Part I. Texas Natural Resource Conservation
Commission
Chapter 37.
Subchapter O. Financial Assurance for Public
Drinking Water Systems and Utilities
The Texas Natural Resource Conservation Commission (commission)
adopts new §§37.5001, 37.5002, and 37.5011, relating
to Financial Assurance for Public Drinking Water Systems
and Utilities. Section 37.5011 is adopted with changes to the
proposed text as published in the October 23, 1998, issue of
the Texas Register (23 TexReg 10803). Sections 37.5001 and
37.5002 are adopted without changes and will not be republished.
EXPLANATION OF THE ADOPTED RULE
The purpose of the adopted amendments is to specify acceptable
forms of financial assurance required of public drinking
water systems, water and wastewater utilities. The rules are
intended in part to comply with the requirements of the Safe
Drinking Water Act Amendments of 1996, which require states
to ensure that new community water systems and new nontransient,
noncommunity water systems demonstrate financial capacity.
Senate Bill 1, Article 6, 75th Legislature, 1997, granted
the commission the authority to require financial assurance in
certain defined circumstances. Financial assurance may be required
for systems that were constructed without approval; have
a history of non-compliance; for applicants requesting approval
for a certificate of convenience; for a person establishing, purchasing,
or acquiring a retail public utility; for a person acquiring
a controlling interest through a purchase of stock in a utility; or
for a utility that is subject to commission enforcement action to
ensure continuous and adequate utility service. The commission
has made changes in the adopted rule to more closely
follow statutory authority.
Concurrently with this amendment, the commission is adopting
amendments to Chapters 290 and 291 that specify under
what conditions financial assurance will be required. Please
refer to the preambles to Chapters 290 and 291 for additional
information. The amendments in this chapter specify accept-able
forms of financial assurance when required by provisions
of these rules.
FINAL REGULATORY IMPACT ANALYSIS
The commission has reviewed the adopted rulemaking in light
of the regulatory analysis requirements of Texas Government
Code §2001.0225 and has determined that the rulemaking
is not subject to §2001.0225 because it does not meet the
definition of "major environmental rule" because the specific
intent of the rule is to regulate the form of financial assurance
required of certain water and sewer service utilities, not to
protect the environment or reduce the risks to human health
from environmental exposure. The rules will not materially affect
the economy, a sector of the economy, productivity, competition,
jobs, or the environment. The effect is not material because
it is estimated that the cost to a utility to comply with the
financial assurance requirement will range from one half of a
percent to ten percent of the amount of the financial assurance.
Furthermore the rules are adopted under the following specific
state laws: Texas Water Code, §§13.246, 13.253, 13.301,
and 13.302, and the Health and Safety Code, §341.035 and
§341.0355. Those statutes do not expressly limit the form and
amount of financial assurance that the commission may require
of public drinking water systems and utilities, and therefore
the rules do not exceed the limitation of those statutes. The
financial assurance provision is adopted in part to comply with
the requirements of the Safe Drinking Water Act Amendments
of 1996, but there are no specific limitations on the amount or
form of financial assurance in those statutes, therefore the rules
do not exceed the requirements of that statute.
TAKINGS IMPACT ASSESSMENT
The commission has prepared a Takings Impact Assessment
for these rules pursuant to Texas Government Code Annotated,
§2007.043. The following is a summary of that Assessment.
The specific purpose of the rules is to specify acceptable forms
of financial assurance required of public drinking water systems
and utilities. The rules will substantially advance this specific
purpose by specifying acceptable forms of financial assurance
that may be required by the commission. Promulgation and
enforcement of these rules will not burden private real property
because these rules only prescribe the form of financial
assurance that may be otherwise imposed on a water or sewer
service provider by the commission.
CONSISTENCY WITH THE COASTAL MANAGEMENT PRO-GRAM
The commission has reviewed the adopted rulemaking and
found that the rules are neither identified in Coastal Coordination
Act Implementation Rules, 31 TAC §505.11, relating to Actions
and Rules Subject to the Coastal Management Program
(CMP), nor will they affect any action or authorization identified
in Coastal Coordination Act Implementation Rules, 31 TAC
§505.11. Therefore, the adopted rules are not subject to the
CMP.
HEARING AND COMMENTERS
A public hearing on the proposed rules was held on November
2, 1998, in Austin. The comment period closed November 23,
1998.
Consumers Union (CU) submitted comments that were generally
supportive of the proposed rules, but suggested changes.
The following paragraph summarizes written and oral comments
received.
CU commented that surcharges and rate increases should not
be the sole form of financial assurance for prospective owners or
operators as proposed in §37.5011. In the case of acquisitions,
CU believes an acquiring utility which relies solely on ratepayer
funds as financial assurance has not added financial strength
to the new utility.
The commission agrees and has modified §290.39(n) to clarify
the circumstances under which surcharges and rate increases
may be allowed as a form of financial assurance. The
commission has limited the scope as to who may be allowed to
use rate increases or surcharges. The commission has done
this by moving the text of §290.39(o) into §290.39(n)(3) which
specifically allows the use of rate increases or surcharges under
specific conditions. These conditions include a public drinking
water supply system constructed without approval, or a public
drinking water supply system with a history of noncompliance,
or one subject to a commission enforcement action.
The commission has made additional changes to §37.5011(b)
to correct references.
STATUTORY AUTHORITY
The new sections are adopted under Texas Water Code,
§5.103, which provides the commission the authority to adopt
and enforce rules necessary to carry out its powers and duties
under the laws of this state, and to implement Texas Water
Code, §§13.246, 13.253, 13.301, and 13.302, and the Health
and Safety Code, §341.035 and §341.0355.
§37.5011. Financial Assurance for a Public Water System or Retail
Public Utility.
(a) Financial assurance demonstrations shall comply with the
wordings of the mechanisms as described in Subchapter A of this
chapter (relating to General Financial Assurance Requirements), Subchapter
B of this chapter (relating to Financial Assurance Requirements
for Closure), Subchapter C of this chapter (relating to Financial
Assurance Mechanisms for Closure), and Subchapter D of this
chapter (relating to Wording of the Mechanisms for Closure), except
operation should be substituted for closure and the appropriate statutory
reference to Public Drinking Water or Utility Regulation should
be cited in the mechanism.
(b) The prospective owner or operator of a public water
system may be ordered to provide adequate financial assurance to
operate the system as specified in §290.39(f) of this title (relating
to General Provisions.) A public water system that was constructed
without approval or has a history of noncompliance or is subject to
commission enforcement action as specified in §290.39(n) of this title,
may be required to provide financial assurance to operate the system
in accordance with applicable laws and rules. Financial assurance
may be required of an applicant requesting approval for a certificate
or a certificate amendment or a person establishing, purchasing or
acquiring a retail public utility as specified in §291.102(d) of this
title (relating to Criteria for Considering and Granting Certificates
or Amendments), and §291.109(c) of this title (relating to Report of
Sale, Merger, Etc: Investigation; Disallowance of Transaction). A
person acquiring a controlling interest in a utility may be required to
demonstrate adequate financial assurance as specified in §291.111(c)
of this title (relating to Purchase of Voting Stock in Another Utility).
The commission may order a utility that has failed to provide
continuous and adequate service to provide financial assurance to
ensure that the system will be operated as required by §291.114
of this title, (relating to Requirements to Provide Continuous and
Adequate Service). Such financial assurance will allow for payment
of improvements and repairs to the water or sewer system.
(c) If rate increases or customer surcharges are determined
by the executive director to be an acceptable form for demonstrating
financial assurance in accordance with §290.39(n)(3) of this title, such
funds shall be deposited into an escrow account with an escrow agent
that has the authority to act as an escrow agent and whose escrow
operations are regulated and examined by a Federal or State agency.
At least annually a statement of the account shall be submitted to the
executive director.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the
agency’s legal authority.
Filed with the Office of the Secretary of State on January 15,
1999.
TRD-9900316
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Effective date: February 4, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 239–1966
Subchapter A. General Rules
The Texas Natural Resource Conservation Commission (commission)
adopts an amendment to §80.3, relating to Judges,
without changes to the proposed text as published in the October
23, 1998, issue of the Texas Register (23 TexReg 10805).
The text of the rule will not be republished.
EXPLANATION OF THE ADOPTED RULE
The purpose of the adopted amendment is to delegate to
Administrative Law Judges the authority to issue interim rate
orders under Texas Water Code, Chapter 13 as provided by
Texas Water Code, §5.311, as amended by Senate Bill 1,
Article 6, 75th Legislature, 1997. This authorization to issue
interlocutory orders will save time and unnecessary expense by
providing a simplified procedure for setting interim rates prior to
final commission action on the rate case.
FINAL REGULATORY IMPACT ANALYSIS
The commission has reviewed the adopted rulemaking in light
of the regulatory analysis requirements of Texas Government
Code, §2001.0225 and has determined that the rulemaking
is not subject to §2001.0225 because it does not meet the
definition of "major environmental rule" because the specific
intent of the amendment is to make the rule consistent with
statutory authority, by allowing an Administrative Law Judge to
issue interim rate orders under Texas Water Code, Chapter 13,
not to protect the environment or reduce risks to human health
from environmental exposure.
TAKINGS IMPACT ASSESSMENT The commission has prepared a Takings Impact Assessment
for these rules pursuant to Texas Government Code Annotated,
§2007.043. The following is a summary of that Assessment.
The specific purpose of the rule is to delegate the authority
to the State Office of Administrative Hearings (SOAH) to set
interim rates under Texas Water Code, Chapter 13. The rule
will substantially advance this specific purpose by expressly
granting SOAH judges the authority to issue interim rate orders
under Texas Water Code, Chapter 13. Promulgation and
enforcement of the rule will not burden private real property
which is the subject of the rules because the rule is a procedural
rule that provides a more streamlined administrative process for
setting interim rates.
CONSISTENCY WITH THE COASTAL MANAGEMENT PROGRAM
The commission has reviewed the adopted rulemaking and
found that the rule is neither identified in Coastal Coordination
Act Implementation Rules, 31 TAC §505.11, relating to
Actions and Rules Subject to the Coastal Management Program (CMP), nor will it affect any action or authorization
identified
in Coastal Coordination Act Implementation Rules, 31 TAC
§505.11. Therefore, the adopted rule is not subject to the CMP.
HEARING AND COMMENTERS
A public hearing on the proposed rule was held on November
2, 1998, in Austin. The comment period closed November 23,
1998.
No written or oral comments were received on the proposed
amendment to §80.3, relating to Judges.
STATUTORY AUTHORITY
The amendment is adopted under Texas Water Code, §5.103,
which provides the commission with the authority to adopt
any rules necessary to carry out its powers and duties under
the Texas Water Code and other laws of the State of Texas,
and to implement Texas Water Code, §5.311, which allows
the commission to delegate to SOAH the authority to issue
interlocutory orders related to interim rates under Texas Water
Code, Chapter 13.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the
agency’s legal authority.
Filed with the Office of the Secretary of State on January 15,
1999.
TRD-9900317
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Effective date: February 4, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 239–1966
Chapter 80. Contested Case Hearings
Chapter 290. Public Drinking Water
EXPLANATION OF THE ADOPTED RULE
The purpose of the adopted amendments is to implement sections of Senate Bill 1, Article 6, 75th Legislature, 1997 related to ensuring the technical, managerial and financial capacity of public water systems; clarify the delineation of responsibility with the State Board of Plumbing Examiners regarding plumbers, customer service inspections, and back ow prevention devices; update definitions to maintain consistency with the federal Safe Drinking Water Act Amendments of 1996; and make organizational and wording changes to improve the readability of the rules.
In §290.38, relating to Public Drinking Water Supply Systems, several definitions of technical terms have been moved from Subchapter F, §290.102, relating to Definitions. The intent is to place all technical words common to both subchapters in §290.38. Technical terms only used in Subchapter F are now defined in §290.102. Definitions of "connection" and "public water system" have been amended in response to the Safe Drinking Water Act Amendments of 1996. The intent is to expand the definition of those terms as broadly as the federal definitions, but not to regulate any public water system or activity not encompassed in the federal definitions. The term "licensed professional engineer" is defined to be consistent with the terminology contained in recent amendments to Article 3271a, Texas Civil Statutes. Accordingly, in the rules, use of the words "registered engineer" have been changed to "licensed professional engineer."
Amendments to §290.39, relating to General Provisions, implement new Texas Water Code, §13.241, changes to Texas Water Code, §13.253, and changes to Health and Safety Code, §341.0315 and §341.035, as enacted by Senate Bill 1, Article 6, 75th Legislature, 1997 related to public drinking water supply system requirements, approval of plans and specifications, business plans, and financial assurance required of some public water systems. The section specifies when approvals, business plans, and financial assurance are required.
Amendments to §290.46, relating to Minimum Acceptable Operating Practices for Public Drinking Water Systems, are to clarify the relationship between the commission’s rules regarding customer service inspections, the prevention of cross connections and illegal lead materials in public water systems and the State Board of Plumbing Examiners’ rules regulating plumbers. A customer service inspection under these rules is not a plumbing inspection as defined by the State Board of Plumbing Examiners. Similarly §290.47(d), Appendix D, relating to Sample Service Inspection Certification, is amended to remove any acts from the customer service inspection that might be construed as a plumbing inspection.
Section 290.102, relating to Definitions, deletes technical terms now defined in §290.38. Definitions contained in Title 40 Code of Federal Regulations §141.2 and a standard industry source are incorporated into this section by reference to maintain consistency between the state and federal safe drinking water programs. Definitions in §290.102 have been expanded to include terms from §290.116, relating to Control of Trihalomethanes in Drinking Water, and subsections of that provision have been renumbered.
FINAL REGULATORY IMPACT ANALYSIS
The commission has reviewed the adopted rulemaking in light of the regulatory analysis requirements of Texas Government Code, §2001.0225 and has determined that the rulemaking is not subject to §2001.0225 because it does not meet the definition of "major environmental rule" because the specific intent of the adopted amendments is to ensure the technical, managerial and financial capacity of public water systems; clarify the delineation of responsibility between the commission and the State Board of Plumbing Examiners regarding plumbers and customer service inspections; update definitions to maintain consistency with the federal Safe Drinking Water Act; and make organizational and wording changes to improve readability of the rules. The rules do not exceed any requirement of state or federal law. The rules do not exceed any requirement of a delegation agreement or contract between the commission and an agency or representative of the federal government. These rules would implement Senate Bill 1, Article 6, 75th Legislature, 1997.
TAKINGS IMPACT ASSESSMENT
The commission has prepared a Takings Impact Assessment for these rules pursuant to Texas Government Code Annotated, §2007.043. The following is a summary of that Assessment. The specific purpose of the rules is to implement sections of Senate Bill 1, Article 6, 75th Legislature, 1997 related to ensuring the technical, managerial and financial capacity of public water systems; clarify the delineation of responsibility between the commission and the State Board of Plumbing Examiners regarding plumbers and customer service inspections; update definitions to maintain consistency with the federal Safe Drinking Water Act; and make organizational and wording changes to update definitions and improve readability of the rules. The rules will substantially advance this specific purpose by requiring public water suppliers, including some mobile home parks and investor owned utilities, to prepare a business plan or provide financial assurance of its ability to provide service. These mobile home parks and investor owned utilities may own private real property. The preparation of a business plan will not burden private real property, because this is a procedural requirement designed to demonstrate the financial capability of the public water system. Preparation of the business plan and requirements for financial assurance are part of the agency’s efforts to comply with the Safe Drinking Water Act Amendments of 1996, specifically §1420 which would reduce federal funds to the state revolving loan fund unless the agency has the "legal authority or other means to ensure that all new ... water systems ... demonstrate technical, managerial, and financial capacity ...." Other than the public water systems required to prepare business plans, private real property is not subject to these regulations.
CONSISTENCY WITH THE COASTAL MANAGEMENT PROGRAM
The commission has reviewed the adopted rulemaking and found that the rules are neither identified in Coastal Coordination Act Implementation Rules, 31 TAC §505.11, relating to Actions and Rules Subject to the Coastal Management Program (CMP), nor will they affect any action or authorization identified in Coastal Coordination Act Implementation Rules, 31 TAC §505.11. Therefore, the adopted rules are not subject to the CMP.
RULES REVIEW
The commission, concurrently with these adopted amendments to Chapter 290, has completed its review of Chapter 290, Subchapters D through G, concerning Public Drinking Water. This review was in accordance with the General Appropriations Act, Article IX, §167, 75th Legislature, 1997. See the January 29, 1999, issue of the Texas Register Adopted Rules Review section for additional information on the rules review of this chapter.
HEARING AND COMMENTERS
A public hearing on the proposed rules was held on November 2, 1998, in Austin. The comment period closed November 23, 1998.
Consumers Union (CU), Independent Water and Sewer Companies of Texas, Inc. (IWSCOT), the City of Irving, and Texas Rural Water Association (TRWA), submitted comments. The City of Irving generally supported the proposed rules, but suggested changes to §290.46. The following paragraphs summarize the comments received.
The City of Irving commented that the rules should contain a definition for customer service inspection.
The commission has made no change in response to this comment. The term, customer service inspection is only used in §290.46(j), relating to customer service inspections, where the term is explained in paragraph (5). Because the term is only used in that one section, a separate definition is not warranted. The commission has further elected to define the term in the rules so that important limitations and qualifications on the term are clearly brought to the attention of the reader.
CU submitted general comments that supported proposed amendments to §290.39. TRWA and IWSCOT commented that §290.39(a) requiring business plans for new systems does not apply to counties and retail public utilities.
The commission agrees with the TRWA and IWSCOT comment and has clarified the rule to reference the Health and Safety Code provision setting forth the exemptions to required business plans.
Simultaneous with the publication of these proposed amendments to Chapter 290, the commission had published proposed amendments to Chapter 37. Consumers Union (CU) submitted comments to the proposed amendments to Chapter 37. CU commented that surcharges and rate increases should not be the sole form of financial assurance for prospective owners or operators as proposed in 37.5011.
In order to respond to the comment on proposed amendments to Chapter 37, the commission modified §290.39(n) to clarify the circumstances under which surcharges and rate increases may be allowed as a form of financial assurance. See the preamble to the adopted amendments to Chapter 37 for additional details.
TRWA and IWSCOT commented that the last sentence in §290.39(a) goes beyond statutory authority and lists the statutory provisions it believes the rule implements as Health and Safety Code, §§341.035, 341.0355, and 341.0356.
The commission has deleted the last sentence because it is not necessary, and because the mere editing of it could be misinterpreted as the commission’s declaration on issues that are broader than the point raised by the commenters.
The City of Irving commented that in §290.46(j)(5) the language regarding how a customer service inspection may be part of a more comprehensive plumbing inspection and a customer service inspector should report any violations immediately to the local entity’s plumbing inspection department, should be moved to a guidance document or made clear that these are options not requirements.
The commission has made no changes in response to this comment. The commission has used the terms "may" and "should" which are intended as discretionary language. Further clarification is not necessary. The commission notes that reporting of violations to the local plumbing inspection department may be either an enforceable state or local requirement.
The City of Irving further objected to the lack of a definition of contaminant. The City of Irving commented that such a definition should either be as defined in 40 CFR 141.2 or as defined in the American Water Works Association (AWWA) M-14 manual.
The commission has made no changes in response to this comment. The commission notes that it does define contamination. Contamination is used in the rules to cover not only cross-connection control, but also other subject areas, such as Drinking Water Standards, §290.101 et. seq. Because the term is used by the rules to cover other situations, an industry definition in current manuals of practice for cross-connection control would be too narrow a definition.
Subchapter D. Rules and Regulations for Public Water Systems
30 TAC §290.102, §290.116
The amendments are adopted under Texas Water Code,
§5.103, which provides the commission the authority to adopt
and enforce rules necessary to carry out its powers and duties
under the laws of this state, and under Health and Safety
Code, §341.031 which gives the commission the power to
establish standards for public drinking water and to adopt rules
to implement the federal Safe Drinking Water Act.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the
agency’s legal authority.
Filed with the Office of the Secretary of State on January 15,
1999.
TRD-9900319
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Effective date: February 4, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 239–1966
The Texas Natural Resource Conservation Commission
Simultaneous with the publication of the proposed rules on October
23, 1998, the commission also proposed amendments
to 30 TAC §§291.121-291.127, concerning Utility Submetering.
The commission will take final action on those Utility Submetering
rules at a later date and will publish those final rules in a
later Texas Register.
EXPLANATION OF THE ADOPTED RULES
The purpose of the adopted amendments is to implement
sections of Senate Bill 1, Article 5, for Notice of Wholesale
Water Supply Contract, and Article 6, 75th Legislature, 1997,
related to ensuring the technical, managerial, and financial
capacity of public water and sewer utility service providers and
rate flexibility; streamline or clarify existing rules, and update
references and definitions.
The provisions of the current §291.15, relating to Jurisdiction
of Municipality: Surrender of Jurisdiction, are moved to a new
§291.150, relating to Jurisdiction of Municipality: Surrender of
Jurisdiction. A new provision is adopted for §291.15, Notice of
Wholesale Water Supply Contract. This section is intended to
implement new Texas Water Code, §13.143 enacted by Senate
Bill 1, 75th Legislature, 1997. The provisions of the current
§291.16, relating to Applicability of Commission Service Rules
Within the Corporate Limits of a Municipality, are moved to a
new §291.151, relating to the same subject matter.
Section 291.21, relating to Form and Filing of Tariffs, adds
provisions regarding rate adjustments to implement phased
rates under §291.34, relating to Alternative Rate Methods, and
downward rate adjustments to the list of minor changes the
executive director may make to tariffs. Subsection (c)(8) is
added to add the requirement that the tariff must address the
form of payments that will be accepted for utility services.
Section 291.29, relating to Interim Rates, was reworded to
clarify that certain actions taken by the commission may also be
taken by an administrative law judge as provided by Texas Water
Code, §5.311, as amended by Senate Bill 1 (1997). The section
also updates references to the State Office of Administrative
Hearings (SOAH). Both the word "Judge" and "SOAH" are
defined in 30 TAC Chapter 3, concerning Definitions. This
section also makes other minor amendments designed to clarify
meaning.
Section 291.31(e), relating to Cost of Service, provides for, over
and above what is allotted under traditional cost of service in
a rate case, a positive acquisition adjustment for utility plant,
property, and equipment acquired from another retail public
utility in a sale, merger, etc., of utility service areas. A positive
acquisition adjustment is intended to provide an incentive for
utilities to facilitate consolidation and regionalization. The
subsection provides eligibility criteria for when an acquisition
adjustment is allowed, a methodology for calculating the amount
of the adjustment, and procedural requirements. The rule would
only allow an acquisition adjustment for a sale and transfer of
a utility that has filed an application on or after September 1,
1997, and the sale on that application closed thereafter.
The adopted §291.31(d), relating to Recovery of Positive Acquisition
Adjustment, would allow a positive acquisition adjustment
for transfers where the utility is acquired through a stock purchase
with a subsequent asset transfer and which is a part of
what is essentially a single sale transaction.
Amendments to §291.32, relating to Rate Design, authorize a
utility to seek and obtain, in a rate change proceeding, a water
conservation surcharge. The water conservation surcharge
would allow a utility to generate revenue above the utility’s
usual cost of service as authorized by Texas Water Code,
§13.183, as amended by Senate Bill 1, 75th Legislature, 1997.
The subsection sets out criteria for when a water conservation
surcharge would be permissible, and establishes restrictions on
the disposition of funds collected by the surcharge. Subsection
(d) provides that the commission may, in a rate proceeding,
authorize collection of an additional surcharge to provide funds
for debt repayments and reserve funds.
The new §291.34, relating to Alternative Rate Methods, implements
Texas Water Code, §13.183 and §13.184, as amended
by Senate Bill 1, 75th Legislature, 1997, which authorize the
commission to set utility rates on factors other than rate of return
and those specified in Texas Water Code, §13.185. The new
section implements three non-traditional rate methods: single
issue rate changes, phased and multi-step rate changes, and
the cash needs method. The single issue rate change allows
a utility to file a simplified rate case limited to only one issue.
A utility may wish to consider a single issue rate change when
faced with a cost increase in a single cost component. Phased
and multi-step rate changes allow a utility to phase in a rate
increase approved in one rate case rather than filing several
separate rate cases. The cash needs method of rate setting
allows the recovery of reasonable and prudently incurred debt
service cost, including principal, interest, and reasonable cash
reserves and other expenses not allowed under standard methods
of establishing rates. The new section sets out criteria and
conditions for the use of each of these alternative rate methods.
The commission intends that the alternative rate method of
§291.34 would be available only for rate applications filed after
the effective date of the final rule. Rate applications filed before
the effective date of the final rule must use the traditional rate
methods specified in the current rules.
Amendments to §291.41, relating to Appeal of Ratemaking
Pursuant to the Texas Water Code, §13.043, update statutory
references, add a notice requirement, and are intended to
relate to actions for which the commission has express statutory
authority. The notice requirement expressly provides for the
existing practice of the commission to require the retail public
utility to provide written notice of a hearing being held pursuant
to §291.41(c) to all affected customers, rather than having notice
provided by the chief clerk.
Amendments to §291.76, relating to Regulatory Assessment,
are intended to require the utility to remit the regulatory
assessment fee to the commission on an annual basis, rather
than allowing the utility the option of paying on a quarterly basis,
and to remove the allowance for retaining 10% when payments
are made quarterly, in order to be consistent with statutory
authority.
Amendments to §291.87, relating to Billing, set out procedures
for a utility to implement a voluntary program to collect voluntary
contributions to a volunteer fire department or emergency
medical service as part of the utility’s regular customer bill.
Amendments to §291.93, relating to Adequacy of Water Utility
Service, change the time for filing a report regarding system
capacity. Under the adopted rule, a retail public utility must
analyze its system capacity after a commission field inspection.
If the retail public utility has reached 85% of its capacity, it must
file a planning report explaining how it will provide service to
the remaining areas within its certificated area, within 90 days
from the date of the commission letter detailing the results of
the inspection. This change was made to conform to the statute
and agency practice.
Amendments to Subchapter G, relating to Certificates of Convenience
and Necessity, implement provisions of Senate Bill
1, Article 6, 75th Legislature, 1997. Section 291.101, relating
to Certificate Required, would add a condition that a water
district may not provide service within an area where a retail
public utility holds a certificate of convenience and necessity,
or within the boundaries of another water district, without the
district’s consent unless the water district proposing to provide
service has obtained a certificate of convenience and necessity
for that area from the commission. Amendments to §291.102,
relating to Criteria for Considering and Granting Certificates or
Amendments, update the section to conform to amendments to
Texas Water Code, §13.241 and §13.246 made by Senate Bill 1,
75th Legislature, 1997, and to add requirements to demonstrate
that regionalization or consolidation is not economically feasible.
Amendments to §291.103, relating to Certificates Not Required,
update the section to conform to amendments to Texas
Water Code, §49.352. The amendments to §291.109, relating
to Report of Sale, Merger, etc.; Investigation; Disallowance
of Transaction, add requirements for the applicant in a sale or
merger of a water or sewer system to demonstrate the financial,
managerial, and technical capability to provide continuous
and adequate service. If the entity acquiring the system cannot
demonstrate adequate financial capability, the commission
may require the provision of financial assurance in an amount
determined by the commission. The form of the financial assurance
will be as provided in the new 30 TAC Chapter 37, Subchapter
O, concerning Financial Assurance for Public Drinking
Water Systems and Utilities. The amendments to §291.111,
relating to Purchase of Voting Stock in Another Utility, are similar
to the provisions of §291.109, except those provisions that
relate to purchase of a water system by transferring of voting
stock in a utility. Amendments to §291.113, relating to Revocation
or Amendment of Certificate, implement Texas Water Code,
§13.254 as amended by Senate Bill 1, 75th Legislature, 1997,
and generally track that statute. Other amendments in this subchapter
update references to current statutes.
Section 291.106(b)(1), relating to Notice for Application for
Certificates of Convenience and Necessity, provides that cities
and other retail public utilities within a specified distance
from the proposed service area must receive notice of an
application for issuance or amendment of a certificate of public
convenience and necessity. The adopted rule increases the
specified distance from a two-mile radius to a five-mile radius
for applications for a new Certificate of Convenience and
Necessity. By this amendment, the commission intends in
applications for Certificates of Convenience and Necessity to
solicit comment from a wider audience on the appropriateness
of the proposed system versus regional service from an existing
system. The commission believes that a more rigorous inquiry
on regionalization than is the current practice is legislatively
mandated by Health and Safety Code, §341.0315(b) and Water
Code, §26.003.
Section 291.138, relating to Filing of Rate Data, is intended to
remove a requirement that providers of water or sewer service
for resale must file an annual report. In place of the mandatory
report, the rule would allow the commission the option to require
that a report be filed. Providers of water or sewer service for
resale would only have to file a report within 30 days of receiving
a written request for the report from the executive director.
FINAL REGULATORY IMPACT ANALYSIS
The commission has reviewed the rulemaking in light of the
regulatory analysis requirements of Texas Government Code,
§2001.0225 and has determined that the rulemaking is not
subject to §2001.0225 because it does not meet the definition
of "major environmental rule" because the specific intent of the
amendment is to regulate water and sewer service utilities and
not to protect the environment or reduce risks to human health
from environmental exposure. The provisions in the adopted
rules related to demonstrating the technical, managerial, and
financial capacity of utilities are in partial response to the
federal Safe Drinking Water Act Amendments of 1996, and are
also specifically required by Senate Bill 1, Article 5 (Notice
of Wholesale Water Supply Contract), and Article 6, 75th
Legislature, 1997. The adopted rules do not exceed an express
requirement of state or federal law.
TAKINGS IMPACT ASSESSMENT
The commission has prepared a Takings Impact Assessment for
these rules pursuant to Texas Government Code, §2007.043.
The following is a summary of that assessment. The specific
purpose of the rules is to implement sections of Senate Bill 1,
75th Legislature, 1997, specifically Article 5, relating to Notice
of Wholesale Water Supply Contracts, and Article 6, relating
to ensuring the technical, managerial, and financial capacity of
utilities; to allow the commission to set water and sewer utility
rates based on factors other than rate of return and those specified
in Texas Water Code, §13.185; streamline existing rules;
and to make the rules consistent with recent statutory changes.
The rules will substantially advance this specific purpose by
requiring applicants for Certificates of Convenience and Necessity
to demonstrate or provide financial assurance of its ability
to provide service; specifying alternative rate methodologies for
water and sewer utilities; eliminating certain required reports
to the agency; clarifying existing rules; and amending rules to
re ect recent legislative changes. Promulgation and enforcement
of these rules will not burden private real property because
the requirement to demonstrate its ability to provide service
is a procedural requirement designed to demonstrate the
financial capability of the utility; and because existing methodologies
for setting water or sewer rates are retained in effect.
The adopted rules only provide additional methodologies that a
water or sewer utility may choose to use in a rate case.
CONSISTENCY WITH THE COASTAL MANAGEMENT PROGRAM
The commission has reviewed the adopted rulemaking and
found that the rules are neither identified in Coastal Coordination
Act Implementation Rules, 31 TAC §505.11, relating to
Actions and Rules Subject to the Coastal Management Program
(CMP), nor will it affect any action or authorization identified
in Coastal Coordination Act Implementation Rules, 31 TAC
§505.11. Therefore, the adopted rules are not subject to the
CMP.
RULES REVIEW
The commission, concurrently with these adopted amendments
to Chapter 291, has completed its review of Chapter 291,
concerning Utility Regulation. This review is in accordance
with the General Appropriations Act, Article IX, §167, 75th
Legislature, 1997. See the Adopted Rules Review section of
this issue of the Texas Register for additional information on
the rules review of this chapter.
HEARING AND COMMENTERS
A public hearing on these proposals was held on November 2,
1998, in Austin, and the comment period closed November 23,
1998.
Consumers Union (CU) and the Public Interest Counsel (PIC) of
the commission submitted comments and generally supported
the proposed amendments, while also offering specific changes.
The Independent Water and Sewer Companies of Texas, Inc.,
AquaSource, Inc., Associates Utility Company, Astro Commercial
Enterprises, Bandera River Ranch Water Company, BBR
Water Company, BBS Water Company, Blue Bell Manor Utility
Company, Bradberry Water Supply, Bulverde Utility Company,
Calico Water Supply, Castle Water, Champ’s Water Company,
Clear Lakes Water System, Comal Water Company, Council
Creek Village, Crystal Springs Water Company, C & P Utilities,
C-Willow Water Company, Deercreek Water Works, Deer
Run Water System, Diamond Water Company, G & S Utilities,
Harper Water Company, Hays Water Company, Highland
Utilities, Hi-Texas Water Company, Holiday Oaks Water System,
Industrial Utilities Services, Jones-Owen Company, Kerrville
South Water Company, Lake McQueeny Estates Water
Company, Lake Vista Utility Company, Lake Whitney Water
Company, Lakewood Water Corporation, Lomas Water Company,
Mitchell County Utility Company, Payne Utilities, Inc., Pine
Trails Utilities, Plum Creek Water Company, Quadvest, Rivercrest
Water Supply, Silverleaf Resorts, Southern Sanitary Corporation,
Southern Utilities Company, Southern Water Corporation,
Southwest Utilities, Tall Timbers Estates Utilities, Tall
Timbers Utility Company, Inc., Tanglewood Water Company
(Tanglewood), Technology/Hydraulics, Tecon Water Companies
(Tecon), Texas Water Systems, Texoma Services Corporation
(Texoma), Walker Water Works, Water Services, and Woodmark
Utilities, submitted similar suggested changes. These
commenters will hereinafter be referred to collectively as IWSCOT.
Also offering specific changes were: Texas Rural Water Association (TRWA), Philip Utilities Management Corporation (Philip),
Tecon Water Companies (Tecon), and the City of Austin. The
following paragraphs summarize the written and oral comments
received.
COMMENTS ON RATE FLEXIBILITY AND RATEMAKING
IWSCOT questioned the intent and purpose of including the
form of payment to be accepted by the utility in its tariff.
This language was included to allow the utility to be able to
restrict the form of payment to reasonable forms of payment
and to be allowed to reject payment for unreasonable forms of
payment, such as paying the bill in pennies.
IWSCOT proposed that a capital reserve account including a
debt service reserve be allowed in the cost of service.
The commission has made no changes in response to this
comment. The commission recognizes that there can be a
seasonal shortfall of revenues and that there is a need for
planning and budgeting on the utility’s part. Current ratemaking
formulas include an extra allowance of 1/8th of operations and
maintenance expense to be included in the cost of service.
Additionally, while not designed specifically to fund a reserve,
the inclusion of an allowance for depreciation does provide
funds that are not cash flow related. Proposed rules would allow
for the establishment of a debt service and debt reserve fund.
Reserves for future capital needs have the effect of requiring
current customers to pay for future improvements, the benefits
of which they may not enjoy.
Texoma commented that the language related to the period of
refund or surcharge which results from interim rates should be
consistent. Subsection (f) requires that the retail public utility
refund or credit against future bills all sums collected in excess
of the rate finally ordered by the commission. Subsection
(g) allows the retail public utility to collect the difference, in a
reasonable number of monthly installments, from its customers
for the amounts by which the rate finally ordered exceeds the
interim rates.
The commission agrees with this comment and has added "...in
a reasonable number of monthly installments..." to §291.29(f)
to make the time periods consistent.
Tanglewood commented that the commission should ensure
that the amount of an acquisition adjustment is sufficient to
assure regionalization statewide.
The commission has made no changes in response to this
comment. The rule includes adequate incentives to ensure
that the acquisition adjustment will be effective statewide. If
experience with the adopted rule does not bear this out, the
commission will consider changes in future rule packages.
IWSCOT and Tecon commented that wording in §291.31(d)(1)
should be changed from "...as part of a sale and transfer of
utility service area..." to "...as part of a sale, transfer, or merger
of utility service area...."
The commission agrees in part with the need for a change and
has modified the language to agree with statutory language by
changing it to "...as part of a sale, merger, etc. of utility service
area...."
IWSCOT, Philip, and Tecon all recommended that the effective
date of the acquisition adjustments be September 1, 1997.
CU commented that the effective date should be the effective
date of the rules and should not be retroactively applied. PIC
commented that the rules should apply prospectively to all rate
applications filed after the effective date of the rules.
The commission has made changes in response to these
comments. Senate Bill 1 granted the commission the authority
to promulgate alternative ratemaking rules and the use of an
acquisition adjustment is included as an alternative ratemaking
process. The authority was permissive, not mandatory, and it
is not clear that the legislature mandated that an acquisition
adjustment be included in these rules. While industry knew
that the commission was considering including an acquisition
adjustment in the rules, they were also kept informed and were
told on a number of occasions that there were no assurances
that they would be eligible for one prior to the effective date of
the rules or that one would even be included in the proposed
rules.
The commission believes that acquisition adjustments could
help create an incentive for regionalization. There has been
considerable discussion related to the criteria that must be
included for a utility to obtain an adjustment. The proposed rules
went through several iterations. CU, IWSCOT, and Tecon were
included in several stakeholders meetings where the adjustment
and other modifications to the rules were discussed.
Notwithstanding the arguments that purchasers should not be
penalized for delays in the rulemaking process, many of the
purchase agreements in question were tied to final adoption
of the rules. Many other sales were consummated with the
understanding that the purchaser may not be able to obtain an
acquisition adjustment.
In many cases, the purchase prices were not based on actual
value of the system assets, but set at an arbitrary per connection
value, suggesting that, in several cases, the purchasers had not
done a thorough evaluation of the system.
Additionally, the Notice of Intent to Sell Facilities and Transfer
the Certificate of Convenience and Necessity form includes
language that "[t]his transaction will have the following effect on
the current customer’s rates and services: ________." Because
most of the sales are between regulated entities and: (1)
rates cannot be changed as a result of the transaction; AND
(2) acquisition adjustments have not been allowed, the typical
response is "NONE." It should be pointed out that the notice
is sent only to the customers of the system being acquired,
not to any of the existing customers of the acquiring utility. As
a result, none of the customers were given the opportunity at
the time of the sale to evaluate the impact of the sales price
and subsequent acquisition adjustment on their rates. The
commission believes that the original notice is not sufficient to
allow the effective date of this provision to be September 1,
1997, unless additional notice is provided. Without requiring
additional notice provisions, the customers will not have been
given an opportunity to know of the impact on their rates
as a result of the sale and will only learn of the impact on
their rates when they are provided notice of a rate change.
The notice should also contain sufficient information to allow
each customer to calculate the impact of the adjustment on an
individual water bill.
In order for the commission to allow an acquisition adjustment
on sales since September 1, 1997, that acquisition adjustment
must meet the standards which will apply for all sales after the
effective date of these rules. This means that the utility will be
required to provide an analysis of the purchase price as described
in the response to the next comment. Without a definitive
standard, the determination of an adjustment would undoubtedly
lead to contested hearings to determine the amount
of the adjustment. And the final result would likely turn on the
actual value of the system versus the purchase price with the
commission having to be the final arbiter.
The commission agrees in part with the PIC comments that
acquisition adjustments should be considered in all rate cases
filed after the effective date of the rules; however, the commission
believes that this would then make acquisition adjustments
available to all previous sales, including those which occurred
prior to September 1, 1997, during a time when there was no
authority to consider them.
After considering all of the comments, the commission has
changed §291.31(d)(1) to reflect that a positive acquisition
adjustment will be considered for all sales resulting from
applications filed on or after September 1, 1997, and the sale
on that application closed thereafter, and that the adjustment is
subject to the cap discussed in response to the next comment.
The amount of the acquisition adjustment will be determined as
part of a rate case.
CU, IWSCOT, Philip, and Tecon all commented on the need
for a clearly defined standard for determining the amount of
an eligible acquisition adjustment. IWSCOT and Tecon jointly
requested a change to the guidelines for establishing the
amount of an acquisition adjustment. They suggested that the
standard should be based on a range of amounts based on a
per capita impact to customers and the size of the customer
base of the acquiring utility. Texoma agreed with using a range,
but proposed different levels and also urged adoption of a
method that did not favor only systems with a large customer
base. Philip requested an alternative change to the guidelines.
They suggested that the standard be limited to the difference
between: the current depreciated replacement cost of the plant,
property, and equipment being acquired; and its original cost
less accumulated depreciation.
The commission agrees in part with these comments and has
added language to the rules which further clarifies and defines
the criteria for an acquisition adjustment. Basing the standard
on a range of amounts based on per capita impacts still leaves
the actual determination of the adjustment open to dispute and
is not based on information that relates to the actual value of the
assets being purchased. Because it is based on an arbitrary
impact on rates, it can also have the effect of setting the sales
price at artificial levels of value. It would also seem to give
an unfair advantage to utilities with a large customer base.
There are a number of smaller well-run utilities that should be
included in the pool of potential buyers. The standard now
included relates to the replacement cost of the assets being
purchased. There are a number of indices that are accepted
by the engineering and construction industry. The information
could be easily verified by all parties. It would provide an even
playing field for all size utilities. It would be the cap for the
amount of the purchase price to be included in the rates of the
customers. It would not restrict the amount of the purchase
price. A purchaser could pay more, but it would have to look
for economies of scale and improved operations to provide a
return on those excess funds. This proposal would also ensure
that the purchaser has done a thorough investigation into the
infrastructure and reliability of the system, an important criteria
for demonstrating financial, managerial, and technical capacity.
IWSCOT and Tecon commented that wording in §291.31(d)(1)
should be changed from "...a positive acquisition adjustment
may be allowed..." to "...a positive acquisition adjustment will
be allowed...."
The commission agrees with the proposed language and has
changed the wording accordingly. It should be noted that the
purchaser bears the burden of proof that it has met all of the
other criteria associated with this section.
IWSCOT, Philip, and Tecon either commented on or supported
the recommendation that an acquisition adjustment should be
allowed to the extent that the property is used and useful either
at the time of the acquisition or as a result of the acquisition.
The commission agrees with the recommendation and has
modified §291.31(d)(1) to reflect that.
Philip commented that there is no reason for an acquisition
adjustment to be considered in light of the financial impact on
the acquiring utilities existing customers.
The commission has made no changes in response to these
comments. Acquisition adjustments can have an impact on the
rates of the acquiring utility’s customers if the utility intends to
develop system-wide rates. Uncontrolled continued acquisitions
can have an impact on the utility’s ability to provide adequate
service. There should be a benefit to the customers if they are
going to have their rates increased.
Philip proposed that in addition to the requirement that the sale
be the result of an arm’s length transaction that there should
be a requirement for full disclosure of any and all transactions
between the buyer and seller entered into as a part or condition
of the sale being proposed.
The commission agrees, and has modified §291.31(d)(1)(D) to
include that requirement.
IWSCOT and Tecon commented that the definition of a multi-stage
sale found in §291.31(d)(1)(F) be changed to eliminate
the word "concurrently."
The commission agrees in part with this comment. The
commission’s intent for the use of "concurrently" was to identify
those transactions which really are just vehicles for tax savings
and it never intended to limit the period of time for which they
would be considered. However, the commission fully intended
that the use of such a sales vehicle would be fully disclosed at
the time of the application for a sale. The commission has
modified §291.31(d)(1)(F) to remove the word "concurrently"
and to add a requirement for full disclosure.
IWSCOT, Philip, and Tecon commented that an acquisition
adjustment should be applied to a stand- alone stock purchase,
not just as a part of a multi-staged stock purchase/asset
transfer agreement. IWSCOT commented that the beneficial tax
consequences of selling stock would result in lower sales prices
and that without a stock sale, the price would be higher and the
purchaser would have to pay more for the acquisition and would
therefore have less funds with which to make necessary repairs
and improvements.
The commission has made no changes in response to these
comments. The commission has acknowledged that a multi-stage
stock purchase/asset transfer is an acceptable reason
for establishing an acquisition adjustment and it is included in
the rules to address the concern that an acquisition adjustment
would not be allowed because the transaction would have been
between affiliated parties. Without allowing this multistage stock
purchase/asset transfer, the new shareholder and the subsequent
owner would be affiliates and would then be unable to
obtain an acquisition adjustment. It was never contemplated
that stock transfers would in and of themselves qualify for an
acquisition adjustment.
Stand-alone stock transfers do not change the legal entity
responsible for the utility. The corporation continues to be the
responsible entity for maintaining the utility. Stock transfers
are off-book transactions which have no effect on the financial
records of the utility. There is no acceptable way to record the
cost of purchasing the shares on the corporation’s books.
It may be true that by disallowing a positive acquisition adjustment
on a stand-alone stock sale, the purchase price and acquisition
adjustment would be higher. However, with the implementation
of a cap on the amount of an acquisition adjustment,
this argument is moot.
The commission is not persuaded by the argument that the
higher the purchase price, the lower the amount of funds the
purchaser will have available to make necessary repairs and
improvements. If a purchaser is to be considered to have
financial, managerial, and technical capacity, then it must be
able to show that it has not only the financial wherewithal to
purchase the system and make the improvements, but also the
managerial capacity to negotiate a sales price which will enable
it to do both. Failing to consider the consequences of the sales
price on its ability to maintain the utility for the long run is an
indication that it does not have that capacity and perhaps should
not have made the purchase.
Philip commented that the period of amortization for the acquisition
adjustment should not exceed the weighted average
remaining life of the acquired assets. CU commented that the
return allowed on the acquisition adjustment should be limited
to a risk-free rate of return.
The commission agrees with the Philip comment and has
changed §291.31(d)(2) to include that language.
The commission has made no changes as a result of the
CU comments. The use of the cap previously discussed
would require that return is to be applied only to those costs
which are related to the assets being purchased. Additionally,
under the new rules, the purchaser will be required to meet
other criteria for including the acquisition adjustment including
improved service and quality of water. Operating the utility,
even with an acquisition adjustment, carries an element of risk.
Therefore, using the utility’s weighted cost of capital as the rate
of return acknowledges that risk.
IWSCOT, Philip, and Tecon commented that the determination
of the amount of an acquisition could be determined at the
time of the approval of the sale; however they recognize that
an acquisition adjustment can only be implemented as a part
of a rate change application. CU commented that allowing
the determination of the acquisition adjustment as a part of
the sale application can facilitate some sales. CU further
commented that it would be appropriate only if the customers
are provided with the same rights of notice and intervention as
in a regular rate case and if the purchaser meets its burden of
proof regarding specific, measurable, and verifiable customer
benefits.
The commission has made no changes in response to this
comment. The use of a cap for determining the amount of an
acquisition adjustment provides the purchaser with a degree
of certainty about the amount of the acquisition adjustment.
Additionally, there is no statutory authorization to hold a hearing
on a sale when the purchase price is in dispute. The
commission does agree that the acquisition adjustment can only
be implemented as a part of a rate change application.
IWSCOT and Tecon commented that language should be added
which limits the amount of an acquisition adjustment in future
sale/purchases.
The commission has made no changes in response to this
comment. Since all acquisition adjustments are determined by
relating the depreciated replacement cost to the book value of
the assets, the argument is moot.
Tanglewood and Texoma commented that the rules relating to
rate design need to be expanded to specifically detail the rate-making
process to provide consistency of application of the
rules.
The commission has made no changes in response to this
comment. Consistency with the process is important, and the
commission strives to maintain that consistency. However, no
two utilities will have the same set of conditions or expenses.
Promulgating rules to cover every variation and situation is not
possible.
CU commented that the rules related to conservation rates
should be applied to both residential and commercial customers
equally.
The commission agrees with this comment and has modified
the rules to include all customer classes.
CU commented that the commission needs to set a reasonable
standard for the first block of usage for all customer classes.
The commission agrees that this is a worthy goal, but does not
have the data necessary to make this determination at this time.
Therefore, no changes were made in response to this comment.
CU commented that the authority for alternative rates is contained
in Article 6 of Senate Bill 1, which is entitled "Small
Community Assistance." CU further commented that the rules
related to alternative rates do not contain such a distinction and
therefore the rules should be limited to use by small systems.
The commission has made no changes in response to these
comments. Small communities were not defined in Senate Bill
1, Article 6, 75th Legislature, 1997. Senate Bill 1 was divided
into various sections for organizational purposes. The title is
not determinative. One must look to the individual statutory
provisions for applicability.
CU commented that Article 6 of Senate Bill 1 contains a requirement
that "[I]n determining to use alternative ratemaking
methodologies, the regulatory authority shall assure that rates,
operations, and service are just and reasonable to the consumers
and to the utilities."
The commission agrees with this comment and has added this
language to §291.34(a).
CU commented that the rules would allow a utility to use several
alternate rate methods at the same time or successively and
that this should not be allowed.
The commission has made no changes in response to this
comment. The rules contain three methodologies for alternate
ratemaking: 1) single issue rate changes; 2) phased and multi-step
rate changes; and 3) the cash needs method.
The single issue rate change may not be used if the utility is
using the cash needs method. Additionally, the utility must file
a complete rate change application within three years following
the effective date of the single issue rate change request.
The phased or multi-step rate change may be used under either
the utility or cash needs method. However, unless the utility
meets certain criteria, it may not apply for another rate increase
during the period of the phase-in rate intervals.
If the cash needs method is being used, the utility is barred from
using the utility method for five years after beginning to use the
cash needs method.
IWSCOT commented that a single issue rate case should be
extended to include all of the ancillary costs associated with
that single issue.
The commission disagrees in part with this comment. The basis
for the rules related to Single Issue Rate Cases was that utilities
often have a significant increase in a single cost, either from the
addition of capital items or an increase in an operations and
maintenance cost. Rather than require a full rate case filing for
that one item, this provision would allow the utility to increase
its rates for that one item. By limiting any proceedings to a
single item with all other costs remaining the same, the utility
could react quickly to that increase and not have to incur costs
for a consultant or a protracted rate appeal process. However,
the rules have been changed to include both depreciation and
return for capital items. This would be a benefit to the customers
for the same reasons.
CU commented that the rules should delineate the type and/
or magnitude of the expenditures that would be eligible for this
single issue treatment and that they should be limited to one
per year.
The commission has made no changes in response to this
comment. While designed to allow the utility to limit the costs
associated with a full rate change application, it will still be
required to meet all notice requirements and possible contested
hearings. The utility will have to weigh the cost of the process
against the cost of the increased expense. This alone should
have the effect of limiting the size of the expense for which a
single issue rate change is requested.
The rules limiting the timing for subsequent rate change applications
apply to this type of change. The utility may not file any
kind of rate change more often than every 12 months unless it
meets the criteria set forth in the rules.
CU commented that the use of the word "elect" for both the
phased and multi-step method and the cash needs method
is inappropriate, but that the utility may "request" and the
commission may approve the use of these methods.
The commission agrees with this comment and has replaced
"elect" with "request" in the sections related to alternative
rates. Further, it has changed the language of §291.34(c)(1)
to improve the readability of that section.
CU commented that §291.34(c)(1)(G) would allow the utility to
use the phased and multi-step rate methodology for any reason.
The commission is making no additional changes in response to
this comment. As noted in the prior comment, the commission
has changed the rules to reflect that a utility may request the
use of this methodology. Section 291.34(c)(1)(G) was included
to ensure that the utility had the opportunity to request the
use of this methodology if there were other conditions not
listed, but which are known and could have an impact on the
financial capacity of the utility. The utility is required to provide
information in the original notice of the phased rate.
IWSCOT commented that the Cash Needs method should be
expanded to include a return for the utility’s business and
regulatory risks, even if there are no financial risks.
The commission has made no changes in response to this
comment. The commission’s intent was not to allow this method
to be used in every instance. The rules contain criteria that
limit its applicability to those cases where there is a clear
indication that its use will enable a troubled utility to survive
and acquire financial, managerial, and technical capacity and
improve service to its customers. In most cases, this method
eliminates most if not all of the risk for operating the utility.
CU commented that in order for a utility to share in any
excess funds in the cash reserve account, that the utility
must also demonstrate that it has also improved its financial,
managerial, and technical capacity. CU further commented that
customers should be provided notice and allowed comment on
the distribution of the excess funds.
The commission agrees in part with these comments and has
included language which ties the utility’s share to both cost
savings and an improvement in its financial, managerial, and
technical capacity. The commission has also added language to
this provision that requires that the utility provide an explanation
of how the excess funds were distributed at the same time as the
refund or credit is issued to the customers. In order for the utility
to keep a portion of the excess it must first demonstrate to the
executive director that it has improved its financial, managerial,
and technical capacity.
IWSCOT commented that the requirements that records be
available at "all reasonable hours" as required by §291.74 needs
to be clarified.
The commission has made no changes in response to this
comment. The relevant section was not opened as a part of this
package and therefore there was no notice of potential changes.
However, the comment is being considered for inclusion in a
subsequent rule package.
IWSCOT commented that late payment penalties should be
increased from $2.00 or 5.0%, to $15 for residential customers
and 10% for all other customers.
The commission agrees in part with this comment and has
increased the late payment penalty to $5.00 or 10% for all
customers.
The City of Austin commented that the phrase "the billed
amount" relating to provisions for including voluntary contribu-tions
for certain emergency services is misleading.
The commission has modified the language in this provision to
make it clear that the charge is voluntary and does not have to
be paid by the customer.
IWSCOT and Water Services commented that the commission
should include water rights held for future use in the cost of
service and the rates to be charged to the customers.
The commission has made no change is response to this
comment. The issue of whether water rights are used and
useful in providing water service hinges on a number of factors.
The commission believes that the treatment of water rights in a
rate proceeding should be on a case-by-case basis.
TRWA commented that the §291.41(j) notice requirement on
appeals is not authorized by Senate Bill 1, is unreasonable,
and is burdensome as written.
The commission agrees, and has modified the rule to limit the
notice requirement to appeals by ratepayers filed under Water
Code, §13.043(b).
COMMENTS ON CERTIFICATES OF CONVENIENCE AND
NECESSITY
In written comment and oral testimony IWSCOT commented
that the two-mile radius provision in §291.102(e)(1) and (2) is
overly broad because it presents an applicant with the responsibility
of identifying water and sewer service providers within
that area, rather than only "public" drinking water and sewer
service providers. IWSCOT also commented that applicants
should only have to consider providers within the radius who
are registered with the commission. IWSCOT and TRWA commented
that proposed §291.102 exceeds statutory authority if
applied to applications to amend existing Certificates of Convenience
and Necessity. TRWA cites Water Code, §13.241 in
support of its comment.
The commission agrees that the word "public" in the appropriate
places in §291.102(e)(1) and (2) should be added to clarify
which systems should be contacted. However, the commission
disagrees that the rule should be limited to those public
drinking water and sewer service providers "registered with the
commission." The word "registered" could mean providers who
hold public water system identification numbers (in the case of
water suppliers) but are not certificated, such as municipalities
and districts. Generally, persons needing to secure water and
sewer utility services often call on the staff in the Water Utilities
Division to help them identify existing certificated providers.
However, since all providers may not be certificated and not
identified on agency maps, applicants should not limit their
search, but should take extra steps to thoroughly assess the
availability of service from an existing provider.
The commission agrees in part and disagrees in part with the
comment as to the applicability of §291.102 to applications for
new certificates and certificate amendments. In drafting a rule
to implement new §13.241 in Senate Bill 1, the commission
modified existing 291.102. However, the effort to integrate
the requirements of new §13.241 into an existing rule which
serves to implement the long-standing statutory requirements
of §13.246 (which applies to new certificates and amendments)
has created some confusion. Therefore, the commission has
modified §291.102 to recite rule requirements for §13.241 first,
to be followed by existing rules which implement §13.246.
However, it should be noted that the commission has, and will
use, the authority to require business plans from public water
systems that were constructed without approval, that have a
history of noncompliance with commission rules, or that are
subject to a commission enforcement action.
In written comment and oral testimony IWSCOT commented
that the requirement in §291.102(e)(6) that persons seeking to
install a new system provide an analysis of the cost of obtaining
alternative service from an existing provider within the two-mile
radius creates a virtual barrier for such persons because the
rule assumes such information is available.
The commission disagrees with this comment. The purpose
of this requirement is to force these persons to diligently pursue
service from existing providers maximizing regionalization
goals. The major portion of this analysis prepared by a potential
applicant will be a summary and personal analysis of the
information satisfying §291.102(a)(3)(A)-(E).
IWSCOT commented that the notice requirement in §291.106
to neighboring utilities within five miles be limited to applicants
for new service areas which would require the construction of
new stand-alone water or sewer systems.
The proposed rule does impose the five-mile notice requirement
on applications for new certificates, but has been clarified to
distinguish it from the notice requirement in §291.106(b)(2) for
applications to amend a certificate.
GENERAL COMMENTS
IWSCOT commented on the requirement for providing the
commission with a certified copy of any wholesale water supply
contract by asking how a utility can comply with the rules if there
is no written contract and if the rules cover all wholesale water
sales.
The commission has made no changes in response to this
comment. The rules track the statutory language. The lack
of a written contract does not relieve the utility of the notice
requirements. It is also the position of the commission that
these types of arrangements should be reduced to writing. The
statute is clear that it applies to any and all wholesale water
supply contracts.
Texoma commented that a waiver for the requirement to submit
a report when the system’s capacity has reached 85% would
not be necessary if capacity is increased to meet or exceed
demand above 85% capacity.
The commission agrees with this comment, but has made no
changes in response to this comment. If the system is no longer
in violation of this rule, no action would be necessary. However,
the commission has made changes in the wording to re ect
actual commission practices related to inspections.
IWSCOT commented that the definitions and other sections of
30 TAC Chapters 290 and 291, specifically noting §291.3 and
§291.89(a)(4), do not adequately define the meter requirements
for multiple unit service such as apartments, condominiums,
and mobile home parks.
The commission agrees that clarification of the definitions and
requirements for meters in Chapters 290 and 291 are needed.
However, §291.89(a)(4) is not open for comment. The commission
will propose clarifying amendments in a subsequent rule
package. At that time, it will make any necessary changes to
the definitions in §291.3.
IWSCOT commented that §291.14(a)(2), relating to Emergency
Interconnections, should be modified to prohibit the issuance of
an emergency order if it could unreasonably diminish service to
customers of the retail public utility required to serve.
The commission disagrees with the need to clarify this section.
When the commission issues an emergency order for an
interconnection, it considers the impacts on both retail public
utilities and should have the flexibility to make the decision
which is in the public interest. Since determination of whether
the interconnection will "unreasonably diminish" service by the
retail public utility being ordered to serve will in any event be
a judgement call by the commission based on the facts of the
case at hand, addition of this language will not add any clarity
to this section and could only serve to limit the commission’s
ability to effectively address crisis situations.
IWSCOT commented that there is a need for more clarity about
alternate systems of accounts, but there is no process for the
commission to adopt an alternate system of accounts as provided
under §291.72(1).
The commission agrees with the comment that more clarity
needs to be provided for "approved systems of accounts" as
alternates to the National Association of Regulatory Utility Commissioners
(NARUC) system, but disagrees with the comment
that there is no process for the executive director to approve alternate
accounting systems. The executive director has in the
past "approved" individual accounting systems for utilities when
rate cases were filed by accepting the systems in use by the utilities
without requiring changes. The executive director should
be allowed the flexibility of amending such a system through
the publication process. Accordingly, the executive director will
publish, in 1999, a system of accounts and recordkeeping guide
which will address these concerns. These publications will clarify
the "approved" system and add more uniformity.
IWSCOT commented that the requirements that records be
available at "all reasonable hours" as required by §291.74 needs
to be clarified.
The commission agrees that clarification of "all reasonable
hours" is appropriate, but does not agree that the proposed
language "normal business hours" will necessarily provide
enough clarity. The commission will propose clarifying language
to address the concern that requests for records might be made
at times that would be unnecessarily burdensome to the utility.
IWSCOT commented that §291.83(a)(3), related to Disputed
Debt to Another Utility, needs to be clarified to prevent abuse
by a new service applicant.
The commission agrees that the rule should be clarified as to
which utilities the rule refers and the type of documentation
that a service applicant must provide. The commission does
not agree that time limits on resolution of disputes should be
established over issues which the commission rules already
address or over which the commission has no jurisdiction or that
the service applicant be required to notify the new utility of the
resolution of the dispute. Once service is established, service
cannot be disconnected for failure to pay a bill to another utility.
The customer is required to pay a deposit if required by the new
utility’s tariff so the new utility does not incur any unreasonable
risk if it provides service to the service applicant. The current
rule does not provide a payment exemption from any charges
due to the new utility.
IWSCOT commented that in §291.84(j), better documentation
is needed to demonstrate that a new service applicant has a
right to receive service at a specified location.
The commission agrees that such a provision is needed.
However, the type of documentation should be specified by the
rule and not left up to the utility to decide if it is satisfactory. The
commission notes that the section is not open for comment. The
commission will propose clarifying language in a subsequent
rule package.
IWSCOT commented that in §291.84(f), a utility should be
allowed to require additional deposits any time a utility amends
its tariff from a current customer who has not been disconnected
for nonpayment, or if the customer has paid late payment
penalties in three of the last 12 months.
The commission disagrees that additional deposits should
be required of a current customer except for those reasons
currently specified in this subsection. This subsection already
authorizes additional deposits for customers that are truly credit
risks. A customer with a history of late payments would not
have been entitled to a refund of the deposit paid when service
was established under §291.84(h), so the scenario described is
unlikely.
IWSCOT commented that in §291.85(a)(3) and (4) a utility
needs longer time periods to provide service.
The commission agrees that the time to restore service where
service has previously been provided should be extended to
three working days and the time where construction is required
should be extended to ten working days. However, the relevant
section is not open as a part of this rule package. The
commission will propose this change in a subsequent rule
package.
IWSCOT commented that a new service applicant should be
required to install a cut-off valve on the customer side of the
meter before receiving service in §291.86(a)(2)(B).
The commission agrees that it is reasonable. However, the
relevant section is not open as a part of this rule package.
The commission will propose this change in a subsequent rule
package.
IWSCOT commented that extension policies as currently written
in §291.86(d)(2)(A) and (B) are unreasonable or result in
preferential treatment of individual service applicants. IWSCOT
further suggested that the rebate period in §291.86(d)(2)(C)
should be limited to five years.
The commission has made no changes in response to this
comment. Utilities are expected to make investments in facilities
and recover their investment through depreciation and return on
the investment over the useful life of the assets. To require
a new customer to pay up front for the cost of all of the
facilities used to serve him would mean that the new customer
would have a greater investment than existing customers, even
though the new customer would be required to pay the same
monthly rates, which would in fact be discriminatory to the new
customer. There is a provision for exceptions to be granted in
certain situations. The commission has no evidence that using
a five-year period for rebates to customers is substantially more
expensive or burdensome than the current seven-year period,
which provides more opportunity for the customer to receive
some of the investment back.
IWSCOT commented that in §291.86(d)(4) a residential customer
with a one-inch meter and sprinkler system should be
treated as a developer when determining extension costs.
The commission agrees that a residential customer with a one-inch
meter and sprinkler system may place a somewhat higher
demand than a standard residential customer with a 5/8-inch
meter but disagrees that the difference is significant enough to
place that customer in the same category as a developer for
purposes of determining extension fees. The commission has
not made changes to this section.
IWSCOT commented that in §291.87(e)(2)(F) surcharges
should not be required to be listed as a separate line item on
bills.
The commission has not made any changes in response to
this comment. Surcharges have been used in this manner for
many years with little apparent problems due to billing programs.
Because surcharges are for a definite time period and for a
specific amount, customers need to be able to see these special
charges as a line item and in addition when the surcharge ends,
it should drop off the bill rather than having the monthly charge
drop without an apparent reason.
IWSCOT commented that the limitations on refunds and
backbilling in §291.87(g) violate Water Code, §13.001(c) and
§13.189 and should be repealed.
The commission agrees in part, but disagrees that the limitations
on refunds and backbilling violate §13.001(c) and §13.189.
Unless a customer has tampered with the meter, bypassed the
meter, or diverted service, the utility controls meter reading and
billing. If the utility is monitoring its meters, billing, and collections
in a prudent manner, it should catch errors within a
reasonable time period. However, the commission agrees that
a longer period than six months, perhaps one year, is reasonable
for the utility to catch and correct the errors. However, the
relevant section is not open as a part of this rule package. The
commission will propose a modification in accordance with this
response in a subsequent rule package.
IWSCOT commented that under §291.87(n) a utility should
be allowed to disconnect a customer for failure to pay for
negligence or damages.
The commission agrees in part that a utility should be allowed
to disconnect a customer for failure to pay for some negligence
or damages other than meter tampering or service diversion.
However, the commission disagrees that a customer should be
disconnected for all charges related to the situations mentioned
in this subsection. This area can be very contentious because
only in rare instances does a utility employee or some other
disinterested person actually observe the damage being committed
by a customer. In addition, some of the costs incurred
by a utility in dealing with these situations are already being recovered
in its rates. However, the relevant section is not open
as a part of this rule package. The commission will propose
revisions to this subsection in a subsequent rule package.
IWSCOT commented that in §291.87(k)(1) a customer should
not be allowed to avoid disconnection by disputing a bill at the
last minute.
The commission agrees in part with this comment. However, the
relevant section is not open as a part of this rule package. The
commission will propose changes to this rule in a subsequent
rule package.
IWSCOT commented that in §291.88(g) a utility should not be
required to disconnect service upon a customer request within
24 hours of receiving the request, but should be allowed a full
working day.
The commission agrees in part that it is reasonable to allow the
utility to disconnect on the next working day, but may propose
slightly different wording. However, the relevant section is not
open as a part of this rule package. The commission will
propose a modification to this rule in a subsequent rule package.
IWSCOT commented that §291.88(h)(1) relating to reconnection
time period after a customer that has been disconnected for
nonpayment pays the outstanding balance should be changed
from 24 hours to "one working day."
The commission agrees in part that the current rule may require
modified dates for disconnections and allow extra time for
customers to pay and that modifications to the rule should
be made. However, the commission does not agree that the
wording change proposed is the best way to deal with the issue,
so a modified rule will be proposed. The relevant section is
not open as a part of this rule package. The commission will
propose a modification to this rule in a subsequent rule package.
Texoma and Plum Creek Water Company commented that the
current limitation of $25 for a reconnect fee in §291.88(h)(2)(C)
is too low and does not cover the actual cost to the utility.
The commission has made no changes in response to this
comment. The commission agrees that utilities do not recover
the cost in full in the $25 fee, but disagrees that it should
be set at $50 or more. The commission believes that water
service is essential and a customer who is struggling to pay
a $25 or $30 water bill should not be unnecessarily punished
by having to pay $50 or more additional dollars for a reconnect
fee. Expenses not included in the $25 fee may be collected
by the utility through rates which are distributed over the whole
customer base. The commission believes that the current $25
fee coupled with having service disconnected for some time
period is a sufficient deterrent to encourage customers who are
able to pay to do so before being disconnected.
IWSCOT commented that §291.89(n) is not a complete listing of
situations that should be included in meter tampering, bypass,
or diversion.
The commission agrees. However, the relevant section is not
open as a part of this rule package. The commission will
propose a revised rule in a subsequent rule package.
ADDITIONAL CHANGES
Senate Bill 1, 75th Legislature, 1997, had amended the Health
and Safety Code, §341.0485 to create a Water Utility Improvement
Account. The account was to receive civil or administrative
penalties for violation of Health and Safety Code, Chapter 341.
Funds deposited in the account could be used for capital improvements
or operating and maintenance expenses for certain
qualified water and sewer systems. The 75th Legislature also
passed House Bill (HB) 2948, which abolished special accounts
not enumerated in the bill. The Water Utility Improvement Account
was not listed in HB 2948. Accordingly, the commission
has not adopted any rules referring to the Water Utility Improvement
Account.
The commission has made some other changes to the adopted
rules to update references, correct grammar, or typographical
errors. These changes do not result in any change in the intent
expressed in the proposed rules.
Subchapter A. General Provisions
Chapter 291. Utility Regulations
30 TAC §§291.1, 291.3, 291.15
STATUTORY AUTHORITY
The amendments and new section are adopted under Texas
Water Code, §5.103, which provides the commission the authority
to adopt and enforce rules necessary to carry out its
powers and duties under the laws of this state, and under Texas
Water Code, §13.041(b), which requires the commission to
adopt rules reasonably required to exercise its jurisdiction. Section
291.15 implements Texas Water Code, §13.143 (Notice of
Wholesale Water Supply Contract). Section 291.31 implements
Texas Water Code, §13.183. Section 291.34 implements Texas
Water Code, §13.183 and 13.184. Section 291.87 implements
Texas Water Code, §13.143 (Voluntary Contributions). Section
291.101 implements Texas Water Code, §49.215(d). Section
291.102 implements Texas Water Code, §13.241 and §13.246.
Section 291.103 implements Texas Water Code, 49.352. Section
291.109 implements Texas Water Code, §13.301. Section
291.111 implements Texas Water Code, §13.302. Section
291.113 implements Texas Water Code, 13.254. Section
291.114 implements Texas Water Code, §13.252. Section
291.125(c) implements Texas Water Code, §13.504. Section
291.140 implements Texas Water Code, 13.411. Section
291.144 implements Texas Water Code, §13.418 and Texas
Health and Safety Code, §341.0485. Section 291.152 implements
Texas Water Code, §13.045. Section 291.153 implements
Texas Water Code, §13.086.
§291.3. Definitions of Terms.
The following words and terms, when used in this chapter, shall
have the following meanings, unless the context clearly indicates
otherwise.
(1) Acquisition adjustment-
(A) The difference between:
(i) the lesser of the purchase price paid by an
acquiring utility or the current depreciated replacement cost of
the plant, property, and equipment comparable in size, quantity,
and quality to that being acquired, excluding customer contributed
property; and
(ii) the original cost of the plant, property, and
equipment being acquired, excluding customer contributed property,
less accumulated depreciation.
(B) A positive acquisition adjustment results when
subparagraph (A)(i) of this paragraph is greater than subparagraph
(A)(ii) of this paragraph.
(C) A negative acquisition adjustment results when
subparagraph (A)(ii) of this paragraph is greater than subparagraph
(A)(i) of this paragraph.
(2) Affected county-A county:
(A) that has a per capita income that averaged 25%
below the state average for the most recent three consecutive years for
which statistics are available and an unemployment rate that averaged
25% above the state average for the most recent three consecutive
years for which statistics are available; and
(B) any part of which is within 50 miles of an
international border.
(3) Affected person-Any retail public utility affected by
any action of the regulatory authority; any person or corporation,
whose utility service or rates are affected by any proceeding before the
regulatory authority; or any person or corporation that is a competitor
of a retail public utility with respect to any service performed by the
retail public utility or that desires to enter into competition.
(4) Affiliated interest or affiliate-
(A) any person or corporation owning or holding
directly or indirectly 5.0% or more of the voting securities of a utility;
(B) any person or corporation in any chain of successive
ownership of 5.0% or more of the voting securities of a utility;
(C) any corporation 5.0% or more of the voting
securities of which is owned or controlled directly or indirectly by a
utility;
(D) any corporation 5.0% or more of the voting
securities of which is owned or controlled directly or indirectly by
any person or corporation that owns or controls directly or indirectly
5.0% or more of the voting securities of any utility or by any person
or corporation in any chain of successive ownership of 5.0% of those
utility securities;
(E) any person who is an officer or director of a utility
or of any corporation in any chain of successive ownership of 5.0%
or more of voting securities of a public utility;
(F) any person or corporation that the commission,
after notice and hearing, determines actually exercises any substantial
influence or control over the policies and actions of a utility or over
which a utility exercises such control or that is under common control
with a utility, such control being the possession directly or indirectly
of the power to direct or cause the direction of the management
and policies of another, whether that power is established through
ownership or voting of securities or by any other direct or indirect
means; or
(G) any person or corporation that the commission,
after notice and hearing, determines is exercising substantial influence
over the policies and action of the utility in conjunction with one
or more persons or corporations with which they are related by
ownership or blood relationship, or by action in concert, that together
they are affiliated within the meaning of this section, even though no
one of them alone is so affiliated.
(5) Agency-Any state board, commission, department, or
officer having statewide jurisdiction (other than an agency wholly
financed by federal funds, the legislature, the courts, the Workers’
Compensation Commission, and institutions for higher education)
which makes rules or determines contested cases.
(6) Allocations-For all retail public utilities, the division
of plant, revenues, expenses, taxes, and reserves between municipalities,
or between municipalities and unincorporated areas, where such
items are used for providing water or sewer utility service in a municipality
or for a municipality and unincorporated areas.
(7) Base rate-The portion of a consumer’s utility bill
which is paid for the opportunity of receiving utility service,
excluding stand-by fees, which does not vary due to changes in utility
service consumption patterns.
(8) Billing period-The usage period between meter reading
dates for which a bill is issued or in nonmetered situations, the
period between bill issuance dates.
(9) Class of service or customer class-A description
of utility service provided to a customer which denotes such
characteristics as nature of use or type of rate.
(10) Code-The Texas Water Code.
(11) Corporation-Any corporation, joint-stock company,
or association, domestic or foreign, and its lessees, assignees,
trustees, receivers, or other successors in interest, having any of the
powers and privileges of corporations not possessed by individuals
or partnerships, but shall not include municipal corporations unless
expressly provided otherwise in the Texas Water Code.
(12) Customer-Any person, firm, partnership, corporation,
municipality, cooperative, organization, or governmental agency
provided with services by any retail public utility.
(13) Customer service line or pipe-The pipe connecting
the water meter to the customer’s point of consumption or the pipe
which conveys sewage from the customer’s premises to the service
provider’s service line.
(14) Facilities-All the plant and equipment of a retail public
utility, including all tangible and intangible real and personal property
without limitation, and any and all means and instrumentalities
in any manner owned, operated, leased, licensed, used, controlled,
furnished, or supplied for, by, or in connection with the business of
any retail public utility.
(15) Incident of tenancy-Water or sewer service, provided
to tenants of rental property, for which no separate or additional
service fee is charged other than the rental payment.
(16) License-The whole or part of any commission permit,
certificate, registration, or similar form of permission required by law.
(17) Licensing-The commission process respecting the
granting, denial, renewal, revocation, suspension, annulment, withdrawal,
or amendment of a license, certificates of convenience and
necessity, or any other authorization granted by the commission pursuant
to its authority under the Texas Water Code.
(18) Main-A pipe operated by a utility service provider
which is used for transmission or distribution of water or to collect
or transport sewage.
(19) Mandatory water use reduction-The temporary reduction
in the use of water imposed by court order, government
agency, or other authority with appropriate jurisdiction. This does
not include water conservation measures which seek to reduce the
loss or waste of water, improve the efficiency in the use of water,
or increase the recycling or reuse of water so that a water supply is
made available for future or alternative uses.
(20) Member-A person who holds a membership in a
water supply or sewer service corporation and who is a record owner
of a fee simple title to property in an area served by a water supply or
sewer service corporation, or a person who is granted a membership
and who either currently receives or will be eligible to receive water
or sewer utility service from the corporation. In determining member
control of a water supply or sewer service corporation, a person is
entitled to only one vote regardless of the number of memberships
the person owns.
(21) Membership fee-A fee assessed each water supply
or sewer service corporation service applicant which entitles the
applicant to one connection to the water or sewer main of the
corporation. The amount of the fee is generally defined in the
corporation’s bylaws and payment of the fee provides for issuance
of one membership certificate in the name of the applicant, for
which certain rights, privileges, and obligations are allowed pursuant
to said bylaws. For purposes of Texas Water Code, §13.043(g),
a membership fee is a fee not exceeding approximately 12 times
the monthly base rate for water or sewer service or an amount that
does not include any materials, labor, or services required for or
provided by the installation of a metering device for the delivery of
service, capital recovery, extension fees, buy-in fees, impact fees, or
contributions in aid of construction.
(22) Municipality-A city, existing, created, or organized
under the general, home rule, or special laws of this state.
(23) Municipally-owned utility-Any retail public utility
owned, operated, and controlled by a municipality or by a nonprofit
corporation whose directors are appointed by one or more municipalities.
(24) Person-Any natural person, partnership, cooperative
corporation, association, or public or private organization of any
character other than an agency or municipality.
(25) Physician-Any public health official, including, but
not limited to, medical doctors, doctors of osteopathy, nurse practitioners,
registered nurses, and any other similar public health official.
(26) Point of use or point of ultimate use-The primary
location where water is used or sewage is generated; for example, a
residence or commercial or industrial facility.
(27) Potable water-Water that is used for or intended to
be used for human consumption or household use.
(28) Premises-A tract of land or real estate including
buildings and other appurtenances thereon.
(29) Public utility-The definition of public utility is that
definition given to water and sewer utility in this subchapter.
(30) Purchased sewage treatment-Sewage treatment purchased
from a source outside the retail public utility’s system to meet
system requirements.
(31) Purchased water-Raw or treated water purchased
from a source outside the retail public utility’s system to meet system
demand requirements.
(32) Rate-Includes every compensation, tariff, charge,
fare, toll, rental, and classification or any of them demanded,
observed, charged, or collected, whether directly or indirectly, by
any retail public utility, or water or sewer service supplier, for
any service, product, or commodity described in the Texas Water
Code, §13.002(23), and any rules, regulations, practices, or contracts
affecting any such compensation, tariff, charge, fare, toll, rental, or
classification.
(33) Ratepayer-Each person receiving a separate bill shall
be considered as a ratepayer, but no person shall be considered as
being more than one ratepayer notwithstanding the number of bills
received. A complaint or a petition for review of a rate change shall
be considered properly signed if signed by any person, or spouse of
any such person, in whose name utility service is carried.
(34) Reconnect fee-A fee charged for restoration of service
where service has previously been provided. It may be charged
to restore service after disconnection for reasons listed in §291.88 of
this title (relating to Discontinuance of Service) or to restore service
after disconnection at the customer’s request.
(35) Retail public utility-Any person, corporation, public
utility, water supply or sewer service corporation, municipality,
political subdivision or agency operating, maintaining, or controlling
in this state facilities for providing potable water service or sewer
service, or both, for compensation.
(36) Retail water or sewer utility service-Potable water
service or sewer service, or both, provided by a retail public utility
to the ultimate consumer for compensation.
(37) Safe drinking water revolving fund-The fund established
by the Texas Water Development Board to provide financial
assistance in accordance with the Federal program established pursuant
to the provisions of the Safe Drinking Water Act and as defined
in Water Code, §15.602.
(38) Service-Any act performed, anything furnished or
supplied, and any facilities used by a retail public utility in the
performance of its duties under the Texas Water Code to its patrons,
employees, other retail public utilities, and the public, as well as the
interchange of facilities between two or more retail public utilities.
(39) Service line or pipe-A pipe connecting the utility
service provider’s main and the water meter or for sewage, connecting
the main and the point at which the customer’s service line is
connected, generally at the customer’s property line.
(40) Sewage-Ground garbage, human and animal, and all
other waterborne type waste normally disposed of through the sanitary
drainage system.
(41) Standby fee-A charge imposed on unimproved property
for the availability of water or sewer service when service is not
being provided.
(42) Tap fee-A tap fee is the charge to new customers
for initiation of service where no service previously existed. A tap
fee for water service may include the cost of physically tapping the
water main and installing meters, meter boxes, fittings, and other
materials and labor. A tap fee for sewer service may include the
cost of physically tapping the main and installing the utility’s service
line to the customer’s property line, fittings, and other material and
labor. Water or sewer taps may include setting up the new customer’s
account, and allowances for equipment and tools used. Extraordinary
expenses such as road bores and street crossings and grinder pumps
may be added if noted on the utility’s approved tariff. Other charges,
such as extension fees, buy-in fees, impact fees, or contributions in
aid of construction (CIAC) are not to be included in a tap fee.
(43) Tariff-The schedule of a retail public utility contain-ing
all rates, tolls, and charges stated separately by type or kind of
service and the customer class, and the rules and regulations of the
retail public utility stated separately by type or kind of service and
the customer class.
(44) Temporary water rate provision-A provision in a
utility’s tariff that allows a utility to adjust its rates in response to
mandatory water use reduction.
(45) Test year-The most recent 12-month period for which
representative operating data for a retail public utility are available.
A utility rate filing must be based on a test year that ended less than
12 months before the date on which the utility made the rate filing.
(46) Utility-The definition of utility is that definition given
to water and sewer utility in this subchapter.
(47) Water and sewer utility-Any person, corporation,
cooperative corporation, affected county, or any combination of those
persons or entities, other than a municipal corporation, water supply
or sewer service corporation, or a political subdivision of the state,
except an affected county, or their lessees, trustees, and receivers,
owning or operating for compensation in this state equipment or
facilities for the production, transmission, storage, distribution, sale,
or provision of potable water to the public or for the resale of potable
water to the public for any use or for the collection, transportation,
treatment, or disposal of sewage or other operation of a sewage
disposal service for the public, other than equipment or facilities
owned and operated for either purpose by a municipality or other
political subdivision of this state or a water supply or sewer service
corporation, but does not include any person or corporation not
otherwise a public utility that furnishes the services or commodity
only to itself or its employees or tenants as an incident of that
employee service or tenancy when that service or commodity is not
resold to or used by others.
(48) Water rationing-Restrictions implemented to reduce
the amount of water which may be consumed by customers of the
system due to emergency conditions or drought.
(49) Water supply or sewer service corporation-Any non-profit,
corporation organized and operating under the Texas Water
Code, Chapter 67, that provides potable water or sewer service for
compensation and that has adopted and is operating in accordance
with by-laws or articles of incorporation which ensure that it is
member-owned and member controlled. The term does not include
a corporation that provides retail water or sewer service to a person
who is not a member, except that the corporation may provide retail
water or sewer service to a person who is not a member if the
person only builds on or develops property to sell to another and the
service is provided on an interim basis before the property is sold.
For purposes of this chapter, to qualify as member-owned, member-controlled
a water supply or sewer service corporation must also meet
the following conditions.
(A) All members of the corporation meet the definition
of "member" under this section, and all members are eligible to vote
in those matters specified in the articles and bylaws of the corporation.
Payment of a membership fee in addition to other conditions of
service may be required provided that all members have paid or are
required to pay the membership fee effective at the time service is
requested.
(B) Each member is entitled to only one vote regardless
of the number of memberships owned by that member.
(C) A majority of the directors and officers of the
corporation must be members of the corporation.
(D) The corporation’s by-laws include language indicating
that the factors specified in subparagraphs (A)-(C) of this paragraph
are in effect.
(50) Wholesale water or sewer service-Potable water or
sewer service, or both, provided to a person, political subdivision, or
municipality who is not the ultimate consumer of the service.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the
agency’s legal authority.
Filed with the Office of the Secretary of State on January 15,
1999.
TRD-9900320
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Effective date: February 4, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 239-1966
STATUTORY AUTHORITY
The repeals are adopted under Texas Water Code, §5.103,
which provides the Texas Natural Resource Conservation Commission
with the authority to adopt any rules necessary to carry
out its powers and duties under the Texas Water Code and
other laws of the State of Texas, and under Texas Water Code,
§13.041(b), which requires the commission to adopt rules reasonably
required to exercise its jurisdiction.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the
agency’s legal authority.
Filed with the Office of the Secretary of State on January 15,
1999.
TRD-9900321
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Effective date: February 4, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 239-1966
STATUTORY AUTHORITY
The amendments and new section are adopted under Texas
Water Code, §5.103, which provides the commission the authority
to adopt and enforce rules necessary to carry out its powers
and duties under the laws of this state, and under Texas Water
Code, §13.041(b), which requires the commission to adopt rules
reasonably required to exercise its jurisdiction. Section 291.31
implements Texas Water Code, §13.183. Section 291.34 implements
Texas Water Code, §13.183 and §13.184.
§291.29. Interim Rates.
(a) The commission or judge may on a motion by the
executive director or by the appellant under the Texas Water Code,
§13.043 (a), (b), or (f), as amended, establish interim rates to remain
in effect until a final decision is made.
(b) At any time after the filing of a statement of intent to
change rates under the Texas Water Code, §13.187, as amended, the
executive director may petition the commission or judge to set interim
rates to remain in effect until further commission action or a final rate
determination is made. After a hearing is convened, any party may
petition the judge or commission to set interim rates.
(c) Interim rates may be established by the commission or
judge in those cases under the commission’s original or appellate
jurisdiction where the proposed increase in rates could result in an
unreasonable economic hardship on the utility’s customers, unjust or
unreasonable rates, or failure to set interim rates could result in an
unreasonable economic hardship on the utility.
(d) In making a determination under subsection (c) of this
section:
(1) The commission or judge may limit its consideration
of the matter to oral arguments of the affected parties and may:
(A) set interim rates not lower than the authorized rates
prior to the proposed increase nor higher than the requested rates;
(B) deny interim rate relief;
(C) require that all or part of the requested rate
increase be deposited in an escrow account in accordance with rules
set forth in §291.30 of this title (relating to Escrow of Proceeds
Received Under Rate Increase); or
(2) The commission may remand the request for interim
rates to SOAH for an evidentiary hearing on interim rates. The
presiding judge will issue a non-appealable interlocutory ruling
setting interim rates to remain in effect until a final rate determination
is made by the commission.
(e) The establishment of interim rates does not preclude the
commission from establishing, as a final rate, a different rate from
the interim rate.
(f) Unless otherwise agreed to by the parties to the rate
proceeding, the retail public utility shall refund or credit against
future bills all sums collected in excess of the rate finally ordered plus
interest as determined by the commission in a reasonable number of
monthly installments.
(g) Unless otherwise agreed to by the parties to the rate
proceeding, the retail public utility shall be authorized by the
commission to collect the difference, in a reasonable number of
monthly installments, from its customers for the amounts by which
the rate finally ordered exceeds the interim rates.
(h) The retail public utility must provide a notice to its
customers including the interim rates set by the commission or judge
with the first billing at the interim rates with the following wording:
"The Texas Natural Resource Conservation Commission (or judge)
has established the following interim rates to be in effect until the
final decision on the requested rate change (appeal) or until another
interim rate is established."
(i) If the commission or judge establishes interim rates or an
escrow account in a proceeding under Texas Water Code, §13.187,
the commission must make a final determination on the rates within
335 days after the effective date of the interim rates or escrowed rates
or the rates are automatically approved as requested by the utility in
its application.
§291.31. Cost of Service.
(a) (No change.)
(b) Allowable expenses. Only those expenses which are
reasonable and necessary to provide service to the ratepayers shall be
included in allowable expenses. In computing a utility’s allowable
expenses, only the utility’s historical test year expenses as adjusted
for known and measurable changes will be considered.
(1) Components of allowable expenses. Allowable expenses,
to the extent they are reasonable and necessary, and subject
to this section, may include, but are not limited to, the following
general categories:
(A) operations and maintenance expense incurred in
furnishing normal utility service and in maintaining utility plant used
by and useful to the utility in providing such service (payments to
affiliated interests for costs of service, or any property, right, or thing,
or for interest expense shall not be allowed as an expense for cost of
service except as provided in the Texas Water Code, §13.185(e));
(B)-(F) (No change.)
(2) (No change.)
(c) Return on invested capital. The return on invested capital
is the rate of return times invested capital.
(1) (No change.)
(2) Invested capital, also referred to as rate base. The rate
of return is applied to the rate base. Components to be included in
determining the rate base are as follows:
(A) original cost, less accumulated depreciation, of
utility plant, property and equipment used by and useful to the utility
in providing service:
(i)-(iv) (No change.)
(B) (No change.)
(3) Items not included in rate base. Unless otherwise
determined by the commission, for good cause shown, the following
items will not be included in determining the overall rate base.
(A)-(B) (No change.)
(d) Recovery of positive acquisition adjustments.
(1) For utility plant, property, and equipment acquired by
a utility from another retail public utility as a sale, merger, etc. of
utility service area for which an application for approval of sale
has been filed with the commission on or after September 1, 1997,
and that sale application closed thereafter, a positive acquisition
adjustment will be allowed to the extent that the acquiring utility
proves that:
(A) the property is used and useful in providing water
or sewer service at the time of the acquisition or as a result of the
acquisition;
(B) reasonable, prudent, and timely investments will
be made if required to bring the system into compliance with all
applicable rules and regulations;
(C) as a result of the sale , merger, etc.:
(i) the customers of the system being acquired will
receive higher quality or more reliable water or sewer service or
that the acquisition was necessary so that customers of the acquiring
utility’s other systems could receive higher quality or more reliable
water or sewer service;
(ii) regionalization of retail public utilities (meaning
a pooling of financial, managerial, or technical resources which
achieve economies of scale or efficiencies of service) was achieved;
or
(iii) the acquiring system will become financially
stable and technically sound as a result of the acquisition, or the
system being acquired which is not financially stable and technically
sound will become a part of a financially stable and technically sound
utility;
(D) any and all transactions between the buyer and the
seller entered into as a part or condition of the sale are fully disclosed
to the executive director and were conducted at arm’s length;
(E) the actual purchase price is reasonable in consideration
of the condition of the plant, property, and equipment being
acquired; the impact on customer rates if the acquisition adjustment
is granted; the benefits to the customers; and, the amount of contributions
in aid of construction in the system being acquired;
(F) in a single or multi-stage sale, the owner of the
acquired retail public utility and the final acquiring utility are not
affiliated. A multi-stage sale is where a stock transaction is followed
by a transfer of assets in what is essentially a single sales transaction.
A positive acquisition adjustment is allowed only in those cases
where the multi-stage transaction was fully disclosed to the executive
director in the application for approval of the initial stock sale.
Any multi-stage sale occurring between September 1, 1997, and
the effective date of these rules is exempt from the requirement for
executive director notification at the time of the approval of the initial
sale, but must provide such notification within 60 days of the effective
date of these rules; and
(G) the rates charged by the acquiring utility to its
preacquisition customers will not increase unreasonably because of
the acquisition.
(2) The amount of the acquisition adjustment approved
by the regulatory authority, shall be amortized using a straight line
method over a period equal to the weighted average remaining useful
life of the acquired plant, property, and equipment, at an interest rate
equal to the rate of return determined under subsection (c) of this
section. The acquisition adjustment may be treated as a surcharge
and may be recovered using non-system-wide rates.
(3) The authorization for and the amount of an acquisition
adjustment can only be determined as a part of a rate change
application.
(4) The acquisition adjustment can only be included in
rates as a part of a rate change application.
§291.32. Rate Design.
(a) General. In fixing the rates of a utility, the commission
shall fix its overall revenues at a level which will permit such utility
a reasonable opportunity to earn a reasonable return on its invested
capital used and useful in rendering service to the public, over and
above its reasonable and necessary operating expenses (unless an
alternative rate method is used as set forth in §291.34 of this title
(relating to Alternative Rate Methods), and preserve the financial
integrity of the utility.
(b) Conservation.
(1) In order to encourage the prudent use of water or
promote conservation, water and sewer utilities shall not apply rate
structures which offer discounts or encourage increased usage within
any customer class.
(2) After receiving final authorization from the regulatory
authority through a rate change proceeding, a utility may implement
a water conservation surcharge using an inclining block rate or other
conservation rate structure. A utility may not implement such a
rate structure to avoid providing facilities necessary to meet the
commission’s minimum standards for public drinking water systems.
A water conservation rate structure may generate revenues over and
above the utility’s usual cost of service:
(A) to reduce water usage or promote conservation
either on a continuing basis or in specified restricted use periods
identified in the utility’s tariff in order to:
(i) comply with mandatory reductions directed by
a wholesale supplier or underground water district; or
(ii) maintain acceptable pressure or storage during
drought periods, or other water rationing conditions authorized by an
approved water rationing plan;
(B) to generate additional revenues necessary to provide
facilities for maintaining or increasing water supply, treatment,
production, or distribution capacity.
(3) All additional revenues over and above the utility’s
usual cost of service collected under paragraph (2) of this subsection:
(A) must be accounted for separately and reported to
the executive director, as requested;
(B) are considered customer contributed capital unless
otherwise specified in a commission order; and
(C) may only be used in a manner approved by the
executive director for applications not subject to hearing under Texas
Water Code, §13.187(b).
(c) Volume charges. Charges for additional usage above the
base rate shall be based on metered usage over and above any volume
included in the base rate rounded up or down as appropriate to
the nearest 1,000 gallons or 100 cubic feet, or the fractional portion
of the usage.
(d) Surcharges.
(1) Capital improvements. In a rate proceeding, the
commission may authorize collection of additional revenues from the
customers to provide funds for capital improvements necessary to
provide facilities capable of providing adequate and continuous utility
service, and for the preparation of design and planning documents.
(2) Debt repayments. In a rate proceeding, the commission
may authorize collection of additional revenues from customers
to provide funds for debt repayments and associated costs, including
funds necessary to establish contingency funds and reserve funds.
Surcharge funds may be collected to meet all of the requirements of
the Texas Water Development Board in regard to financial assistance
from the Safe Drinking Water Revolving Fund.
§291.34. Alternative Rate Methods.
(a) To ensure that retail customers receive a higher quality
or more reliable water or sewer service, to encourage regionalization,
or to maintain financially stable and technically sound utilities, the
commission may utilize alternate methods of establishing rates. The
commission shall assure that rates, operations, and service are just
and reasonable to the consumers and to the utilities. The executive
director may prescribe modified rate filing packages for these alternate
methods of establishing rates.
(b) Single issue rate change. Unless a utility is using the cash
needs method, it may request approval to increase rates to reflect a
change in any one specific cost component. The following conditions
shall apply to this type of request.
(1) The proposed effective date of the single issue rate
change request must be within 24 months of the effective date of the
last rate change request in which a complete rate change application
was filed.
(2) The change in rates is limited to those amounts
necessary to recover the increase in the specific cost component and
the increase will be allocated to the rate structure in the same manner
as in the previous rate change.
(3) The scope of a single issue rate proceeding is limited
to the single issue prompting a change in rates. For capital items this
includes depreciation and return determined using the rate of return
established in the prior rate change proceeding.
(4) The utility shall provide notice as described in
§291.22(a)-(e) of this title (relating to Notice of Intent to Change
Rates), and the notice shall describe the cost component and reason
for the increased cost.
(5) A utility exercising this option is required to submit
a complete rate change application within three years following the
effective date of the single issue rate change request.
(c) Phased and multi-step rate changes. In a rate proceeding,
the commission may authorize a phased, stepped, or multi-year approach
to setting and implementing rates to eliminate the requirement
that a utility file another rate application.
(1) A utility may request to use the phased or multi-step
rate method :
(A) to include the capital cost of installation of utility
plant items that are necessary to improve service or achieve compliance
with commission regulations in the utility’s rate base and operating
expenses in the revenue requirement when facilities are placed
in service;
(B) to provide additional construction funds after major
milestones are met;
(C) to provide assurance to a lender that rates will be
immediately increased when facilities are placed in service;
(D) to allow a utility to move to metered rates from
unmetered rates as soon as meters can be installed at all service
connections;
(E) to phase in increased rates when a utility has been
acquired by another utility with higher rates;
(F) to phase in rates when a utility with multiple rate
schedules is making the transition to a system-wide rate structure;
or
(G) when requested by the utility.
(2) Construction schedules and cost estimates for new
facilities which are the basis for the phased or multi-step rate increase
must be prepared by a licensed professional engineer.
(3) Unless otherwise specified in the commission order,
the next phase or step cannot be implemented without verification of
completion of each step by a licensed professional engineer, agency
inspector, or agency subcontractor.
(4) At the time each rate step is implemented, the utility
must review actual costs of construction versus the estimates upon
which the phase-in rates were based. If the revenues received from
the phased or multi-step rates are higher than what the actual costs
indicate, the excess amount must be reported to the executive director
prior to implementing the next phase or step. Unless otherwise
specified in a commission order or directed by the executive director,
the utility may:
(A) refund or credit the overage to the customers in a
lump sum; or
(B) retain the excess to cover shortages on later phases
of the project. Any revenues retained but not needed for later phases
must be proportioned and refunded to the customers at the end of the
project with interest paid at the rate on deposits.
(5) The original notice to customers must include the
proposed phased or multi-step rate change and informational notice
must be provided to customers and the executive director 30 days
prior to the implementation of each step.
(6) A utility that requests and receives a phased or multi
step rate increase cannot apply for another rate increase during the
period of the phase-in rate intervals unless:
(A) the utility can prove financial hardship; or
(B) the utility is willing to void the next steps of the
phase-in rate structure and undergo a full cost of service analysis.
(d) Cash needs method. The cash needs method of establishing
rates allows a utility to recover reasonable and prudently incurred
debt service, a reasonable cash reserve account, and other expenses
not allowed under standard methods of establishing rates.
(1) A utility may request to use the cash needs method of
setting rates if:
(A) the utility is a nonprofit corporation controlled by
individuals who are customers and who represent a majority of the
customers; or
(B) the utility can demonstrate that use of the cash
needs basis:
(i) is necessary to preserve the financial integrity of
the utility;
(ii) will enable it to develop the necessary financial,
managerial, and technical capacity of the utility; and
(iii) will result in higher quality and more reliable
utility service for customers.
(2) Under the cash needs method, the allowable components
of cost of service are: allowable operating and maintenance expenses;
depreciation expense; reasonable and prudently incurred debt
service costs; recurring capital improvements, replacements, and extensions
which are not debt-financed; and a reasonable cash reserve
account.
(A) Allowable operating and maintenance expenses:
only those expenses which are reasonable and necessary to provide
service to the ratepayers shall be included in allowable operations and
maintenance expenses and shall be based on the utility’s historical
test year expenses as adjusted for known and measurable changes
and reasonably anticipated, prudent projected expenses.
(B) Depreciation expense: depreciation expense may
be included on any used and useful depreciable plant, property, or
equipment which was paid for by the utility and which has a positive
net book value on the effective date of the rate change.
(C) Debt service costs. Cash outlays to an unaffiliated
interest necessary to repay principal and interest on reasonably and
prudently incurred loans. If required by the lender, debt service costs
may also include amounts placed in a debt service reserve account in
escrow or as required by the commission, Texas Water Development
Board, or other state or federal agency or other financial institution.
Hypothetical debt service costs may be used for:
(i) self-financed major capital asset purchases
where the useful life of the asset is ten years or more. Hypothetical
debt service costs may include the debt repayments using an amortization
schedule with the same term as the estimated service life of
the asset using the prime interest rate at the time the application is
filed;
(ii) prospective loans to be executed after the new
rates are effective. Any pre-commitments, amortization schedules or
other documentation from the financial institution pertaining to the
prospective loan must be presented for consideration.
(D) Recurring capital improvements, replacements,
and extensions which are not debt-financed. Capital assets, repairs,
or extensions which are a part of the normal business of the utility
may be included as allowable expenses. This does not include
routine capital expenses which are specifically debt-financed.
(E) Cash reserve account: a reasonable cash reserve
account, up to 10% of annual operation and maintenance expenses,
shall be maintained and revenues to fund it may be included as an
allowable expense. Funds from this account may be used to pay
expenses incurred before revenues from rates are received and for
extraordinary repair and maintenance expenses and other capital needs
or unanticipated expenses if approved in writing by the executive
director. The utility shall account for these funds separately and report
to the commission as required by the executive director. Unless the
utility requests an exception in writing and the exception is explicitly
allowed by the executive director in writing, any funds in excess of
10%, shall be refunded to the customers each year with the January
billing either as a credit on the bill or refund accompanied by a written
explanation which explains the method used to calculate the amounts
to be refunded. Each customer shall receive the same refund amount.
These reserves are not for the personal use of the management or
ownership of the utility and may not be used to compensate an owner,
manager, or individual employee above the amount approved for that
position in the most recent rate change request unless authorized in
writing by the executive director.
(3) If the revenues collected exceed the actual cost of
service, defined in subsection (d)(2) of this section, during any
calendar year, these excess cash revenues must be placed in the cash
reserve account described in subsection (d)(2)(D) of this section and
become subject to the same restrictions.
(4) If the utility demonstrates to the executive director
that it has reduced expenses through its efforts, and has improved its
financial, managerial, and technical capability, the executive director
may allow the utility to retain 50% of the savings which result for
the personal use of the management or ownership of the utility rather
than pass on the full amount of the savings through lower rates or
refund all of the amounts saved to the customers.
(5) If a utility elects to use the cash needs method, it may
not elect to use the utility method for any rate change application
initiated within five years after beginning to use the cash needs
method. If after the five-year period, the utility does elect to use
the utility method, it may not include in rate base, or recover the
depreciation expense, for the portion of any capital assets paid for
by customers as a result of including debt service costs in rates. It
may, however, include in rate base, and recover through rates, the
depreciation expense for capital assets which were not paid for by
customers as a result of including debt service costs in rates. The
net book value of these assets may be recovered over the remaining
useful life of the asset.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the
agency’s legal authority.
Filed with the Office of the Secretary of State on January 15,
1999.
TRD-9900322
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Effective date: February 4, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 239-1966
STATUTORY AUTHORITY
The amendment is adopted under Texas Water Code, §5.103,
which provides the commission the authority to adopt and
enforce rules necessary to carry out its powers and duties
under the laws of this state, and under Texas Water Code,
§13.041(b), which requires the commission to adopt rules
reasonably required to exercise its jurisdiction.
§291.41. Appeal of Ratemaking Pursuant to the Texas Water Code,
§13.043.
(a) Any party to a rate proceeding before the governing body
of a municipality may appeal the decision of the governing body to
the commission. This subsection does not apply to a municipally-owned
utility, but does include privately-owned utilities operating
within the corporate limits of a municipality. An appeal under this
subsection may be initiated by filing with the commission a petition
signed by a responsible official of the party to the rate proceeding
or its authorized representative and accompanied by the filing fee as
required by the Texas Water Code, §5.235 and by serving a copy
of the petition on all parties to the original proceeding. The appeal
must be initiated within 90 days after the date of notice of the final
decision of the governing body.
(b) An appeal under the Texas Water Code, §13.043(b) must
be initiated within 90 days after the effective date of the rate change
or, if appealing under §13.043(b)(2) or (5), within 90 days after the
date on which the governing body of the municipality or affected
county makes a final decision. An appeal is initiated by filing an
original and four copies of a petition for review with the commission
and by filing a copy of the petition with the entity providing service
and with the governing body whose decision is being appealed if it
is not the entity providing service. The petition must be signed by
the lesser of 10,000 or 10% of the ratepayers whose rates have been
changed and who are eligible to appeal under subsection (c) of this
section.
(c) Retail ratepayers of the following entities may appeal the
decision of the governing body of the entity affecting their water or
sewer utility rates to the commission:
(1) a nonprofit water supply or sewer service corporation
created and operating under Texas Water Code, Chapter 67;
(2)-(5) (No change.)
(6) in an appeal under this subsection, the retail public
utility shall provide written notice of hearing to all affected customers
in a form prescribed by the executive director.
(d)-(f) (No change.)
(g) An applicant requesting service from an affected county
or a water supply or sewer service corporation may appeal to the
commission a decision of the county or water supply or sewer service
corporation affecting the amount to be paid to obtain service other
than the regular membership or tap fees. An appeal under Texas
Water Code, §13.043(g) must be initiated within 90 days after written
notice of the amount to be paid to obtain service is provided to the
service applicant or member of the decision of an affected county or
water supply or sewer service corporation affecting the amount to be
paid to obtain service as requested in the applicant’s initial request
for that service. The appeal must be accompanied by a $100 filing
fee as required by the Texas Water Code, §5.235.
(1) If the commission finds the amount charged to be
clearly unreasonable, it shall establish the fee to be paid and shall
establish conditions for the applicant to pay any amounts due to the
affected county or water supply or sewer service corporation. Unless
otherwise ordered, any portion of the charges paid by the applicant
which exceed the amount determined in the commission’s order shall
be repaid to the applicant with interest at a rate determined by the
commission within 30 days of the signing of the order.
(2) In an appeal brought under this subsection, the commission
shall affirm the decision of the water supply or sewer service
corporation if the amount paid by the applicant or demanded by the
water supply or sewer service corporation is consistent with the tariff
of the water supply or sewer service corporation and is reasonably related
to the cost of installing on-site and off-site facilities to provide
service to that applicant, in addition to the factors specified under
subsection (i) of this section.
(3) A determination made by the commission on an appeal
from an applicant for service from a water supply or sewer service
corporation under this subsection is binding on all similarly situated
applicants for service, and the commission may not consider other
appeals on the same issue until the applicable provisions of the tariff
of the water supply or sewer service corporation are amended.
(h) The commission may, on a motion by the executive
director or by the appellant under subsection (a), (b), or (f) of this
section, establish interim rates to be in effect until a final decision is
made.
(i) In an appeal under this section, the commission shall
ensure that every rate made, demanded, or received by any retail
public utility or by any two or more retail public utilities jointly shall
be just and reasonable. Rates shall not be unreasonably preferential,
prejudicial, or discriminatory but shall be sufficient, equitable, and
consistent in application to each class of customers. The commission
shall use a methodology that preserves the financial integrity of the
retail public utility.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the
agency’s legal authority.
Filed with the Office of the Secretary of State on January 15,
1999.
TRD-9900323
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Effective date: February 4, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 239-1966
STATUTORY AUTHORITY
The amendment is adopted under Texas Water Code, §5.103,
which provides the commission the authority to adopt and
enforce rules necessary to carry out its powers and duties
under the laws of this state, and under Texas Water Code,
§13.041(b), which requires the commission to adopt rules
reasonably required to exercise its jurisdiction.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the
agency’s legal authority.
Filed with the Office of the Secretary of State on January 15,
1999.
TRD-9900324
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Effective date: February 4, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 239-1966
STATUTORY AUTHORITY
The amendment is adopted under Texas Water Code, §5.103,
which provides the commission the authority to adopt and
enforce rules necessary to carry out its powers and duties
under the laws of this state, and under Texas Water Code,
§13.041(b), which requires the commission to adopt rules
reasonably required to exercise its jurisdiction. Section 291.87
implements Texas Water Code, §13.143.
§291.87. Billing.
(a)-(b) (No change.)
(c) Penalty on delinquent bills for retail service. Unless
otherwise provided, a one-time penalty of either $5.00 or 10% for
all customers may be made on delinquent bills. If, after receiving
a bill including a late fee, a customer pays the bill in full except
for the late fee, the bill may be considered delinquent and subject to
termination after proper notice under §291.88 of this title (relating to
Discontinuance of Service). An additional late fee may not be applied
to a subsequent bill for failure to pay the prior late fee. The penalty
on delinquent bills may not be applied to any balance to which the
penalty was applied in a previous billing. No such penalty may be
charged unless a record of the date the utility mails the bills is made
at the time of the mailing and maintained at the principal office of
the utility. Late fees may not be charged on any payment received by
5:00 p.m. on the due date at the utility’s office or authorized payment
agency. The commission may prohibit a utility from collecting late
fees for a specified period if it determines that the utility has charged
late fees on payments which were not delinquent.
(d)-(p) (No change.)
(q) Voluntary contributions for certain emergency services.
(1) A utility may implement as part of its billing process
a program under which the utility collects from its customers a voluntary
contribution including a voluntary membership or subscription
fee, on behalf of a volunteer fire department or an emergency medical
service. A utility that collects contributions under this section
shall provide each customer at the time the customer first becomes a
customer, and at least annually thereafter, a written statement:
(A) describing the procedure by which the customer
may make a contribution with the customer’s bill payment;
(B) designating the volunteer fire department or emergency
medical service to which the utility will deliver the contribution;
(C) informing the customer that a contribution is
voluntary;
(D) if applicable, informing the customer the utility
intends to keep a portion of the contributions to cover related
expenses; and
(E) describing the deductibility status of the contribution
under federal income tax law.
(2) A billing by the utility that includes a voluntary
contribution under this section must clearly state that the contribution
is voluntary and that it is not required to be paid .
(3) The utility shall promptly deliver contributions that it
collects under this section to the designated volunteer fire department
or emergency medical service, except that the utility may keep from
the contributions an amount equal to the lesser of:
(A) the utility’s expenses in administering the contribution
program; or
(B) 5.0% of the amount collected as contributions.
(4) Amounts collected under this section are not rates and
are not subject to regulatory assessments, late payment penalties, or
other utility related fees, are not required to be shown in tariffs filed
with the regulatory authority, and non-payment may not be the basis
for termination of service.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the
agency’s legal authority.
Filed with the Office of the Secretary of State on January 15,
1999.
TRD-9900325
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Effective date: February 4, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 239-1966
STATUTORY AUTHORITY
The amendment is adopted under Texas Water Code, §5.103,
which provides the commission the authority to adopt and
enforce rules necessary to carry out its powers and duties
under the laws of this state, and under Texas Water Code,
§13.041(b), which requires the commission to adopt rules
reasonably required to exercise its jurisdiction.
§291.93. Adequacy of Water Utility Service.
Sufficiency of service. Each retail public utility which provides water
service shall plan, furnish, operate, and maintain production, treatment,
storage, transmission, and distribution facilities of sufficient
size and capacity to provide a continuous and adequate supply of
water for all reasonable consumer uses.
(1) The water system quantity and quality requirements
of the commission shall be the minimum standards for determining
the sufficiency of production, treatment, storage, transmission, and
distribution facilities of water suppliers and the safety of the water
supplied for household usage. Additional capacity shall be provided
to meet the reasonable local demand characteristics of the service
area, including reasonable quantities of water for outside usage and
livestock.
(2) In cases of extreme drought, periods of abnormally
high usage, or extended reduction in ability to supply water due to
equipment failure, or to comply with a state agency or court order
on conservation, temporary restrictions may be instituted to limit
water usage. For utilities, these temporary restrictions must be in
accordance with an approved water rationing plan. Unless specifically
authorized by the executive director, retail public utilities may not use
water rationing in lieu of providing facilities which meet the minimum
capacity requirements of the commission’s rules in Chapter 290 of
this title (relating to Rules and Regulations for Public Water Systems),
or reasonable local demand characteristics during normal use periods,
or when the system is not making all immediate and necessary efforts
to repair or replace malfunctioning equipment.
(A) An approved water rationing plan must be on file
with the utility’s approved tariff prior to implementing water rationing
unless authorized by the executive director.
(B) Temporary restrictions must be in accordance with
the utility’s approved water rationing plan on file or specifically
authorized by the executive director. The utility shall file a
status report every 30 days that rationing continues or as required
by the executive director. The executive director may suspend
implementation of the restrictions at any time with written notice
to the utility.
(C) The utility must provide written notice to each
customer prior to implementing the provisions of the rationing plan.
Mailed notice is acceptable and rationing may be enforced by the
utility if notice is mailed 72 hours prior to the start of rationing. If
notice is hand delivered, the utility cannot enforce the provisions of
the plan for 24 hours after notice is provided unless authorized by the
executive director. Notice shall be provided to the commission prior
to implementing the program and may be by telephone if written
notice is provided by mail within ten days. Customer notice must
contain:
(i) the date rationing is to begin;
(ii) the expected duration of the rationing program;
(iii) the restrictions or stage of rationing being
implemented and the specific restrictions which apply; and
(iv) the penalties for violations of the rationing
program.
(3) A retail public utility that possesses a certificate of
public convenience and necessity that has reached 85% of its capacity
as compared to the most restrictive criteria of the commission’s
minimum capacity requirements in Chapter 290 of this title shall
submit to the executive director a planning report that clearly explains
how the retail public utility will provide the expected service demands
to the remaining areas within the boundaries of its certificated area.
A report is not required if the source of supply available to the utility
service provider is reduced to below the 85% level due to a court
or agency conservation order unless that order is expected to extend
for more than 18 months from the date it is entered in which case a
report shall be required.
(A) After any commission field inspection, a retail
public utility must analyze the system’s capacity to determine if it has
reached 85% of its capacity. If the retail public utility has reached
85% of its capacity, it must file this report no later than 90 days after
the date of a commission letter detailing the results of the inspection.
Capacity is considered to be the overall rated capacity in number
of residential connection equivalents based on the most restrictive
criteria for production, treatment, storage, or pumping.
(B) The report should be submitted in writing and
should contain the following:
(i) a brief description of the overall utility system
and service area;
(ii) an analysis of the plant capacity as defined in
subparagraph (A) of this paragraph;
(iii) details on how the retail public utility will
provide service to the remaining areas within the boundaries of its
certificated area. This includes projections of cost and expected
design and installation dates for additional facilities.
(C) The executive director may waive or limit the
reporting requirements if the retail public utility demonstrates that
the projected growth of the area will not require the retail public
utility to exceed 100% of its current capacity for the next five years.
(D) Any retail public utility required to file reports
under this section of the rules, including those requesting waivers,
shall file updated reports within 90 days after the retail public utility
receives a copy of each subsequent commission field inspection report
until the system demand is below 85% capacity.
(E) Submission of this report shall not relieve the retail
public utility from abiding by the requirements of other regulatory
agencies as set forth in §291.92 of this title (relating to Requirements
by Others).
(4) Each retail public utility which possesses or is required
to possess a certificate of convenience and necessity shall furnish
safe water which meets the minimum quality criteria for drinking
water prescribed by the commission. The supply must meet the
requirements of Health and Safety Code, §341.031 and commission
rules. A utility or water supply corporation which is authorized to
operate without a certificate of convenience and necessity pursuant to
Health and Safety Code, §13.242(c) may be required by the executive
director to meet the minimum criteria prescribed by the commission
if so instructed in writing.
(5) Each retail public utility must promptly take all
reasonable actions necessary to protect the health of its customers
at all times.
(6) Every retail public utility shall maintain its facilities
to protect them from contamination, ensure efficient operation, and
promptly repair leaks.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the
agency’s legal authority.
Filed with the Office of the Secretary of State on January 15,
1999.
TRD-9900326
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Effective date: February 4, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 239-1966
The amendments are adopted under Texas Water Code,
§5.103, which provides the commission the authority to adopt
and enforce rules necessary to carry out its powers and duties
under the laws of this state, and under Texas Water Code,
§13.041(b), which requires the commission to adopt rules
reasonably required to exercise its jurisdiction. Section 291.101
implements Texas Water Code, §49.215(d). Section 291.102
implements Texas Water Code, §13.241 and 13.246. Section
291.103 implements Texas Water Code, §49.352. Section
291.109 implements Texas Water Code, §13.301. Section
291.111 implements Texas Water Code, 13.302. Section
291.113 implements Texas Water Code, §13.254. Section
291.114 implements Texas Water Code, §13.253.
§291.102. Criteria for Considering and Granting Certificates or
Amendments.
(a) In determining whether to grant a new certificate of
public convenience and necessity, the commission shall ensure that
the applicant possesses the financial, managerial, and technical
capability to provide continuous and adequate service.
(1) For water utility service, the commission shall ensure
that the applicant is capable of providing drinking water that meets
the requirements of Health and Safety Code, Chapter 341 and
commission rules and has access to an adequate supply of water.
(2) For sewer utility service, the commission shall ensure
that the applicant is capable of meeting the commission’s design
criteria for sewer treatment plants, commission rules, and the Texas
Water Code.
(3) Where a new certificate of convenience and necessity
is being issued for an area which would require construction of
a physically separate water or sewer system, the applicant must
demonstrate that regionalization or consolidation with another retail
public utility is not economically feasible. To demonstrate this, the
applicant must at a minimum provide:
(A) a list of all public drinking water supply systems
or sewer systems within a two-mile radius of the proposed system;
(B) copies of written requests seeking to obtain
service from each of the public drinking water supply systems or
sewer systems or demonstrate that it is not economically feasible
to obtain service from a neighboring public drinking water supply
system or sewer system;
(C) copies of written responses from each of the
systems or evidence that they failed to respond;
(D) a description of the type of service that a
neighboring public drinking water supply system or sewer system
is willing to provide and comparison with service the applicant is
proposing;
(E) an analysis of all necessary costs for constructing,
operating, and maintaining the new system for at least the first five
years, including such items as taxes and insurance;
(F) an analysis of all necessary costs for acquiring and
continuing to receive service from the neighboring public drinking
water supply system or sewer system for at least the first five years.
(b) The commission may approve applications and grant or
amend a certificate only after finding that the certificate is necessary
for the service, accommodation, convenience, or safety of the public.
The commission may issue or amend the certificate as applied for, or
refuse to issue it, or issue it for the construction of a portion only of
the contemplated system or facility or extension thereof, or for the
partial exercise only of the right or privilege and may impose special
conditions necessary to ensure that continuous and adequate service
is provided.
(c) In considering whether to grant or amend a certificate,
the commission shall also consider:
(1) the adequacy of service currently provided to the
requested area;
(2) the need for additional service in the requested area;
(3) the effect of the granting of a certificate on the
recipient of the certificate and on any retail public utility of the same
kind already serving the proximate area;
(4) the ability of the applicant to provide adequate
service;
(5) the feasibility of obtaining service from an adjacent
retail public utility;
(6) the financial stability of the applicant, including, if
applicable, the adequacy of the applicant’s debt-equity ratio;
(7) environmental integrity; and
(8) the probable improvement in service or lowering of
cost to consumers in that area.
(d) The commission may require an applicant utility to
provide financial assurance to ensure that continuous and adequate
utility service is provided. The commission shall set the amount
of financial assurance. The form of the financial assurance will be
as specified in Chapter 37, Subchapter O of this title (relating to
Financial Assurance for Public Drinking Water Systems and Utilities).
(e) Where applicable, in addition to the other factors in this
section the commission shall consider the efforts of the applicant to
extend service to any economically distressed areas located within
the service areas certificated to the applicant. For purposes of this
subsection, "economically distressed area" has the meaning assigned
in Texas Water Code, §15.001.
§291.106. Notice for Applications for Certificates of Convenience
and Necessity.
(a) If an application for issuance or amendment of a
certificate of public convenience and necessity is filed, the applicant
will prepare a notice or notices, as prescribed in the commission’s
application form, which will include the following:
(1) All information outlined in the Administrative Procedure
Act, Government Code, Chapter 2001;
(2)-(3) (No change.)
(b) After reviewing and, if necessary, modifying the proposed
notice, the commission will send the notice to the applicant
for publication and/or mailing.
(1) For applications for issuance of a new certificate of
public convenience and necessity, the applicant shall mail the notice
to cities and neighboring retail public utilities providing the same
utility service within five miles of the requested service area, and any
city with an extra-territorial jurisdiction which overlaps the proposed
service area.
(2) For applications for an amendment of a certificate of
public convenience and necessity, the applicant shall mail the notice
to cities and neighboring retail public utilities providing the same
utility service within two miles of the requested service area, and any
city with an extra-territorial jurisdiction which overlaps the proposed
service area.
(3) Applicants previously exempted for operations or
extensions in progress as of September 1, 1975, must provide
individual mailed notice to all current customers. The notice must
contain the information required in the application.
(4) Utilities that are required to possess a certificate but
that are currently providing service without a certificate must provide
individual mailed notice to all current customers. The notice must
contain the current rates, the effective date those rates were instituted
and any other information required in the application.
(5) Within 30 days of the date of the notice, the applicant
shall submit to the commission an affidavit specifying the persons to
whom notice was provided and the date of that notice.
(c)-(d) (No change.)
§291.109. Report of Sale, Merger, Etc; Investigation; Disallowance
of Transaction.
(a) On or before the 120th day before the effective date
of any sale, acquisition, lease, rental, merger, or consolidation of
any water or sewer system required by law to possess a certificate
of public convenience and necessity, the utility or water supply or
sewer service corporation shall file a written application with the
commission and give public notice of the action. The notification
shall be on the form required by the commission and the comment
period will not be less than 30 days. Public notice may be waived
by the executive director for good cause shown.
(b) A person purchasing or acquiring the water or sewer system
must demonstrate adequate financial, managerial, and technical
capability for providing continuous and adequate service to the requested
area and any areas currently certificated to the person.
(c) If the person purchasing or acquiring the water or
sewer system cannot demonstrate adequate financial capability, the
commission may require that the person provide financial assurance
to ensure continuous and adequate utility service is provided. The
commission shall set the amount of financial assurance. The form of
the financial assurance must be as specified in Chapter 37, Subchapter
O of this title (relating to Financial Assurance for Public Drinking
Water Systems and Utilities).
(d) The commission shall, with or without a public hearing,
investigate the sale, acquisition, lease, rental, merger or consolidation
to determine whether the transaction will serve the public interest.
(e) Prior to the expiration of the 120-day notification period,
the executive director shall notify all known parties to the transaction
of the decision to either approve the sale administratively or to
request that the commission hold a public hearing to determine if
the transaction will serve the public interest. The executive director
may request a hearing if:
(1) the application filed with the commission or the public
notice was improper;
(2) the person purchasing or acquiring the water or sewer
system has not demonstrated adequate financial, managerial, and
technical capability for providing continuous and adequate service to
the service area being acquired and to any areas currently certificated
to that person;
(3) the person or an affiliated interest of the person
purchasing or acquiring the water or sewer system has a history of:
(A) noncompliance with the requirements of the
commission or the Texas Department of Health; or
(B) continuing mismanagement or misuse of revenues
as a utility service provider;
(4) the person purchasing or acquiring the water or
sewer system cannot demonstrate the financial ability to provide the
necessary capital investment to ensure the provision of continuous
and adequate service to the customers of the water or sewer system;
(5) it is in the public interest to investigate the following
factors:
(A) whether the seller has failed to comply with a
commission order;
(B) the adequacy of service currently provided to the
area;
(C) the need for additional service in the requested
area;
(D) the effect of approving the transaction on the
utility or water supply or sewer service corporation, the person
purchasing or acquiring the water or sewer system, and on any retail
public utility of the same kind already serving the proximate area;
(E) the ability of the person purchasing or acquiring
the water or sewer system to provide adequate service;
(F) the feasibility of obtaining service from an adjacent
retail public utility;
(G) the financial stability of the person purchasing
or acquiring the water or sewer system, including, if applicable,
the adequacy of the debt-equity ratio of the person purchasing or
acquiring the water or sewer system if the transaction is approved;
(H) the environmental integrity; and
(I) the probable improvement of service or lowering
of cost to consumers in that area resulting from approving the
transaction.
(f) Unless the executive director requests that a public
hearing be held, the sale, acquisition, lease, or rental or merger or
consolidation may be completed as proposed:
(1) at the end of the 120-day period;
(2) or may be completed at any time after the utility
or water supply or sewer service corporation receives notice that a
hearing will not be requested.
(g) Within 30 days after the actual effective date of the
transaction, the utility or water supply or sewer service corporation
must file a signed contract, bill of sale, or other appropriate
documents as evidence that the transaction has been made final
and documentation that customer deposits have been transferred or
refunded to the customer with interest as required by these rules.
(h) If a hearing is requested or if the utility or water supply
or sewer service corporation fails to make the application as required
or to provide public notice, the sale, acquisition, lease, merger,
consolidation, or rental may not be completed unless the commission
determines that the proposed transaction serves the public interest.
(i) A sale, acquisition, lease, or rental of any water or sewer
system, required by law to possess a certificate of public convenience
and necessity that is not completed in accordance with the provisions
of the Texas Water Code, §13.301 is void.
(j) The requirements of the Texas Water Code, §13.301 do
not apply to:
(1) the purchase of replacement property;
(2) a transaction under the Texas Water Code, §13.255;
or
(3) foreclosure on the physical assets of a utility.
(k) If a utility facility or system is sold and the facility or
system was partially or wholly constructed with customer contributions
in aid of construction derived from specific surcharges approved
by the regulatory authority over and above revenues required for normal
operating expenses and return, the utility may not sell or transfer
any of its assets, its certificate of convenience and necessity, or controlling
interest in an incorporated utility, unless the utility provides
to the purchaser or transferee before the date of the sale or transfer a
written disclosure relating to the contributions. The disclosure must
contain, at a minimum, the total dollar amount of the contributions
and a statement that the contributed property or capital may not be
included in invested capital or allowed depreciation expense by the
regulatory authority in rate-making proceedings.
(l) A utility or a water supply or sewer service corporation
that proposes to sell, assign, lease, or rent its facilities shall notify
the other party to the transaction of the requirements of this section
before signing an agreement to sell, assign, lease, or rent its facilities.
§291.111. Purchase of Voting Stock in Another Utility.
(a) A utility may not purchase voting stock in and a person
may not acquire a controlling interest in a utility doing business in this
state unless the utility or person files a written application with the
commission not later than the 61st day before the date on which the
transaction is to occur. A controlling interest is defined as a person
or a combination of a person and other family members possessing at
least 50% of the voting stock of the utility; or a person that controls
at least 30% of the stock and is the largest stockholder.
(b) A person acquiring a controlling interest in a utility
may be required to demonstrate adequate financial, managerial, and
technical capability for providing continuous and adequate service to
the requested area and any areas currently certificated to the person.
(c) If the person acquiring a controlling interest cannot
demonstrate adequate financial capability, the commission may require
that the person provide financial assurance to ensure continuous
and adequate utility service is provided. The commission shall set
the amount of financial assurance. The form of the financial assurance
must be as specified in Chapter 37, Subchapter O of this title
(relating to Financial Assurance for Public Drinking Water Systems
and Utilities).
(d) The executive director may request that the commission
hold a public hearing on the transaction if the executive director
believes that a criterion prescribed by §291.110 of this title (relating
to Foreclosure and Bankruptcy) applies.
(e) Unless the executive director requests that a public
hearing be held, the purchase or acquisition may be completed as
proposed:
(1) at the end of the 60 day period; or
(2) at any time after the executive director notifies the
person or utility that a hearing will not be requested.
(f) The utility or person must notify the commission within
30 days after the date that the transaction is completed.
(g) If a hearing is requested by the executive director or if
the person or utility fails to make the application to the commission
as required, the purchase or acquisition may not be completed unless
the commission determines that the proposed transaction serves the
public interest. A purchase or acquisition that is not completed in
accordance with the provisions of this section is void.
§291.114. Requirement to Provide Continuous and Adequate Service.
(a) Any retail public utility which possesses or is required
by law to possess a certificate of convenience and necessity or a
person who possesses facilities used to provide utility service must
provide continuous and adequate service to every customer and every
qualified applicant for service whose primary point of use is within
the certificated area and may not discontinue, reduce or impair utility
service except for:
(1) nonpayment of charges for services provided by the
certificate holder or a person who possesses facilities used to provide
utility service;
(2) nonpayment of charges for sewer service provided
by another retail public utility under an agreement between the retail
public utility and the certificate holder or a person who possesses
facilities used to provide utility service or under a commission order;
(3) nonuse; or
(4) other similar reasons in the usual course of business
without conforming to the conditions, restrictions, and limitations
prescribed by the commission.
(b) After notice and hearing, the commission may:
(1) order any retail public utility that is required by law
to possess a certificate of public convenience and necessity or any
retail public utility that possesses a certificate of public convenience
and necessity and is located in an affected county as defined in Texas
Water Code, §16.341, to:
(A) provide specified improvements in its service in
a defined area if:
(i) service in that area is inadequate as set forth
in §291.93 and §291.94 of this title (relating to Adequacy of Water
Utility Service; and Adequacy of Sewer Service); or
(ii) is substantially inferior to service in a comparable
area; and
(iii) it is reasonable to require the retail public
utility to provide the improved service; or
(B) develop, implement, and follow financial, managerial,
and technical practices that are acceptable to the commission
to ensure that continuous and adequate service is provided to any areas
currently certificated to the retail public utility if the retail public
utility has not provided continuous and adequate service to any of
those areas and, for a utility, to provide financial assurance of the
retail public utility’s ability to operate the system in accordance with
applicable laws and rules as specified in Chapter 37, Subchapter O of
this title (relating to Financial Assurance for Public Drinking Water
Systems and Utilities), or as specified by the commission;
(2) order two or more public utilities or water supply
or sewer service corporations to establish specified facilities for
interconnecting service;
(3) order a public utility or water supply or sewer
service corporation that has not demonstrated that it can provide
continuous and adequate service from its drinking water source
or sewer treatment facility to obtain service sufficient to meet its
obligation to provide continuous and adequate service on at least a
wholesale basis from another consenting utility service provider; or
(4) issue an emergency order, with or without a hearing,
under §291.14 of this title (relating to Emergency Orders).
(c) If the commission has reason to believe that improvements
and repairs to a water or sewer service system are necessary
to enable a retail public utility to provide continuous and adequate
service in any portion of its service area and the retail public utility
has provided financial assurance under Health and Safety Code,
§341.0355, or under this chapter, the commission, after providing to
the retail public utility notice and an opportunity to be heard by the
commissioners at a commission meeting, may:
(1) immediately order specified improvements and repairs
to the water or sewer system, the costs of which may be paid by the
financial assurance in an amount determined by the commission not
to exceed the amount of the financial assurance. The order requiring
the improvements may be an emergency order if it is issued after
the retail public utility has had an opportunity to be heard by the
commissioners at a commission meeting; and
(2) require a retail public utility to obligate additional
money to replace the financial assurance used for the improvements.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the
agency’s legal authority.
Filed with the Office of the Secretary of State on January 15,
1999.
TRD-9900327
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Effective date: February 4, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 239–1966
The amendment is adopted under Texas Water Code, §5.103,
which provides the commission the authority to adopt and
enforce rules necessary to carry out its powers and duties
under the laws of this state, and under Texas Water Code,
§13.041(b), which requires the commission to adopt rules
reasonably required to exercise its jurisdiction.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the
agency’s legal authority.
Filed with the Office of the Secretary of State on January 15,
1999.
TRD-9900328
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Effective date: February 4, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 239–1966
The new sections are adopted under Texas Water Code,
§5.103, which provides the commission the authority to adopt
and enforce rules necessary to carry out its powers and duties
under the laws of this state, and under Texas Water Code,
§13.041(b), which requires the commission to adopt rules
reasonably required to exercise its jurisdiction. Section 291.140
implements Texas Water Code, §13.411.
§291.144. Fines and Penalties.
Disposition. Fines and penalties collected under Water Code, Chapter
13, from a retail public utility that is not a public utility in other than
criminal proceedings shall be paid to the commission and deposited
in the general revenue fund.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the
agency’s legal authority.
Filed with the Office of the Secretary of State on January 15,
1999.
TRD-9900329
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Effective date: February 4, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 239–1966
The new sections are adopted under Texas Water Code,
§5.103, which provides the commission the authority to adopt
and enforce rules necessary to carry out its powers and duties
under the laws of this state, and under Texas Water Code,
§13.041(b), which requires the commission to adopt rules
reasonably required to exercise its jurisdiction. Section 291.152
implements Texas Water Code, §13.045. Section 291.153
implements Texas Water Code, §13.086.
§291.151. Applicability of Commission Service Rules Within the
Corporate Limits of a Municipality.
The commission’s rules relating to service and response to requests
for service will apply to utilities operating within the corporate
limits of a municipality unless the municipality adopts its own rules.
These rules include Subchapters E and F of this chapter (relating to
Customer Service and Protection and Quality of Service).
§291.152. Notification Regarding Use of Revenue.
At least annually, and before any rate increase, a municipality shall
notify in writing each water and sewer retail customer of any service
or capital expenditure, not water or sewer related, funded in whole
or in part by customer revenue.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the
agency’s legal authority.
Filed with the Office of the Secretary of State on January 15,
1999.
TRD-9900330
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Effective date: February 4, 1999
Proposal publication date: October 23, 1998
For further information, please call: (512) 239–1966
30 TAC §291.15, §291.16
Subchapter B. Rates, Ratemaking, and Rate/Tariff
Changes
Subchapter C. Ratemaking Appeals
Subchapter D. Records and Reports
Subchapter E. Customer Service and Protection
Subchapter F. Quality of Service
Subchapter G. Certificate of Convenience and
Necessity
Subchapter I. Wholesale Water or Sewer Service
Subchapter J. Enforcement, Supervision, and Receivership
Subchapter K. Provisions Regarding Municipalities