Adopted Sections An agency may take final action on a section 30 days after a proposal has been published in the Texas Register. The section becomes effective 20 days after the agency files the correct document with the Texas Register, unless a later date is specified or unless a federal statute or regulation requires implementation of the action on shorter notice. If an agency adopts the section without any changes to the proposed text, only the preamble of the notice and statement of legal authority will be published. If an agency adopts the section with changes to the proposed text, the proposal will be republished with the changes. TITLE 7. BANKING AND SECURITIES Part VII. State Securities Board Chapter 109. Transactions Exemption from Registration 7 TAC sec.109.17 The State Securities Board adopts new sec.109.17, concerning federal savings banks, without changes to the proposed text as published in the June 9, 1992, issue of the Texas Register (17 TexReg 4153). The section provides greater certainty with regard to the availability of the exemption under the Securities Act, sec.5.L. The section clarifies the status of federal savings banks for purposes of the Securities Act, sec.5.L. No comments were received regarding adoption of the new section. The new section is adopted under Texas Civil Statutes, Article 581, sec.28-1, which provide that the board may make or adopt rules or regulations governing registration statements, applications, notices, and reports, and in the adoption of rules and regulations, may classify securities, persons, and matters within its jurisdiction, and prescribe different requirements for different classes. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 6, 1992. TRD-9210794 Richard D. Latham Securities Commissioner State Securities Board Effective date: August 28, 1992 Proposal publication date: June 9, 1992 For further information, please call: (512) 474-2233 Chapter 133. Forms 7 TAC sec.133.34 The State Securities Board adopts new sec.133.34, concerning undertaking regarding non-issuer sales pursuant to sec.139.14, with changes to the proposed text as published in the June 9, 1992, issue of the Texas Register (17 TexReg 4154). The section will decrease the likelihood that the exemption contained in sec.139.14 would be relied upon improperly. The change reflects that the adoption occurred in July rather than October as was set forth in the proposal. The section provides a form upon which certain users of the sec.139.14 exemption can commit that the proceeds from sale of their securities will not inure to the benefit of the issuer of the securities. No comments were received regarding adoption of the new section. The new section is adopted under Texas Civil Statutes, Article 581, sec.28-1, which provide that the board may make or adopt rules or regulations governing registration statements, applications, notices, and reports, and in the adoption of rules and regulations, may classify securities, persons, and matters within its jurisdiction, and prescribe different requirements for different classes. sec.133.34. Undertaking Regarding Non-Issuer Sales Pursuant to sec.139. 14. The State Securities Board adopts by reference the undertaking regarding non- issuer sales pursuant to sec.139.14 of this title (relating to Non-Issuer Sales) in July 1992. This form is available from the State Securities Board, P.O. Box 13167, Austin, Texas 78711-3167. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 6, 1992. TRD-9210799 Richard D. Latham Securities Commissioner State Securities Board Effective date: August 28, 1992 Proposal publication date: June 9, 1992 For further information, please call: (512) 474-2233 Chapter 139. Exemptions by Rule or Order 7 TAC sec.139.13 The State Securities Board adopts new sec.139.13, concerning exemption for resales under SEC Rule 144 and Rule 145(d), without changes to the proposed text as published in the June 9, 1992, issue of the Texas Register (17 TexReg 4154). The section provides an additional exemption to cover rare situations in which non-issuer owners of securities are unable to sell their securities pursuant to one or more exemptions under the Securities Act, including sec.5. C(1). The section provides a new exemption to fill a narrow gap that exists by virtue of the fact that the Act, sec.5.C(1), is too narrow to cover certain legitimate non-issuer sales of securities that are not otherwise exempt. No comments were received regarding adoption of the new section. The new section is adopted under Texas Civil Statutes, Article 581, sec.28-1, which provide that the board may make or adopt rules or regulations governing registration statements, applications, notices, and reports, and in the adoption of rules and regulations, may classify securities, persons, and matters within its jurisdiction, and prescribe different requirements for different classes. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 6, 1992. TRD-9210795 Richard D. Latham Securities Commissioner State Securities Board Effective date: August 28, 1992 Proposal publication date: June 9, 1992 For further information, please call: (512) 474-2233 7 TAC sec.139.14 The State Securities Board adopts the new sec.139.14, concerning an exemption for certain new section not covered by the Securities Act, sec.5.C(1), with changes to the proposed text as published in the June 9, 1992, issue of the Texas Register (17 TexReg 4154). The changes concern citations to other exemptions and are contained in paragraph (4)(A). There was no intent to eliminate a person's ability to exclude sales made pursuant to such exemptions from the count of persons to whom sales are made under the new section. The section provides an additional exemption to cover rare situations in which non-issuer owners of securities are unable to sell their securities pursuant to one or more exemptions under the Securities Act, including sec.5. C(1). The section provides a new exemption to fill a narrow gap that exists by virtue of the fact that the Act, sec.5.C(1), is too narrow to cover certain legitimate non-issuer sales of securities that are not otherwise exempt. No comments were received regarding adoption of the new section. The new section is adopted under Texas Civil Statutes, Article 581, sec.28-1, which provide that the board may make or adopt rules or regulations governing registration statements, applications, notices, and reports, and in the adoption of rules and regulations, may classify securities, persons, and matters within its jurisdiction, and prescribe different requirements for different classes. sec.139.14. Non-Issuer Sales. The State Securities Board, pursuant to the Securities Act, sec.5.T, exempts from the securities registration requirements of the Securities Act, sec.7, the offer and sale of any securities, provided the following conditions are met. (1) Who may sell. Offers or sales may be made by an owner of the securities, or any person acting on the owner's behalf, so long as the owner is not the issuer of the securities. (2) Dealer and agent registration. Any person (other than the owner) who acts as an agent of the owner in connection with a sale to any prospective purchaser in a transaction exempt from securities registration by virtue of this section shall be registered as either a dealer or agent under the Act, as applicable. (3) Use of proceeds. The proceeds of the sale shall be for the benefit of the owner and not directly or indirectly for the benefit of the issuer of the securities. (4) Number of sales. (A) The owner, together with any persons acting in concert with the owner, may make no more than 15 sales in any 12-month period under and in reliance on this section, exclusive of sales made to the issuer, or in compliance with the Act, sec.sec.5.0, 6.F, or 5.H; sec.109.3 of this title (relating to Sales to Institutions Under the Securities Act; sec.5.H); sec.139.4 of this title (relating to Private Resales Under SEC Rule 144A); sec.139.7 of this title (relating to Sales of Securities to Non-Residents); or sec.139.13 of this title (relating to Resales under SEC Rule 144 and Rule 145(d)), except as the allowable number of sales may be increased as provided in subparagraph (B) of this paragraph. (B) The number of sales that may be made under subparagraph (A) of this paragraph may be increased to a higher number as approved by the securities commissioner in response to a written request based on the particular circumstances of a specific transaction. If the securities commissioner approves a higher number of sales in accordance with the provisions of this subparagraph, then in the particular case addressed by the written request, the higher number of approved sales will be allowed. (C) The exemption provided by this section may not be combined with sales made pursuant to the Act, sec.5.C(1), to exceed sales otherwise allowable under this section. (5) Filing requirement for certain persons. Any person who is a director, executive officer, or owner of 15% or more of a class of voting securities or other ownership interests of the issuer who wishes to make sales under and in reliance on this section must file a Form 133.34 with the securities commissioner no later than 15 days after the first receipt of any portion of the consideration for the securities being sold. (6) Anti-fraud provisions. Nothing in this section is intended to or should be construed as in any way relieving owners or persons acting on behalf of owners from an existing duty to disclose to prospective investors information adequate to satisfy the anti-fraud provisions of the Act. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 6, 1992. TRD-9210796 Richard D. Latham Securities Commissioner State Securities Board Effective date: August 28, 1992 Proposal publication date: June 9, 1992 For further information, please call: (512) 474-2233 Chapter 143. Administrative Guidelines for Registration of Real Estate Investment Trusts 7 TAC sec.sec.143.1, 143.3, 143.8 The State Securities Board adopts amendments to sec.sec.143.1, 143.3, and 143. 8, concerning administrative guidelines for registration of real estate investment trusts, without changes to the proposed text as published in the June 12, 1992, issue of the Texas Register (17 TexReg 4227). The amendments, along with adoptions to repeal existing sec.sec.143.12-143.21 and create new sec.sec.143.12-142.23, have the overall effect of reflecting provisions that were included in the most recent amendments to the North American Securities Administrators' Association, Inc. (NASAA) real estate investment trust guidelines. The sections allow for continued uniformity with other states in applying standards for registration of real estate investment trusts. The section reflects the current version of the guidelines as promulgated by NASAA. No comments were received regarding adoption of the amendments. The amendments are adopted under Texas Civil Statutes, Article 581, sec.28-1, which provide that the board may make or adopt rules or regulations governing registration statements, applications, notices, and reports, and in the adoption of rules and regulations, may classify securities, persons, and matters within its jurisdiction, and prescribe different requirements for different classes. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 6, 1992. TRD-9210797 Richard D. Latham Securities Commissioner State Securities Board Effective date: August 28, 1992 Proposal publication date: June 12, 1992 For further information, please call: (512) 474-2233 7 TAC sec.sec.143.12-143.21 The State Securities Board adopts the repeal of sec.sec.143.12-143.21, concerning administrative guidelines for registration of real estate investment trusts, without changes to the proposed text as published in the June 12, 1992, issue of the Texas Register (17 TexReg 4229). The repeals, along with adoptions to amend sec.sec.143.1, 143.3, and 143.8 and create new sections 143.12-143.23, have the overall effect of reflecting provisions that were included in the most recent amendments to the North American Securities Administrators' Association, Inc. (NASAA) real estate investment trust guidelines. The repeal of the sections allow for continued uniformity with other states in applying standards for registration of real estate investment trusts. The repeal of the sections allows for the chapter to reflect the current version of the guidelines as promulgated by NASAA. No comments were received regarding adoption of the repeals The repeals are adopted under Texas Civil Statutes, Article 581, sec.28-1, which provide that the board may make or adopt rules or regulations governing registration statements, applications, notices, and reports, and in the adoption of rules and regulations, may classify securities, persons, and matters within its jurisdiction, and prescribe different requirements for different classes. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 6, 1992. TRD-9210798 Richard D. Latham Securities Commissioner State Securities Board Effective date: August 28, 1992 Proposal publication date: June 12, 1992 For further information, please call: (512) 474-2233 7 TAC sec.sec.143.12-143.23 The State Securities Board adopts new sec.sec.143.12-143.23, concerning administrative guidelines for registration of real estate investment trusts, without changes to the proposed text as published in the June 12, 1992, issue of the Texas Register (17 TexReg 4229). The new sections, along with adoptions to amend sec.sec.143.1, 143.3, and 143.8 and repeal sec.sec.143.12-143.21, have the overall effect of reflecting provisions that were included in the most recent amendments to the North American Securities Administrators' Association, Inc. (NASAA) real estate investment trust guidelines. The sections allow for continued uniformity with other states in applying standards for registration of real estate investment trusts. No comments were received regarding adoption of the new sections. The new sections are adopted under Texas Civil Statutes, Article 581, sec.28-1, which provide that the board may make or adopt rules or regulations governing registration statements, applications, notices, and reports, and in the adoption of rules and regulations, may classify securities, persons, and matters within its jurisdiction, and prescribe different requirements for different classes. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 6, 1992. TRD-9210800 Richard D. Latham Securities Commissioner State Securities Board Effective date: August 28, 1992 Proposal publication date: June 12, 1992 For further information, please call: (512) 474-2233 TITLE 16. ECONOMIC REGULATION Part II. Public Utility Commission of Texas Chapter 23. Substantive Rules Certification 16 TAC sec.23.31 The Public Utility Commission of Texas adopts an amendment to sec.23.31, with changes to the proposed text as published in the February 7, 1992, issue of the Texas Register (17 TexReg 993). The proposed amendments to sec.23. 66, which were published at the same time, are not being adopted. The amendment to sec.23.31 concerns the licensing proceedings related to the construction of electric generating units: notice of intent proceedings and applications for certificates of convenience and necessity. The purpose of the amendment is to require a utility that is planning to build additional generating capacity to conduct a formal solicitation for the purchase of generating capacity and demand-side resources from other sources. A number of other changes that were included in the proposed amendment are not being adopted. During the comment period, the commission received extensive written comments from a large number of interested parties. In addition, the commission conducted a series of public forums on the significant issues that relate to utility resource planning. The commission has decided that it needs additional time to evaluate all of the information that the parties provided on the general topic of resource planning and believes that it will be appropriate to issue a rule on utility resource planning and related topics later. In the meantime, the commission believes that the immediate adoption of a formal requirement that utilities solicit proposals for alternative sources of generating capacity and demand-side resources is necessary to assure that utilities meet the needs of their customers at a reasonable cost. There may be utilities that will file notices of intent or applications for certificates of convenience and necessity before a general resource planning rule is adopted, and, if they do, the commission believes that it is important to ensure that they adequately consider purchase and construction options and demand-side resources that may be offered by third parties. A formal solicitation process should ensure that utilities consider all of these options, will establish a rational timetable for their consideration of such options, and will facilitate the commission's review of issues relating to the availability and terms of purchase options. The comments of the parties are summarized as follows. Many parties urged the commission to adopt an integrated resource planning process that would provide for a balanced comparison of demand- and supply-side resources. The parties urging the commission to adopt an integrated resource planning process included the Public Counsel, consumer groups such as Consumers Union, Public Citizen, and Texas Citizen Action, and utilities, including the LCRA, El Paso Electric Company, and the East Texas Cooperatives. Some of these parties criticized the proposed rule, on the basis that the IRP process should involve an ongoing process with periodic filings by utilities, rather than a one-time filing in connection with an NOI. An integrated resource planning process is the central element of the resource planning rule that the commission intends to consider further. The commission believes that additional time is required to develop an integrated resource planning process for Texas. In addition, one of the factors in the decision not to adopt a more comprehensive set of rules on resource planning now is that the proposed rule did not require a comprehensive assessment of resource options on a regular basis. For this reason, it is questionable whether the adoption now of a rule that did impose such a requirement on utilities would be consistent with the Administrative Procedure and Texas Register Act. A number of parties commented on the solicitation requirement that was included in the proposed rule. Many of these comments supported a formal solicitation requirement. Texas Industrial Energy Consumer and many of the independent power developers supported the solicitation requirement. According to TIEC, the proposed rule would eliminate the need to examine purchased power alternatives in the NOI proceeding, because the utility would be required to solicit bids from other suppliers after it receives its NOI. Texas Utilities Electric Company opposed the requirement that a utility issue a solicitation for bids for purchases of power. TU Electric believes that this requirement would be contrary to the Public Utility Regulatory Act and inconsistent with the public interest. TU Electric asserts that there may be instances in which such a solicitation would be a costly, but useless step, and that it would increase the lead time associated with a new generating plant. There were differences of opinion about when in the NOI/CCN process that the solicitation should take place. TIEC believes that the solicitation should take place after the NOI, so that it can be based on accurate projections of the utility's need for capacity, as determined by the commission in the NOI proceeding. Central and Southwest Services Company recommended that a utility consider offers to sell power after the approval of an NOI and before the CCN proceeding. El Paso Electric Company proposed that the solicitation process take place after the commission certifies the need for a generating resource (by granting a CCN). Houston Lighting and Power Company suggested that the solicitation should take place at the beginning of the NOI process. The East Texas Cooperatives suggested that if a solicitation of purchase offers is required as a part of the licensing process, it should take place before the NOI proceeding. TU Electric and other parties commented that the solicitation process in the rule improperly focuses solely on price, ignoring other factors that are important in selecting a generating resource, including quality of firmness of the power, dispatchability, the type of fuel, assurances of availability and deliverability of fuel, the reliability and security of the supplier, and other contractual and technical factors. The Lower Colorado River Authority commented that the rules should require utilities to issue solicitations for both supply-side resources and demand-side resources. The LCRA also believes that the proposed provisions on supply-side solicitation are an inflexible treatment of a complex problem and are internally inconsistent. The commission believes that there are a number of potential suppliers of power in Texas, and that an orderly system should be adopted for a utility that needs capacity to consider offers from potential suppliers. It is the commission's belief that these offers should be considered after the commission reviews the issue of the utility's need for capacity in an NOI proceeding. This proceeding should provide valuable information to prospective suppliers concerning the need to be met. The commission also believes that utilities should consider proposals by third parties to provide demand-side or energy-efficiency resources, as a means of meeting the needs of their customers. Under the commission rule, as amended, the utility would file an NOI when it determines that it has a need for capacity. The utility could issue a solicitation for the supply-side and demand-side resources to meet this need, either before or after the NOI proceeding is completed, but the deadline for submitting proposals must be after the approval of the NOI. If the commission approves a notice of intent that is substantially different from the utility's proposal, then the utility must update the information that it provides to interested parties to reflect the commission's changes. After evaluating the proposals it receives, the utility could enter contracts with some or all of the persons who made proposals, or it could file an application for a CCN. If the utility files an application for a CCN, it must show that it evaluated the proposals and that the option to build was better for the utility's customers than the options presented in the proposals. The solicitation process in the rule would eliminate any need for a utility to evaluate the option of purchasing capacity in the NOI proceeding. For this reason, sec.23.31(h)(4) is being amended to delete the requirement that the utility evaluate purchase-power options in the NOI proceeding. The commission believes that non-price factors have a significant bearing on the evaluation of proposals to supply power or energy efficiency services. The proposed rule may have suggested that cost was the sole factor for evaluating offers to sell power. The rule that is being adopted would not prescribe the factors to be considered in evaluating alternatives or the weight to be assigned to each factor, but would require the utility to evaluate the offers and explain its evaluation in any CCN proceeding. The solicitation system that was set out in the proposed rule was also somewhat rigid and appears to have precluded a utility from negotiating with prospective suppliers about their proposals. In the commission's view, buying generating capacity or energy efficiency services is a complex matter that cannot be resolve through a simple "bid" process, and the utility should have the freedom to negotiate with persons who make proposals and should not be limited to accepting or rejecting a proposal. Finally, the commission disagrees with the assertion of TU Electric that the commission does not have the authority to require solicitations. Section 54 of PURA requires the consideration of alternatives to the utility's proposal to construct a generating unit, and the commission believes that the solicitation requirement is a legitimate means of eliciting offers from other parties to supply power or provide energy efficiency services that might be an economical alternative to the utility's proposal to construct a plant. The solicitation procedure is consistent with the commission's general authority to adopt rules reasonably required in the exercise of its powers under PURA, with its specific authority to adopt rules to encourage the production of economical energy by qualifying facilities, and with its responsibility to ensure that utilities consider conservation and alternative energy sources. In general, the independent power developers that filed comments in this case supported the application of a cost cap on rate treatment for a utility- constructed generating unit that is based on the costs that the utility relied on in the NOI or CCN process. The utilities that commented opposed the cost cap, asserting, in part, that the proposed cap is inconsistent with PURA. TU Electric also argues that the cost cap would impair a utility's ability to delay a project, where lower load projections or the availability of economical power purchase opportunities warrant the delay of the utility project. As is noted previously, the commission has decided that it needs additional time to evaluate all of the information that the parties provided on the general topic of resource planning. The commission believes the cost cap is an issue that should be decided as a part of that broader rulemaking effort and, unlike the question of solicitation, should not be decided separately. For this reason, the commission is not adopting the proposed provision concerning the cost cap now. Most of the utilities that file comments opposed the proposed amendments relating to retail wheeling, asserting that this proposal would shift costs from industrial customers to the general body of utility customers and create reliability problems for the utility. Many of the utilities also asserted that the retail wheeling proposal is contrary to PURA. In addition, the utilities that are subject to the regulation of the Federal Energy Regulatory Commission believe that the FERC has exclusive jurisdiction over transmission access for non-ERCOT utilities. Some of the independent power developers urged the commission to adopt the proposed rule on retail wheeling. They assert that this proposed rule would serve as a supplemental bidding mechanism that would prevent the utility from undermining the solicitation process, and that the rule would not result in stranded utility investment. According to these parties, the general body of utility customers will not be harmed, because they will not be required to pay more than they otherwise would for additional generating capacity. In addition to these comments, Cap Rock Electric Cooperative urged the commission to adopt a rule that would facilitate wheeling of power that is produced by a utility, permitting access to remote suppliers or remote generating plants owned by the utility. The commission believes that the question of retail wheeling is an issue that should be decided as a part of the broader rulemaking effort that it is undertaking. For this reason, the commission is not adopting the proposed provision concerning retail wheeling at this time. The commission believes that the issue of wholesale wheeling should be a part of a broader resource planning rule. In addition, the issue of wholesale wheeling is outside the scope of the proposed rule, as it was published. The proposed rule would eliminate the requirement that utilities evaluate the external effects of a resource option in connection with the NOI application. The Environmental Defense Fund and the LCRA opposed this proposed change. On the other hand, some utilities supported this proposed change. The commission believes that the consideration of environmental externalities is an important feature of an integrated resource planning process. While the commission is uncertain whether the current rule is the best means of assessing the externalities associated with a resource option, the commission believes that such an analysis must be done, and that if NOI applications are filed before the commission adopts a comprehensive rule on integrated resource planning, the applicant should present information to the commission concerning the external effects of the proposed power plant. For this reason, the commission is not amending the current rule concerning the treatment of externalities in the NOI process. The proposed rule would have required the commission to establish standard avoided costs for purchases from qualifying facilities and independent power producers. Southwestern Public Service Company and other parties asserted that purchases from IPPs are not permitted under Texas law or, alternatively, that this issue is a matter that is within the jurisdiction of the FERC, rather than this commission. The commission believes that the status in Texas of non-utility sellers of electricity, other than qualifying facilities, is questionable. For these reasons, the commission does not believe that it is appropriate to adopt a rule that would prescribe avoided cost rules that addressed sales by independent power producers. The amendment is adopted under Texas Civil Statutes, Article 1446c, sec.16, which provides the Public Utility Commission of Texas with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction. sec.23.31. Certification Criteria. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Transmission lines-Those lines which are used for bulk transmission of electricity which are not normally used for serving the end user. For electric utilities, this includes all lines operated at 60,000 volts or above, when measured phase-to-phase. (2) Interoffice trunks-Those communication circuits which connect central offices. (3) Distribution lines-Those lines from which the end user may be provided direct service. (4) Generating unit-Any electric generating facility. This subsection does not apply to any generating unit that is less than 10 megawatts and is built for experimental purposes only, and not for purposes of commercial operation. (b) Certificates for existing service areas and facilities. For purposes of granting certificates of convenience and necessity for those facilities and areas in which a utility was providing service on September 1, 1975, or was actively engaged in the construction, installation, extension, improvement of, or addition to any facility actually used or to be used in providing public utility service on September 1, 1975, unless found by the commission to be otherwise, the following provisions shall prevail for certification purposes. (1) The electrical generation or telephone central office facilities and service area boundary of a utility having such facilities in place or being actively engaged in the construction, installation, extension, improvement of, or addition to such facilities or the utility's system as of September 1, 1975, shall be limited, unless otherwise provided, to the facilities and real property on which the facilities were actually located, used, or dedicated as of September 1, 1975. (2) The transmission or interexchange trunk facilities and service area boundary of a utility having such facilities in place or being actively engaged in the construction, installation, extension, improvement of, or addition to such facilities or the utility's system as of September 1, 1975, shall be, unless otherwise provided, the facilities and a corridor extending 100 feet on either side of said transmission or interexchange trunk facilities in place, used or dedicated as of September 1, 1975. (3) The facilities and service area boundary for the following types of utilities providing distribution or collection service to any area, or actively engaged in the construction, installation, extension, improvement of, or addition to such facilities or the utility's system as of September 1, 1975, shall be limited, unless otherwise found by the commission, to the facilities and the area which lie within: (A) 200 feet of any point along a local service distribution and service drop line for telephone utilities; and (B) 200 feet of any point along a distribution line, which is specifically deemed to include service drop lines, for electrical utilities. (c) Certificates for new service areas and facilities. Except for certificates granted under subsection (b) of this section, the commission may grant applications and issue certificates only after finding that the certificate is necessary for the service, accommodation, convenience, or safety of the public. For an electric utility generating unit, the commission may grant an application only when it finds that purchased power, conservation, and alternative capacity and associated energy sources available at a lower or equal cost to the ratepayers, together with capacity from qualifying facilities with which contracts have been executed, cannot be reasonably expected to be available in sufficient quantity and for sufficient duration to allow the utility to modify its capacity expansion plan so as to provide for deferral or cancellation of the generating unit for which certification is requested. The commission may issue 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. The commission may amend or revoke any certificate issued under this section upon a finding of fact that the public convenience and necessity requires such amendment or revocation. The cost of construction of a new electric generating unit found reasonable in granting a certificate may be taken into consideration in determining the amount of construction work in progress and the plant in service associated with that unit to be included in the rate base of the utility. In addition, the projected design electrical rating, capacity factor, and heat rate associated with the unit shall be taken into consideration in determining recoverable fuel expenses associated with the operation of the unit. (1) A certificate, or certificate amendment, is required for the following: (A) a change in service area; (B) a new electric generating unit; (C) a new electric transmission line; (D) any new electric substation outside the utility's certificated service area; (E) a new interexchange telecommunications trunk route; and (F) a qualifying facility which is making or plans to make retail sales of electricity to an end user, unless the end user is also the sole purchaser of the thermal output of the qualifying facility, or unless the qualifying facility generates less than 10 megawatts of electric power by renewable resources, biomass, or waste. As a requisite to certification, the commission shall find that the ratepayers of the utility in whose service area the purchasing end user is located will not be substantially adversely impacted as a result of such retail sales. (2) A certificate is not required for the following: (A) a contiguous extension of those facilities described in the Public Utility Regulatory Act, sec.51; (B) a new electric high voltage switching station; (C) a new electric substation within the utility's certificated area; (D) routine activities associated with transmission facilities that are conducted by electric utilities, including wholesale generation and transmission utilities, and as specifically noted following: (i) the alteration of an existing transmission line to provide service to a customer-owned substation or a utility-owned substation, where that utility- owned substation is located within two spans of the exiting transmission line, provided that any neighboring utilities and landowner(s) crossed by the transmission facilities constructed to connect the substation to the existing transmission line has given prior consent; (ii) the rebuilding, upgrading, bundling of conductors or reconductoring of an existing transmission facility; or the installation of an additional circuit(s) on facilities that were originally designed and certificated for multiple- circuit capacity. Activities described previously which occur in the certificated area of another utility require the prior consent of that utility. For purposes of this section, "upgrading" to a higher voltage shall be limited to 230 KV or less and "rebuilding" work shall be limited to the replacement and/or respacing of structures along an existing route of the transmission line; (iii) the relocation of all or part of an existing transmission facility due to a request for relocation to be done at the expense of the requesting party and to be relocated solely on rights-of-way provided by the requesting party. Activities described previously which occur in the certificated area of another utility require the prior consent of that utility. (iv) the relocation or alteration of all or part of an existing transmission facility to avoid or eliminate existing encroachments, provided that any neighboring utilities and landowner(s) crossed by such relocation or alteration has given prior consent; (v) the relocation, alteration, or reconstruction of a transmission facility due to the requirements of any federal, state, county, or municipal governmental body or agency for purposes of highway transportation, public safety, or air and water quality, provided that the new construction is in close proximity to the existing facilities and that any new landowner(s) crossed by the new facilities has given prior consent; (vi) nothing contained in clauses (i)-(v) of this subparagraph should be construed as a limitation of the commission's authority as set forth in the Public Utility Regulatory Act. Any activity described in clauses (i)-(v) of this subparagraph must be reported to the commission not less than 30 days prior to the commencement of construction, and the commission may require additional facts or call a public hearing thereon to determine whether a Certificate of Convenience and Necessity is required. Reports shall include a general description of and explanation of the reason for the project, estimated costs, a map(s) detailing the location, and copies of documents indicating landowner(s) consent, as necessary. For projects that require new or additional rights-of-way direct mail notice is required to landowners of adjacent property within 200 feet of the proposed project, the parks and recreation areas within 1,000 feet, and airports within 10,000 feet, of the proposed project is also required; (E) the construction or upgrading of distribution facilities within the utility's service area; and (F) new telephone central offices; (G) however any extension, upgrading, or construction of facilities described in subparagraph (F) of this paragraph in excess of $250,000 must be reported to the commission as prescribed in sec.23.13(b) of this title (relating to Statistical Reports), and the commission may require additional facts or call a public hearing thereon; (H) use or provision of pay telephones registered under Title 47, Code of Federal Regulations, Part 68. (3) The term construction and/or extension, as used in this subsection, shall not include the purchase or condemnation of real property for use as facility sites or right-of-way. However, prior acquisition of such sites or right-of-way shall not be deemed to entitle a utility to the grant of a certificate of convenience and necessity without showing that the proposed extension is necessary for the service, accommodation, convenience, or safety of the public. (4) The commission shall render a decision approving or denying an application for a certificate required under paragraph (1) of this subsection, submitted by an entity not currently certificated to provide electric or telephone utility service within this state, within one year of the date of filing of a complete application for such a certificate, unless good cause is shown for exceeding that period. (5) An electric utility that intends to apply for a certificate for a generating unit shall conduct a solicitation for proposals for supply- and demand-side resources that would allow it to defer or displace the proposed unit. The solicitation shall be based on a generating unit that the utility has proposed or intends to propose in a notice of intent proceeding. The solicitation shall be updated, if necessary, if the commission approves a notice of intent that is substantially different from the utility's proposed notice of intent. A utility conducting a solicitation shall: (A) provide reasonable notice to persons who are likely to be interested in responding to the solicitation, including publishing notice of the solicitation in newspapers of general circulation in the major cities in its service area and the Wall Street Journal; (B) establish a deadline for interested persons to respond to the solicitation that is not less than 120 days after the issuance of notice of the solicitation and not less than 60 days after the commission's approval of the notice of intent; and (C) make available to interested persons information concerning the projected need for additional capacity, updated, if necessary, if the commission approves a notice of intent that is substantially different from the utility's proposed notice of intent. (6) An electric utility may not file an application for a certificate for a new generating unit until after the deadline for interested persons to respond to a solicitation under paragraph (5) of this subsection and until it has evaluated any responses to the solicitation. If the utility files an application for a certificate, it shall explain why it decided to build the generating unit, rather than accept one of the proposals in the solicitation. An electric utility shall file an avoided cost for the new generating unit for which it seeks a certificate. (7) If an electric utility files an application for the approval of a purchase of capacity from a qualifying facility under the Public Utility Regulatory Act, sec.41A, following a solicitation under this subsection, it shall explain why it decided to purchase the capacity it did, rather than accept one of the other proposals submitted in the solicitation. (8) Information concerning proposals made to the utility and its evaluation of those proposals shall be made available in any proceeding that is related to that capacity need, including a proceeding in which the utility seeks a certificate or seeks approval of a purchase of capacity from a qualifying facility under the Public Utility Regulatory Act, sec.41A. (9) The amendment to paragraphs (5)-(8) of this subsection shall apply to any utility that files an application for a certificate of convenience and necessity for a new generating unit after the adoption of the amendment. (d) Transferability of certificates. Any certificate granted under this section is not transferable without approval of the commission and shall continue in force until further order of the commission. (e) Exclusiveness of certificate. Any certificate granted under this section shall not be construed to vest exclusive service or property rights in and to the area certificated. The commission may grant, upon finding that the public convenience and necessity requires additional certification to another utility or utilities, additional certification to any other utility or utilities to all or any part of the area heretofore certificated under this section. (f) Certification forms. The commission shall adopt a form or forms which will facilitate the granting of certificates of convenience and necessity so that the granting of certificates, both contested and uncontested, will be expedited. (g) Radio-telephone service provided by a telephone utility. A telephone utility subject to the jurisdiction of the commission shall not be required to obtain a certificate of convenience and necessity or an amendment thereto to provide paging service, mobile telephone service, or rural radio service unless a base station or repeater facility is to be located outside the area certificated to the utility for wireline telephone service. (h) Notice-of-intent applications for generating plants. A utility should file a notice-of-intent (NOI) application upon deciding that it should construct a new generating plant. (1) Purpose of proceeding. The purpose of an NOI proceeding is to decide the appropriateness of a proposed plant, in light of the alternatives, before a utility commits or expends substantial resources on the proposed plant. It is not the purpose of an NOI proceeding to decide the specific site or site facilities, whether conservation and alternative energy sources cannot meet the need, or whether the proposed plant is the best and most economical choice of technology available, because those issues will be decided in the subsequent certification proceeding in the event that the NOI is approved. (2) Commission review. The commission will approve the NOI if it concludes that the proposed plant is feasible and reasonable, is compatible with the commission's most recent long-term forecast, and should be given further consideration in light of the alternatives. Approval of the NOI thus allows the utility to apply for certification of the proposed plant, but does not imply that the plant is the best alternative available to the utility. (3) Standards. The commission will apply the standards in this paragraph in reviewing a utility's NOI filing, which must include the information required in the commission's application to enable the commission to decide the appropriateness of the proposed plant. (A) Specificity of plans. The utility's plans and cost estimates must be specific enough for the proposed plant to be compared with alternatives, but the plans should not be final. In particular, the utility need not propose a specific site for a generating plant. (B) Need. The utility must demonstrate that the proposed plant is compatible with the commission's most recent long-term forecast. Such compatibility may be demonstrated by showing that there is a reasonable likelihood that the proposed plant will be needed when scheduled to be in service. The demonstration of compatibility includes consideration of any data that materially affect the commission's most recent long-term forecast. (4) Analysis of alternatives. The utility must show that it used a reasonable method to evaluate the advantages and disadvantages of the proposed plant and a broad range of alternatives to it. (A) Scope. At a minimum, the following alternatives must be considered: (i) increasing the capacity or efficiency of existing generation, transmission, and distribution facilities; (ii) extending the life of existing generating capacity; (iii) purchasing all or a portion of an existing or planned generating plant; (iv) constructing a generating plant employing technologies or fuels different from those of the proposed plant; and (v) demand-side management, including conservation and renewable resources. (B) Method. The utility must show that it used a reasonable method of narrowing the range of alternatives and that it adequately considered the remaining alternatives to the proposed plant. At a minimum, adequate consideration includes an assessment of the following factors for the proposed plant and each feasible alternative: (i) availability; (ii) cost and benefits -operating and capital costs, cost of related facilities, environmental costs and benefits, and any costs and benefits, and any cost and benefits accruing to persons other than the utility and its ratepayers (for example, environmental, social and health); (iii) reliability; (iv) risks; and (v) financing requirements-whether the utility can finance the proposed plant or an alternative without unduly impairing its financial condition. (5) Definitions. The following works an terms, when used in this subsection, have the following meanings, unless the context clearly indicates otherwise. (A) Feasible-(With respect to a proposed plant alternative) reasonably likely to work or be useful in attaining the end desired. (B) Proposed plant-One or more generating units, including an additional generating unit at an existing generating plant site. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 5, 1992. TRD-9210719 John Renfrow Secretary of the Commission Public Utility Commission of Texas Effective date: August 26, 1992 Proposal publication date: February 7, 1992 For further information, please call: (512) 458-0100 TITLE 25. HEALTH SERVICES Part I. Texas Department of Health Chapter 313. Athletic Trainers General Requirements and Guidelines 25 TAC sec.313.6 The Advisory Board of Athletic Trainers (board) adopts an amendment to sec.313.6, without changes to the proposed text as published in the June 5, 1992, issue of the Texas Register (17 TexReg 4058). The section concerns apprenticeship requirements for student trainers. The amendment clarifies the activities a student trainer may perform as part of the athletic training requirements of a college or university approved by the board and not be in violation of the Athletic Trainers Act (Act), sec.8. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 4512d, sec.5, which provides the Advisory Board of Athletic Trainers with the authority to adopt rules to implement its statutory duties. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 6, 1992. TRD-9210754 James Glenn Murray Chairman Advisory Board of Athletic Trainers Effective date: August 27, 1992 Proposal publication date: June 5, 1992 For further information, please call: (512) 834-6615 25 TAC sec.313.13 The Advisory Board of Athletic Trainers (board) adopts an amendment to sec.313.13, without changes to the proposed text as published in the June 5, 1992, issue of the Texas Register (17 TexReg 4058). The section concerns general requirements and guidelines for athletic trainers. The amendment increases continuing education requirements and specifies the effective date of the increased requirements and late reporting of continuing education. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 4512d, sec.5, which provide the Advisory Board of Athletic Trainers with the authority to adopt rules to implement its statutory duties. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 6, 1992. TRD-9210756 James Glenn Murray Chairman Advisory Board of Athletic Trainers Effective date: August 27, 1992 Proposal publication date: June 5, 1992 For further information, please call: (512) 834-6615 Chapter 337. Water Hygiene Drinking Water Standards Governing Drinking Water Quality and Reporting Requirements for Public Water Supply Systems 25 TAC sec.337.18 The Texas Department of Health (department) adopts an amendment to sec.338.18, concerning fees for services to drinking water systems, without changes to the proposed text published in the March 20, 1992, issue of the Texas Register (17 TexReg 2100). The amendment deleted existing subsections (c) and (e) because the department moved them to new 25 TAC sec.73.41, which was adopted and published in the July 21, 1992, issue of the Texas Register, effective July 20, 1992. The subsections were moved strictly for organizational purposes to be in a more appropriate chapter. There were no changes to the text of subsections (c) and (e) when moved. Editorial changes to existing subsection (d) update statutory citations and the language within the subsection (See adopted subsection (c).) The department retains its laboratory and its approved laboratory status for performing services as required under the Safe Drinking Water Act, (under new sec.73.41) thus providing analytical services to the regulated community with the Texas Water Commission making determinations as to the number and frequency of lab tests to be done. No comments were received regarding adoption of the amendment. The amendment is being adopted under the Health and Safety Code, sec.sec.12. 031-12.032, which provides the Board of Health (board) with the authority to adopt rules concerning fees for public health services; and sec.12.001, which provides the board with authority to adopt rules to implement every duty imposed by law on the board, the department, and the commissioner of health. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 5, 1992. TRD-9210707 Robert A. MacLean, M.D. Deputy Commissioner Texas Department of Health Effective date: August 26, 1992 Proposal publication date: March 20, 1992 For further information, please call: (512) 834-6640 TITLE 28. INSURANCE Part I. Texas Department of Insurance Chapter 28. Supervision and Conservation Subchapter A. General Provisions Regarding Supervision and Conservation 278>28 TAC sec.28.3 The State Board of Insurance of the Texas Department of Insurance adopts new sec.28.3, concerning encouragement of the merger of insurers in weak financial condition with insurers in a stronger financial condition in situations where rehabilitation or conservation would be inefficient or impracticable, with changes to the proposed text as published in the April 24, 1992, Texas Register on (17 TexReg 2925). The Insurance Code, Article 21.28-A, amended by House Bill 2, 72nd Legislature, regular session, effective September 1, 1991, provides that the board adopt rules concerning the encouragement of the merger of insurers in weak financial condition with insurers in a stronger financial condition in situations where rehabilitation or conservation is inefficient or impracticable. Merger is not a feasible option for all weak insurers. The condition of the economy and market trends or forces may make it impracticable for an insurer to continue to operate competitively in the market place, resulting in insolvencies which adversely affect the insureds' and policyholders' continuation of or ability to obtain insurance coverage. When these conditions exist, the Commissioner of Insurance should be empowered to notify such insurer of the department's determination that the company is in hazardous financial condition and to encourage the insurer to explore the concept of merging with an insurer in strong financial condition. Essentially, three changes were proposed by commenters recommending changes to the section as proposed and published for comment. First, changes throughout the adopted section replace second and subsequent references to "strong" or "financially strong insurers" with the term "potential merger partner" or "potential merger partners". Second, subsection (d)(1) of the adopted section, relating to identification of potential merger partners, includes changes to delete the requirement of a specific minimum rating by one of the financial rating services, to provide that internal procedures and management control requirements are to conform to generally accepted auditing standards, and to add a discretionary provision giving the Commissioner the flexibility to consider any documented characteristic of an insurer relevant to financial condition. Third, subsection (d)(2), relating to identification of financially weak insurers, is changed to add criteria related to the capabilities of management to sufficiently direct and operate the insurer. Section 28.3 will create a method to identify and disseminate information relevant to potential merger partners for financially weak insurers. Section 28.3 is adopted as part of Title 28, Part I. Chapter 28, Subchapter A, relating to general provisions of supervision and conservation, of insurance carriers. The Section is necessary to assure the orderly and efficient administration and implementation of the new legislation encouraging mergers to prevent, where possible, insurer delinquencies and the necessity of supervision, conservatorship and/or receivership pursuant to the Insurance Code, Articles 21.28 and 21.28-A. Section 28.3 will enable the Commissioner of Insurance to evaluate the facts and circumstances of each insurer and determine if a merger should be required or if other regulatory action is more appropriate. In recognition of the fact that merger is not a feasible option for all financially weak insurers, this section is not designed or intended to prohibit the Commissioner of Insurance from taking any other regulatory action deemed necessary, and is not a condition precedent to such other action relating to insurer delinquencies or insolvencies. To further encourage the merger of insurers in weak financial condition with those in stronger financial condition, sec.28.3 provides that mergers pursuant to its provisions shall be acted upon in an expedited manner and shall be given precedence over other matters of a similar nature not initiated pursuant to this section. A total of four sets of comments was received on the section as proposed and published. The American Council of Life Insurance and Government Personnel Mutual Life Insurance Company commented in favor of the section as proposed, but recommended changes to the proposal. Blue Cross and Blue Shield of Texas, Inc., and Unified Life Insurance Company commented against the section as proposed. All four commenters focused comments on the "Identification of Financially Strong Insurers" as problematic. The comments urged that, under the criteria as proposed, many financially sound insurers would be excluded. Comments in this area also focused on the closed nature of the criteria as proposed, as well as the required minimum rating provided by particular professional rating organizations. The department agrees with some of these comments, and for that reason the adoption includes provisions for commissioner discretion in the consideration of particular relevant financial characteristics in determination of appropriate potential merger partners for financially weak insurers. The adoption also deletes the requirement for a minimum required financial rating from any professional rating service. One commenter identified the internal management and accounting controls provision as an area governed by generally accepted auditing standards. The department agrees and for that reason the adoption includes a reference to such standards, and deletes the reference to generally accepted accounting principles. One commenter complained that sec.28.3(d) does not have specific criteria. The department disagrees, and paragraphs (1) and (2) as adopted contain sufficiently specific criteria, while simultaneously providing for needed simplicity and flexibility in the criteria that are set out in such paragraphs. All four commenters objected to use of the phrase "financially strong insurers" to refer to potential merger partners. The department agrees that a better term should be used to identify such insurers. For this reason, the adoption, after initial reference to "financially weak" and "financially strong" insurers as are used in the Insurance Code, Article 21.28- A,sec.1, the word "stronger" and the phrase "potential merger partner" or "potential merger partners" are used instead to identify insurers placed on the list maintained by the commissioner for potential merger partners. The new section is adopted under the Insurance Code, Articles 21.28-A and 1. 04, and Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5. The Insurance Code, Article 21.28-A, sec.1, authorizes and requires the State Board of Insurance to promulgate rules that encourage the merger of insurers in weak financial condition with insurers in strong financial condition. Article 1. 04(b) authorizes the board to determine rules in accordance with the laws of this state. Texas Civil Statutes, Article 6252-13a, sec.4 and sec.5 authorize and require each state agency to adopt rules of practice setting forth the nature and requirement of available procedures, and prescribe the procedures for adoption of rules by a state administrative agency. sec.28.3. The Encouragement of the Merger of Insurers in Weak Financial Condition With Insurers in a Stronger Financial Condition. (a) Purpose and applicability. The purpose of this section is to provide the basis for encouragement of the merger of financially weak insurers with financially stronger insurers, as provided in the Insurance Code, Article 21.28- A, sec.1, in circumstances where rehabilitation or conservation of an insurer would be inefficient or impracticable. The provisions of this section shall be utilized in conjunction with authority granted and duties required in the Insurance Code, Articles 1.15-1.19, 1.32, 9.48, 21.28, 21.28-A, 21.28-C, 21.28- D, and 21.49-1. If a financially weak insurer, as provided in this section, indicates it does not wish to be merged with a potential merger partner, the provisions of this section shall not apply. (b) Threshold criteria for merger. The Commissioner of Insurance, in determining whether to pursue a merger alternative under this section, shall consider the following threshold criteria: (1) whether the corporate form of the financially weak insurance carrier is one which legally accommodates a merger alternative; and (2) whether conservation or rehabilitation of the financially weak insurer is inefficient or impracticable. (c) Scope of consideration. So long as the criteria of subsection (b), (1) of this section is present, the commissioner may consider and pursue merger of a financially weak insurer upon determination that merger is a feasible alternative to supervision, conservatorship, or receivership which otherwise would be required of such insurer. The commissioner is not required, however, to further pursue the alternative of merger with respect to a financially weak insurer if either of the conditions described in subsection (b), paragraphs (1) and (2) of this section is not present. (d) Identification of potential merger partners and financially weak insurers. To facilitate the merger of financially weak insurers with financially stronger insurers, the Texas Department of Insurance shall utilize the procedures outlined in paragraphs (1) and (2) of this subsection for identification of potential merger partners and financially weak insurers, respectively. (1) Potential merger partners are those which exhibit one or more of the following characteristics as of the close of the most recent calendar year: (A) a review of internal management and accounting controls as required by generally accepted auditing standards which are documented by a Certified Public Accountant's audit; (B) an operations history of at least five years with respect to all lines of insurance to be merged; and/or (C) any other documented characteristics, including any financial conditions, deemed appropriate by the commissioner. (2) Financially weak insurers are those which exhibit any or a combination of the following factors which would result in a finding of hazardous financial condition by the Commissioner of Insurance: (A) the required surplus, capital, or capital stock is impaired to an extent prohibited by law; (B) the surplus, capital, or capital stock of the company is insufficient to permit it by law to continue to write new business; (C) the business of the insurance company is being conducted fraudulently; (D) the insurer has attempted to dissolve or liquidate without first having made provisions satisfactory to the commissioner of insurance for the payment of liabilities arising from policies of insurance issued by such company; and/or (E) a review of the financial condition of the insurer indicates that the continued operation of the insurer might be hazardous to its policyholders, creditors, or the general public when such review is made in conjunction with the following: (i) the kinds and nature of risks insured; (ii) the loss experience and ownership of the insurer; (iii) the ratio of total annual premium and net investment income to commission expenses, general insurance expenses, policy benefits paid, and required policy reserve increases; (iv) the capabilities of management to sufficiently direct and operate the insurer; (v) the method of operation of the insurer; (vi) affiliations; (vii) investments; (viii) any contracts which lead or may lead to contingent liability; and/or (ix) agreements with respect to which the insurer is a guarantor or surety. (e) Compilation and maintenance of list of potential merger partners. The Texas Department of Insurance shall, on or before August 1 of each year, solicit insurers potentially meeting the criteria of subsection (d) (1) of this section to be included on a list of potential merger partners interested in pursuing merger with weak insurers. All interested potential merger partners shall be added to the list of potential merger partners compiled and maintained by the department. (f) Procedural provisions. Any insurer identified as a weak insurer and meeting the criteria set out in subsection (b) of this section shall be provided with the list of potential merger partners in connection with a communication encouraging the weak insurer to contact potential merger partners for a possible merger. The weak insurer shall provide the department with either of the following within 30 days from the date on which the list of insurers is mailed to the weak insurer: (1) a letter of intent to merge, from one or more potential merger partners; provided that the Commissioner of Insurance may extend the time period for response, based upon written application of the weak insurer, and establish such conditions and limitations as are appropriate under the circumstances; or (2) a letter or other communication indicating that the insurer has elected not to pursue the alternative of merging with any potential merger partner. (g) Failure to respond. In the event a financially weak insurer fails to respond in accordance with subsection (f) of this section, the insurer shall be deemed to have elected not to pursue the alternative of merger. (h) Docketing pending mergers. Any merger initiated pursuant to the provisions of this section shall have preference over other matters of a similar nature pending before the Texas Department of Insurance and shall receive official action at the earliest practicable date. (i) In relation to other law. The provisions of this section are not intended in any manner to limit the authority conferred upon the Commissioner of Insurance in the Insurance Code or other applicable law. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 6, 1992. TRD-9210760 Linda K. von Quintus-Dorn Chief Clerk Texas Department of Insurance Effective date: August 27, 1992 Proposal publication date: April 24, 1992 For further information, please call: (512) 463-6327 Part II. Texas Workers' Compensation Commission Chapter 165. Rejected Risk: Injury Prevention Services 28 TAC sec.sec.165.1-165.4 The Texas Workers' Compensation Commission adopts sec. sec.165.1-165.4, concerning injury prevention services required by House Bill 62. Section 165.2 is adopted with changes to the proposed text published in the May 26, 1992, issue of the Texas Register (17 TexReg 3822). Sections 165.1, 165.3, and 165.4 are adopted without changes and will not be republished. These sections are necessary to implement the program of safety and health inspections required by House Bill 62. The only change made in the proposed text of these sections was in sec.165.2(a)(1) where the reference to sec.164.8 was changed to refer to 164.3. This corrected an error in the published text. These new sections provide a mechanism for employers, who are classified by the Texas Workers' Compensation Insurance Facility as rejected risk, to assess the work-place hazards and produce an accident prevention program. These sections also provide for inspection of those programs by the commission. The only public comment received on sec.165.1 was from the Independent Insurance Agents of Texas. The comment recommended the rule be changed to require the facility to include the agent's name and address when providing the commission with the list of identified employers and send a copy of the employer's notification letter to the agent. The commissioners disagreed with the recommended change because the program is designed to allow an employer to reduce loss experience and retain coverage by the facility. If the employer elects not to participate in the program but drops coverage provided by the facility, the employer may seek assistance from the agent in locating other coverage if the employer chooses to. If the facility ultimately rejects coverage, the facility should follow the normal procedure they follow today with any employer they refuse to cover. If the employer elects to pursue coverage and enter the process described in these rules, the agent does not have a role. The insurance carrier selected by the facility to underwrite the coverage will be in a position to provide assistance in assessing risks and evaluating loss history for employers. The only public comment regarding sec.165.2 was from the American Insurance Association. The comment stated that the 24-hour filing requirement is too short. Because detailed follow-up surveys or multiple locations may be involved, this time should be 21 or 30 days. Thirty days is consistent with the requirement that the division report in 30 days. The commissioners disagreed with the recommended change because the rule requires filing within 24 hours but only after completion of the consultation. The consultation will be complete when the professional source and the employer sign the hazard survey report. Twenty four hours should be more than adequate time to mail the report to the commission. There were no public comments on the other sections. The new sections are adopted under the Insurance Code, Texas Civil Statutes, Article 5.76-2, sec.4.06, regarding injury prevention requirements, which requires the commission to establish additional criteria for identifying employers and authorizes the commission to provide injury prevention services. sec.165.2. Safety Consultation and Formulation of the Accident Prevention Plan. (a) Not later than 30 days following the effective date of the rejected risk policy, or receipt of notice of identification, whichever occurs later, the policyholder shall complete a safety consultation using a source approved by the division pursuant to sec.164.9 of this title (relating to Approval of Professional Sources for Safety Consultations). The consultation may be provided by: (1) the division, subject to the conditions specified in sec.sec.164.3, 164.11, and 164.12 of this title (relating to Safety Consultation; Request for Safety Consultation from the Division, Reimbursement of Division for Services Provided to Extra-hazardous Employer); (2) the policyholder's insurance carrier; or (3) another professional source. (b) The division shall provide a list of approved professional sources for inclusion with the notification letter to each policyholder notified. (c) The safety consultant shall conduct a hazard survey at each appropriate job site of the policyholder and prepare a hazard survey report. The report shall be in a written format prescribed by the commission and shall include a description of any hazardous conditions or practices identified, along with recommendations for controlling the identified hazardous conditions or practices. (d) The hazard survey report(s), signed by both the consultant and the policyholder, and any attachments shall be filed by the consultant with the division within 24 hours of completing the consultation. (e) If the initial consultation and report cannot be completed in the time allowed under this section, the policyholder may apply to the commission for an extension of the time requirements upon a showing of good cause. (f) Formulation of an accident prevention plan shall be in accordance with sec.164.4 of this title (relating to Formulation of Accident Prevention Plan). This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 5, 1992. TRD-9210723 Susan Cory General Counsel Workers' Compensation Commission Effective date: September 14, 1992 Proposal publication date: May 26, 1992 For further information, please call: (512) 440-3592 28 TAC sec.165.5 The Texas Workers' Compensation Commission adopts new sec.165.5, without changes to the proposed text as published in the June 19, 1992, issue of the Texas Register (17 TexReg 4429). This section is necessary to implement the program of safety and health inspections required by House Bill 62. This new section provides a mechanism for employers, who are classified by the Texas Workers' Compensation Insurance Facility as an extraordinary risk, to assess the workplace hazards and produce an accident prevention program. This section also provides for inspection of those programs by the commission. No comments were received regarding the new section. The new section is adopted under the Insurance Code, Texas Civil Statutes, Article 5.76-2, sec.4.06, regarding injury prevention requirements, which requires the commission to establish additional criteria for identifying employers and authorizes the commission to provide injury prevention services. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 5, 1992. TRD-9210724 Susan Cory General Counsel Workers' Compensation Commission Effective date: September 14, 1992 Proposal publication date: June 19, 1992 For further information, please call: (512) 440-3592 TITLE 40. SOCIAL SERVICES AND ASSISTANCE Part I. Texas Department of Human Services Chapter 19. Long-Term Care Nursing Facility Requirements for Licensure and Medicaid Certification Subchapter C. Resident Rights 40 TAC sec.19.203, sec.19. 217 The Texas Department of Human Services (DHS) adopts amendments to sec.19. 203 and sec.19.217, concerning notice of rights and services and directives and durable powers of attorney for health care. The purpose of the amendment to sec.19.203 is to add as a right of nursing facility residents formulation of advance directives concerning their medical treatment. Section 19.217 is amended to require that all residents, not just new admissions, be given information regarding advance directives. The justification for the amendments is to comply with the Omnibus Budget Reconciliation Act of 1990. The amendments will function by ensuring that nursing facility residents have every opportunity to receive the benefit of making an advance directive that reflects their choices concerning receiving or refusing medical treatment. The amendments are adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which provides the department with the authority to administer public and medical assistance programs. The amendments are adopted in compliance with federal requirements to be effective April 6, 1992. sec.19.203. Notice of Rights and Services. (a)-(f) (No change. ) (g) The resident has the right to refuse treatment, to formulate an advance directive (as specified in sec.19.217 of this title (relating to Directives and Durable Powers of Attorney for Health Care)), and to refuse to participate in experimental research. (1)-(3) (No change.) (h) -(n) (No change.) sec.19.217. Directives and Durable Powers of Attorney for Health Care. Competent adults may issue directives or durable powers of attorney for health care, subject to the requirements of this section, and the Texas Natural Death Act and law governing Durable Powers of Attorney for Health Care. (See sec.19.219 of this title (relating to Documentation for the Delegation of Long Term Care Resident's Rights) and sec.19.205(b) of this title (relating to Free Choice).) When an individual has issued no directive, has no legal guardian, and has been determined by the physician to be incapable of understanding and exercising his rights, treatment decisions must be made according to the Texas Natural Death Act, sec.672.009. (1)-(2) (No change.) (3) Facility Responsibility (Resident Self-Determination). The nursing facility must maintain policies and procedures regarding the following rules with respect to all adult individuals receiving services provided by the facility. (A) All individuals must be provided with the following written information: (i)-(ii) (No change.) (B) -(F) (No change.) (G) When an individual is in a comatose or otherwise incapacitated state, and therefore is unable to receive information or articulate whether he has executed an advance directive, the family, surrogate, or other concerned person must receive the information concerning advance directives. The facility must provide this information to the resident once he is no longer incapacitated. (H)-(J) (No change.) This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 7, 1992. TRD-9210818 Nancy Murphy Agency Liaison, Policy and Document Support Texas Department of Human Services Effective date: April 6, 1992 For further information, please call: (512) 450-3765 40 TAC sec.19.204 The Texas Department of Human Services (DHS) adopts amendments to sec.19. 204 and sec.19.1301, concerning protection of resident funds and pharmacy services, in its Long Term Care Nursing Facility Requirements rule chapter. The purpose of the amendment to sec.19.204 is to clarify that nursing facility residents' individual financial record must be available to residents or their legal representatives through quarterly statements and on request. The purpose of the amendment to sec.19.1301 is to require pharmacists to report any irregularities to the attending physician and the director of nursing. The justification for the amendments is to comply with the Omnibus Budget Reconciliation Act of 1987. The amendments will function by ensuring that nursing facility residents and their legal representatives receive information about residents' financial status on request. The amendment is adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which provides the department with the authority to administer public and medical assistance programs. The amendments are adopted in compliance with federal requirements to be effective April 1, 1992. sec.19.204. Protection of Resident Funds. (a)-(l) (No change.) (m) Quarterly statement. The individual financial record must be available, through quarterly statements and on request, to the resident or his legal representative. The statement must reflect any recipient funds which the facility has deposited in an account as well as any recipient funds held by the facility in a petty cash account. The statement must include at least the following: (1)-(5) (No change.) (n)-(s) (No change.) This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 7, 1992. TRD-9210819 Nancy Murphy Agency Liaison, Policy and Document Support Texas Department of Human Services Effective date: April 1, 1992 For further information, please call: (512) 450-3765 Subchapter N. Pharmacy Services 40 TAC sec.19. 1301 The amendment is adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which provides the department with the authority to administer public and medical assistance programs. The amendments are adopted in compliance with federal requirements to be effective April 1, 1992. sec.19.1301. Pharmacy Services. The facility must provide routine and emergency drugs and biologicals to its residents, or obtain them under an agreement described in sec.19.1906 of this title (relating to Use of Outside Resources). See also sec.19.701(12) and (13) of this title (relating to Quality of Care) for information concerning drug therapy and medication errors. (1)-(4) (No change.) (5) Drug regimen review. (A) (No change.) (B) The pharmacist must report any irregularities to the attending physician and the director of nursing, and these reports must be acted upon. (C) (No change.) (6)-(7) (No change.) This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 7, 1992. TRD-9210820 Nancy Murphy Agency Liaison, Policy and Document Support Texas Department of Human Services Effective date: April 1, 1992 For further information, please call: (512) 450-3765 Subchapter O. Infection Control 40 TAC sec.19. 1402 The Texas Department of Human Services (DHS) adopts an amendment to sec.19. 1402, concerning universal precautions against spread of infection among nursing facility residents, in its Long Term Care Nursing Facility Requirements rule chapter. The purpose of the amendment is to identify potentially infectious materials and clarify requirements regarding hepatitis B vaccinations for facility employees. The justification for the amendments is to comply with Occupational Safety Hazards Administration (OSHA) rules concerning bloodborne pathogens. The amendments will function by ensuring that the section meets federal standards concerning protection of facility residents and employees from exposure to infectious agents. The amendments are adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which provides the department with the authority to administer public and medical assistance programs. The amendments are adopted in compliance with federal requirements to be effective March 6, 1992. sec.19.1402. Universal Precautions. Universal precautions shall be used in the care of all residents because a reliable source cannot identify all those persons infected with blood-borne pathogens. Facilities are responsible for complying with Occupational Safety Hazards Administration (OSHA) regulations found at 29 Code of Federal Regulations, sec.1910.1030 (relating to Bloodborne Pathogens). (1) Universal precautions apply to blood and other potentially infectious materials. (A) Other potentially infectious materials means the following human body fluids: semen, vaginal secretions, cerebrospinal fluid, peritoneal fluid, amniotic fluid, saliva in dental procedures, any body fluid that is visibly contaminated with blood, and all body fluids in situations when it is difficult or impossible to differentiate between body fluids. (B) Universal precautions do not apply to feces, nasal secretions, sputum, tears, urine, and vomitus unless they contain visible blood. (C) Universal precautions do not apply to saliva, unless it contains visible blood. Gloves need not be worn when feeding residents and when wiping saliva from skin. (2) General principles of universal precautions. (A) All health-care workers shall routinely use appropriate barrier precautions to prevent skin and mucous-membrane exposure when contact with blood or other body fluids of any resident is anticipated. (i) Gloves shall be worn for touching blood and body fluids, mucous membranes, or non-intact skin of all residents, for handling items or surfaces soiled with blood or body fluids, and for performing venipuncture and other vascular access procedures. (ii)-(iv) (No change.) (B)-(E) (No change.) (3) (No change.) (4) The facility shall implement infection control procedures including, but not limited to, universal precautions. The intent is to provide protection from predictable exposure to blood or body fluids, regardless of known or suspected human immunodeficiency virus (HIV) serologic status. It is not the intent to mandate protection from all possible or theoretical exposure to blood or body fluids. This represents minimum precautions and facilities are free to utilize more stringent policies for the protection of their employees and residents. (5) Facility employees and residents shall be protected from direct exposure to blood and body fluids to prevent exposure to HIV and hepatitis B virus (HBV). The following outlines minimum requirements for specific departments in a facility. (A) Overall facility requirements. (i) The facility's policy regarding hepatitis B vaccinations shall address all circumstances warranting such vaccinations and identify employees at risk of directly contacting blood or potentially infectious materials. All such employees shall be offered Hepatitis B vaccinations within 10 days of employment. If the employee initially declines Hepatitis B vaccination but at a later date, while still at risk of directly contacting blood or potentially infectious materials, decides to accept the vaccination, the facility must make the vaccination available at that time. (ii)-(ix) (No change.) (B)-(D) (No change.) This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 7, 1992. TRD-9210821 Nancy Murphy Agency Liaison, Policy and Document Support Texas Department of Human Services Effective date: March 6, 1992 For further information, please call: (512) 450-3765 Chapter 49. Child Protective Services Subchapter E. Intake and Investigation Services 40 TAC sec.49.519 The Texas Department of Human Services (DHS) adopts new sec.49.519, with changes to the proposed text as published in the July 3, 1992, issue of the Texas Register (17 TexReg 4738). The justification of the new section is to comply with House Bill (H.B.) 2252 as passed by the 72nd Texas Legislature. House Bill 2252 amended the Texas Family Code (TFC) by adding TFC, sec.34.054, which requires DHS to adopt voluntary standards for investigators of child abuse. The provisions of the adopted section meet all the requirements specified in TFC, sec.34.054. The amendment will function by encouraging "professionalism and consistency in the investigation of suspected child abuse" as specified in TFC, sec.34.054. No comments were received regarding adoption of the amendment. The department, however, has initiated one change to the text. In sec.49.519(6), the department has changed the number of the rule that is referenced from sec.49.514 to sec.49.513. The new section is adopted under the Human Resources Code, Title 2, Chapter 41, which authorizes the department to enforce laws for the protection of children. The new section is also adopted under the Texas Family Code, Title 2, Chapter 34, which authorizes the department to provide services to alleviate the effects of child abuse and neglect, and under sec.34.054 in particular, which authorizes the department to develop and adopt voluntary standards for individuals who investigate suspected child abuse at the state or local level. sec.49.519. Voluntary Standards for Investigators of Child Abuse. To encourage professionalism and consistency in the investigation of reports of child abuse as specified in the Texas Family Code (TFC), sec.34.054, the Texas Department of Human Services (DHS) recommends the voluntary standards set forth in this section to individuals who investigate reports of child abuse. (1) As specified in TFC, sec.34.054, and in Item 2300(1) of DHS's Minimum Standards for Child-Placing Agencies, each individual responsible for investigating reports of child abuse, or for conducting interviews during investigations of child abuse, must receive at least 15 hours of professional training every year. (2) The professional training curriculum for individuals who conduct investigations or investigation interviews must include information about: (A) physical abuse as defined in TFC, sec.34.012(1)(C)-(D), including the distinction between: (i) physical injuries resulting from abuse; and (ii) ordinary childhood injuries; (B) psychological abuse as defined in TFC, sec.34.012(1)(A)-(B); (C) available treatment resources; and (D) the types of abuse reported to the investigating agency for whom the investigator works, including information about: (i) the incidence of each type of abuse reported; and (ii) the receipt of false reports. (3) Individuals who conduct videotaped or audiotaped interviews with suspected victims of child abuse must ensure that the interviews meet the requirements for recorded interviews specified in TFC, sec.11.21(b), including the requirement in sec.11.21(b)(3) that the recording be accurate and unaltered. (4) Children often disclose information about the occurrence of abuse progressively over the course of several interviews. Accordingly, individuals who investigate reports of child abuse must: (A) conduct enough interviews and examinations of suspected victims of child abuse to give them sufficient opportunity to disclose what they know; but (B) refrain from conducting additional interviews or examinations after a child has disclosed enough information to confirm or rule out the occurrence or risk of abuse, unless there is a good reason for conducting additional interviews or examinations. When there is a good reason for conducting additional interviews or examinations, the individual responsible for conducting the interviews or examinations may consult with a supervisor or another individual with appropriate expertise to confirm the need for additional interviews or examinations. All decisions about conducting additional interviews or examinations as specified in this subparagraph must be based on the best interest of the child. (5) Investigating agencies must keep all documents generated during investigations in the child's case record for the life of the record. (6) Investigators must make reasonable efforts to locate and notify each parent of a suspected victim of child abuse regarding the disposition of the investigation, except for absent parents who are abusive, dangerous, or otherwise unlikely to protect the child, as specified in sec.49.513 of this title (relating to Notification About Results). This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on August 7, 1992. TRD-9210822 Nancy Murphy Agency Liaison, Policy and Document Support Texas Department of Human Services Proposal publication date: July 3, 1992 Effective date: August 31, 1992 For further information, please call: (512) 450-3765