addition, all affiliate payments must comply with the requirements of PURA §36.058.

(4) Temporary rates and reconciliation. If eligible costs are not reviewed for prudence, reasonableness, and necessity, the rates to recover those costs are temporary rates that must be reconciled in the TDU's next comprehensive ratemaking proceeding. Any over-recovery must be returned to customers with interest at the TDU's weighted average cost of capital most recently approved for the TDU during the time the over-recovery occurred and during the time the refund is in effect.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 13, 2024.

TRD-202402613

Adriana Gonzales

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: July 28, 2024

For further information, please call: (512) 936-7322

SUBCHAPTER S. WHOLESALE MARKETS

16 TAC §25.508

The Public Utility Commission of Texas (commission) proposes new 16 Texas Administrative Code (TAC) §25.508, relating to Reliability Standard for the Electric Reliability Council of Texas (ERCOT) Region.

The proposed rule will facilitate the implementation of Public Utility Regulatory Act (PURA) §39.159(b)(1) as revised by Section 18 of Senate Bill (S.B.) 3 during the Texas 87th Regular Legislative Session. The proposed rule will create a reliability standard for the ERCOT region, made up of three measures of loss of load events: frequency, magnitude, and duration.

Growth Impact Statement

The agency provides the following governmental growth impact statement for the proposed rule, as required by Texas Government Code §2001.0221. The agency has determined that for each year of the first five years that the proposed rule is in effect, the following statements will apply:

(1) the proposed rule will not create a government program and will not eliminate a government program;

(2) implementation of the proposed rule will not require the creation of new employee positions and will not require the elimination of existing employee positions;

(3) implementation of the proposed rule will not require an increase and will not require a decrease in future legislative appropriations to the agency;

(4) the proposed rule will not require an increase and will not require a decrease in fees paid to the agency;

(5) the proposed rule will create a new regulation, implementing a new requirement from S.B. 3;

(6) the proposed rule will not expand, limit, or repeal an existing regulation;

(7) the proposed rule will not change the number of individuals subject to the rule's applicability; and

(8) the proposed rule will not affect this state's economy.

Fiscal Impact on Small and Micro-Businesses and Rural Communities

There is no adverse economic effect anticipated for small businesses, micro-businesses, or rural communities as a result of implementing the proposed rule. Accordingly, no economic impact statement or regulatory flexibility analysis is required under Texas Government Code §2006.002(c).

Takings Impact Analysis

The commission has determined that the proposed rule will not be a taking of private property as defined in chapter 2007 of the Texas Government Code.

Fiscal Impact on State and Local Government

Werner Roth, Senior Market Economist, Market Analysis, has determined that for the first five-year period the proposed rule is in effect, there will be no fiscal implications for the state or for units of local government under Texas Government Code §2001.024(a)(4) as a result of enforcing or administering the section.

Public Benefits

Mr. Roth has determined that for each year of the first five years the proposed section is in effect, the public benefit anticipated as a result of enforcing the section will be an increased ability to determine if there is sufficient generation capacity to meet the projected electric demand of Texans in the ERCOT region. There will be no probable economic cost to persons required to comply with the rule under Texas Government Code §2001.024(a)(5).

Local Employment Impact Statement

For each year of the first five years the proposed section is in effect, there should be no effect on a local economy; therefore, no local employment impact statement is required under Texas Government Code §2001.022.

Costs to Regulated Persons

Texas Government Code §2001.0045(b) does not apply to this rulemaking because the commission is expressly excluded under subsection §2001.0045(c)(7).

Public Hearing

The commission will conduct a public hearing on this rulemaking if requested in accordance with Texas Government Code §2001.029. The request for a public hearing must be received by July 15, 2024. If a request for public hearing is received, commission staff will file in this project a notice of hearing.

Public Comments

Interested persons may file comments electronically through the interchange on the commission's website. Comments must be filed by July 15, 2024. Comments should be organized in a manner consistent with the organization of the proposed rules. The commission invites specific comments regarding the costs associated with, and benefits that will be gained by, implementation of the proposed rule. The commission will consider the costs and benefits in deciding whether to modify the proposed rules on adoption. All comments should refer to Project Number 54584.

In addition to comments on the text of the proposed rule, the commission invites interested persons to address the following questions:

1. What are the advantages and disadvantages of enshrining an exceedance tolerance for magnitude and duration in the commission's rule?

2. Should the exceedance tolerance be evaluated more frequently than the reliability standard? If so, what is the appropriate frequency?

Statutory Authority

The rule is proposed under Public Utility Regulatory Act (PURA) §14.001, which grants the commission the general power to regulate and supervise the business of each public utility within its jurisdiction and to do anything specifically designated or implied by this title that is necessary and convenient to the exercise of that power and jurisdiction; §14.002, which authorizes the commission to adopt and enforce rules reasonably required in the exercise of its powers and jurisdiction; §39.159(b)(1), which directs the commission to ensure that ERCOT establish requirements to meet the reliability needs of the ERCOT region; §39.151(d), which directs the commission to adopt and enforce rules relating to the reliability of the regional electrical network and allows the commission to delegate these responsibilities to an independent organization; §39.151(h), which allows the independent organization to adopt procedures and acquire resources needed to carry out its listed functions, consistent with any rules or orders of the commission; §39.151(i), which allows the commission to delegate authority to ERCOT to enforce operating standards within the ERCOT region; and §39.151(j), which requires market participants in the ERCOT region to observe reliability policies and guidelines established by ERCOT.

Cross Reference to Statute: Public Utility Regulatory Act §§14.001, 14.002, 39.159(b)(1), and 39.151(d), (h), (i), and (j).

§25.508.Reliability Standard for the Electric Reliability Council of Texas (ERCOT) Region.

(a) Definitions. The following words and terms, when used in this section, have the following meanings, unless the context indicates otherwise.

(1) Exceedance tolerance--the maximum acceptable percentage of simulations in which the modeled ERCOT system experiences a loss of load event that exceeds the threshold for a given metric of the reliability standard.

(2) Loss of load event--an occurrence when the system load is greater than the available resource capacity to serve that load, resulting in involuntary load shed.

(3) Transmission operator--as the term is defined in the ERCOT protocols.

(4) Weatherization effectiveness--the assumed percentage reduction in the amount of weather-related unplanned outages for thermal generation resources included in the model, due to compliance with the weatherization standards in §25.55 of this title (relating to Weather Emergency Preparedness).

(b) Reliability standard for the ERCOT region. The bulk power system for the ERCOT region meets the reliability standard if an ERCOT model analysis finds that the system meets each of the criteria provided in this subsection.

(1) Frequency. The expected loss of load events for the ERCOT region must be less than 0.1 days per year on average, i.e., 0.1 loss of load expectation (LOLE).

(2) Duration. The maximum expected length of a loss of load event for the ERCOT region, measured in hours, must be less than 12 hours, with a 1.00 percent exceedance tolerance.

(3) Magnitude. The expected highest instantaneous level of load shed during a loss of load event for the ERCOT region, measured in megawatts, must be less than the maximum number of megawatts of load shed that can be safely rotated during a loss of load event, as determined by ERCOT, in consultation with commission staff and the transmission operators, with a 0.25 percent exceedance tolerance.

(1) ERCOT's assessment. Beginning January 1, 2026, ERCOT must initiate an assessment to determine whether the bulk power system for the ERCOT region is meeting the reliability standard and is likely to continue to meet the reliability standard for the three years following the date of assessment. The assessment must be conducted at least once every five years.

(A) Before conducting the assessment, ERCOT must file a list of proposed modeling assumptions to be used in the reliability assessment for commission review. The proposed assumptions must include:

(i) the number of historic weather years that will be included in the modeling;

(ii) the amount of new resources and retirements, in megawatts, listed by resource type;

(iii) the weatherization effectiveness;

(iv) an update to the calculation for the cost of new entry, including review of the current reference technology; and

(v) any other assumptions that would impact the modeling results, along with an explanation of the possible impact of the additional assumptions.

(B) ERCOT's assessment must include review and analysis of the resource fleet, loads, and other system characteristics for the ERCOT region for the following points in time:

(i) the current year's system configuration;

(ii) the expected system configuration three years from the date of the current year's system analysis; and

(iii) the system configuration three years from the date of the current year's system analysis that would be required to achieve the market equilibrium reserve margin.

(i) the LOLE;

(ii) the probability of a loss of load event exceeding the duration threshold established in subsection (b)(2) of this section;

(iii) the probability of a loss of load event exceeding the magnitude threshold established in subsection (b)(3) of this section;

(iv) the expected unserved energy; and

(v) the normalized expected unserved energy.

(D) If the assessment shows that any reviewed systems fall below the reliability standard described in subsection (b) of this section, ERCOT must include in its assessment recommended changes to components of the ERCOT market design intended to address that deficiency.

(2) Commission's review of assessment. ERCOT must file its assessment with the commission. The commission will review ERCOT's assessment to determine whether any market design changes are necessary.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on June 13, 2024.

TRD-202402605

Adriana Gonzales

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: July 28, 2024

For further information, please call: (512) 936-7322