ADOPTED RULES 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 16. ECONOMIC REGULATION Part II. Public Utility Commission of Texas Chapter 23. Substantive Rules Quality of Service 16 TAC sec.23.70 The Public Utility Commission of Texas adopts new sec.23.70, concerning Terms and Conditions of Open-access Comparable Transmission Service with changes to the proposed text as published in the February 6, 1996, issue of the Texas Register (21 TexReg 824). This rule is a companion to the amendments to sec.23.66 and sec.23.67, adopted by the commission in early February, relating to transmission access and pricing. The issues in this rule were examined, to some degree, in the workshops that the commission held on transmission access and pricing. The commission held workshops on transmission issues relating to electric utilities on June 16, July 14 and 18, and August 13 and 17, 1995. The commission also conducted an additional workshop on transmission pricing and the role of an ERCOT independent system operator on December 15, 1995. The commission held substantive discussions on wholesale transmission issues during numerous commission open meetings between June 1995 and February 1996. At an open meeting on January 24, the commission voted to publish proposed sec.23.70 for comment in the Texas Register. In addition to the workshops and open meetings referred to previously, the commission staff has convened meetings of interested parties and established working groups of interested parties to attempt to resolve issues that have arisen, and the commission has held discussions of transmission issues at several open meetings. The commission held a public meeting to permit interested persons to make oral comments on sec.23.70 on February 23. The new rule is being adopted pursuant to new legislation that directs the Public Utility Commission to adopt rules relating to wholesale transmission service. In PURA 95, the Texas Legislature adopted a significant revision to its statement of legislative policy regarding the electric utility industry. This revised policy statement concluded that wholesale competition among utilities and certain nonutilities is in the public interest. In order to effectuate this policy, the Legislature directed the commission to adopt rules regarding wholesale transmission service which require utilities to provide such service at rates, terms, and conditions which are comparable to the rates, terms, and conditions under which the utility uses its own transmission system. This rule and the prior rule adopted on transmission access and pricing are vital to the accomplishment of the Legislature's policy objective of achieving wholesale competition, because the transmission system which is used to deliver wholesale power is also owned by certain competitors in the wholesale market. Wholesale competition can produce the expected benefits of lower electricity prices and higher quality service only when the market allows participation by a maximum number of buyers and sellers of generation services. Without a requirement for comparable use of the State's transmission system by all wholesale market participants, the Legislature's stated goal of promoting wholesale competition will be frustrated. The legislation enacted by the Texas Legislature requires that the rules adopted by the commission be consistent with the rules adopted by the Federal Energy Regulatory commission relating to open-access, comparable transmission service. Much of sec.23.70 that the commission is adopting is based on the terms of the FERC's proposed tariff for network service. This new section has also been the subject of extensive discussion among interested persons in the working group on operating issues. The FERC has not completed its rulemaking on transmission access, and the commission will undoubtedly have to review this rule for consistency with the FERC rule, after the FERC rule is adopted. Modifications to the commission's rule may be required at that time. The following parties filed comments on the proposed rule: the City of Austin, Brazos Electric Power Cooperative, the City of Brownsville, Central & South West Corp., Destec Energy, Inc., Enron Capital and Trade Resources and Electric Clearinghouse, Inc., Houston Lighting & Power Company, the Public Counsel, the City of San Antonio, South Texas Electric Cooperative, Texas-New Mexico Power Company, Texas Utilities Electric Company, and the City of Weatherford. Cap Rock Electric Cooperative filed a letter supporting the comments of certain other parties. A number of the parties supported the adoption of the rule. Several parties opposed the adoption of certain provisions of the rule, but none of them opposed its adoption. In the preamble to the proposed rule, the commission posed the following question: should the commission mandate a planning process that takes place on an annual basis? This question addressed the annual planning requirement in subsection (f) of the proposed rule, which provided as follows: "Planned resources must be designated by transmission customers in a timely fashion on an annual planning basis such that deficiencies in the ERCOT transmission system may be identified and plans may be formulated by transmission providers to correct these deficiencies." Most of the parties that filed comments on this issue supported a required annual planning process. South Texas Electric Cooperative (STEC) stated that the planning process should take place on an annual basis, as proposed in the rule. As a part of the planning process, transmission users should provide an annual update of their ten year forecast. STEC expressed the view that such information is necessary if the transmission system is to accommodate a competitive wholesale power market while maintaining system reliability. The Lower Colorado River Authority (LCRA) argued that an annual planning process would significantly enhance the reliability of transmission service by assessing on a regular basis the impact of both load growth and changed load/supply arrangements. Other parties supporting an annual planning process were the City of Austin, the City of San Antonio, Central and South West Corp. (CSW), Houston Lighting & Power Company (HL&P), and Texas Utilities Electric Company (TU Electric). Brazos Electric Power Cooperative (Brazos) argued that the rule should not prescribe a schedule for planning updates. Brazos expressed the view that the independent system operator, which is mandated by sec.23.67, would facilitate ERCOT-wide planning, and that the rule should simply require that planning updates be made at regular intervals, as needed to accommodate wholesale transactions that may be requested or reasonably anticipated. STEC and TU Electric noted that the interval for conducting planning did not have to be the same as the interval for revising transmission rates. The commission agrees with the parties that recommended that transmission planning be updated annually. It may also be appropriate to update elements of the transmission rates periodically to reflect changes in load, new transmission service customers, and utilities' reliance on different resources. Such an update would not require that utilities file new cost information. Instead, the most recently approved transmission cost information could be used to establish new rates that reflect current loads and resource plans. In the preamble to the proposed rule, the commission posed the following question: should the commission permit a transmission provider to impose additional requirements, not specified in the Rule, before transmission service may commence? This question addressed the ancillary service requirements that must be met before transmission service is initiated. Subsection (h)(5) of the proposed rule included the following provision: "Service under this subsection shall not commence until the utility and the customer, or a third party, have completed installation of all equipment specified under the operating agreement and consistent with national and regional guidelines and any additional requirements reasonable and consistently imposed to ensure the reliable operation of the utility's system. " Several parties commented in favor of retaining this provision in the rule. CSW argued that permitting the transmitting utility to establish technical requirements that are reasonably and consistently imposed would help ensure the reliable operations of the transmitting utility's system. CSW expressed the view that the rule could not address every conceivable set of circumstances that could occur in the provision of transmission services. Other parties supporting a transmitting utility's ability to impose additional requirements were the City of San Antonio, Brazos, HL&P, STEC, and TU Electric. The City of Weatherford, on the other hand, noted that it is a transmission dependent utility and objected to this provision. The City argued that the proliferation of special requirements by various transmission providers will strangle an open competitive marketplace. Destec expressed the same position. Enron Capital and Trade Resources and Electric Clearinghouse (Power Marketers) agreed that some flexibility to impose additional requirements is appropriate, but the additional requirements must be imposed in a non-discriminatory manner. The commission concludes that it is unlikely to be able to anticipate all of the requirements that might be needed to ensure reliable service. At the same time, as parties have pointed out, the ability to impose additional requirements could be a barrier to comparable transmission service. The commission has attempted to include the most important service requirements in the rule. If a transmission provider believes that additional requirements should be imposed, they would be subject to the revised criteria in the rule: the requirements would have to be reasonable, non-discriminatory, consistently imposed, and necessary to ensure the reliable operation of a transmission service provider's system. The additional requirements would also have to be approved by the independent system operator. In the preamble to the proposed rule, the commission posed the following question: what is a reasonable plan for implementing the requirements that result from the adoption of sec.23.67 and sec.23.70? Some of the parties that filed comments supported the implementation of all of the provisions of the new rules simultaneously. Other parties contended that it will take some time for the commission to approve facilities charges for planned transmission service, but urged that the commission require utilities to offer unplanned service and ancillary services immediately. Some of the parties argued that interim adoption of rates for planned service and floor and ceiling rates for ancillary services is a reasonable means of putting the rules into effect quickly. STEC recommended that both planned and unplanned transactions be implemented simultaneously. STEC argued that if the pricing of unplanned transactions is implemented prior to pricing for planned transactions, transmission providers would not be properly compensated for the use of their transmission facilities, which would result in the confiscation of property. The LCRA made a similar argument. It submitted that the compensation for unplanned transactions is purely a derivative of the compensation for planned transactions, and that it would be inappropriate (and arguably a violation of PURA. Section 2.057(c)) to implement provisions for planned and unplanned transactions at different times. San Antonio and HL&P also urged that planned and unplanned service be implemented simultaneously. LCRA indicated that service under the new rules should be implemented immediately after the transmission owners make initial tariff filings, and should be implemented as interim rates, subject to refund or surcharge following final orders on the owners' transmission cost of service. The City of Austin agreed that if interim rates are adopted for planned services they should be subject to refund. TU Electric also argued that the new pricing system adopted by the commission requires planned transactions to entirely support the revenue requirement of transmission providers. TU Electric supported the adoption of transmission rates on an interim basis, suggesting that such rates take effect September 1, and that revised rate filings be made in December, to reflect the discontinuation of transmission service under separate contracts and the conversion to service under these rules. The East Texas G&Ts urged the commission to require all transmission owners to file transmission and ancillary services tariffs incorporating sec.23.67 to be effective March 1 and proceed with unplanned transmission and ancillary service as of that date. Pricing for unplanned service could and should be effective as of March 1. There would be no reason to set interim rates subject to refund, since pricing for that service has already been decided. Destec and Power Marketers also urged the commission to implement unplanned service right away. According to Destec, economy energy transactions have been occurring in ERCOT for years with little or no pre-planning, no specific terms and conditions other than the ERCOT Operating Guides, and compensation only for energy losses. Destec indicated that the commission should state up front that this practice is to continue, on a non-discriminatory, comparable basis for all parties desiring service. Power Marketers urged the commission to implement as much of sec.23.67 and sec.23.70, as soon as possible. They urged that prices for planned transmission service and ancillary services take effect on an interim basis 35 days after the tariffs are filed, with provisions for true-up of payments, following approval of the tariffs. CSW expressed a similar position, noting that unplanned service could commence after the effective dates of sec.23.67 and sec.23.70, if the commission is willing to permit the use of existing ERCOT loss matrices. The City of Weatherford submitted that it was critical for wholesale loads needing to acquire resources during the transition period that a pricing mechanism be in place. Weatherford suggested that an estimate for pricing of transmission services could be used until such a time that a price is set by the commission, with a true-up after the commission sets prices. Brazos Electric recommended that implementation proceed in stages, in order to allow parties to analyze the effect of the rules in the real world. A cautious approach would enable the commission to evaluate any adverse consequences not anticipated by the parties. The commission concludes that unplanned service does not impose a cost related to the ownership and operation of transmission facilities. Thus, it is appropriate that unplanned transactions be permitted to take place without a facilities charge, whether or not the new rules for pricing planned service have been implemented. The commission also concludes that there are benefits for all utilities and their customers in initiating the new pricing rules for unplanned service immediately. Permitting unplanned transactions to take place without the payment of facilities charges should stimulate a more active short-term wholesale market and permit utilities to obtain short-term resources on favorable terms. This rule should take effect during the third week in April. The commission considers that May 1 is an appropriate date for the commencement of service using the pricing provisions for unplanned service under sec.23.67. Until new loss matrices are approved, the utilities that are required to provide transmission service under sec.23.67 should rely on the existing ERCOT loss matrices and should file these matrices, as required in sec.23.67(h)(1). The commission also concludes that there is a need to set the rates for planned service as quickly as possible. The cost information for setting rates for planned transmission service is to be filed on May 3, but this filing will not include information for the calculation of the megawatt-mile element of the rates. The ERCOT ISO is responsible for calculating the megawatt-mile impacts, but the ISO proposal is not required to be filed until June 10. The commission is aware that the parties that are interested in the megawatt-mile impact calculation have begun assembling the information necessary to make this calculation, in a task that parallels their discussions of the development of an ISO proposal. The commission encourages the parties to continue these efforts and identify any tasks that must be carried out to produce a megawatt-mile impact calculation that is consistent with sec.23.67 of the Substantive Rules and this rule. The commission believes that it should be possible to set interim rates for planned transmission service by September 1 and intends to establish procedures for the setting of transmission rates that will permit it to do so. TU Electric pointed out in connection with subsection (a) that transmission service to, from and over HVDC interconnection is now, and will be in the future provided pursuant to a FERC tariff (the TFO tariff). TU Electric stated that once this rulemaking is completed and new tariffs have been implemented in accordance with the rule for intra-ERCOT transactions, it will be appropriate for TU Electric to revisit its TFO tariff and determine what changes, if any, should be made to that rate schedule. HL&P raised a similar concern, commenting that the commission lacks jurisdiction to prescribe terms and conditions, or the rate methodology, for transmission service to, from and over the direct-current interconnections between ERCOT and the Southwest Power (SPP). HL&P indicated that the proposed rules distinction between planned and unplanned service and proposed requirements for securing service are in conflict with HL&P's TFO tariff. Under its current TFO tariff, HL&P stated that a customer may be able to secure transportation on a long-term basis without restriction as to the duration, or advance notice as proposed in sec.23. 70. CSW submitted that even though subsection (a) allowed transmission customers to deliver unplanned energy purchases to their load without an additional facilities charge, it was not clear how a transmission customer could deliver energy to third parties. The commission recognizes that the current tariffs for service to, from and over the DC ties are FERC tariffs. At the same time, they incorporate pricing methods that are consistent with this commission's rules, and the commission participated in the FERC proceeding in which these tariffs were originally proposed. It is the commission's expectation that the tariffs will be revised so that they are consistent with the comparability standard that is the central element of current FERC policy on transmission service. When the tariffs are changed, it will be possible for the utilities that provide the service to modify them in such a way that they are consistent with the transmission rules in this section and sec.23.67. With respect to the CSW comment, the rule was drafted to permit the broadest possible use of transmission service by transmission customers in the wholesale market. That there are uses of the transmission system described in the rule that do not appear to be practical is not a reason for narrowing the permissible uses. In narrowing the permissible uses, the commission might inadvertently eliminate a purpose of transmission service that would otherwise be permissible. The East Texas G&Ts commented that the definition of "Direct Assignment Facilities" in subsection (b) should be descriptive rather than normative. In addition, the definition was inaccurate and narrowly described what constitutes direct assignment. The East Texas G&Ts also commented that the definition of "Transmission Upgrade" should not preclude construction of direct assignment facilities. CSW noted that the definition "Interconnection Agreement" was relatively narrow in that it covered only the requirements for physical connection between transmission customers and providers. FERC jurisdictional utilities, such as CSW, are required to have service agreements filed under tariffs of general applicability. Therefore, the rule should recognize service agreements for FERC jurisdictional utilities. CSW also had questions about existing transmission agreements and whether they would be acceptable in lieu of an interconnection agreement. CSW also commented that in the definition of "Eligible Customer," designated agents should not be eligible for service in their own right, and that the definition of "Good Utility Practice" should include, without limitation, ERCOT and NERC reliability criteria and operating guides. The term "direct assignment facilities" is one that was used in the FERC network tariff, on which this rule is based. The commission, in adopting sec.23. 67, has not included the concept of direct cost assignment. Rather, it has permitted the use of contributions in aid of construction, under sec.23.67(n). The commission concludes that where the term "direct assignment" appears in the rule, it should be replaced by the concept of contribution in aid of construction, and that the definition of "direct assignment facilities" should be removed from this rule. The commission agrees with the suggestions of CSW and is revising these definitions. In response to the comments of a number of parties, the commission has modified several of the definitions to conform to sec.23.67. In connection with subsection (c), the East Texas G&Ts raised a concern about the lack of a requirement that a utility be a default provider for ancillary services. The East Texas G&Ts raised the question who decides whether the transmission customer has obtained sufficient ancillary services. The rule did not explain what would happen in the event a customer has not obtained all the needed ancillary services, or has obtained ancillary services that another utility believed are of insufficient quality to qualify as ancillary services. The East Texas G&Ts were concerned that control area utilities could declare customer's ancillary services insufficient and unilaterally refuse transmission access. The East Texas G&Ts recommended that the ISO resolve issues pertaining to ancillary services. The commission concludes that it is appropriate to have the ISO make determinations concerning the adequacy of arrangements for ancillary services. TU Electric recommended deletion of subsection (d)(3) dealing with transmission service to, from, and over the HVDC interconnection, on ground that this service is under the jurisdiction of the FERC. HL&P stated that redispatch requirements should be shared equally by all generators. Subsection (d)(5) requires every transmission customer to redispatch its resources to provide transmission capacity for third parties. HL&P suggested that this could be interpreted as all generators would be subject to redispatch. HL&P contended that under subsection (i)(3)(E), redispatch responsibility would fall entirely on the utilities, and that under the Public Utility Regulatory Policies Act, HL&P is under the obligation to purchase all output from qualifying facilities; hence, it would be unable to require redispatch of a qualifying facility for conditions other than system emergencies. HL&P suggested that this problem could be resolved if the responsibility to redispatch was put on all generators, and all generators are required to provide binding bids to the ISO for redispatch. The East Texas G&Ts stated that subsection (d)(2) should permit the filing of an unexecuted interconnection agreement when a transmission customer disputes the agreement offered. In the absence of such a requirement, the transmission provider would have overwhelming bargaining leverage. The East Texas G&Ts also recommended that the preconditions for services be listed in one place, under subsection (e)(1), and that the interconnection agreement requirement be listed as in subsection (e)(1)(C). The East Texas G&Ts noted a problem with the pricing methodology governing exports from ERCOT. For ERCOT exports there would be no ERCOT buyer and thus no load-ratio share. Instead, the rule contained rates for planned service that were arbitrarily lowered to one-fourth on peak service and one twelfth for off- peak service. However, one would not be able to determine from the rule what the total charge paid for transmission would be. The East Texas G&Ts recommended pricing ERCOT exports based on point-to-point service. The access fee would be comprised of an access fee and an impact fee, and losses calculated in accordance with sec.23.67. City Public Service of San Antonio suggested that for service out of ERCOT each utility be allowed to charge a dollar/megawatt-mile equal to its approved transmission cost of service divided by the utility's total system megawatt-miles. CSW remarked that subsections (d) and (h) established ancillary service options for transmission customers that were not completely consistent. San Antonio, recommended that the obligation to execute contracts should be required for transmission customers whether or not physically connected to the transmission provider; otherwise the cost of constraints could be unfairly borne by the transmission provider's other customers. San Antonio noted that sec.23.70(d)(5) did not address payment of redispatch costs. San Antonio stated that it would not be fair to require its customers to be charged redispatch costs in order to serve a third party. The issue raised by TU Electric is the same one that it raised in connection with subsection (a). As is noted previously, the commission concludes that there is no need to modify the rule to avoid conflict with the FERC. The commission expects that it will be possible for the utilities that own portions of the DC ties to obtain FERC approval of modified tariffs that are consistent with this rule. The obligation to redispatch was expressed as an obligation of utilities, because the commission has broad authority over utilities and does not have such power over non-utility generators. Utilities that rely on non-utility generators, however, would be required to meet their obligations under this rule, even if it means redispatching a non-utility generator. The FERC transmission rules permit parties to file an unexecuted agreement and begin the transmission service, while the FERC resolves any disputes between them. The commission intends that a similar process take place under sec.23.67, except that the dispute would be submitted for alternative dispute resolution before being submitted to the commission. Section 23.67(s)(7) provides that a transaction that is the subject of a dispute shall be allowed to go forward while the dispute is being resolved, to the extent that reliability is not affected. With regard to pricing of service for exporting power out of ERCOT, the commission concludes that sec.23.67(g) and sec.23.70(d) adequately describe a method that will permit export rates to be calculated. These rates will, however, be prorated for periods shorter than one year. The rates should be calculated in the same proceeding in which the commission sets the facilities charges for transmission service within ERCOT. The commission concludes that a uniform method for setting rates will facilitate competition among generators that seek to provide power to utilities outside of ERCOT. Thus, the commission concludes that San Antonio's suggestion that rates be set by each utility should not be adopted. The commission has modified subsections (d) and (h) to ensure that they are consistent. The commission concludes that San Antonio's concerns are met by sec.23.67(n), which permits a utility to require a contribution in aid of construction or, in connection with a request for ancillary services, a long-term contract. TU Electric recommended that the power factor requirement be deleted from subsection (e)(1). It stated that it is unnecessary for a rule to delve into engineering details. TU Electric added that power factor requirements are specific to individual points of delivery and take into account utility-specific load characteristics. The East Texas G&Ts also recommended deletion of the power factor requirement as a precondition to obtaining service. They commented that rural electric cooperatives would be disadvantaged and would have no alternative but install expensive equipment. HL&P made several suggestions concerning the information that should be provided in connection with an application for transmission service, including a requirement to identify ancillary service providers and the services that they are providing and a requirement to specify how unplanned transmission service would affect the customer's use of planned resources. The East Texas G&Ts stated that the literal terms of this section of the rule would require both the buyer and seller of power to apply for transmission service. The source of the confusion is believed to be the attempt of the commission to apply an ERCOT-wide rate to transmission customer's load ratio share, while keeping the rule open to power sellers or resellers who do not have a load ratio share. The East Texas G&Ts suggested requiring either the buyer of power or the seller to apply for transmission service. LCRA recommended that the rule should specify requirements for a generator to connect to the transmission system. Generators would be required to meet the stability and voltage deviation requirements of the transmission provider at the particular location where the generator is to be connected. Texas-New Mexico Power Company (TNP) urged the commission to be specific with respect to the ISO being the final authority in operational determinations, define direct assignment facilities in a way that differentiates them from transmission upgrades that benefit the system, subject transmission providers "reasonable efforts to mitigate" to regulatory scrutiny, and pointed out that the prospect of collecting triple payments from those in need for ancillary service could discourage prompt responses on the part of providers precluding some short-run economic opportunities. TNP recommended that any entity given decision-making authority should submit itself to the regulatory authority of the commission. Brazos commented that subsection (e)(2)(A) implied that transmission providers may be required to construct facilities that are needed for a few years or even a few months. The rule should encourage coordinated planning so that any facilities that are constructed may have maximum benefit to the transmission network. Furthermore, since impact fees will be due to transmission providers from customers not physically connected, the rule should include a mechanism for the transmission provider to enforce collections of its impact fees. Power Marketers and Destec urged the commission to carefully consider lead time for requests for unplanned service in subsection (e)(4). The lead time for service as specified in the rule would unnecessarily impede a robust and vibrant economy energy market in ERCOT. Power Marketers urged the commission to prescribe a minimum advance notification for hourly and daily transactions of ten minutes, for weekly transactions of four hours, and for monthly transactions of twenty four hours. Destec suggested the same notification requirements as Power Marketers for hourly and daily transactions. Power Marketers would permit utilities to impose longer notification requirements in response to emergency conditions. In addition, Power Marketers and Destec expressed the view that there was no rationale for limiting the duration of unplanned transactions to thirty days. Instead, a transmission customer should be able to request an unplanned transaction for a period of up to a year. The commission concludes that the suggestion by TU Electric and the East Texas G&Ts, that the rule need not address power factor, should not be adopted. Section 23.67 provides that var support is a part of the transmission function, and, in order for a transmission provider to provide this service as transmission, there needs to be some uniformity of reactive power needs among loads. The proposed rule would establish a uniform standard for wholesale loads. The alternative is to treat var support as an ancillary service and address each transmission customer's needs individually. The commission recognizes that there may be some wholesale loads that do not now meet this requirement and may need some time to comply with the rule. The commission is modifying the rule in response to the suggestions of HL&P. Some of these suggestions are included in subsection (e) and others are being included in subsection (h), relating to ancillary services. The commission does not agree that the rule as proposed requires both the buyer and seller of power to apply for service. Both a buyer and a seller are eligible customers, but for any transaction, either of them may apply for the necessary transmission service. The commission agrees that it will probably be necessary to prescribe standards for interconnection of generators to the transmission network. It is not doing so now, however, because other parties should have an opportunity to comment on such requirements before the commission adopts them. This may also be a matter that the ISO could address. In any event, the commission concludes that it has not had sufficient information provided on this subject to take any action now. As is noted previously, the commission has concluded that the ISO should make determinations concerning the adequacy of ancillary service arrangements. Assigning this role to the ISO should minimize disputes about the adequacy of ancillary service arrangements, but if disputes do arise, the alternative dispute resolution process and complaints to the commission are available for resolving them. The commission is eliminating the concept of direct assignment facilities from this rule, but the problem of allocating the initial costs of additional facilities is one that remains, in determining whether a contribution in aid of construction is appropriate. Section 23.67(n) sets out standards for determining when a contribution in aid of construction is required in connection with a new facility. The commission does not agree with the conclusion drawn by Brazos, that additional facilities could be required to be built to facilitate very short term transactions. The annual planning process prescribed by subsection (f) would identify each utility's needs, the generating resources it plans to use to meet those needs, and the transmission facilities that would be needed to deliver power from the generating resource to the utility's loads. The rule does not establish an obligation to build new facilities to meet short-term needs. Rather, any new facilities should be evaluated on the basis of the costs and benefits involved. The commission also believes that mechanisms to ensure payment will probably not be needed and that it need not prescribe enforcement mechanisms now. The commission agrees with the comments of Power Marketers and Destec that lead times for requesting hourly, daily, and monthly unplanned service can be shortened. The rule has been modified to provide for the following minimum lead times: for hourly service, at least 20 minutes' notice; and for daily service, by 2:00 p.m. a day ahead. The required notice will remain as initially proposed for weekly service, at least two days' notice. The notice requirement for monthly service is being revised to at least four days' notice. As suggested by the Power Marketers, the commission is including a provision that will permit the ISO to set longer notification times, during a system emergency. The commission is also including a provision that will permit the ISO to periodically review the notice periods and propose adjustments to them. The commission does not see the benefit of permitting unplanned service for a period longer than one month. The commission is concerned that permitting requests for long-term unplanned service would amount to reservations that would preclude later requests for service for shorter periods, even if the long-term service that has been reserved is not actually used. TU Electric recommended that the application procedure for annual planned service in subsection (f) include a descriptive ten-year forecast. The suggested revisions to this part of the rule were intended to reflect the fact that the planning process for transmission service is keyed to a load and capacity resource forecast, submitted by each load in ERCOT. Decisions concerning the availability of capacity on the ERCOT transmission systems and the need for upgrades or new facilities depend heavily on the type and location of the resources a utility relies on to serve its customers. It is possible that new facility additions or even upgrades would require significant lead time to design, obtain regulatory approvals, and construct. The East Texas G&Ts noted that there was no ERCOT prescribed minimum capacity. Under ERCOT Operating Guide II.A, control area utilities are required to maintain their allocated responsive reserve, which is entirely different from a minimum obligation for all transmission customers. Subsection (f)(1) would give a vague blank check for ERCOT to come up with a minimum requirement, and is unnecessary. The East Texas G&Ts suggested that designation of new planned resources be provided to the independent system operator. LCRA noted that in the normal course of events, schedules will be requested that are later canceled. Because transmission capacity is effectively reserved by scheduling transactions, it would be possible for the process to be abused by the establishment of schedules for future events solely for the purpose of reducing available transmission capacity. Therefore, LCRA recommended that the ISO be given the authority to either assess a schedule cancellation fee or deny transactions where there has been a pattern of abuse. Power Marketers stated that rates should not be reviewed each time planning is performed. Such review should occur only if a utility filed a rate case or was overearning. The commission agrees that the appropriate time horizon for evaluation of transmission needs is ten years. The rule has been modified to provide that the forecasts required in connection with planned service are ten-year forecasts. The commission has modified the description of existing planned resources in subsection (f)(1) so that it does not refer to capacity reserves. This should meet the East Texas G&Ts' concern about the ability of ERCOT to prescribe unreasonable reserve requirements. The commission is not adopting the LCRA's suggestion to implement a reservation fee. The commission concludes that some actual experience in operating the transmission system under open-access rules and under the supervision of the ISO is necessary, before it adopts reservation fees. It may be appropriate for the ISO to make a recommendation on this matter after some period of operation under the new rules. As is noted previously in the discussion of the implementation schedule, the commission recognizes that it is not necessary to revise rates on an annual basis, even if the utilities and ISO update resource plans on an annual basis. The East Texas G&Ts were concerned with the requirement in subsection (g) that transmission customers individually contract for system studies with all ERCOT transmission providers as a prerequisite for new services, contending that this requirement would be unduly burdensome. Furthermore, this section avoided specifics on transmission upgrades and did not specify standards for direct assignment of new facilities. The East Texas G&Ts asserted that the creation of a transmission request queue vaguely implied direct assignment at incremental cost of all transmission upgrades. The proposed tariff was also entirely silent on distribution upgrades. While 23.67(c)(2) required utilities to provide transmission service down to the distribution level, it did not resolve the construction and obligation issues. The East Texas G&Ts suggested that the issue of construction of new facilities could be decided by a neutral decision maker that would require construction of facilities that are most economical for the ERCOT grid as a whole. This responsibility could be assigned to the ISO or an ERCOT committee made up of an equal representation of all interested parties in ERCOT. The East Texas G&Ts also pointed out that the Federal Energy Regulatory Commission (FERC) prohibited recovery of both average and incremental costs. Under the commission's rule a customer could be paying an embedded rate, and be subject to a direct assignment, clearly in conflict with federal law. Finally, the East Texas G&Ts proposed a procedure based on the FERC's requirement that distribution costs be directly assigned to transmission customers. The CSW Companies noted that subsection (g)(5) did not address instances where the customer's annual updates are not consistent. A utility that conducts a system security study or a facility study as required in sec.23.70(g) would bear the costs of the study initially. Under the pricing mechanism in sec.23.67(g), however, the costs of such a study would be transmission costs that would be eligible for inclusion in the ERCOT transmission costs, and the utility could recover some part of the costs from other transmission customers. There would be a delay in the utility's recovery of its costs, but it would be able to recover a portion of the transmission costs from other utilities following a transmission rate case under sec.23.67(g) . The commission concludes that it is appropriate to require a utility that seeks to add a new generating resource to initially bear the costs of determining how the new resource can be safely integrated into the transmission network and the cost of any facilities needed to integrate the new resource. The requirement that the contract for a system security study involve all transmission providers is based on the treatment of the ERCOT transmission facilities as a single system, under sec.23.67 and this section. The independent system operator shall develop practical procedures to streamline the process for approving a security study. As is noted previosly, the commission has removed the definition of "direct assignment facility." Matters relating to the need for and amount of a contribution in aid of construction will be resolved under sec.23.67(n). With this change and considering the pricing method set out in sec.23.67(g), the commission concludes that its rules will not permit the recovery of both average embedded cost and incremental cost. The commission recognizes that the planning process in sec.23.70 addresses transmission planning and that issues may arise between a transmission provider and a transmission customer concerning the construction of additional distribution facilities. The commission does not believe that a regional organization, like the ISO, should have responsibility for resolving issues concerning the construction of distribution facilities. As the commission noted in its explanation of the reasons supporting the adoption of sec.23.67, where additional distribution facilities are needed at the interface between two utilities, the parties should attempt to resolve what facilities will be added to provided the additional service in the most cost-effective manner, who will own them, and whether a contribution in aid of construction is appropriate. If they are unable to resolve these matters, the alternative dispute resolution process is available. With regard to CSW's comment concerning inconsistent forecasts, the commission concludes that the process for identifying loads and resources in determining megawatt-mile impacts will permit utilities, under a process directed by the ISO, to examine each other's load forecasts and raise issues with the ISO concerning consistency, accuracy or other matters relating to the load and resource forecasts. HL&P and Destec recommended that subsection (h) of the rule state that the need for specific ancillary services should be determined by the ISO, and specify how transmission providers would be notified that ancillary services are in place. Destec recommended that the load and/or transmission customer would propose the services needed and where they will be sourced to the ISO. If, in the view of the ISO, there would be any negative reliability impacts due to this proposed alignment, the ISO would notify the load or transmission customer to work out any shortcoming. The CSW Companies submitted the subsection (h)(1)(A) defined ancillary service customer, inter alia, as a "utility (for its own use of the service)", which raises the issue of an integrated utility taking ancillary services under its own tariffs. The CSW Companies recommended that this requirement not apply to a utility until it is functionally unbundled into generation, transmission, and distribution business units. As is noted previously, the commission is revising the rule to require the ISO to determine the adequacy of a utility's arrangements for ancillary services and to notify transmission service providers that ancillary service arrangements have been made. With regard to CSW's comments, the commission concludes that the requirement that a utility take ancillary services under its tariff for such services is an important measure that will ensure comparability in the provision of such services. TU Electric and CSW recommended changes to subsection (i)(3), relating to bids for redispatch services. TU Electric stated that it is not reasonable to bind utilities to estimates of redispatch costs; such calculations are performed before the fact and are based on expectations of future costs, such as spot market fuel costs. CSW pointed out the difficulty in bidding for redispatch, without prior knowledge of location or destination of the unplanned transaction, time of day, and conditions of the ERCOT grid. Brazos raised a similar issue, noting that the cost of redispatch is to a large extent based upon the cost of fuel. For this reason, it is impractical, if not impossible, for utilities to provide "binding advance bids" for redispatch services for unplanned transactions. The most that could be expected is that each utility would provide a formula from which such costs would be calculated. According to CSW, binding estimates would be appropriate if the utility were allowed to include, and the customer was required to pay, an adjustable risk component in the price of redispatch costs. CSW also commented that the requirement of subsection (i)(3)(D) to include in the tariff a methodology for calculating redispatch cost may be difficult until the ISO establishes such a methodology. The East Texas G&Ts stated that transmission customers receiving transmission service for unplanned resources receive only as-available capacity transmission. These customers could not cause transmission constraints and thus should not be liable for any redispatch costs under subsection (i)(3)(C). Further, subsection (i)(4) should include language that obligates a transmission provider to promptly restore service once it is interrupted. Public Counsel raised a concern about utilities gaining some market advantage by underestimating redispatch costs, as part of an effort to make other competitive services appear more competitive. Hence, OPC recommended that the ISO audit the utilities' calculation of redispatch costs. OPC noted a larger problem: the assignment of redispatch costs for planned transactions to utilities rather than transmission customers. These costs would be caused by the newly-created presence of transmission customers on the system. Therefore, transmission customers should be assigned all costs related to the need to redispatch the system for their benefit. The City of San Antonio expressed a similar view: that redispatch costs for ongoing transactions should be borne by the party causing redispatch. OPC and the East Texas G&Ts noted an inconsistency relating to the proposed rules regarding security studies and transmission upgrades-sec.23.70(e)(3)(E) and (g)(2)(D)-that contemplate assignment of such costs to transmission customers, while the redispatch rules require sharing of these costs among all utilities. OPC stated that the costs of security studies and transmission upgrades required to relieve constraints should be directly assigned to those customers causing the problem. The City of San Antonio expressed the view that the utility native load customers and whose behalf San Antonio system was built should receive priority treatment and be the last to be interrupted under emergency situations. Destec commented that the rule as currently drafted included the utility obligation to redispatch non-utility resources it is relying on, but did not address the cost recovery for such resources. The Working Group discussed this issue and concluded that non-utility resources should also be provided with cost recovery if redispatched. Hence, sec.23.70(i)(3)(E) should be revised to incorporate the Working Group recommendation. With regard to binding bids for redispatch to facilitate unplanned transactions, the commission notes that the rule does not limit a utility to recovering its actual costs of redispatch. Thus, there does not appear to be a need to amend the rule to explicitly permit a risk factor in a bid for redispatch. Each utility that is required to provide ancillary services should file a proposed methodology for calculating the cost of redispatch service. The commission recognizes that information will be needed in making redispatch bids, but it concludes that the ISO can provide sufficient information to a utility that would be requested to redispatch its facilities concerning the nature of the constraint and the duration of the transaction so that the utility could make a reasonable bid. As is noted previously, the utility would be able to include in the price a factor to reflect the uncertainty involved in offering the service. The commission does not agree with the East Texas G&Ts that redispatch provisions for unplanned service are unnecessary. While unplanned service is provided within the capability of the existing transmission system, a transmission customer may be able to, in effect, buy additional capacity through paying another utility to redispatch its resources. Presumably, the transmission customer would pay for such redispatch if the benefits of doing so are greater than the costs. The commission agrees that subsection (i)(4) should be modified to require a transmission service provider to restore interrupted service as quickly as possible. The commission does not share Public Counsel's concern about utilities underestimating redispatch costs. Redispatch will be initiated where the ISO identifies a constraint that is an obstacle to a proposed transaction. The ISO will notify the party that needs to redispatch its resources, and that party would not have any interest in the underlying transaction that the redispatch is intended to facilitate. Thus, the utility being asked to redispatch will not have any competitive interest in offering too low a price. It appears to the commission that such a utility would offer a price that covers its costs and the risks that it assumes in providing the service and provide it a small margin. The utility would not have any incentive to offer a lower price, and it stands to lose the expected margin if it offers too high a price. The commission also does not agree with the Public Counsel's recommendation on the allocation of costs of redispatch for planned service. In the commission's view, comparability requires that all planned customers be treated equally, and one load (the new transmission customer) cannot be assigned all of the costs of the redispatch. The commission recognizes that there appears to be an inconsistency between the treatment of redispatch costs and the costs of system studies that would create asymmetrical incentives. The rule requires that the utility requesting to add a new resource bear the costs of the securities studies and system studies, but these expenses would ultimately be shared with other transmission service customers through the pooling of costs under sec.23.67(g). Thus, the treatment of redispatch costs and the costs of system upgrades is consistent. The commission concludes that the treatment of redispatch costs and the priority for native customers proposed by the City of San Antonio are inconsistent with the comparability principle. TU Electric suggested modifications to subsection (j)(5), to recognize that even though a customer may not wish to take a particular ancillary service, it may nonetheless be taken by virtue of the laws of physics. TU Electric' proposed language would ensure that if a customer does not want service from the provider, but ends up actually taking the service, the provider would not be penalized or deemed in violation of the commission rule. The East Texas G&Ts commented that subsection (j)(5) applied a charge of three times the rate for knowing use of an ancillary service required by the ISO without the agreement of the party providing that service. The requirement was vague and could be abused. Further, FERC precedent condemned exorbitant penalty rates to utilities facing emergencies that could not be prudently avoided. The provision that these parties commented on reads as follows: "Any person who knowingly makes use of an ancillary service required by the Independent System Operator without the agreement of the party providing that service shall pay to such service provider an amount equal to three times the otherwise applicable charge. In no case shall a service provider knowingly provide such an ancillary service without prior arrangements with the customer nor shall a service provider be able to unilaterally impose such an ancillary service on an unwilling purchaser." The commission concludes that a penalty provision may be appropriate to ensure that transmission customers make adequate arrangements for the services that are necessary to ensure that the electric network functions reliably and efficiently. Part of a utility's responsibility is making appropriate provisions for emergency situations. The penalty provisions may provide some risk of over- reaching, but the alternative dispute resolution process and the commission complaint process are available if parties abuse this provision. The commission concludes that the modifications recommended by TU Electric are not necessary, because service providers are not at risk for a penalty rate. TU Electric and CSW took issue with subsection (k)(1)(D). In their view, the requirement that organizational transfers be posted on the information network is unnecessary and would impose administrative burden on utilities. TU Electric recommended that subsection (k)(1)(K), which deals with the exchange of information be deleted in its entirety. TU Electric asserted that the commission should not adopt a rule that, in contravention of the statutory requirement for rulemaking proceedings in Texas, will be superseded by the FERC standards at some unspecified time in the future. San Antonio emphasized that the level of unbundling called for in the rule is extreme and exceeded the commission's legal authority as well as the requirements of the PURA objectives, and urged the commission to reconsider this requirement. Brazos also expressed strong concern regarding this section of the rule. According to Brazos, the commission should clarify what evil it is attempting to avoid with functional separation and restrictions on the exchange of information. Organizations such as Brazos could be seriously impacted by these provisions of the rule. The very least that this commission could do is exempt non-profit cooperatives such as Brazos, who lack market power in wholesale transmission, and who have the motivation to acquire for their customers the lowest cost energy from whatever sources. The commission has yet to describe, with any specificity, the information which must be placed on the information network. Yet this provision denied the free flow of information between the transmission function and the merchant function of any and all information that is not on such network. This is a flagrant violation of free speech guaranteed by the First Amendment of the U.S. Constitution. The CSW Companies recommended deletion of the first sentence of subsection (k)(1)(A) on grounds that it did not have any proximate antecedent and was confusing. HL&P suggested that the requirement to file information describing its implementation of the requirements in subsection (k) be clarified. The commission agrees with the comments of CSW and HL&P that subsection (k) (1)(A) was not entirely clear and has modified it to make it clearer. The commission has also modified the date for making the filing describing the implementation of the requirements of this section. This filing will be due no later than 60 days after the date the section takes effect, rather than 60 days after its adoption, as had been proposed. With regard to the posting of transfers, the commission notes that such posting is required in the proposed FERC rules on standards of conduct. The commission is modifying this requirement, to make it less onerous and to make the electronic information network more useful. Information concerning transfers of personnel must be provided to the OSO on a monthly basis, rather than be posted on the information network. The information provided to the ISO would then be availalble to other market participants. This provision is intended to limit utilities' ability to circumvent the prohibitions on exchange of information by transferring personnel between the marketing and transmission operations functions. If such transfers were not posted, utilities could easily circumvent the rule. The purpose of the requirement to separate the merchant and transmission operations functions and limit the exchange of information between them is to ensure that a utility's operation of transmission facilities does not give it an advantage over other power producers who are seeking to sell power. The FERC has proposed standards of conduct that require the separation of these functions and limit the exchange of information between them, and the commission's rules were based on the FERC proposal. Thus, if the FERC ultimately adopts rules that are similar to the rules that it proposed, the commission would be required to apply these requirements, as a matter of consistency with the FERC rules. One of the key prohibitions on the exchange of information in the Texas rule, sec.23.70(k)(1)(B)(iii), is similar to the proposed FERC rule, sec.37.6(c), which provides: "Employees of the public utility that are engaged in wholesale merchant functions . . . are prohibited from obtaining information about the public utility's transmission system (including information about available transmission capability, price, curtailments, ancillary services, etc.) through communications conducted off the RIN or through access to information not posted on the RIN." The commission does not regard providing service to a full-requirements customer as a marketing function, because the customer has already committed to buy all of its power from a particular source. Thus, employees of a generation and transmission utility who are engaged in determining the needs of their full service customers and making arrangements to meet them are not engaged in merchant functions. On the other hand, to the extent that a wholesale customer of a G&T utility has the ability to buy power from other suppliers, employees who are engaged in determining the needs of the customer and making offers to supply those needs are engaged in merchant functions and should not also be engaged in transmission operations functions or receive information from employees engaged in transmission operations functions, except through the electronic information network. If a full-requirements customer is considering other supply arrangements, such as when its contract is about to expire, the current supplier would be required to observe the restrictions in the rule in its dealings with the customer concerning its power needs. The commission concludes that the standards that it proposed are narrow limitations that are intended to effectuate an important government objective and are, therefore, permissible limitations under the First Amendment. As is noted previously, the standards are based on the rule proposed by the FERC. The commission believes that it could adopt a requirement that the standards under this subsection would be superseded by rules adopted by the FERC relating to the standards of conduct. Other provisions of the rule refer to standards that may be adopted at some time in the future, such as the ERCOT and NERC standards that are referred to in the definition of good utility practice. Subsection (k)(1)(K) is likely to engender confusion, however, as to when any new rules apply and what they are. For this reason, the commission is deleting this subparagraph and will consider revisions to these rules when the FERC adopts or modifies standards of conduct. TU Electric asserted that in its current form the indemnity and liability provisions in subsection (l) would inhibit rather than encourage wholesale transactions. TU Electric suggested modifications to exclude consequential or special damages from the damage for which a customer or transmission provider may be liable. San Antonio and Brazos agreed that the indemnification clause created an unacceptably broad scope of liability for transmission providers. According to Brazos, the commission should obtain input from the insurance and financial industry before embarking on a perverse course that could affect the cost of capital to utilities. HL&P expressed similar views, commenting that it is a mistake for the commission to create a "one size fits all" for commercial terms. HL&P noted that PURA's requirement for open access did not require or empower the commission to impose a generic tariff that disregards important commercial differences between the systems of each transmission provider. HL&P pointed out that its own commission-approved tariffs contained four separate wheeling tariffs each with different terms and conditions based on the characteristics of the service involved. HL&P contended that the problems it identified with form-fitting a generic commercial terms and conditions tariff become magnified on a statewide basis, in that a small co-op may need vastly different terms and conditions than HL&P needs. HL&P cited subsection (l) of the rule as both misnamed and unfair to all transmission providers. HL&P had concerns that the liability provision did not limit the transmission provider's liability at all, even as it pertained to damage to property of third persons who were not customers of the transmission provider. HL&P recommended that the commission follow the practice of the electric industry and remain flexible in the area of transmission. The CSW Companies suggested that the force majeure listed in subsection (l) (1) should include the failure to obtain a governmental permit, license or approval and that the mutual indemnification offered in subsection (l)(2) be expanded to cover the directors officers, employees, and agents. It was not the intention of this subsection to create new grounds for liability on the part of utilities to third persons. Rather, the purpose of this section was to establish equal terms of liability among transmission service providers and customers. Many utilities include in their tariffs broad limitation-of- liability provisions to protect the utility from liability to customers. If such provisions were permitted in transmission service tariffs, transmission service providers would be able to limit their liability to transmission customers. The commission has concluded that the ERCOT transmission facilities operate as a single network in which an individual utility's transmission facilities support the operations of other utilities. One of the problems with one-sided limitation-of-liability provisions is that in a network service situation, there may be several utilities that could claim status as the service provider that is entitled to protection by the limitation of liability. In a transmission transaction involving the delivery of power from one transmission-owing utility to another, both would be transmission providers under the rule, and both might also be regarded as transmission customers. In such a situation, it would not make sense to prescribe different liability protections to transmission providers and customers. Thus, the commission concluded that it was important to establish equal liability provisions among transmission providers and customers. The commission also concludes that the negotiation of individual limitation-of- liability terms with each transmission provider would be a barrier to obtaining transmission service. For this reason, the commission is not adopting the suggestions of HL&P. The commission concludes that it has the power to prescribe terms of liability, as between a transmission provider and transmission customer, under sec.2.057 of PURA, which directs the commission to ensure that utilities provide non-discriminatory access to transmission service. The commission recognizes, however, that subsection (l) might have been construed as affecting a utility's liability to a retail customer. The commission has modified subsection (l)(2) to make it clear that this is not the case. Finally, the commission notes that the pro forma tariff proposed by the FERC includes a provision on indemnification and liability that is similar to the one that the commission is adopting. The adoption of such a provision to apply to transmission service in ERCOT is consistent with the statutory directives under PURA that the commission's rules be consistent with applicable Federal rules. The specific suggestions of TU Electric and the City of San Antonio and the suggestion of CSW relating to officers and employees are not adopted, however. The commission believes that with the clarification discussed previously, the rule leaves the matter of liability to retail customers as it existed before the adoption of the rule. To the extent that a utility is not liable to a customer or is able to limit its liability under existing tariffs, the limitations on liability would also benefit a service provider rendering transmission service to the utility. The commission also concludes that the suggestions of CSW should not be adopted. The events listed in the force majeure provision in paragraph (1) are unexpected events that may disrupt the delivery of power and for which it may be difficult to make contingency plans. The inability to obtain a license is an event that may entail some uncertainty, but it is usually a possibility that can be anticipated and which allows time and reflection for contingency planning. In its comments on subsection (m), San Antonio expressed the view that a transmission provider should have the authority to protect itself financially by being able to refuse to provide service, unless the customer provides a letter of credit. The rule should go further and make explicit that a letter of credit can be used to protect native load customers from paying for a transmission customer's obligations. The commission concludes that where reasonable commercial practices indicate that a customer is credit worthy, no letter of credit should be required. Risk of non-payment is obviously one of the risks involved in permitting broad open- access transmission rules, but another risk is the imposition of unreasonable requirements that would impede the development of a vigorous, competitive wholesale market. The commission concludes that the balance it drew in the proposed rule is appropriate. HL&P submitted that the proposed rule inappropriately expands the role of the ISO. Responsibility to curtail should remain with the control area utility or transmission provider. San Antonio recommended that for planned transactions, the ISO should request bids for redispatch from the utilities that are best able to redispatch and, from the bid information, determine the most economical redispatch for that transaction. However, in no event should a generating utility be required to submit generating cost information to the ISO. Power Marketers expressed the view that the proposed rule did not specify to whom a transmission customer must submit an application for service. They recommended that sec.23.70 should clarify the responsibilities of the ISO and the transmission provider. Under sec.23.67, the ISO is not directly responsible for curtailment of resources. The commission is modifying sec.23.70 to ensure that it is consistent with sec.23.67, with respect to the duties of the ISO. The commission believes that in many instances, there will be only one utility that will be able to redispatch its resources to free up additional transmission capacity. In these circumstances, the ISO must compare the costs of the redispatch with the savings that would be obtained from the additional transmission service that would be made available. The confidentiality provisions should prevent unauthorized release of such information. The commission agrees that this subsection of the rule, as proposed, might have been read as expanding the powers of the ISO. This section was intended to recognize that the ISO has not yet been established and that until it is in operation, transmission providers or an ERCOT committee will carry out some of the functions set out in the rule. The commission has revised this subsection to make it clear that this subsection does not create additional powers for the ISO. With regard to the point raised by the Power Marketers, that it was not clear to whom a customer submitted a request for transmission service, sec.23.67(p) provides that the ISO, when it is in operation, will be the point of contact for initiating requests for transmission service. HL&P commented that the methodology for applying the megawatt-mile impacts was not adequately described in subsection (o), and that it was not clear how the megawatt-mile impacts would be applied to derive the charges to each utility. Further, HL&P stated that there were various ways to apply the megawatt-mile method with vastly different results in terms of over or under recovery for each utility. The East Texas G&Ts were concerned with the potential of gaming; that a utility with excess reserves could represent its expected use of planned resources inaccurately, as compared to the resources that would be used in an economic dispatch. This section should be revised to ensure that nomination of planned resources should track the utility's planned resources as determined by economic dispatch. Destec raised a similar issue, noting that as worded subsection (o)(7) would allow utilities to nominate resources greater than or equal to 115% of the utility's demand, giving them tremendous latitude to game their selection from their list. Not only would they be given an incentive to disregard economic dispatch, but they could also keep in their resource plan generators that might be retired (or possibly mothballed units) for the sole purpose of providing desired impacts. The Public Utilities Board of the City of Brownsville (Brownsville) focused its comments on the implementation of the VAMM methodology. Brownsville advocated a voltage differentiated, total event, load-bus-by-load-bus implementation of VAMM as best satisfying the commission's stated regulatory objectives. The voltage differentiated method would take into account that lower voltage lines are far more expensive than higher voltage lines on a per megawatt-mile basis. This has important implications for the use of VAMM impacts to set charges and to allocate costs. Assigning the proper, higher price to impacts on lower voltage lines would send the correct price signals and reduce distortion to the transmission planning process. Accordingly, Brownsville would modify sec.23.70(o)(6) to provide for the preparation of a separate matrix for each voltage level maintained by a transmission provider. Another critical element of the proposed rule is that all loads of a utility are paired with all of the utility's planned resources. If sub-pairings of particular generators and particular loads are permitted, then the vector-absolute megawatt-mile methodology will lose the critically important attributes of predictability and low gaming potential, and its already troubling hostility to competition will be enhanced. Brownsville recommended that if unbundled transmission is priced by the specific delivery point, then bundled transmission must be priced the same way. This would require the use of the load-bus-by-load bus VAMM established in Docket Number 6995, not the generator-by-generator methodology that appears in the proposed rule. Brazos requested clarification of the calculation of the VAMM for monthly planned service. Destec noted that the lack of clarity in the rule could afford significant opportunity to game the system. Destec recommended that the rule be modified so that all generators represented in an event are equally scaled up to the same percentage in the base case, and that the sum be equal to or greater than the load for that event. Destec also recommended that each utility be allowed to have only one event which would constitute all of its load, and its entire planned resource. The impact calculation should make it clear that the intent of the rule is that a separate change case is made for each and every generator within one event. The commission agrees that additional steps to the calculation should be added, as recommended by HL&P. The commission has modified this subsection to provide this additional detail. The commission has also added a requirement that the designation of resources be consistent with an economic dispatch of the utility's planned resources and that the impact calculations be consistent, from one utility to another. The commission believes that these modifications will significantly reduce the latitude for utilities to game the results. Brownsville made several suggestions concerning a more logical arrangement of the paragraphs in this subsection, and the commission has adopted these suggestions. Brownsville also suggests that the megawatt-mile calculation be differentiated by voltage level. Implementing this suggestion would involve collecting information on transmission costs by voltage level, which undoubtedly involves additional difficulty for the transmission providers. Because there is such a short time between the date of adoption of this rule and the date on which utilities are required to file their transmission costs, and because the commission has not heretofore indicated that it wanted transmission providers to file costs that were differentiated by voltage level, the commission concludes that it is not practical to require such differentiation in this case. The commission reserves judgment on such differentiation. Brownsville also suggested that impact calculations be performed sequentially by load bus, while the rule required that the impact calculations be performed sequentially by generator. Brownsville expressed the view that the cost of delivering power should be calculated separately for each delivery point, and that this can only be done using a load-by-load method. According to Brownsville, failing to recognize the different costs of delivering power to different delivery points results in rates that are not comparable, because a large system would have an average cost of transmission service to all of its delivery points, so that the rate would not be dependent on location. On the other hand, for a small system, the mere fact that it has few delivery points means that cost of delivery is dependent on location. The commission concludes that the generator-by-generator calculation is not at odds with the comparability principle. A large system such as TU Electric will have a different cost of delivering power to its many delivery points, and nothing in the rule requires such a system to price its bundled service using location- specific transmission costs; by the same token nothing requires it to price its bundled service using average transmission costs. The rule works the same for Brownsville and other small systems. The chief difference is that in small systems the delivery points will typically be close to each other, and the differences in megawatt-mile impacts associated with their delivery points will be small. For utilities that are close to the generators that they rely on, the megawatt-mile impacts should be small. Where a utility relies on remote generators, its megawatt-mile impacts will be large. Because the commission has decided that a transmission customer's distance from its resources is to be a factor in calculating transmission rates does not imply that transmission costs may not be averaged. Even where the transmission customer is a large system, such as TU Electric, the customer will bear the costs of transmitting power to remote points of delivery, but it could seek approval of transmission rates that average those costs in its rates for bundled-service customers. The commission concludes that transmission rates should be calculated for each wholesale customer, and a new paragraph has been added to subsection (o) of the rule to explicitly require the calculation of such rates. Such rates will make the transmission costs transparent for any utility that is considering changing its wholesale supplier. The calculation of the transmission rates does not imply that the customer will be charged the new rate. Where the utility has contracted to buy wholesale power on a bundled basis, and the parties to the contract do not seek a change in that relationship, the contract for bundled service would remain in effect. Finally, the commission believes that with the additional details on the calculation of the megawatt-mile rates, the rule provides sufficient guidance for the calculation of rates for monthly service. The section is adopted under the Public Utility Regulatory Act, 1995, sec.sec.1.101, 2.056, 2.057, and 2.216, Texas Civil Statutes, Article 1446c-0, sec.sec.1.101, 2.0572.216. Section 1.101 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.2.056 authorizes it to require utilities to provide transmission service, sec.2.057 directs it to adopt rules relating to transmission service, and sec.2.216 prohibits public utilities from engaging in anti-competitive conduct. sec.23.70. Terms and Conditions of Open-access Comparable Transmission Service. (a) Purpose. The purpose of this section is to clearly state terms and conditions that govern transmission access and related ancillary services. Service provided pursuant to this section allows a transmission customer to deliver energy from its planned resources to serve loads within ERCOT. Transmission service also may be used by a transmission customer to deliver unplanned energy purchases to its loads without an additional facilities charge and to deliver energy to third parties in connection with a sale of energy to loads within ERCOT. The transmission service standards described in this section shall be applicable to transmission service to, from, and over the direct- current interconnections between ERCOT and the Southwest Power Pool, to the extent that tariffs for such service incorporating the terms of this section and sec.23.67 of this title (relating to Open-access Comparable Transmission Service) are approved for utilities that own an interest in the interconnections. All transmission service and ancillary services shall be provided in the same manner that the service provider uses them to serve its native load customers. (b) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise: (1) Ancillary Services-As defined in sec.23.67(b) of this title (relating to Open-access Comparable Transmission Service). (2) Application-A request by an eligible customer for transmission or ancillary services pursuant to the provisions of this section. (3) Commission or Public Utility Commission-The Public Utility Commission of Texas. (4) Control Area-An electric power system or combination of electric power systems to which a common automatic generation control scheme is applied in order to: (A) match, at all times, the power output of the generators within the electric power system(s) and capacity and energy purchased from entities outside the electric power system(s), with the load within the electric power system(s); (B) maintain, within the limits of good utility practice, scheduled interchange with other Control Areas; (C) maintain the frequency of the electric power system(s) within reasonable limits in accordance with good utility practice; and (D) obtain sufficient generating capacity to maintain operating reserves in accordance with good utility practice. (5) Designated Agent-Any entity that performs actions or functions on behalf of a transmission provider, an eligible customer, or a transmission customer. (6) Eligible Customer-An eligible customer is any of the following: the transmission provider (for all uses of its transmission system) and any electric utility, federal power marketing agency, exempt wholesale generator, qualifying facility, or power marketer. An eligible customer may designate an agent to represent it in making arrangements for transmission service under this section. (7) ERCOT-As defined in sec.23.67 of this title. (8) Facilities Study-An engineering study conducted by a transmission provider subsequent to a system security study to determine the required modifications to its transmission system, including the detailed costs and scheduled completion date for such modifications, that will be required to provide a requested transmission service. (9) Good Utility Practice-Any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry during the relevant time period, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable cost consistent with good business practices, reliability, safety and expedition. Good utility practice is not intended to be limited to the optimum practice, method, or act, to the exclusion of all others, but rather to be practices, methods, or acts that are generally accepted in ERCOT, or prescribed by NERC and consistently adhered to by the transmission providers. Good utility practice shall not be used as a basis to unreasonably withhold access to transmission service. (10) Interconnection Agreement-An agreement that sets forth requirements for physical connection or other terms relating to electrical connection between an eligible transmission customer and a transmission provider, including contracts or tariffs for transmission service that include provisions for interconnection. Transmission providers must have such an agreement with all transmission providers to whom they are physically connected. (11) Native Load Customers-Those wholesale and retail customers on whose behalf the transmission provider, by statute, franchise, regulatory requirement or contract, has an obligation to construct and operate its system to meet in a reliable manner the electric needs of such customers. (12) NERC-The North American Electric Reliability Council. (13) Parties-The transmission providers and the transmission customers receiving service. (14) Planned Resources-Generation resources owned, controlled, or purchased by the transmission customer, and designated as planned resources for the purpose of serving load. (15) Planned Service-As defined in sec.23.67 of this title. (16) Service Provider-A public utility or an affiliate of a public utility that provides either transmission service or ancillary services. (17) SPP-The Southwest Power Pool. (18) System Security Study-An assessment by a transmission provider of the adequacy of the transmission system to accommodate a request for transmission service, and whether any costs are anticipated in order to provide transmission service. (19) Transmission Customer-Any eligible customer receiving transmission service. Where consistent with the context, "transmission customer" includes an eligible customer seeking transmission service. (20) Transmission Provider-A public utility that owns or controls facilities used for the transmission of electricity and provides transmission service. The term "public utility" as used herein shall have the same meaning as the term "utility" defined in sec.23.67 of this title. (21) Transmission Service-Is defined in sec.23.67(b) of this title and includes the use of the transmission system to deliver planned and unplanned resources to loads. Transmission service shall include use of the distribution system, where such use is necessary to enable eligible wholesale transmission customers to access generation providers. (22) Transmission System-The transmission facilities at or above 60 kilovolts owned, controlled, operated or supported by a transmission provider or transmission customer that are used to provide transmission service. (23) Transmission Upgrade-A modification or addition to transmission facilities constructed by a transmission provider. (24) Unplanned Resources-Generation resources owned, controlled or purchased by the transmission customer, and that have not been designated as planned resources. (25) Unplanned Service-As defined in sec.23.67 of this title. (c) Nature of Transmission Service. (1) Scope of Service. Transmission service allows transmission customers to use the transmission providers' transmission systems to utilize generation resources to serve their loads, inside and outside of ERCOT. Transmission service also allows transmission customers to transmit power to, from, and over the direct-current interconnections between ERCOT and SPP, to the extent that tariffs for such service incorporating the terms of this section and sec.23.67 of this title are approved for utilities that own an interest in these interconnections. Transmission service provided pursuant to this section may use the transmission systems of all of the transmission providers in ERCOT. (2) Planned Service. A transmission customer shall have the right to use the transmission providers' transmission systems for the delivery of power from planned resources to loads on the same basis as the transmission providers use their transmission systems to reliably serve their native load customers. Service over the transmission providers' transmission systems for the delivery of power from planned resources to loads shall have priority over all unplanned uses. (3) Unplanned Service. A Transmission Customer may use the transmission providers' transmission systems to deliver energy to its loads from resources that have not been designated as the transmission customer's planned resources. Such energy shall be delivered if sufficient transmission capacity is available to support the requested service. (d) Availability of Transmission Service. (1) General Conditions. In accordance with the provisions of this section and sec.23.67 of this title, transmission service shall be provided to any eligible customer on a non-discriminatory basis. All transmission service shall be provided in the same manner that the transmission provider uses its transmission system to serve its native load customers. (2) Transmission Service Requirements. As a condition to obtaining transmission service, the transmission customer shall execute interconnection agreements with the transmission providers to which it is physically connected. The transmission provider shall not unreasonably refuse to accept contractual arrangements with another entity for ancillary services. The transmission customer shall either: (A) operate as a control area under applicable NERC and ERCOT guidelines; or (B) satisfy its control area requirements, including the provision of all necessary ancillary services by contracting with the transmission provider or by purchasing the necessary services from another service provider or non-utility provider of such services, in accordance with good utility practice. (3) Transmission Service Requirement For Exports From ERCOT. Transmission service to export power from ERCOT will be governed by this section, to the extent provided in subsection (c)(1) of this section. Facilities charges and loss compensation will be assessed to transmission customers for that portion of transmission that is within the boundaries of ERCOT, in accordance with sec.23.67 of this title. For the purposes of facilitating these transactions, the transmission rate shall be prorated on a monthly, weekly, daily and hourly basis. Transmission customers exporting power from ERCOT on an unplanned basis will be assessed a prorated charge in proportion to the duration of the transaction, and will be charged only for the transmission service actually used. For transmission customers exporting power from ERCOT on a planned basis, a fee will be assessed to the customer for that portion of transmission that is within the boundaries of ERCOT. Such transmission service shall have a minimum term of 30 days. The monthly on-peak access fee for planned transactions will be one- fourth the annual rate, and the monthly off-peak access fee for planned transactions will be one-twelfth the annual rate. The peak period used to determine the applicable transmission rate for such transactions shall be the ERCOT system peak, as that peak is determined under sec.23.67 of this title. The access fee for planned transactions shall be the greater of the sum of the monthly rates for the off-peak months for which transmission service is requested or the sum of the monthly rates for the on-peak months for which transmission service is requested. The impact charge will be calculated in accordance with sec.23.67 of this title. (4) Transmission Provider Responsibilities. The transmission provider will plan, construct, operate and maintain its transmission system in accordance with good utility practice in order to provide transmission customers with planned transmission service over the transmission provider's transmission system in accordance with this section. The transmission provider shall include transmission customers' load in its transmission system planning and shall, consistent with good utility practice, endeavor to construct and place into service sufficient transmission capacity to deliver power from transmission customers' planned resources to serve load on the same basis as the transmission provider's delivery of its own generating and purchased resources to its native load customers. (5) Transmission Customer Redispatch Obligation. As a condition for receiving transmission service, a transmission customer will redispatch its resources to provide planned transmission service to third parties. The redispatch of resources pursuant to this section shall be on a non- discriminatory basis among all transmission customers and transmission providers. (e) Initiating Service. Where a transmission customer uses the transmission facilities in ERCOT, whether its own facilities or those of another transmission provider, in serving its native load or in making sales of energy to a third party, it shall apply for transmission service pursuant to this section. To the extent that transmission planning is performed by the independent system operator established under sec.23.67 of this title or an ERCOT committee, the transmission customer and transmission provider shall provide the information that is required under this section to the independent system operator or appropriate ERCOT committee, rather than to a transmission provider. (1) Conditions Precedent for Receiving Service. Subject to the terms and conditions of this section, the transmission provider will provide transmission service to any eligible customer, provided that: (A) the eligible customer has completed an application for service as provided under this subsection; (B) the eligible customer and the transmission provider have completed the technical arrangements set forth in paragraph (5) of this subsection; (C) the eligible customer has an executed interconnection agreement for service under this section or, if necessary, requested in writing that the transmission provider file a proposed unexecuted agreement with the commission; (D) the eligible customer has arranged for ancillary services necessary for the transaction; and (E) each wholesale load maintains a power factor of 95% or greater at each point of interconnection. (2) Application Procedures For Annual Planned Service. (A) An eligible customer requesting annual service under this section must submit an application for service by October 1 in the year preceding the year in which service is to commence. A completed application shall provide information required in subparagraph (B) of this paragraph. To the extent that transmission planning is performed by an independent system operator or an ERCOT committee, the eligible customer and transmission provider shall provide the information that is required under subparagraph (B) of this paragraph to the independent system operator or appropriate ERCOT committee. To the extent that transmission planning is not performed by the independent system operator or an ERCOT committee, the eligible customer shall provide the information to all transmission providers. Transmission customers who were receiving an equivalent service prior to the approval of this section shall provide the information required by subparagraph (B) of this paragraph within 60 days of the effective date of this section. Information required under this section may be provided through electronic medium or any other means mutually agreed by the parties. (B) The following information shall be provided in connection with an application for service under this section: (i) The identity, address, telephone number and facsimile number of the party requesting service and the name of a contact person to deal with matters relating to the application. (ii) A statement that the party requesting service is, or will be upon commencement of service, an eligible customer under this section. (iii) A description of the load to be served. The description should include a ten-year forecast of summer and winter peak load and resource requirements beginning with the first year after the service is scheduled to commence. The independent system operator will establish the nature, detail and format of the information that must be provided. (iv) A description of planned resources (current and ten-year projection), which shall include, for each resource: (I) Location, unit size and amount of capacity from a unit to be designated as a resource. (II) Var capability (both leading and lagging) of all generators. (III) Operating restrictions, including: (-a-) any periods of restricted operations during the year; (-b-) minimum loading level of unit; (-c-) normal operating level of unit; and (-d-) any must-run unit designations required for system reliability or contract reasons. (IV) A description of purchased power designated as a resource, including source of supply, control area location, transmission arrangements and, if applicable, delivery points into ERCOT. (V) To the extent arrangements have been made for ancillary services, the identity of the providers of ancillary services. (VI) The service commencement date of the requested transmission service and service termination date or duration of service. (VII) Any other information designated by the independent system operator as reasonably necessary to evaluate the ability of the interconnected ERCOT transmission systems to reliably accommodate the requested service. (C) Unless the parties agree to a different time frame, the transmission provider must acknowledge the request within ten days of receipt. The acknowledgment must include a date by which a response will be sent to the eligible customer and a statement of any fees associated with responding to the request (e.g., system studies). (D) If an application fails to meet the requirements of this section, the transmission provider shall notify the eligible customer requesting service within 15 days of receipt and specify the reasons for such failure. Wherever possible, a transmission provider will attempt to remedy deficiencies in the application through informal communications with an eligible customer. (E) If a system security study is required, upon approval of the requesting transmission customer, the transmission provider will initiate such a study. Should this study conclude that the transmission system will be adequate to accommodate the request for service, either in whole or in part, or that no costs are likely to be incurred for new transmission facilities or upgrades, the transmission provider will tender transmission service, within 15 days of completion of the system security study. (F) If the transmission provider determines as a result of the system security study that additions or upgrades to the transmission system are needed to supply the transmission's customer's forecasted transmission requirements, it will, upon the approval of the requesting transmission customer, initiate a facilities study. When completed, a facilities study will include an estimate of the contribution in aid of construction to be charged to the transmission customer for the cost of any required facilities or upgrades as determined pursuant to the provisions of this section, and the time required to complete such construction and initiate the requested service. (G) Unplanned service transactions of a duration of more than 30 days may be converted to planned service transactions upon approval of an application submitted pursuant to paragraph (3) of this subsection. To the extent that such a converted transaction utilizes more megawatt miles than those offset by terminating a previously approved planned transaction, the additional megawatt miles may be purchased from transmission providers or from other transmission customers. The participants to such a transaction are responsible for the costs of feasibility analysis. (3) Application Procedures For Monthly Planned Service. (A) After January 1 of each year, eligible customers may request a change in their designated planned resources by submitting an application for monthly planned service at least 15 days before the commencement of such service. The application must provide information similar to that required for annual planned service for the period that the planned service is to be effective. (B) The planned service must be for at least 30 days. (C) When the transmission provider determines that the service can be provided and a system security study is not required it will notify the requesting transmission customer and tender transmission service. (4) Application Procedures For Unplanned Transmission Service. Use of the transmission system to deliver power to loads from resources that are not planned resources is unplanned transmission service. Eligible customers wishing to use the ERCOT transmission system for unplanned service must submit a request for this service to the appropriate transmission provider, ERCOT Security Center or independent system operator. The duration for unplanned transactions is from one hour to 30 days. In no case shall unplanned transactions be accepted for consideration more than 30 days in advance of the actual commencement of service. (A) Requests for service must be submitted with at least the lead times prescribed in clauses (i)-(iv) of this subparagraph: (i) for hourly transactions, at least 20 minutes in advance, (ii) for daily transactions, no later than 2 p.m. the day before the transaction is to commence, (iii) for weekly transactions, at least two days in advance, and (iv) for monthly transactions, at least four days in advance. (B) A response to a request for service will be made by the appropriate transmission operators as soon as practical after the request is made. Unless the parties agree to a different time frame, responses to requests for unplanned service shall be provided no later than the times prescribed in clauses (i)-(iv) of this subparagraph: (i) for hourly transactions, within 10 minutes of the request for service, (ii) for daily transactions, within four hours of the request for service, (iii) for weekly transactions, within 24 hours of the request for service, and (iv) for monthly transactions, within two days of the request for service. (C) A request for a transaction will be analyzed first for the next hour and allowed to start if no violations of the transmission operating criteria are anticipated. (D) The following information shall be provided in connection with an application for unplanned transmission service: (i) The identity, address, telephone number and facsimile number of the party requesting service and contact person to deal with questions concerning the application for service. (ii) A statement that the party requesting service is, or will be upon commencement of service, an eligible customer under this section. (iii) A description of the load to be served and the resources serving the load, which shall include, for each resource: (I) Location, unit size and amount of capacity from that unit to be designated as resource. (II) Var capability (both leading and lagging) of all generators. (III) Operating restrictions, including minimum loading level of unit, and normal operating level of unit. (IV) A description of purchased power designated as a resource including source of supply, control area location, and, if applicable, delivery points into ERCOT. (V) To the extent arrangements have been made for ancillary services, the identity of the providers of ancillary services. (VI) When service is to begin and the anticipated duration. (VII) If the unplanned service will affect the transmission customer's planned resources, a statement of the effect of the unplanned service on the planned resources. (E) The transmission providers, ERCOT Security Center, or the independent system operator will make every reasonable attempt to begin the transactions as soon as possible to conform to the requested commencement time. Operating restrictions, anticipated redispatch needs, the potential for curtailment, and other related information, if known, will be communicated to the requester to see if the transactions are still feasible for the eligible customer given the known restrictions. (F) The transmission provider, at its discretion, may take requests outside the timeframes prescribed in subparagraph (A) of this paragraph, if practical given the current or expected operating conditions on the transmission providers' systems. The independent system operator may set longer notification and response times than those prescribed in subparagraphs (A) and (B) of this paragraph, during a system emergency, and shall periodically review the notification and response times and may propose to the commission revisions to those times. The independent system operator may put such revisions into effect, pending action by the commission on its proposal. (5) Technical Arrangements to be Completed Prior to Commencement of Service. Service under this section shall not commence until the transmission provider and the transmission customer, or a third party, have completed installation of all equipment specified under the interconnection agreement, consistent with NERC and ERCOT guidelines. The transmission provider shall exercise reasonable efforts, in coordination with the transmission customer, to complete such arrangements as soon as practical prior to the service commencement date. (6) Transmission Customer Facilities. The provision of transmission service shall be conditioned upon the transmission customer's constructing, maintaining and operating the facilities on its side of each point of interconnection that are necessary to reliably interconnect and deliver power from a resource to the transmission system and from the transmission system to the transmission customer's loads. (7) Termination of Planned Transmission Service. A transmission customer may terminate service under this section after providing the transmission provider with written notice of the transmission customer's intention to terminate. A transmission customer's provision of notice to terminate service under this section shall not relieve the transmission customer of its obligation to pay transmission providers any rates, charges, or fees, including contributions in aid of construction, for service previously provided under the applicable interconnection service agreement, and which are owed to transmission providers as of the date of termination. (f) Planned Resources. Planned resources must be designated by transmission customers as required by subparagraph (e)(2)(A) of this section in a timely fashion on an annual planning basis such that deficiencies in the ERCOT transmission system may be identified and plans may be formulated by transmission providers to correct these deficiencies. (1) Designation of Existing Planned Resources. A resource shall be included in the transmission customer's initial designation of planned resources, if on or before the commencement date for the implementation of substantive rule sec.23.67 and sec.23.70 as prescribed by the commission, the resource was: (A) owned by a transmission customer and serving its loads; or (B) purchased by the transmission customer and serving its loads under a firm power agreement. (2) Designation of New Planned Resources. A transmission customer may designate a new planned resource by providing the independent system operator notice of such designation. Until the transmission providers have completed any transmission facilities or upgrades that have been determined in accordance with subsection (g) of this section to be necessary for planned delivery from a new resource to the transmission customer's load, delivery of power from such resource will be provided by the transmission provider, but only to the extent that such service does not impair the reliability of other planned transmission or other unplanned service with a higher service priority. Notice of a transmission customer's designation of a new resource shall include sufficient engineering and technical information, as described in subsection (e)(2)(B) of this section, to permit the transmission provider to perform a system security study addressing the transmission requirements associated with delivery of such new resource to the transmission customer's load. (3) Transmission Arrangements for Resources Located Outside of ERCOT. It shall be the transmission customer's responsibility to make any transmission arrangements necessary for delivery of capacity and energy produced from a resource outside of ERCOT to the interconnection with the SPP. The transmission provider shall undertake reasonable efforts to assist the transmission customer in coordinating and scheduling arrangements with connecting systems within ERCOT. (g) Transmission Facilities or Upgrades Related to Designation of New Planned Resources. (1) Priority For Transmission Service Applications. Applications for new transmission service or for new resources will be assigned a priority according to the date and time that the application is received, with the earliest application receiving the highest priority. (2) System Security Study. (A) Once a transmission customer provides the transmission provider or independent system operator with notice of its intent to designate a new resource pursuant to subsection (f)(2) of this section, the transmission customer and all transmission providers shall execute a joint study agreement under which the transmission provider will perform a system security study to determine the feasibility of integrating such new resource into the transmission providers' transmission system, and whether any upgrades of facilities providing transmission or ancillary services are needed. (B) In performing the system security study, transmission providers shall apply the same methods and criteria that they employ in integrating new resources they acquire to serve planned uses of the transmission system or integrating new loads. (C) The transmission provider shall complete the system security study within 60 days after the receipt of the executed study agreement and receipt from the customer of all the data necessary to complete the study. In the event a transmission provider is unable to complete its portion of the study within the 60 day period, the transmission provider will provide the transmission customer a written explanation of when the study will be completed and the reasons for the delay. (D) The requesting transmission customer shall be responsible for the cost of the system security study and shall be provided with the results thereof, including relevant workpapers. (E) The transmission providers will use a methodology consistent with good utility practice to conduct a system security study and shall coordinate with other transmission providers as needed in determining the most efficient means for all ERCOT utilities to assure feasibility of transmission service. (3) Facilities Study. (A) Based on the results of the system security study, the transmission provider also may perform, pursuant to an executed facilities study agreement with the transmission customer, a facilities study addressing the detailed engineering, design and cost of transmission or ancillary services facilities required to provide the requested transmission service. (B) The facilities study will be completed as soon as reasonably practicable. Using the information in the system security study and the facilities study, the transmission provider shall notify the transmission customer whether it considers that a contribution in aid of construction is appropriate and the amount of the contribution that the transmission customer should make. (C) The transmission customer shall be responsible for the reasonable cost of the facilities study pursuant to the terms of the facilities study agreement and shall be provided with the results of the facility study , including relevant workpapers. (D) The transmission provider shall be responsible for the costs of any facilities study undertaken to determine the engineering, design and cost of facilities associated with the transmission provider's addition of new resources used to serve the transmission provider's load. Such costs will be separately booked by the transmission provider. (4) Changes in Service Requests. Under no circumstances shall a transmission customer's decision to cancel or delay the addition of a new planned resource in any way reduce or relieve the transmission customer's obligation to pay a contribution in aid of construction to cover the costs of transmission facilities constructed by a transmission provider. Upon receipt of a transmission customer's written notice of such a cancellation or delay, a transmission provider will use the same reasonable efforts to mitigate the costs and charges owed by the transmission customer to the transmission provider as it would to reduce its own costs and charges. (5) Annual Load and Resource Information Updates. A transmission customer shall provide the transmission provider with annual updates of load and resource forecasts consistent with those included in its application for transmission service by October first of each year. The transmission customer also shall provide the transmission provider with timely written notice of material changes in any other information provided in its application relating to the transmission customer's planned load, resources, its transmission system or other aspects of its facilities or operations affecting the transmission provider's ability to provide reliable service under this section. (h) Ancillary Services. Ancillary services include all services necessary to support the transmission of electric power from resources to load while maintaining reliable operation of the interconnected transmission system. A transmission customer is responsible for obtaining or providing necessary ancillary services. The independent system operator shall assess whether an eligible transmission customer has secured ancillary services that are adequate for a proposed transaction, shall notify the transmission customer if additional ancillary services are needed, and shall notify affected transmission providers of the ancillary service arrangements that the customer has made, including the services being provided and the identity of the service providers. A transmission customer may provide the ancillary services necessary for prudent utility operation by purchasing the services from the transmission provider or from another supplier, or supplying the service to itself, in accordance with subsection (d) of this section. Provision of all ancillary services within ERCOT, including a utility's provision of such services to itself, shall be in accordance with this section, sec.23.67 of this title, and approved tariffs. (1) Ancillary Service Customer. An eligible customer shall be an entity that requires ancillary services to utilize transmission service within ERCOT or to transmit power across the interconnection with the SPP. An eligible customer includes the utility (for its own use of the service), any other electric utility, a federal power marketing agency, exempt wholesale generator, qualifying facility, or power marketer. An eligible customer may designate an agent to represent it in making arrangements for ancillary services under this section. (2) Required Ancillary Services. The specific ancillary services, and methods for determining the rates for such services are described in sec.23.67 of this title. (3) Initiating Service. In order to receive ancillary services under this section, the eligible customer and the service provider shall have completed the technical arrangements set forth in paragraph (5) of this subsection. In addition, the customer shall- (A) complete an application for service as provided under this subsection; and (B) execute a service agreement for service under this subsection, or request in writing that the utility file a proposed unexecuted service agreement with the commission. (4) Application Procedures. (A) An eligible customer requesting service under this section must submit an application to the service provider. A completed application shall provide the following information: (i) the identity, address, telephone number, and facsimile number of the party requesting service; (ii) a statement that the party requesting service is, or will be upon commencement of service, an eligible service customer under this subsection; (iii) the service requested, its commencement date and the term of the requested service. (B) Requests for ancillary services must be submitted with at least the lead time prescribed as follows: (i) to support hourly transactions, at least 20 minutes in advance of the commencement of the transaction; (ii) to support daily transactions, no later than 2 p.m. the day before the transaction is to commence; (iii) to support weekly transactions, at least two days in advance; (iv) to support monthly transactions, at least four days in advance; and (v) to support planned annual transactions, at least 15 days in advance. (C) If an application fails to meet the requirements of this section, the service provider shall notify the eligible customer requesting service and specify the reasons of such failure. A service provider's response to a request under this subsection must include a statement of any fees associated with responding to the request (e.g., system studies). (D) Unless the parties agree to a different time frame, responses to requests for ancillary services shall be provided by the utility to the transmission customer no later than the time prescribed in clauses (i) -(v) of this subparagraph: (i) for hourly transactions, within 10 minutes of the request; (ii) for daily transactions, within four hours; (iii) for weekly transactions, within 24 hours; (iv) for monthly transactions, within two days; and (v) for planned annual transactions, within seven days. (E) Wherever possible, the utility will attempt to remedy deficiencies in the application through informal communications with the eligible customer. (F) The ancillary service provider will not divulge information from the application to its marketing personnel, its affiliates, or persons buying or selling electricity in the bulk power market. (G) The independent system operator may set longer notification and response times than those prescribed in subparagraphs (B) and (D) of this paragraph, during a system emergency, and shall periodically review the notification and response times and may propose to the commission revisions to those times. The independent system operator may put such revisions into effect, pending action by the commission on its proposal. (5) Technical Arrangements to be Completed Prior to Commencement of Ancillary Service. The provision of ancillary service shall be conditioned upon construction, maintenance and operation of facilities necessary to reliably interconnect and receive service from the ancillary service provider consistent with good utility practice. Additional requirements may be applied by a utility only if they are reasonably and consistently imposed to ensure the reliable operation of the systems of affected utilities and service providers, are applied in a non-discriminatory manner, and have been approved by the independent system operator. The ancillary service provider shall exercise reasonable efforts, in coordination with the customer, to complete such arrangements as soon as practical prior to the service commencement date. (6) Termination of Service. A customer may terminate service under this subsection following written notice of the customer's intention to terminate. A customer's provision of notice to terminate service under this section shall not relieve the customer of its obligation to pay the service provider any rates, charges, or fees, including contributions in aid of construction, for service previously provided under the applicable service agreement or the operating agreement, and which are owed to the service provider as of the date of termination; nor shall such a notice relieve the customer of its obligations under a long-term contract with the service provider. (7) Notification. The customer or service provider of any ancillary service shall report to the independent system operator the identity of the provider and user of such service and the non-price terms and conditions. (i) Load Shedding and Curtailments. (1) Procedures. (A) Transmission providers, the ERCOT security centers, and the independent system operator shall establish non-discriminatory emergency load shedding and curtailment procedures for responding to emergencies on the transmission system. (B) Transmission providers and transmission customers will comply with the load shedding and curtailment procedures established under this subsection. (C) Transmission providers and customers will implement such programs during any period when the independent system operator, an ERCOT security center, or a transmission provider determines that a transmission capacity constraint exists and such procedures are necessary to alleviate the constraint. (D) The transmission provider will notify all affected transmission customers in a timely manner of any scheduled transmission facility interruption (e.g., scheduled maintenance). (2) Transmission Constraints. (A) During any period when the transmission provider, an ERCOT security center, or the independent system operator determines that a transmission constraint exists on the transmission system, and such constraint may impair the reliability of a transmission provider's system or adversely affect the operations of either a transmission provider or a transmission customer, the transmission provider, an ERCOT security center, or the independent system operator will take whatever actions, consistent with good utility practice, that are reasonably necessary to maintain the reliability of the transmission provider's system and avoid interruption of service. The independent system operator shall determine whether a proposed redispatch is cost-effective and which utility shall redispatch its generating resources to facilitate a transaction. (B) To the extent the transmission provider, an ERCOT security center, or the independent system operator determines that the reliability of the transmission system can be maintained by redispatching resources (including reductions in off-system purchases and sales), or when redispatch arrangements are necessary to facilitate generation and transmission transactions for an eligible customer, a transmission provider or transmission customer will initiate procedures to redispatch its resources. (C) To the extent possible, any redispatch shall be made on a least-cost non- discriminatory basis. Any redispatch under this section will provide for equal treatment between a transmission provider and other transmission customers. If the transmission provider determines that it will not have adequate transmission capacity to satisfy the full amount of a valid request for planned transmission service, the transmission provider nonetheless shall be obligated to offer and provide the portion of the requested planned transmission service that can be accommodated without addition of any facilities. This obligation includes a duty to redispatch resources to increase the level of planned transmission service that may be provided. However, the transmission provider shall not be obligated to provide transmission service, to the extent that the service requires the addition of facilities or upgrades to the transmission system, until such facilities or upgrades have been placed in service. (3) Cost Responsibility for Relieving Capacity Constraints. (A) ERCOT utilities shall provide redispatch services on a non-discriminatory basis to all wholesale market participants when necessary to preserve system reliability or to alleviate transmission constraints that impede wholesale generation and transmission transactions. The price for redispatch services for planned transactions shall be based on the cost of providing the service, which shall be allocated among utilities in proportion to each utility's share of the transmission cost of service, as determined by the commission under sec.23.67 of this title. (B) The cost of redispatch services for unplanned transactions shall be borne by the transmission customer for whose benefit the redispatch is made. Utilities shall provide binding advance bids for redispatch services for unplanned transactions. The participants in unplanned transactions shall be promptly notified by the independent system operator that their transactions may be or have been continued through redispatch; shall be informed of the cost of the redispatch measures; and shall have the opportunity to abandon or curtail their transactions to avoid additional redispatch costs. (C) ERCOT utilities that are required to provide ancillary services under sec.23.67(d) of this title shall include in their tariffs a standard methodology for calculating redispatch costs. (D) The obligation of a utility to redispatch its resources includes the obligation to redispatch non-utility resources that it is relying on. To the extent that non-utility resources are redispatched by a utility pursuant to this subsection, the compensation for such services shall be consistent with this paragraph. (4) System Reliability. (A) Notwithstanding any other provisions of this section, the transmission provider reserves the right, consistent with good utility practice and on a non- discriminatory basis, to interrupt transmission service without liability on the transmission provider's part for the purpose of making necessary adjustments to, changes in, or repairs to its lines, substations and other facilities, or where the continuance of transmission service would endanger persons or property. (B) In the event of any adverse condition or disturbance on the transmission provider's system or on any other system directly or indirectly interconnected with the transmission provider's system, the transmission provider, consistent with good utility practice, also may interrupt transmission service on a non- discriminatory basis in order to limit the extent or damage of the adverse condition or disturbance, to prevent damage to generating or transmission facilities, or to expedite restoration of service. (C) The transmission provider will give the transmission customer as much advance notice as is practicable in the event of such interruption, and shall restore service with due diligence. (D) Any interruption of transmission service and any restoration of service shall not be discriminatory relative to the transmission provider's use of the transmission system on behalf of its native load customers. (E) The transmission customer's failure to respond to established emergency load shedding and curtailment procedures to relieve emergencies on the transmission system may result in the transmission customer being deemed by the transmission provider to be in default and may result in the termination of transmission service. (j) Billing and Payment for Transmission Service and Ancillary Services. (1) Billing Procedure. Within a reasonable time after the first day of each month, the service provider shall submit an invoice to the customer for the charges for all services furnished under this section during the preceding month. (2) Payment Procedure. The invoice shall be paid to the service provider by the customer so that the service provider will receive the funds by the 20th calendar day after the date of issuance of the invoice, unless the provider and the customer agree on another mutually acceptable deadline. All payments shall be made in immediately available funds payable to service provider, or by wire transfer to a bank named by the service provider. (3) Interest on Unpaid Balances. Interest on any unpaid amount shall be calculated in accordance with the methodology specified for interest on overbillings and underbillings in sec.23.45(h) of this title (relating to Billing). Interest on delinquent amounts shall be calculated from the due date of the bill to the date of payment. When payments are made by mail, bills shall be considered as having been paid on the date of receipt by the service provider. (4) Customer Default. (A) In the event the customer fails, for any reason other than a billing dispute as described in subparagraph (B) of this paragraph, to make payment to the service provider on or before the due date, and such failure of payment is not corrected within 30 calendar days after the service provider notifies the customer to cure such failure, a default by the customer shall be deemed to exist. (B) Upon the occurrence of a default, the service provider may initiate a proceeding with the commission to terminate service. In the event of a billing dispute between the service provider and the customer, the service provider will continue to provide service during the pendency of the proceeding, as long as the customer: (i) continues to make all payments not in dispute; and (ii) pays into an independent escrow account the portion of the invoice in dispute, pending resolution of such dispute. (C) If the transmission customer fails to meet the requirements in subparagraph (B) of this paragraph, then the service provider will provide notice to the customer and to the commission of its intention to terminate service. (D) Any dispute arising in connection with the termination or proposed termination of service shall be referred to the informal dispute resolution process described in sec.23.67(s) of this title. (5) Unauthorized Use of Ancillary Services. Any person who knowingly makes use of an ancillary service required by the independent system operator without the agreement of the party providing that service shall pay to such service provider an amount equal to three times the otherwise applicable charge. In no case shall a service provider knowingly provide such an ancillary service without prior arrangements with the customer, nor shall a service provider unilaterally impose such an ancillary service on an unwilling purchaser. (k) Standards of Conduct. (1) Standard of Nondiscrimination. In performing its obligations under this section, a service provider shall apply the provisions of this section in a non- discriminatory manner to all users, including itself as a user of its services. (A) The employees of a utility in the merchant function described in subparagraph (B) of this paragraph and the transmission operations functions described in subparagraph (C) of this paragraph shall adhere to the standards of conduct in this subsection and sec.23.67 of this title. Within 60 days of the effective date of this section, each electric utility in ERCOT that owns 100 megawatts or more of generating capacity shall make a filing describing its procedures for implementing the requirements of this subsection and sec.23.67 of this title, including written procedures governing the exchange of information and physical separation of personnel among its functionally unbundled organizational units. (B) The employees of a utility that are engaged in wholesale merchant functions (that is, the purchase or sale of electric energy at wholesale), other than purchases required under the Public Utility Regulatory Policies Act, shall not- (i) conduct transmission system operations or reliability functions; (ii) have preferential access to the utility's system control center and other facilities, beyond the access that is available to other market participants; (iii) have preferential access to information about the utility's transmission system that is not available to users of the electronic information network established in accordance with section sec.23.67(p) of this title; and (iv) obtain information about the utility's transmission system and offerings of ancillary services, including calculations of available transmission capacity and information concerning curtailments, through means or sources other than the information network. (C) To the maximum extent practicable, employees of a utility engaged in transmission system operations must function independently of employees engaged in wholesale merchant functions and of employees of any affiliate of the utility. Employees engaged in transmission system operations may disclose information to employees of the utility engaged in merchant functions only through the information network, if the information relates to the utility's transmission system or offerings of ancillary services, including calculations of available transmission capacity and information concerning curtailments. (D) Information concerning transfers of persons between an organizational unit that is responsible for transmission system operations and a unit that is responsible for wholesale merchant functions shall be provided to the independent system operator on a monthly basis and shall be made available, on request, to any market participant. (E) If an employee of a public utility discloses or obtains information in a manner that is inconsistent with the rules in this subsection, the utility shall post a notice and details of the disclosure on the information network. (F) Employees of a utility engaged in transmission operations shall apply the rules in this section, sec.23.67 of this title, and any tariffs relating to transmission service in a fair and impartial manner. (G) Provisions of this section that allow no discretion shall be strictly applied, and where discretion is allowed, it shall be exercised in a non- discriminatory manner. (H) For all of the commission-authorized discounts on ancillary transmission services, the service provider shall offer discounts on all services to similarly-situated transmission customers on a non-discriminatory basis. Service providers shall post on the ERCOT electronic information network on a contemporaneous basis discounts offered to its power marketing personnel, its affiliates, or persons buying or selling electricity in the bulk power market. (I) Bids or offers for ancillary services shall not be bundled with a power sale. The purchase of power from a source shall not be contingent on purchase of ancillary services from the same source. (J) This subsection shall not apply to data that does not relate to transmission service operations such as information on human resource policies. (2) Communications with Eligible Customers. A service provider shall use all reasonable efforts to communicate promptly with all eligible customers to resolve any questions regarding their requests for service in a non- discriminatory manner. (3) Standard of Due Diligence. If a service provider or customer is required to complete activities or to negotiate agreements as a condition of service, each party shall use due diligence to complete these actions within a reasonable time. (l) Indemnification and Liability. (1) Neither a customer nor service provider shall be liable to the other for damages for any act that is beyond such party's control, including any event that is a result of an act of God, labor disturbance, act of the public enemy, war, insurrection, riot, fire, storm or flood, explosion, breakage or accident to machinery or equipment, a curtailment, order, regulation or restriction imposed by governmental, military, or lawfully established civilian authorities, or by the making of necessary repairs upon the property or equipment of either party. (2) Notwithstanding the provisions of the foregoing paragraph, a transmission customer and service provider shall assume all liability for, and shall indemnify each other for, any losses resulting from negligence or other fault in the design, construction, or operation of their respective facilities. Such liability shall include a transmission customer or service provider's monetary losses, costs and expenses of defending an action or claim made by a third person, payments for damages related to the death or injury of any person, damage to the property of the service provider or transmission customer, and payments for damages to the property of a third person, and damages for the disruption of the business of a third person. This paragraph does not create a liability on the part of a service provider or transmission customer to a retail customer or other third person, but requires indemnification where such liability exists. The indemnification required under this paragraph does not include responsibility for the service provider's or transmission customer's costs and expenses of prosecuting or defending an action or claim against the other, or damages for the disruption of the business of the service provider or customer. The limitations on liability set forth in this subsection do not apply in cases of gross negligence or intentional wrongdoing. (m) Creditworthiness for Transmission Service and Ancillary Services. (1) For the purpose of determining the ability of a customer to meet its obligations related to service hereunder, a service provider may require reasonable credit review procedures. This review shall be made in accordance with standard commercial practices. (2) The service provider may require a customer to provide and maintain in effect during the term of service, an unconditional and irrevocable letter of credit in a reasonable amount as security to meet its responsibilities and obligations under this section and sec.23.67, or an alternative form of security proposed by the customer and acceptable to the service provider and consistent with commercial practices established by the Uniform Commercial Code that reasonably protects the service provider against the risk of non-payment. (3) If a transmission customer is creditworthy, no letter of credit or alternative form of security shall be required. (n) Responsibilities of ERCOT Independent System Operator. To the extent that this section or sec.23.67 of this title assigns a responsibility to another person or entity in conjunction with or in lieu of the ERCOT independent system operator, the independent system operator shall exclusively assume those specified responsibilities at such time as the formation of the independent system operator is approved by the commission. This subsection is not intended to expand the powers of the independent system operator beyond the powers prescribed in sec.23.67 or elsewhere in this section. (o) Impact Calculations Using the Vector-Absolute Megawatt-Mile Method. The vector-absolute megawatt-mile impacts referred to in sec.23.67(g) of this title shall be calculated in accordance with this subsection. When transmission rates are fixed, in accordance with sec.23.67 of this title, each electric utility in ERCOT shall provide the information necessary to perform the calculations described in this subsection. The independent system operator shall establish a working group, with equal participation from all wholesale market participants, to review the load flow case and the underlying data to be used in the impact calculations, and shall appoint a chair of the working group. The chair of the working group shall report in writing to the independent system operator either the working group's unanimous acceptance of the data, or the objections raised to the data by any member of the group. Disputes over the data will be resolved in accordance with the procedures for alternative dispute resolution prescribed in sec.23.67(s) of this title. The independent system operator shall include in the working group any transmission provider or eligible customer that requests to participate. (1) Megawatt-miles for all ERCOT loads shall be determined using a single load flow model that is based on the following conditions or assumptions: (A) the transmission system will be configured as it is anticipated to operate in the upcoming summer season, (B) every generator that is a part of any load's planned resource commitment will be represented in the calculations; and (C) events will be modeled in a consistent manner, to the greatest extent possible, from one utility to another. (2) The vector-absolute megawatt-mile impact is an assessment of the impact of the transmission of power and energy made by calculating the sum of the products of the vector-absolute change in megawatt power flows for each transmission line that has a nominal operating voltage of at least 60,000 volts when measured phase-to-phase, and the length of each line in miles, calculated for each generator. (3) The impact calculation is based on identifying the generating units that, by reason of ownership or contractual entitlement, are serving the load of a transmission customer and have been designated as planned resources. Each group of generating units and the loads they serve are referred to in this subsection as a transmission event. Transmission transactions that are not included in a transmission event in the calculation of impacts are considered unplanned transactions. (4) Each transmission customer taking service under sec.23.67 of this title shall nominate from its list of planned resources a specific amount of generation from each unit, such that the sum of the nominations is greater than or equal to 115% of the utility's demand or at a level based on the reserve requirement established by the independent system operator. Such nominations shall be consistent with an economic dispatch of the utility's planned resources. (5) The impact calculation is based on a single load-flow base case that takes into account all transmission events. (6) The impact calculation is performed for each generator bus that serves load within a single transmission event, as follows: (A) The portion of the load on every bus that is assigned to the particular transmission event is removed. (B) The output of the generators in the transmission event is reduced by an amount that results in a balancing of load and generation, without affecting the output of generators that are not included in the transmission event. (C) The vector-absolute change in flow on every line is determined by comparing the flow calculated in subparagraph (B) of this paragraph with the base case and multiplying the vector-absolute change in flow, in megawatts, by the length of the line in miles. (D) The megawatt-mile impact per megawatt of generation is determined by dividing the impact determined in subparagraph (C) of this paragraph by the generation change used in subparagraph (B) of this paragraph. (7) From the information calculated in paragraph (6) of this subsection, a matrix is prepared that shows the megawatt-mile impact on each transmission provider per megawatt of generation for each generator in each transmission event. (8) The total megawatt-mile impact of a transmission event is determined by summing the product of the nomination level for each generator, as prescribed in paragraph (4) of this subsection, and the megawatt-mile impact per megawatt for that generator, as calculated in paragraph (6) of this subsection. (9) For each transmission provider, the impact of each transmission customer's planned resources will be determined by calculating a ratio in which the numerator is the megawatt-miles of impact of the transmission customer's use of planned resources and the denominator is the sum of the megawatt-mile impacts of all planned resources on the transmission provider's system, using the impacts calculated in paragraph (8) of this subsection. (10) Each transmission customer, including the transmission provider, will be responsible for a portion of the transmission provider's transmission costs, determined by multiplying the customer's impact ratio calculated in paragraph (9) of this subsection by three-tenths of the transmission provider's annual transmission costs, as determined in accordance with sec.23.67 of this title. (11) Each transmission customer's cost responsibility, determined in accordance with paragraph (10) of this subsection, will be converted to a monthly amount and paid to the transmission providers, in accordance with a commission order entered under sec.23.67 of this title. (12) Based on the megawatt-mile method prescribed in this section and the transmission rate provisions of sec.23.67 of this title, a rate for transmission service shall be calculated for each utility in ERCOT. (p) Summary of required filings. This section prescribes certain information that must be filed with the commission or provided to the independent system operator. These requirements, which do not include applications for transmission or ancillary services, are summarized as follows:: (1) Methodologies for determining redispatch costs, in subsection (i)(1) of this section. (2) Procedures for implementing the standards of conduct, in subsection (k)(1) of this section. (3) Information relating to the transfer of personnel, in subsection (k)(1)(D) of this section. (4) Information needed to perform megawatt-mile impact calculations, in subsection (o) of this section. This agency hereby certifies that the adoption been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604676 Paula Mueller Secretary of the Commission Public Utility Commission of Texas Effective date: April 24, 1996 Proposal publication date: February 26, 1996 For further information, please call: (512) 458-0100 Part III. Texas Alcoholic Beverage Commission Chapter 33. Licensing License and Permit Surcharges 16 TAC sec.33.24 The Texas Alcoholic Beverage Commission adopts an amendment to sec.33.24, with changes to the proposed text as published in the February 20, 1996, issue of the Texas Register (21 TexReg 1341). The amendment establishes a procedure by which permittees and licensees can obtain a hearing prior to revocation of their conduct surety bond. The amendment further addresses the question of how the misconduct of an employee or agent of the licensee or permittee, because of the operations of the Alcoholic Beverage Code, sec.106.14, can be issued to revoke the conduct surety bond. Section sec.33.24(j)(2) was amended from the originally published text to allow licensees and permittees 30 days to request a hearing after notification by the agency of its intention to seek forfeiture of the bond. This amendment was adopted in order to provide a definite time period within which to obtain revocation of the bond or proceed to hearing. The last sentence of subsection (j)(3) was changed to substitute the language reflected as follows. The present language was added to make clear that the evidentiary process described in subsection (j)(3) applies only to situations in which bond revocation is based in whole or part on violations of the Alcoholic Beverage Code that were not attributed to the licensee or permittee because of the Alcoholic Beverage Code, sec.106.14. Use of such evidence as a ground for bond revocation is mandated by the language of the Alcoholic Beverage Code, sec.11.11(b)(2) and sec.61.13(b)(2). Section sec.33.24(j)(4) was changed from the previously published text to add the phrases "against the licensee or permittee" and "the hearing described in sec.33.24(j)(2)." This language was added to make the object of the paragraph clear. Comments were received from the Mothers Against Drunk Driving and several attorneys representing retailers engaged in the alcoholic beverage business. The Mothers Against Drunk Driving suggested amending subsection (j)(2) to allow a licensee or permittee seven days within which to request a hearing under this rule. This suggestion was partially accommodated by the amendments discussed above. The decision to request or waive a hearing is one involving consideration of many factors. Accordingly, the commission adopted a thirty day decisional period as more reasonable rather than the proposed seven day period. One commenter suggested the language clarifications to subsection (j)(4) which were adopted as discussed previously. This commenter also suggested adding the phrase "due to the licensee's or permittee's failure to conform its operations with alcoholic beverage law in violation of the Alcoholic Beverage Code, sec.61.13 or sec.11.11, respectively" to subsection (j)(1). This proposal was rejected as adding surplus language without greatly clarifying the amended passage. This commenter further proposed adding language to subsection (j)(1) which would make this rule inapplicable to licensees or permittees that voluntarily cancel their license or permit. This proposal was rejected because it would allow licensees or permittees to avoid the statutorily imposed consequences of violations of the Alcoholic Beverage Code, specifically the consequence of bond revocation mandated by the Alcoholic Beverage Code, sec.11.11 and sec.61.13. A third commenter suggested that the last sentence of subsection (j)(3) was surplus and unnecessarily confusing. This proposal was rejected because of the reasons discussed above in connection with this paragraph. This commenter further objected to that portion of subsection (j)(3) that would allow use of a deferred adjudication, given to the employee of a licensee or permittee, as evidence in a bond revocation proceeding. The commenter argued that deferred adjudication was not a final adjudication, as required by the Alcoholic Beverage Code, sec.11.11 and sec.61.13, and that such practice would unduly burden the relevant criminal courts by increasing the likelihood that charged employees would proceed to trial rather than enter pleas of guilty. This contention was rejected as contrary to the language and intent of the enabling statutes. The last sentence of the Alcoholic Beverage Code, sec.11. 11(b)(2) and sec.61.13(b)(2) clearly mandate that conduct surety bonds are to be revoked because of events that would be attributable to a licensee or permittee but for the defense provided by the Alcoholic Beverage Code, sec.106. 14. An event that results in the deferred adjudication of an employee, as described in subsection (j)(3), would inarguably be attributed to the licensee or permittee but for the Alcoholic Beverage Code, sec.106.14. This reasoning is buttressed by the fact that deferred adjudication can only be granted on a judicial finding that the evidence against the defendant substantiates guilt, and when the defendant enters no controverting plea. Texas Code of Criminal Procedure, Article 42.12 sec.5(a). The amendment is adopted pursuant to the Texas Alcoholic Beverage Code, sec.5.31, which provides the Texas Alcoholic Beverage Commission with the authority to prescribe and publish rules necessary to carry out the provisions of the Alcoholic Beverage Code. Cross reference: Alcoholic Beverage Code, sec.11.11(c) and sec.61.13(c). sec.33.24. Conduct Surety Bond. (a) A bond required under the Alcoholic Beverage Code, Texas Civil Statutes, sec.11.11 and sec.61.13, must be executed only on forms prescribed by this agency with the licensee or permittee as principal, a qualified surety company doing business in this state as surety and the state as payee. (b) All bonds of permittees and licensees shall be payable in Travis county. (c) A separate surety, in the amount of $5,000 or $10,000, shall be obtained, submitted and maintained for each license or permit as set out in the Alcoholic Beverage Code, sec.11.11 and sec.61.13. (d) If certificates of deposit, savings accounts or letters of credit are furnished, the administrator or his designee shall keep them in his possession. Interest earned on a certificate of deposit or savings account is not subject to the assignment and remains the property of the owner of the certificate of deposit or savings account. (e) A certificate of deposit or savings account furnished by a licensee or permittee must be assigned to the state, in a manner approved by the administrator or his designee, to secure payment to the state. (f) A letter of credit furnished by a licensee or permittee, under this rule, must be on a form approved by the administrator or his designee and contain any conditions required by the administrator to secure payment to the state. (g) The surety bond, assignment of certificate of deposit, savings account, or letter of credit may be continuous in nature and must cover the minimum time required of the applicant to qualify for exemption from the surety imposed by the Alcoholic Beverage Code, sec.11.11 and sec.61.13. (h) Qualifications of Surety. (1) A surety company, to qualify to provide bonds under this rule, must be licensed by this state and in "good standing" with the State Board of Insurance, Comptroller of Public Accounts, Secretary of State and any other regulatory agencies with jurisdiction over its affairs. (2) A bank, savings institution or credit union, in addition to the requirements of the Alcoholic Beverage Code, sec.11.11 and sec.61.13, must have a physical facility in this state to accept cash deposits, make cash advances to customers and carry out day-to-day operations within this state. (i) Submission of Security. (1) An applicant for an original or renewal license or permit must submit, at the time of their application, the security as prescribed by the Alcoholic Beverage Code, sec.11.11 and sec.61.13, and meet the requirements of this rule. (2) Failure to submit the necessary surety in proper form will result in the denial of the application. (j) Forfeiture of the Bond (1) When a license or permit is cancelled, or a final adjudication that the licensee or permittee has committed three violations of the Alcoholic Beverage Code since September 1, 1995, the commission shall notify the licensee or permittee, in writing, of its intent to seek forfeiture of the bond. (2) The licensee or permittee may, within 30 days of the notice specified in subsection (j)(1) of this section, request hearing on the question of whether the criteria for forfeiture of the bond, as established by the Alcoholic Beverage Code, sec.11. 11 and sec.61.13 and this rule have been satisfied. The hearing shall be conducted in accordance with the Administrative Procedures Act. (3) Evidence that an agent or servant of the licensee or permittee has been adjudicated guilty of, or granted deferred adjudication for, an offense under the Alcoholic Beverage Code, because of conduct occurring during the performance of his/her duties for the licensee or permittee, shall constitute evidence of an adjudication that the licensee or permittee has violated a provision of the Alcoholic Beverage Code. This paragraph only applies to violations which were not attributable to the licensee or permittee because of the operations of the Alcoholic Beverage Code, sec.106.14. (4) Upon entry of final order against the licensee or permittee in the hearing described in subsection (j)(2) of this section, or upon waiver of said hearing by the licensee or permittee, the commission shall notify the surety company, bank, savings institution or credit union to remit to the state the amount of surety required within ten days after notification. (5) The commission may institute action in its own name, for the benefit of the state, on the surety supporting the bond, and against the bank, savings institution or credit union, as set forth in the Alcoholic Beverage Code, sec.11.70, to recover the surety. (k) Release of Surety. (1) A surety company may terminate liability by giving the proper 30 day written notice, as provided in the Alcoholic Beverage Code, sec.11.71. (2) Grounds for termination of a permit/license upon termination of liability by surety is the same as provided in the Alcoholic Beverage Code, sec.11.71. (3) Upon expiration of the license or permit, its voluntary cancellation, or upon the applicant's subsequent approval for exemption from the surety requirement, the licensee or permittee may request the release and return of the security supporting their license or permit. (4) The release of this security will not be unreasonably withheld; however, the surety company, bank, savings institution or credit union is not released from its obligation until they receive written notice of the release from this agency. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on April 4, 1996. TRD-9604718 Lou Bright General Counsel Texas Alcoholic Beverage Commission Effective date: April 25, 1996 Proposal publication date: February 20, 1996 For further information, please call (512) 206-3204 Part VIII. Texas Racing Commission Chapter 305. Licenses for Pari-mutuel Racing Subchapter B. Individual Licenses Specific Licensees 16 TAC sec.305.41 The Texas Racing Commission adopts an amendment to sec.305.41, concerning the licensing criteria for veterinarians, without changes to the proposed text as published in the February 9, 1996, issue of the Texas Register (21 TexReg 921). The amendment is adopted to ensure that the persons permitted to practice veterinary medicine on the grounds of licensed racetracks are qualified and competent. The amendment changes the qualifications to be licensed by the commission as a veterinarian. No comments were received regarding adoption of the amendment. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3. 02, which authorize the commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.7.02, which authorizes the commission to adopt rules establishing the categories of licenses and the qualifications relating to each license category. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604736 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: May 1, 1996 Proposal publication date: February 9, 1996 For further information, please call: (512) 833-6699 Subchapter C. Racetrack Licenses General Provisions 16 TAC sec.305.70 The Texas Racing Commission adopts an amendment to sec.305.70, concerning officials' fees at horse racetracks, without changes to the proposed text as published in the February 9, 1996, issue of the Texas Register (21 TexReg 922). The amendment is adopted to ensure the officials supervising pari-mutuel horse racing will be of the highest quality. The amendment eliminates the differential in the compensation for stewards and commission veterinarians at pari-mutuel horse racetracks and raises the rate of compensation for those officials on race days. No comments were received regarding adoption of the amendment. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3. 02, which authorize the commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.3.07, which authorizes the commission to impose a fee to offset the costs of compensating officials and to set the amount of the compensation by rule. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604737 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: May 1, 1996 Proposal publication date: February 9, 1996 For further information, please call: (512) 833-6699 Chapter 313. Officials and Rules of Horse Racing Subchapter A. Officials Duties of Other Officials 16 TAC sec.313.53 The Texas Racing Commission adopts an amendment to sec.313.53, concerning the mutuel manager at horse racetracks, without changes to the proposed text as published in the February 9, 1996, issue of the Texas Register (21 TexReg 922). The amendment is adopted to ensure the officials supervising pari-mutuel horse racing will be of the highest quality. The amendment authorizes the mutuel manager to designate an individual to serve in the mutuel manager's absence subject to the approval of the executive secretary. No comments were received regarding adoption of the amendment. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3. 02, which authorize the commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the commission to adopt rules on all matters relating to the operation of racetracks; and sec.11.01, which authorizes the commission to adopt rules to regulate pari-mutuel wagering. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604738 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: May 1, 1996 Proposal publication date: February 9, 1996 For further information, please call: (512) 833-6699 Subchapter B. Entries, Declarations, and Allowances Declarations and Scratches 16 TAC sec.313.132 The Texas Racing Commission adopts an amendment to sec.313.132, concerning scratch time at a horse racetrack, without changes to the proposed text as published in the February 9, 1996, issue of the Texas Register (21 TexReg 923). The amendment is adopted to ensure the patrons will have accurate information regarding the participants in a race, because late changes will be significantly reduced. The amendment eliminates the requirement that a horse racetrack have a "scratch time". No comments were received regarding adoption of the amendment. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3. 02, which authorize the commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.6.06, which authorizes the commission to adopt rules on all matters relating to the operation of racetracks. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604747 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: May 1, 1996 Proposal publication date: February 9, 1996 For further information, please call: (512) 833-6699 Subchapter C. Claiming Races 16 TAC sec.313.301 The Texas Racing Commission adopts an amendment to sec.313.301, concerning claiming races at a horse racetrack, without changes to the proposed text as published in the February 9, 1996, issue of the Texas Register (21 TexReg 923). The amendment is adopted to encourage the owning of race horses in Texas by increasing the number of people who are eligible to file claims for race horses. The amendment changes the criteria for claiming a horse. No comments were received regarding adoption of the amendment. The amendment is adopted under the Texas Civil Statutes, Article 179e, This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604739 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: May 1, 1996 Proposal publication date: February 9, 1996 For further information, please call: (512) 833-6699 Subchapter D. Running of the Race The Race 16 TAC sec.313.449 The Texas Racing Commission adopts an amendment to sec.313.449, concerning the official order of finish at a horse racetrack, without changes to the proposed text published in the February 9, 1996, issue of the Texas Register (21 TexReg 923). The amendment is adopted to ensure pari-mutuel racing in Texas will be of the highest quality and integrity. The amendment clarifies the requirements for a horse to be included in the official order of finish. No comments were received regarding adoption of the amendment. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3. 02, which authorize the commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.6.06, which authorizes the commission to adopt rules on all matters relating to the operation of racetracks. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604808 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: May 1, 1996 Proposal publication date: February 9, 1996 For further information, please call: (512) 833-6699 Chapter 315. Officials and Rules for Greyhound Racing Subchapter A. Officials Duties 16 TAC sec.315.36 The Texas Racing Commission adopts an amendment to sec.315.36, concerning the mutuel manager at a greyhound racetrack, without changes to the proposed text as published in the February 9, 1996, issue of the Texas Register (21 TexReg 924). The amendment is adopted to ensure the officials supervising pari- mutuel greyhound racing will be of the highest quality. The amendment authorizes the mutuel manager at a greyhound racetrack to designate an individual to serve in the mutuel manager's absence, subject to the approval of the executive secretary. No comments were received regarding adoption of the amendment. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3. 02, which authorize the commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; and sec.6.06, which authorizes the commission to adopt rules on all matters relating to the operation of racetracks. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604746 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: May 1, 1996 Proposal publication date: February 9, 1996 For further information, please call: (512) 833-6699 Chapter 319. Veterinary Practices and Drug Testing Subchapter B. Treatment of Horses 16 TAC sec.319.111 The Texas Racing Commission adopts an amendment to sec.319.111, concerning the bleeder and furosemide (Lasix) program for race horses, with changes to the proposed text as published in the February 9, 1996, issue of the Texas Register (21 TexReg 924). The amendment is adopted to ensure pari-mutuel racing in Texas will be humane for race horses and that information provided to patrons will be accurate and reliable. The amendment streamlines and clarifies the requirements for designating a horse as a bleeder and for participating in the furosemide (Lasix) program. Comments were received from Retama Park pari-mutuel racetrack regarding adoption of the amendment. The commenter suggested that the deadline for admission to the Lasix program be on race day, rather than on entry day to assist horses shipping in for a race. The commission disagrees with the comment on the grounds that the commission will accept requests for admission by fax, thereby assisting trainers who will be shipping in. The commenter also suggested that because of the differences in entry time at the various racetracks that the stewards be given some latitude with respect to a horse's eligibility to be entered in a race before it is scheduled to come off the bleeder's list. The commission disagrees with the comment at this time, but is planning additional rulemaking in the near future that will address the commenter's concerns. The changes from the proposed text were suggested by the commission staff to clarify the status of a horse that does not experience an EIPH event in 365 days and to minimum the possibility of a horse being scratched for the trainer's failure to follow the correct procedures. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3. 02, which authorize the commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the commission to adopt rules on all matters relating to the operation of racetracks; and sec.14.03, which authorizes the commission to adopt rules prohibiting the illegally influencing of a race, including the use of medication. sec.319.111. Bleeders and Furosemide (Lasix) Program. (a) Diagnosis of EIPH. A bleeder is a horse that experiences Exercise Induced Pulmonary Hemorrhage (EIPH). The medical diagnosis of EIPH may be made only by a commission veterinarian or a practicing veterinarian holding a current license from the commission. A veterinarian who diagnoses an EIPH event in a horse participating in pari-mutuel racing in this state shall report the event to the commission veterinarian in a format prescribed by the commission. On receipt of the first report of a diagnosed EIPH event for a horse, the commission veterinarian shall certify the horse as a bleeder. (b) Admission to Furosemide (Lasix) Program. (1) A horse that has been certified as a bleeder in this state may be admitted to the furosemide (Lasix) program. To be admitted to the furosemide (Lasix) program, the trainer of the horse must file a request for the horse's admission to the program before the horse is entered in its next race. (2) The trainer of a horse that was certified as a bleeder in another pari- mutuel racing jurisdiction and who competed with furosemide (Lasix) in its most recent start out-of-state is required to request the horse's admission to the furosemide (Lasix) program. The trainer must provide documentation satisfactory to the commission veterinarian that the horse was certified as a bleeder in another jurisdiction. The request that the horse be admitted to the furosemide (Lasix) program must be filed before the horse is entered in its next race. (c) Administration of Furosemide (Lasix). Furosemide (Lasix) shall be administered to a horse in the furosemide (Lasix) program not later than four hours before the published post time for the race the horse is entered to run. The furosemide (Lasix) must be administered intravenously by a veterinarian licensed by the commission. The chief veterinarian shall periodically publish the permissible blood levels of furosemide (Lasix) in post-race specimens and shall post the levels at each licensed racetrack. (d) Requirement to Use Furosemide (Lasix). A horse in the furosemide (Lasix) program in Texas must compete with furosemide (Lasix) until withdrawn from the program. (e) Withdrawal from Furosemide (Lasix) Program. (1) The chief veterinarian of the commission shall establish criteria for withdrawing a horse from the furosemide (Lasix) program and shall make those criteria available in the commission veterinarian's office at each racetrack. (2) To withdraw a horse from the furosemide (Lasix) program, the trainer must apply to the commission veterinarian. The commission veterinarian shall require a signed medical statement from the trainer's regular practicing veterinarian that it is in the horse's best interest to be withdrawn from the furosemide (Lasix) program. The commission veterinarian may also request a record of past performances, a workout without furosemide (Lasix), a blood test at the time of the workout to confirm the absence of furosemide (Lasix), or a post-workout endoscopic examination. A withdrawal request and all accompanying information must be reviewed and approved by two commission veterinarians. The commission veterinarians must act on a withdrawal request no later than one week after the request is filed. (3) A horse in the furosemide (Lasix) program may not compete without furosemide (Lasix) until its withdrawal from the program has been approved by the commission veterinarians. Withdrawal from the furosemide (Lasix) program does not prohibit a horse from subsequent readmission to the program in accordance with this section. (f) Bleeders List. (1) The commission veterinarian shall maintain a list of horses that have been certified as bleeders and a list of horses that have been admitted to the furosemide (Lasix) program. (2) On receipt of a report of a diagnosed EIPH event, the commission veterinarian shall place the horse on the veterinarian's list. For the first diagnosed EIPH event, a horse shall be placed on the veterinarian's list and is not eligible to enter a race before the 10th day after the horse is placed on the list. For the second diagnosed EIPH event, a horse shall be placed on the veterinarian's list and is not eligible to enter a race before the 30th day after the date the horse is placed on the list. For the third diagnosed EIPH event, a horse shall be placed on the veterinarian's list and is not eligible to enter a race before the 180th day after the date the horse is placed on the list. For the fourth diagnosed EIPH event, a horse is barred from pari-mutuel racing in this state. A horse that has not had a diagnosed EIPH event for a period of 365 consecutive days is considered a non-bleeder for purposes of this paragraph. (3) Notwithstanding the foregoing, if after reviewing a report of a diagnosed EIPH event the commission veterinarian determines additional days on the veterinarian's list are essential to the health and safety of the horse, the commission veterinarian may extend the number of days the horse is on the veterinarian's list. The commission veterinarian shall record the medical reasons for the additional days for review by the chief veterinarian. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604740 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: May 1, 1996 Proposal publication date: February 9, 1996 For further information, please call: (512) 833-6699 Chapter 321. Pari-mutuel Wagering Subchapter A. Regulation and Totalisator Operations General Provisions 16 TAC sec.321.6 The Texas Racing Commission adopts an amendment to sec.321.6, concerning the pari-mutuel track report, without changes to the proposed text as published in the February 9, 1996, issue of the Texas Register (21 TexReg 926). The amendment is adopted to ensure the commission will have complete information for the effective regulation of pari-mutuel wagering. The amendment modifies the type of information that must be provided by the racetrack to the commission regarding each day's wagering activity. No comments were received regarding the proposal. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3. 02, which authorize the commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the commission to adopt rules relating to all aspects of the operation of pari- mutuel racetracks; and sec.11.01, which authorizes the commission to adopt rules regulating pari-mutuel wagering. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604745 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: May 1, 1996 Proposal publication date: February 9, 1996 For further information, please call: (512) 833-6699 Subchapter B. Distribution of Pari-mutuel Pools 16 TAC sec.321.114 The Texas Racing Commission adopts an amendment to sec.321.114, concerning the prevention of start, without changes to the proposed text published in the February 9, 1996, issue of the Texas Register (21 TexReg 927). The amendment is adopted to ensure pari-mutuel wagering will be fair to the patrons, effectively regulated, and of the highest integrity. The amendment clarifies the effect on the distribution of pari-mutuel pools if a race animal is prevented from starting in a race due to the failure of the starting gate or starting box to open properly. No comments were received regarding the proposal. The amendment is adopted under the Texas Civil Statutes, Article 179e, sec.3. 02, which authorize the commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the commission to adopt rules relating to all aspects of the operation of pari- mutuel racetracks; and sec.11.01, which authorizes the commission to adopt rules regulating pari-mutuel wagering. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604741 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: May 1, 1996 Proposal publication date: February 9, 1996 For further information, please call: (512) 833-6699 Simulcasting at Horse Racetracks 16 TAC sec.321.234, sec.321.235 The Texas Racing Commission adopts amendments to sec.321.234 and sec.321. 235, concerning pari-mutuel wagering on simulcast races at horse racetracks, without changes to the proposed text as published in the February 9, 1996, issue of the Texas Register (21 TexReg 929). The amendments are adopted to ensure pari-mutuel wagering will be fair to the patrons, effectively regulated, and of the highest integrity. The amendments change the requirements for allocating Texas-bred revenue among the various breeds and prioritizing simulcast signals. Comment was received from the Texas Thoroughbred Association regarding the proposal. The commenter suggested a substantial modification to the proposed amendment to sec.321.234, to permit the breed registries and the racetracks 45 days after the award of live race dates to negotiate the allocation percentages. The commission disagrees with the comment on the grounds that the suggested revision would not solve the problem the commission seeks to address. The breed registries and the racetracks have previously been required to negotiate regarding the allocation percentages and have been unable to reach an agreement; therefore, permitting more negotiation is inefficient, costly, and time- consuming. The amendments are adopted under the Texas Civil Statutes, Article 179e, sec.3.02, which authorize the commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the commission to adopt rules relating to all aspects of the operation of pari-mutuel racetracks; sec.11.01, which authorizes the commission to adopt rules to regulate pari-mutuel wagering; and sec.11.011, which authorizes the commission to adopt rules to regulate pari-mutuel wagering on simulcast races. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604743 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: May 1, 1996 Proposal publication date: February 9, 1996 For further information, please call: (512) 833-6699 Common Pool Wagering 16 TAC sec.321.272, sec.321.275 The Texas Racing Commission adopts amendments to sec.321.272 and sec.321. 275, concerning common pooling of pari-mutuel wagers on simulcast races, without changes to the proposed text as published in the February 9, 1996, issue of the Texas Register (21 TexReg 930). The amendments are adopted to ensure pari-mutuel wagering on simulcast races will be fair to the patrons, cost-effective for the racetracks, effectively regulated, and of the highest integrity. The amendments change the requirements for transmitting wagering data for common pools between the sending and receiving racetracks and for filing the report on the common pool. No comments were received regarding the proposal. The amendments are adopted under the Texas Civil Statutes, Article 179e, sec.3.02, which authorize the commission to adopt rules for conducting racing with wagering and for administering the Texas Racing Act; sec.6.06, which authorizes the commission to adopt rules relating to all aspects of the operation of pari-mutuel racetracks; sec.11.01, which authorizes the commission to adopt rules to regulate pari-mutuel wagering; and sec.11.011, which authorizes the commission to adopt rules to regulate pari-mutuel wagering on simulcast races. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604744 Paula Cochran Carter General Counsel Texas Racing Commission Effective date: May 1, 1996 Proposal publication date: February 9, 1996 For further information, please call: (512) 833-6699 TITLE 22. EXAMINING BOARDS Part XXI. Texas State Board of Examiners of Psychologists Chapter 463. Applications 22 TAC sec.463.5 The Texas State Board of Examiners of Psychologists adopts an amendment to sec.463.5, concerning Application File Requirements, with changes to the proposed text as published in the February 27, 1996, issue of the Texas Register (21 TexReg 1478). The rule is being amended to clarify the wording of the rule and to add the requirements for the Licensed Specialist in School Psychology, as well as the requirements for a temporary license/certificate. The amendment will make the rule easier to understand and follow by all licensees/certificands and the general public. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, 4512c, which provide the Texas State Board of Examiners of Psychologists with the authority to promulgate rules consistent with the Statute. sec.463.5. Application File Requirements. An application file must be complete and contain whatever information or examination results the Board requires. An incomplete application remains in the active file for 90 days, at the end of which time, if still incomplete, it is void. If certification or licensure is sought again, a new application and filing fee must be submitted. No applicant can have more than one application as described in paragraphs (2), (3) and/or (5) of this section pending before the Board at one time. For any applicant against whom a complaint is filed with this Board, any final decision on the application will be held in abeyance until the Board has made a final determination on the complaint filed. The applicant will be permitted to take all required exams as scheduled but will not be certified or licensed until approved by the Board. (1) All Applications. Unless specifically stated otherwise by Board rule, all applications for licensure and certification by the Board must contain: (A) An application and required fee(s); (B) Two current passport pictures of the applicant; (C) Official transcripts sent directly to the Board's office from all colleges/universities where post-baccalaureate course work was completed; (D) Documentation that applicant has complied with Board Rule sec.463.10 of this title (relating to Written Examinations Administered by the Board); (E) Three acceptable reference letters from three different psychologists, two of whom are licensed; (F) Supportive documentation and other materials the Board may deem necessary, including the name of all jurisdictions where the applicant currently holds a certificate or license to practice psychology; and (G) A written explanation and/or meeting with the Board, prior to final approval, if the application file contains any negative reference letters. (2) Licensed Psychological Associate. A completed application for licensure as a psychological associate includes, in addition to the requirements set forth in paragraph one of this section, documentation of four hundred and fifty clock hours of practicum internship, or experience in psychology, in not more than two placements, supervised by a licensed psychologist. (3) Certified Psychologist. A completed application for certification as a psychologist includes, in addition to the requirements set forth in paragraph one of this section, an official transcript which indicates that the applicant has received a doctoral degree in psychology and meets the requirements of either sec.11(b) or (c) of the Psychologists' Certification and Licensing Act, for the State of Texas. (4) Oral Exam. A completed application for the Oral Exam includes an application, current passport picture of the applicant and required fee. (5) Licensed Psychologist. A completed application for licensure as a psychologist includes, in addition to the requirements set forth in paragraph one of this section: (A) An official transcript which indicates that the applicant has received a doctoral degree in psychology and meets the requirements of either sec.11(b) or (c) of the Psychologists' Certification and Licensing Act, for the State of Texas. (B) Documentation indicating passage of the Board's Oral Exam. (C) Documentation of two years of supervised experience from a licensed psychologist which satisfies the requirements of the Board. (6) Licensed Specialist in School Psychology. A completed application for licensure as a specialist in school psychology includes, in addition to the requirements set forth in paragraph one of this section: (A) One of the following: (i) Documentation from the National School Psychologists' Certification Board sent directly to the Board indicating the applicant holds current valid certification as a National Certified School Psychologist; or (ii) The transcripts submitted must verify that the applicant has met the requirements set forth in sec.463.32 of this title (relating to Licensed Specialist in School Psychology); and, (B) If the applicant did not graduate from either a training program approved by the National Association of School Psychologists or a training program in school psychology accredited by the American Psychological Association, proof of the internship required by Board Rule sec.463.32 of this title (relating to Licensed Specialist in School Psychology). (C) Documentation sent directly from the Education Testing Service of the score that the applicant has received on the School Psychology Examination. (7) License/Certificate by Reciprocity. A completed application for certification or licensure by reciprocity with this Board must include, in addition to the requirements in paragraph one of this section: (A) If the applicant is providing psychological services in Texas before receiving licensure or certification by the Board, proof that the applicant is employed in an exempt agency, or holds a temporary license or certificate, or is being supervised by a licensed psychologist in an acceptable setting which is appropriate for the education/experience background of the applicant; (B) Documentation that the applicant is currently licensed and has been in good standing in one jurisdiction for the five years immediately preceding filing application in Texas; (C) Proof that the applicant is the identical person to whom the original license was issued; (D) Documentation that there is no pending action against the applicant's license in any jurisdiction; (E) A sworn statement by the applicant that the applicant has never held any professional license that was suspended, revoked, cancelled, or in any way otherwise restricted; (F) Three professional reference letters from three separate psychologists, two of whom are licensed, each of whom must attest without reservation to the applicant's professional competence, ethics, and current fitness to practice. An applicant whose file contains any negative reference letters will be asked to provide a written explanation and/or to meet with the Board prior to final approval of the application file; (G) If licensed in a foreign country, proof that the requirements of Board Rule sec.463.17 of this title (relating to Foreign Graduates) have been satisfied. (8) Temporary License/Certificate. (A) An application file must be complete and contain whatever information or examination results the Board requires. An incomplete application remains in the active file for 90 days, at the end of which time, if still incomplete, it is void. If a temporary license or certificate is sought again, a new application and filing fee must be submitted. An application for permanent licensure must be on file with the Board. (B) A completed application for a temporary license or certificate must include, in addition to the requirements stated in paragraph one of this section for all applicants: (i) a statement which has a notary seal or a state seal from the appropriate psychology licensing agency in another jurisdiction confirming that the applicant has an active license/certificate and is in good standing with that jurisdiction; (ii) an official notification directly from the appropriate professional examination service that the applicant has passed the required appropriate examination with a score that meets or exceeds the cut-off score in Texas at the time the application is filed with the Board; and (iii) proof that the requirements for licensure/certification in the other jurisdiction are substantially equal to those prescribed by the Psychologists' Certification and Licensing Act for the State of Texas. (C) In addition to the requirements listed in subparagraph (B) of this paragraph, all applications must include the following: (i) For temporary licensure as a psychological associate, official transcripts sent directly to the Board's office from all colleges/universities where post- baccalaureate course work was completed as found in Board Rule sec.463.8 of this title (relating to Educational Requirements for the Licensed Psychological Associate); or (ii) For temporary certification or licensure as a psychologist, an official transcript which indicates that an applicant has received a doctoral degree in psychology and meets the requirements of either sec.11(b) or (c) of the Psychologists' Certification and Licensing Act, for the State of Texas. (iii) For temporary licensure as a Licensed Specialist in School Psychology, proof that the individual has been certified as a National Certified School Psychologist, or official transcripts sent directly to the Board from all colleges/universities where applicant completed post- baccalaureate course work verifying the requirements set forth in Board Rule sec.463.32 of this title (relating to Licensed Specialist in School Psychology); and, if the applicant did not graduate from either a training program accredited by the National Association of School Psychologists or a training program in school psychology accredited by the American Psychological Association, proof of the internship required by Board Rule sec.463.32 of this title (relating to Licensed Specialist in School Psychology). (9) Applications for grandparenting as a licensed specialist in school psychology must include the information required in Board Rule sec.463.32 of this title (relating to Licensed Specialist in School Psychology). This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 4,1996. TRD-9604776 Rebecca E. Forkner Executive Director Texas State Board of Examiners of Psychologists Effective date: April 25, 1996 Proposal publication date: February 27, 1996 For further information, please call: (512) 305-7700 22 TAC sec.463.8 The Texas State Board of Examiners of Psychologists adopts an amendment to sec.463.8, concerning Educational Requirements for the Licensed Psychological Associate, without changes to the proposed text as published in the February 27, 1996, issue of the Texas Register (21 TexReg 1480). The rule is being amended to clarify that the rule applies to the education requirements of psychological associates only and not to any other subdoctoral license issued by the Board. The amendment will better inform the public of the Board's licensing requirements for licensed psychological associates. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, 4512c, which provide the Texas State Board of Examiners of Psychologists with the authority to promulgate rules consistent with the Statute. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 4, 1996. TRD-9604777 Rebecca E. Forkner Executive Director Texas State Board of Examiners of Psychologists Effective date: April 25, 1996 Proposal publication date: February 27, 1996 For further information, please call: (512) 305-7700 22 TAC sec.463.10 The Texas State Board of Examiners of Psychologists adopts an amendment to sec.463.10, concerning Required Written Examinations Administered by the Board, with changes to the proposed text as published in the February 27, 1996, issue of the Texas Register (21 TexReg 1481). The rule is being amended to consolidate rules regarding the written examinations required for applicants for licensure/certification. The amendment will make the rules easier to understand and follow and better inform the public of the Board's licensing requirements. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, 4512c, which provide the Texas State Board of Examiners of Psychologists with the authority to promulgate rules consistent with the Statute. sec.463.10. Required Written Examinations Administered by the Board. (a) Jurisprudence Examination. All applicants for permanent certification or licensure by the Board are required to pass the Jurisprudence Examination prior to certification or licensure. Applications for certification or licensure by reciprocity may take the Jurisprudence Examination at times mutually agreed upon between them and the Board's office. All other applicants must take the examination at the times regularly scheduled by the Board. (b) All applicants for certification as a psychologist or licensure as a psychological associate are required to pass the Examination for Professional Practice in Psychology, in addition to the Board's Jurisprudence Examination, prior to the Board granting certificates/licenses. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 4, 1996. TRD-9604778 Rebecca E. Forkner Executive Director Texas State Board of Examiners of Psychologists Effective date: April 25, 1996 Proposal publication date: February 27, 1996 For further information, please call: (512) 305-7700 22 TAC sec.463.30 The Texas State Board of Examiners of Psychologists adopts the repeal of sec.463.30, concerning Jurisprudence Examination for Applications for Certification and Licensure by Reciprocity or Application for Provisional License/Certificate, without changes to the proposed text as published in the February 27, 1996, issue of the Texas Register (21 TexReg 1481). The rule is being repealed because the Board is consolidating the rules dealing with written examinations. The repeal of the rule will make the rules easier for licensees/certificands and the general public to follow and understand. No comments were received regarding adoption of the repeal. The repeal is adopted under Texas Civil Statutes, 4512c, which provide the Texas State Board of Examiners of Psychologists with the authority to promulgate rules consistent with the Statute. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 4, 1996. TRD-9604779 Rebecca E. Forkner Executive Director Texas State Board of Examiners of Psychologists Effective date: April 25, 1996 Proposal publication date: February 27, 1996 For further information, please call: (512) 305-7700 22 TAC sec.463.31 The Texas State Board of Examiners of Psychologists adopts the repeal of sec.463.31, concerning Provisional License/Certificate Application File Requirements, without changes to the proposed text as published in the February 27, 1996, issue of the Texas Register (21 TexReg 1482). The rule is being repealed because the Board is consolidating the rules dealing with application requirements. The repeal of the rule will make the rules easier for licensees/certificands and the general public to follow and understand. No comments were received regarding adoption of the repeal. The repeal is adopted under Texas Civil Statutes, 4512c, which provide the Texas State Board of Examiners of Psychologists with the authority to promulgate rules consistent with the Statute. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 4, 1996. TRD-9604780 Rebecca E. Forkner Executive Director Texas State Board of Examiners of Psychologists Effective date: April 25, 1996 Proposal publication date: February 27, 1996 For further information, please call: (512) 305-7700 Chapter 469. Specialty Certification 22 TAC sec.469.2 The Texas State Board of Examiners of Psychologists adopts an amendment to sec.469.2, concerning Criteria for Health Service Provider in Psychology, with changes to the proposed text as published in the February 27, 1996, issue of the Texas Register (21 TexReg 1483). The rule is being amended to expand the deadline for qualified individuals to obtain status as Health Service Providers. The amendment will enable more qualified professionals to obtain credentialing as Health Service Providers in psychology. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, 4512c, which provide the Texas State Board of Examiners of Psychologists with the authority to promulgate rules consistent with the Statute. sec.469.2. Criteria for Health Service Provider in Psychology. (a)-(b) (No change.) (c) For all individuals who hold a doctoral degree in psychology or the substantial equivalent thereof as defined in sec.463.16 of this title (relating to Degree Requirements for Certification of Psychologists) and were enrolled in that doctoral degree program prior to September 1, 1983, the following are the Board's requirements at the time of application for specialty certification as a Health Service Provider in Psychology: (1) The psychologist must be currently licensed by the Texas State Board of Examiners of Psychologists and have five years, full-time, licensed experience as a psychologist in providing health services to the public with no violations of licensure; (2) The psychologist must have completed not less than two years (3,000 hours) of supervised psychological experience in health services, of which at least one year (1,500 hours) was in an organized health service training program or internship and one year (1,500 hours) was at the post-doctoral level at a site where health services were provided; and (3) Two supportive letters of recommendation from licensed Health Service Providers in Psychology who are familiar with the applicant's work or from health care organizations for whom the applicant has provided health services as a psychologist are required. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 4,1996. TRD-9604781 Rebecca E. Forkner Executive Director Texas State Board of Examiners of Psychologists Effective date: April 25, 1996 Proposal publication date: February 27, 1996 For further information, please call: (512) 305-7700 Chapter 473. Fees 22 TAC sec.473.1 The Texas State Board of Examiners of Psychologists proposes an amendment to sec.473.1, concerning Application Fees, without changes to the proposed text as published in the February 27, 1996, issue of the Texas Register (21 TexReg 1484). The rule is being amended to reflect changes made in the Psychologists' Certification and Licensing Act by the 74th Legislature. The amendment will clarify the fee for temporary licensure or certification by the Board and the fee for the new category of licensed specialist in school psychology. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, 4512c, which provide the Texas State Board of Examiners of Psychologists with the authority to promulgate rules consistent with the Statute. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on April 4, 1996. TRD-9604782 Rebecca E. Forkner Executive Director Texas State Board of Examiners of Psychologists Effective date: April 25, 1996 Proposal publication date: February 27, 1996 For further information, please call: (512) 305-7700 TITLE 28. INSURANCE Part I. Texas Department of Insurance Chapter 1. General Administration Subchapter K. Custody and Use of Criminal History Record Information 28 TAC sec.sec.1.1201-1.1205 The Commissioner of Insurance adopts the repeal of sec. sec.1.1201-1.1205, concerning administration, without changes to the proposed text as published in the December 8, 1995, issue of the Texas Register (20 TexReg 10364). Sections 1.1201-1.1205 concern the custody and use of criminal history record information by the department. The repeal of these sections is necessary because they are based upon sections of Insurance Code, Article 1. 10C that were repealed by the 73rd Legislature. The repeal also enables the commissioner to simultaneously adopt new Subchapter S, sec.sec.19.1801-19.1807 (regarding Fingerprint Card Requirement for Applicants for License). The repeal of sec.sec.1.1201-1.1205 allow the commissioner to adopt new Subchapter S, sec.sec.19.1801-19.1807, concerning the submission of completed fingerprint cards with new applications for licensure as insurance agents, adjusters, life insurance counselors, reinsurance intermediaries or risk managers. No comments were received regarding adoption of the repeals. The repeals are adopted pursuant to the Insurance Code, Articles 1.10C and 1.03A, and the Government Code, sec.sec.2001.004 et seq (Administrative Procedure Act). Article 1.10C concerns the department's right to access to certain criminal history record information. Article 1.03A provides that the Commissioner of Insurance may adopt rules and regulations to execute the duties and functions of the Texas Department of Insurance only as authorized by a statute. The Government Code, sec.sec.2001.004 et seq authorize and require each state agency to adopt rules of practice setting forth the nature and requirements of available procedures and to prescribe the procedures for adoption of rules by a state agency. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on April 5, 1996. TRD-9604858 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: April 26, 1996 Proposal publication date: December 8, 1995 For further information, please call: (512) 463-6327 Chapter 3. Life, Accident, Health Insurance and Annuities Subchapter W. Miscellaneous Rules for Group and Individual Accident and Health Insurance Required Disclosure Statements for Policies that Duplicate Medicare 28 TAC sec.sec.3.3603-3.3613 The Commissioner of Insurance adopts new sec.sec.3.3603-3.3613, relating to required disclosure statements for policies that duplicate Medicare benefits, without changes to the proposed text as published in the December 15, 1995, Texas Register (20 TexReg 10738). A request for public hearing on the sections was submitted January 3, 1996, but was withdrawn January 31, 1996. The sections are necessary to codify notice requirements for the content and format of ten disclosure statements which must be provided to inform prospective buyers of health insurance policies about the extent to which benefits under such policies duplicate Medicare benefits, pursuant to federal requirements approved by the U.S. Secretary of Health and Human Services. Section 3.3603 sets out the purpose and scope of the notice and disclosure. Section 3.3604 sets out the content and format of the notice for policies that provide benefits for expenses incurred for an accidental injury only. Section 3.3605 sets out the content and format of the notice for policies that provide benefits for specified limited services. Section 3.3606 sets out the content and format of the notice for policies that reimburse expenses incurred for specified disease or other specified impairments (including, cancer policies, specified disease policies and other policies limiting reimbursement to named medical conditions). Section 3.3607 sets out the content and format of the notice for policies that pay fixed dollar amounts for specified disease or other specified impairments (including cancer, specified disease policies, and other policies that pay a scheduled benefit or specified payment based on diagnosis of the conditions named in the policy). Section 3.3608 sets out the content and format of the notice for indemnity and other policies (other than long-term care policies) that pay a fixed dollar amount per day. Section 3. 3609 sets out the content and format of the notice for policies that provide benefits for both expenses incurred and fixed indemnity. Section 3.3610 sets out the content and format for the notice for long-term care policies providing both nursing home and non-institutional coverage. Section 3.3611 sets out the content and format of the notice for long term care policies primarily providing nursing home care only. Section 3.3612 sets out the content and format of the notice for home care policies. Section 3.3613 sets out the content and format of the notice for other health insurance policies not specifically identified in sec.sec.3.3604-3.3612. One comment suggested including a requirement for a Spanish translation for each of the disclosure statements, to be put on the opposite side of each of the English-language disclosures. The department responds that providing a Spanish translation for each of the disclosure statements as circumstances warrant supports good social policy and good business practices. In addition, the department expects all issuers of policies which must be accompanied by any of the disclosures addressed in these sections to make certain that the disclosure is made to persons in a language they understand in circumstances involving prospective sale to Texans for whom English is not a first language. However, the adoption of this proposal is not changed to require a parallel Spanish translation for a number of reasons as follow: First, the adopted disclosure statements were developed by the National Association of Insurance Commissioners in compliance with federal directives of H.R. 5252 (P.L. 103-432) . These statements were developed to be identical in all 50 jurisdictions and are subject to a federal requirement that all health insurance policy types which duplicate Medicare benefits must include the appropriate disclosure statement, and further that the disclosure may not vary from the statements developed by the NAIC in terms of language or format, including type size, type proportional spacing, bold character, line spacing, and usage of boxes around the text. The statements so developed were intended to be uniform in appearance and text for any prospective insured under any applicable policy in any jurisdiction. Second, the uniform requirements developed by the NAIC were published in the Federal Register June 12, 1995 and approved by the U.S. Secretary of Health and Human Services for application on and after August 11, 1995. The department's purpose in adopting the notices is to codify at the state level subject matter which already has been codified at the federal level, for the mutual convenience and benefit of the regulators and issuers for purposes of application and reference. The department believes that a parallel Spanish translation is not necessary at this time to effectively administer and enforce the sections as proposed. For these reasons the sections as adopted do not contain the translation recommended. The Office of Public Insurance Counsel submitted a written comment in favor of the sections as published but with a recommendation for change. The new sections are adopted pursuant to the Insurance Code, Articles 3.74, 3.70-3 and 1.03A. Article 3.74, sec.5(d) provides that the department may promulgate reasonable rules for captions or notice requirements determined to be in the public interest and designed to inform prospective insureds, subscribers, or enrollees that particular coverages are not Medicare supplement coverages. Article 3.70-3 authorizes the department to adopt rules and regulations for the filing an submission of health insurance policies as are necessary, proper or advisable. Article 1.03A authorizes the Commissioner to adopt rules and regulations for the conduct and execution of the duties and functions of the department as authorized by statute. This agency certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on April 4, 1996. TRD-9604789 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: April 25, 1996 Proposal publication date: December 15, 1995 Chapter 5. Property and Casualty Insurance Subchapter E. Texas Catastrophe Property Insurance Association Pan of Operation 28 TAC sec.5.4001 The Commissioner of Insurance adopts an amendment to sec.5.4001, the plan of operation of the Texas Catastrophe Property Insurance Association (TCPIA), without changes to the proposed text as published in the January 16, 1996, issue of the Texas Register (21 TexReg 424). The amendment was considered and adopted by the Commissioner of Insurance in a public hearing on March 14, 1996, Docket Number 2208. Pursuant to the Catastrophe Property Insurance Pool Act (Insurance Code, Article 21.49), the TCPIA was created by the Texas legislature in 1971 and is composed of all property insurers authorized to transact property insurance in Texas. The purpose of the TCPIA is to provide windstorm and hail insurance coverage to residents in designated catastrophe areas who are unable to obtain such coverage in the voluntary market. Since its inception, the TCPIA has provided this coverage to residents of 14 coastal counties, including Aransas, Brazoria, Calhoun, Cameron, Chambers, Galveston, Jefferson, Kenedy, Kleberg, Matagorda, Nueces, Refugio, San Patricio and Willacy. Pursuant to Commissioner's Order Number 95-1200 (November 14, 1995), effective March 1, 1996, the TCPIA also provides coverage to residents in two additional coastal areas -the area located east of the boundary line of State Highway 146 and inside the city limits of the City of Seabrook (Harris County) and the area located east of the boundary line of State Highway 146 and inside the city limits of the City of La Porte (Harris County). The adopted amendment is necessary to amend subsection (e) of the plan of operation, relating to Building Codes, to include the two additional areas as designated catastrophe areas that are subject to the applicability of the TCPIA's building code specifications and standards and to the Department's Windstorm Inspection Program. Subsection (e)(3), relating to limitations on the applicability of building codes, specifies the designated areas to which the TCPIA building code standards apply. Newly designated subparagraph (A) specifies that the counties of Aransas, Brazoria, Calhoun, Cameron, Chambers, Galveston, Jefferson, Kenedy, Kleberg, Matagorda, Nueces, Refugio, San Patricio and Willacy are subject to the building code requirements set forth in subsection (e) of the plan of operation. New subparagraph (B) specifies that the area located east of the boundary line of State Highway 146 and inside the city limits of the City of Seabrook (Harris County) and the area located east of the boundary line of State Highway 146 and inside the city limits of the City of La Porte (Harris County) are also subject to the building code requirements set forth in subsection (e) of the plan of operation. An amendment is adopted to subsection (e)(4), relating to insurable property for windstorm and hail insurance, to add a new subparagraph (B) to provide that a structure constructed, repaired, or to which additions were made on and after January 1, 1988 and before March 1, 1996, that is located in an area east of the boundary line of State Highway 146 and inside the city limits of the City of Seabrook (Harris County) or in an area east of the boundary line of State Highway 146 and inside the city limits of the City of La Porte (Harris County) shall be considered approved by the Commissioner of Insurance as being in compliance with the TCPIA's inland building code requirements contained in paragraph 2 of subsection (e) (Standard Building Code, 1973 Edition) and, therefore, shall be considered insurable property by the TCPIA if the owner of the structure presents to the TCPIA at the time of application a statement, as specified in subparagraph (B), signed by a city building official. In the statement, the city building official shall affirm that to his/her best belief and knowledge, the structure to be insured by the TCPIA was constructed, repaired or an addition was made on and after January 1, 1988 and before March 1, 1996, in accordance with building specifications and standards which comply with the Standard Building Code (1973 Edition) or an equivalent recognized code, and that the city has inspected the structure and enforced compliance to said code. An amendment is also adopted to subsection (e)(4) to add a new subparagraph (C) to provide that a structure constructed, repaired, or to which additions were made on and after March 1, 1996, that is located in an area east of the boundary line of State Highway 146 and inside the city limits of the City of Seabrook (Harris County) or in an area east of the boundary line of State Highway 146 and inside the city limits of the City of La Porte (Harris County) shall be considered an insurable property for windstorm and hail insurance from the TCPIA only if the structure is inspected or approved by the Commissioner of Insurance for compliance with building specifications as provided in the plan of operation, including any specifications for roofing materials as provided in Article 21.49, sec.6A(a) of the Insurance Code. The amendment is adopted to become effective on May 1, 1996. No comments were received regarding adoption of the amendment. The amendment is adopted pursuant to the Insurance Code, Articles 21.49 and 1.03A, and the Government Code, sec.sec.2001.004-2001.038. Article 21.49, sec.3(h) authorizes the Commissioner to designate a city or a county as a catastrophe area to be served by the TCPIA upon determination, after notice of not less than 10 days and a hearing, that windstorm and hail insurance is not reasonably available to a substantial number of owners of insurable property within that city or county that is subject to unusually frequent and severe damage resulting from windstorms and/or hailstorms. The 74th Texas Legislature amended Article 21.49, sec.3(h) in House Bill 2593 (Acts 1995, 74th Legislature, page 4724, Chapter 944, sec.1, effective September 1, 1995) to provide that a part of a city or a part of a county could also be designated as a catastrophe area eligible for coverage by the TCPIA. Pursuant to Commissioner's Order Number 95-1200, effective March 1, 1996, the area east of the boundary line of State Highway 146 and inside the city limits of the City of Seabrook and the area east of the boundary line of State Highway 146 and inside the city limits of the City of La Porte were designated by the Commissioner of Insurance as catastrophe areas eligible for windstorm and hail insurance coverage through the TCPIA. Article 21.49, sec.6A specifies building code requirements and approval or inspection procedures for windstorm and hail insurance through the TCPIA. The Insurance Code, Article 21.49, sec.5(c), provides that the Commissioner of Insurance by rule shall adopt the TCPIA plan of operation with the advice of the TCPIA board of directors. Article 21.49, sec.5(f), provides that any interested person may petition the Commissioner to modify the plan of operation in accordance with the Administrative Procedure Act (Government Code, Title 10, Subtitle A, Chapter 2001). Article 21.49, sec.5(c) and (f), by their terms, delegate the foregoing authority to the State Board of Insurance. However, under the Insurance Code, Article 1.02, a reference in the Insurance Code or another insurance law to the State Board of Insurance means the Commissioner of Insurance or the Texas Department of Insurance, as consistent with the respective powers and duties of the Commissioner and the Department under Article 1.02. Article 1.03A authorizes the Commissioner of Insurance to adopt rules and regulations, which must be for general and uniform application, for the conduct and execution of the duties and functions of the Texas Department of Insurance only as authorized by a statute. The Government Code, sec.sec.2001.004-2001.038 (Administrative Procedure Act) authorize and require each state agency to adopt rules of practice stating the nature and requirements of available formal and informal procedures and prescribe the procedures for adoption of rules by a state agency. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on April 5, 1996. TRD-9604860 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: May 1, 1996 Proposal publication date: January 16, 1996 For further information, please call: (512) 463-6327 Standard Policy Forms-Windstorm and Hail 28 TAC sec.5.4201 The Texas Department of Insurance adopts an amendment to sec.5.4201, concerning the adoption by reference of a new endorsement form-TCPIA Form Number 525, Dwelling Optional Large Deductible Clause (One or Two-Family Dwellings) for attachment to a windstorm and hail insurance policy issued by the Texas Catastrophe Property Insurance Association (TCPIA). The amendment was considered by the Commissioner of Insurance in a public hearing on March 14, 1996, Docket Number 2207, and is adopted with changes to the proposed text as published in the January 16, 1996, issue of the Texas Register (21 TexReg 426). Pursuant to the Catastrophe Property Insurance Pool Act (Insurance Code, Article 21.49), the TCPIA was created by the Texas legislature in 1971 and is composed of property insurers authorized to transact property insurance in Texas. The purpose of the TCPIA is to provide windstorm and hail insurance coverage to residents in designated catastrophe areas who are unable to obtain such coverage in the voluntary market. Currently, the TCPIA provides this coverage to residents of 14 coastal counties, including Aransas, Brazoria, Calhoun, Cameron, Chambers, Galveston, Jefferson, Kenedy, Kleberg, Matagorda, Nueces, Refugio, San Patricio, and Willacy. Pursuant to Commissioner's Order Number 95-1200 (November 14, 1995), effective March 1, 1996, the TCPIA also provides coverage to residents in two additional coastal areas-the area located east of the boundary line of State Highway 146 and inside the city limits of the City of Seabrook (Harris County) and the area located east of the boundary line of State Highway 146 and inside the city limits of the City of La Porte (Harris County). The adopted endorsement is necessary to enable TCPIA policyholders to select large deductibles of 1.5%, 2.0%, 2.5%, 3.0%, 4. 0%, or 5.0%, in addition to the current deductibles of $100, $250, and 1.0%, for the perils of windstorm and hail for a dwelling risk. The only change in the proposed text as published in the January 16, 1996, issue of the Texas Register (21 TexReg 426) is the change of the effective date of the endorsement from March 1, 1996 to May 1, 1996. The endorsement, however, may only be used on TCPIA dwelling policies issued on and after the effective date of the residential property insurance benchmark rates determined pursuant to the December 20, 1995, benchmark rate hearing. Under the adopted endorsement, TCPIA policyholders will have the option of selecting a large deductible of 1.5%, 2.0%, 2.5%, 3.0%, 4.0%, or 5.0%, in addition to the current deductibles of $100, $250, and 1.0%, for the perils of windstorm and hail for a dwelling risk. TCPIA policyholders who select any of the optional large deductibles, and thereby agree to bear a large portion of any windstorm and hail loss, will receive a reduction in premium. The adopted amendatory endorsement provides that the percentage deductible of each item of insurance to which the deductible applies shall be deducted from a loss caused by the perils of windstorm and hail. The endorsement further provides that in no event shall the deductible amount be less than $100 and that the provisions of this deductible endorsement shall apply separately to each item of insurance covering dwelling, dwelling contents, or dwelling household goods. Under the endorsement, the term "dwelling(s)" shall also mean garage apartments, duplex dwellings, servants' houses, private garages, private barns, miscellaneous out buildings on the dwelling premises, seasonal dwellings, private club houses, and private camp houses. The effective date of the endorsement is May 1, 1996; however, the endorsement may only be used on TCPIA dwelling policies issued on and after the effective date of the residential property insurance benchmark rates determined pursuant to the December 20, 1995, benchmark rate hearing. The TCPIA Manual rules governing the use of this endorsement are adopted under 28 TAC sec.5.4501. No comments were received regarding adoption of the amendment. The amendment is adopted pursuant to the Insurance Code, Articles 21.49 and 1.03A; and the Government Code, sec.sec.2001.004-2001.038. Article 21.49, sec.5A authorizes the Commissioner, after notice and hearing, to issue any orders which the Commissioner considers necessary to carry out the purposes of Article 21.49, including, but not limited to, maximum rates, competitive rates and policy forms. Article 21.49, sec.8 authorizes the Commissioner to approve every manual of classifications, rules, rates, rating plans, and every modification of any of the foregoing for use by the TCPIA. Article 21.49, sec.5A and sec.8, by their terms, delegate the foregoing authority to the State Board of Insurance; however, under the Insurance Code, Article 1.02, a reference in the Insurance Code or another insurance law to the State Board of Insurance means the Commissioner of Insurance or the Texas Department of Insurance, as consistent with the respective powers and duties of the Commissioner and the Department under Article 1.02. Article 1.03A authorizes the Commissioner of Insurance to adopt rules and regulations, which must be for general and uniform application, for the conduct and execution of the duties and functions of the Texas Department of Insurance only as authorized by a statute. The Government Code, sec.sec.2001.004-2001.038 (Administrative Procedure Act) authorize and require each state agency to adopt rules of practice stating the nature and requirements of available formal and informal procedures and prescribe the procedures for adoption of rules by a state agency. sec.5.4201. Standard Texas Catastrophe Property Insurance Association Forms for Windstorm and Hail. The Commissioner of Insurance adopts by reference the standard Texas Catastrophe Property Insurance Association forms for windstorm and hail. Specimen copies of these forms are available from the Texas Catastrophe Property Insurance Association, P.O. Box 2930, Austin, Texas 78767. They are also available from the Property and Casualty Division, MC #103-1A, Texas Department of Insurance, 333 Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104. The forms are more specifically identified as follows. (1)-(22) (No change.) (23) TCPIA FORM 525-dwelling optional large deductible clause. Effective May 1, 1996. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on April 5, 1996. TRD-9604862 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: May 1, 1996 Proposal publication date: January 16, 1996 For further information, please call: (512) 463-6327 Manual 28 TAC sec.5.4501 The Texas Department of Insurance adopts an amendment to sec.5.4501, concerning the adoption by reference of a revised manual of rules governing the writing of windstorm and hail insurance by the Texas Catastrophe Property Insurance Association (TCPIA), pursuant to the Insurance Code, Article 21.49. The amendment was considered by the Commissioner of Insurance in a public hearing on March 14, 1996, Docket Number 2206, and is adopted with changes to the proposed text as published in the January 16, 1996, issue of the Texas Register (21 TexReg 427). Pursuant to the Catastrophe Property Insurance Pool Act (Insurance Code, Article 21.49), the TCPIA was created by the Texas legislature in 1971 and is composed of all property insurers authorized to transact property insurance in Texas. The purpose of the TCPIA is to provide windstorm and hail insurance coverage to residents in designated catastrophe areas who are unable to obtain such coverage in the voluntary market. Currently, the TCPIA provides this coverage to residents of 14 coastal counties, including Aransas, Brazoria, Calhoun, Cameron, Chambers, Galveston, Jefferson, Kenedy, Kleberg, Matagorda, Nueces, Refugio, San Patricio, and Willacy. Pursuant to Commissioner's Order Number 95-1200 (November 14, 1995), effective March 1, 1996, the TCPIA also provides coverage to residents in two additional coastal areas-the area located east of the boundary line of State Highway 146 and inside the city limits of the City of Seabrook (Harris County) and the area located east of the boundary line of State Highway 146 and inside the city limits of the City of La Porte (Harris County). The revised manual is necessary to incorporate three new sets of amendments: (i) rule amendments to reflect adjustments to the maximum limits of liability for risks insured by the TCPIA; (ii) rule amendments to provide for the applicability of the TCPIA's building code and inspection requirements to two newly designated catastrophe areas which became eligible for coverage through the TCPIA on March 1, 1996; and (iii) new rules relating to the availability of optional large deductibles for dwelling risks insured under windstorm and hail policies issued by the TCPIA. The only change in the proposed text as published in the January 16, 1996 issue of the Texas Register (21 TexReg 427) is the change of the effective date from March 1, 1996 to May 1, 1996. This adoption involves three sets of amendments to the TCPIA rules manual: (i) rule amendments to reflect adjustments to the maximum limits of liability for risks insured by the TCPIA; (ii) rule amendments to provide for the applicability of the TCPIA's building code and inspection requirements to two newly designated catastrophe areas which became eligible for coverage through the TCPIA on March 1, 1996; and (iii) new rules relating to the availability of optional large deductibles for dwelling risks insured under windstorm and hail policies issued by the TCPIA. Under the first set of adopted amendments, Rule J, relating to Limits of Liability, in Section I-General Rules of the TCPIA, is amended to reflect adjustments to the maximum limits of liability applicable to risks being insured by the TCPIA. Pursuant to Article 21.49, sec.8D(c), the Commissioner, as part of the annual rate hearing, shall adjust the liability limits for inflation, including the statutory limits specified in subsection (a) of sec.8D, at a rate that reflects any change in the BOECK Index or other index that may accurately reflect changes in the cost of construction or residential values in the catastrophe area. Pursuant to Commissioner's Order Number 95-0525 (May 29, 1995), the limits of liability for TCPIA coverage are increased by 3.5% on an annual basis for dwellings and contents and 1.9% on an annual basis for government buildings, apartments and commercial buildings. These annual percentage increases are to be applied from the effective date of the last index adjustment (June 1, 1993) to the effective date of the current adjustment (August 1, 1995). Following the application of the annual percentage factors, the resulting maximum limits of liability are rounded up to the nearest $1,000 to produce the new applicable maximum limits of liability. These new maximum limits of liability as specified in the adopted amendment to Rule J are $279,000 (changed from $258, 750) for a dwelling and its contents; $279,000 (changed from $258,750) for a townhouse unit and its contents; $804,000 (changed from $771,750) per building for an apartment, condominium or townhouse and the contents of the owner of the structure in which the apartment, condominium or townhouse is located; $108,000 (changed from $102,900) for individually owned contents in an apartment, residential condominium or townhouse unit; $2,144,000 (changed from $2,058,000) for a government building and its contents; and $1,084,000 (changed from $1,040,000) for a commercial building and its contents. Pursuant to Commissioner's Order Number 95-0525 the new maximum limits of liability are applicable on policies effective on and after August 1, 1995. Under the second set of adopted amendments, the TCPIA rules manual is revised to apply the TCPIA's building code and inspection requirements to two newly designated catastrophe areas which became eligible for coverage through the TCPIA on March 1, 1996. The two newly designated catastrophe areas are: (i) the area east of a boundary line of State Highway 146 and inside the city limits of the City of Seabrook (Harris County) and (ii) the area east of a boundary line of State Highway 146 and inside the city limits of the City of La Porte (Harris County). These areas have been determined to be catastrophe areas by the Commissioner of Insurance and so designated under Commissioner's Order Number 95-1200 (November 14, 1995). An amendment is adopted to Rule C, relating to Determination of Territory (Catastrophe Areas), in Section I-General Rules of the TCPIA manual, to add a new provision 2 to include the two newly designated catastrophe areas. Rule D, relating to Insurable Property, in Section I-General Rules, is amended in provision 3 and a new provision 4 is added to provide that for property located in the two newly designated catastrophe areas, all structures constructed, repaired or to which additions were made on and after January 1, 1988, and before March 1, 1996, are approved as complying with the TCPIA Inland Building Code (1973 Edition Standard Building Code) if the City of Seabrook or the City of La Porte has issued to the owner of the property a statement signed by a city building official that the structure was constructed, repaired, or an addition was made in accordance with the building specifications and standards which comply with the Standard Building Code (1973 Edition) or an equivalent recognized code, and the city inspected the structure and enforced compliance to said code. The adopted amendment provides that if such a statement is provided to the TCPIA, the structure shall be considered insurable property by the TCPIA. Rule D, relating to Insurable Property, in Section I-General Rules, is also amended to add a new provision 5 to provide that for property located east of the boundary line of State Highway 146 and inside the city limits of the City of Seabrook (Harris County) and for property located east of the boundary line of State Highway 146 and inside the city limits of the City of La Porte (Harris County), all structures constructed, repaired or to which additions were made on and after March 1, 1996, that have been certified by the Texas Department of Insurance as being in compliance with the building specifications of the plan of operation shall be considered insurable property. A certificate of compliance (Form WPI-8) issued by the Texas Department of Insurance shall be considered evidence of insurability of the structure by the TCPIA. An amendment is adopted to Rule B, relating to Windstorm, Hurricane, and Hail Deductible Endorsement Form Number 66, in Section II-Policy Forms and Endorsements, to delete the reference to the 14 counties being the designated catastrophe area and to provide that "Deductible Windstorm, Hurricane and Hail Insurance may be written only in the Catastrophe Area(s) designated by the Texas Department of Insurance." Rate Tables A, B, and C showing applicability to territories 8, 9, and 10 are amended to delete the reference to territories 8, 9 and 10 because with the designation of the new catastrophe areas the rate tables will apply to all commercial properties located in any of the designated catastrophe area and not just commercial properties located in territories 8, 9 and 10. Under the third set of adopted amendments, Rule H, relating to Deductibles, in Section I-General Rules, is amended to add a new provision 5 that authorizes the attachment of TCPIA Endorsement Number 525 to enable TCPIA policyholders to select a large deductible of 1.5%, 2.0%, 2.5%, 3. 0%, 4.0%, or 5.0%, in addition to the current deductibles of $100, $250, and 1. 0%, for the perils of windstorm and hail for a dwelling risk. TCPIA Endorsement Form Number 525 is adopted pursuant to 28 TAC sec.5.4201. TCPIA policyholders who select any of the optional large deductibles, and thereby agree to bear a large portion of any windstorm and hail loss, will receive a reduction in premium. The adopted amendment also provides for appropriate premium credits for large deductibles applicable to the perils of windstorm and hail as set forth in the Optional Large Deductible Adjustment Chart of the dwelling section or farm and ranch section of the Texas Personal Lines Manual. The adopted amendment also specifies certain requirements and conditions for selection of the optional large deductible: (i) the minimum deductible amount may not be less than $100; (ii) the actual deductible amount in dollars must be shown on the declarations page of the policy; and (iii) the selection of a large deductible is at the option of the insured; the TCPIA may not require the selection of a large deductible as a condition to issue the windstorm and hail insurance policy. The revised manual is adopted to be effective on May 1, 1996. No comments were received regarding adoption of the amendment. The amendment is adopted pursuant to the Insurance Code, Articles 21.49 and 1.03A and the Government Code, sec.sec.2001.004-2001.038. Pursuant to Article 21. 49, sec.8D(c), the Commissioner, as part of the annual rate hearing, shall adjust the liability limits for inflation, including the statutory limits specified in subsection (a) of sec.8D, at a rate that reflects any change in the BOECK Index or other index that may accurately reflect changes in the cost of construction or residential values in the catastrophe area. Pursuant to Commissioner's Order Number 95-0525 (May 29, 1995), the limits of liability for TCPIA coverage are increased by 3.5% on an annual basis for dwellings and contents and 1.9% on an annual basis for government buildings, apartments and commercial buildings. These annual percentage increases are to be applied from the effective date of the last index adjustment (June 1, 1993) to the effective date of the current adjustment (August 1, 1995). Article 21.49, sec.3(h) authorizes the Commissioner to designate a city or a county as a catastrophe area to be served by the TCPIA upon determination, after notice of not less than ten days and a hearing, that windstorm and hail insurance is not reasonably available to a substantial number of owners of insurable property within that city or county that is subject to unusually frequent and severe damage resulting from windstorms and/or hailstorms. The 74th Texas Legislature amended Article 21.49, sec.3(h) in House Bill 2593 (Acts 1995, 74th Legislature, page 4724, Chapter 944, sec.1, effective September 1, 1995) to provide that a part of a city or a part of a county could also be designated as a catastrophe area eligible for coverage through the TCPIA. Pursuant to Commissioner's Order Number 95-1200, effective March 1, 1996, the area east of the boundary line of State Highway 146 and inside the city limits of the City of Seabrook and the area east of the boundary line of State Highway 146 and inside the city limits of the City of La Porte were designated by the Commissioner of Insurance as catastrophe areas eligible for windstorm and hail insurance coverage through the TCPIA. Article 21.49, sec.6A specifies building code requirements and the approval or inspection procedures for windstorm and hail insurance through the TCPIA. Article 21.49, sec.5A authorizes the Commissioner, after notice and hearing, to issue any orders which the Commissioner considers necessary to carry out the purposes of Article 21.49, including, but not limited to, maximum rates, competitive rates and policy forms. Article 21.49, sec.8 authorizes the Commissioner to approve every manual of classifications, rules, rates, rating plans, and every modification of any of the foregoing for use by the TCPIA. Articles 21.49, sec. sec.5A, 6A, 8, and 8D, by their terms delegate the foregoing authority to the State Board of Insurance; however, under the Insurance Code, Article 1.02, a reference in the Insurance Code or another insurance law to the State Board of Insurance means the Commissioner of Insurance or the Texas Department of Insurance, as consistent with the respective powers and duties of the Commissioner and the Department under Article 1.02. Article 1.03A authorizes the Commissioner of Insurance to adopt rules and regulations, which must be for general and uniform application, for the conduct and execution of the duties and functions of the Texas Department of Insurance only as authorized by a statute. The Government Code, sec.sec.2001. 004-2001.038 (Administrative Procedure Act) authorize and require each state agency to adopt rules of practice stating the nature and requirements of available formal and informal procedures and prescribe the procedures for adoption of rules by a state agency. sec.5.4501. Rules and Regulations for the Texas Catastrophe Property Insurance Association (association). The Texas Department of Insurance adopts by reference a rules manual for the association as amended effective May 1, 1996. Copies of the rules manual may be obtained by contacting the Property/Casualty Division, Mail Code 103-1A, Texas Department of Insurance, 333 Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104. IT IS THEREFORE THE ORDER of the Commissioner of Insurance that amendments to 28 TAC sec.5.4501, concerning the adoption by reference of a revised manual of rules governing the writing of windstorm and hail insurance by the Texas Catastrophe Property Insurance Association, as specified herein and attached hereto, are adopted to be effective on May 1, 1996. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on April 5, 1996. TRD-9604861 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: May 1, 1996 Proposal publication date: January 16, 1996 For further information, please call: (512) 463-6327 Chapter 19. Agents' Licensing Subchapter S. Fingerprint Card Requirement for Applicants for License 28 TAC sec.sec.19.1801-19.1807 The Commissioner of Insurance adopts new Subchapter S, sec.sec.19.1801-19. 1807, regarding submission of completed fingerprint cards with new applications for licensure as insurance agents, adjusters, life insurance counselors, reinsurance intermediaries or risk managers, with changes to the proposed text as published in the December 8, 1995, issue of the Texas Register (20 TexReg 10365). New Subchapter S concerns the submission of completed fingerprint cards with new applications for licensure as insurance agents, adjusters, life insurance counselors, reinsurance intermediaries or risk managers. In response to comments and information received, the subchapter as proposed was changed to require the submission of completed fingerprint cards rather than criminal history record information with applications for licensure. Sections 19. 1801-19.1807 were changed to delete all references to submission of criminal history record information, and to insert the requirement that completed fingerprint cards be submitted with applications. The definition for "criminal history record information" was changed to reflect that the information regarding a resident applicant's criminal history background will now be provided to the department. Section 19.1803 was changed to delete reference to nonresident applicants since sec.19.1805 sets out the provisions for nonresident agents and nonresident adjusters. Section 19.1805 was changed to clarify that its provisions apply to nonresident adjusters as well as nonresident agents. Section 19.1806 was changed to provide that the department shall ensure that its licensing procedures comply with the requirements of 18 U.S.C. sec.1033 (crimes by or affecting persons engaged in the business of insurance whose activities affect interstate commerce). New subsection (b) was added to sec.19.1806 to provide that if a check of an applicant on the National Crime Information Center (NCIC)/Texas Crime Information Center (TCIC) database indicates a possible criminal conviction, and there is any doubt that the applicant is the same person as the person with the criminal history, the department shall submit the applicant's fingerprint card to the Texas Department of Public Safety and request the applicant's criminal history record information. New subsection (c) of sec.19.1806 was added to clarify that the completed fingerprint cards received from applicants pursuant to these sections will not be used by the department in a discriminatory manner. Section 19.1807 was changed to provide that a completed fingerprint card shall be considered confidential unless determined otherwise by a court of competent jurisdiction, or the applicant or his representative provides written authorization for release of the fingerprint card. New Subchapter S will enable the department to more effectively combat insurance fraud. The subchapter will also enable the department to make more effective use of its resources and promote a more fair and efficient licensing and enforcement process. It defines the terms to be used in administering the subchapter and sets out the procedures that applicants must follow to comply with the fingerprint requirement. Comment: Commenters object to the proposal to fingerprint applicants for licensure because one commenter believes it implies that local insurance agencies are riddled with criminals and another commenter asserts that this is a substantial burden to place on thousands of applicants in order to help the department identify a few dishonest applicants. A commenter believes that insurance agents are trustworthy and serve their communities in numerous ways. The commenter concedes that the "bad apples" should be eliminated but states that there is a better way than treating all new applicants as suspect. Another commenter suggests that a good place for improvement would be to impose tougher examination standards on applicants. Another commenter believes that requiring applicants to provide criminal history reports is a bad idea because it would make it difficult for persons considering insurance as a possible career and finds it offensive that applicants should have to prove their innocence before being allowed to work in the profession of their choice. The commenter feels that most employers usually investigate applicants before hiring them. The commenter also believes that if an applicant has lied about his or her criminal background, criminal sanctions can be imposed and the person's license quickly revoked. Agency Response: The department agrees that the majority of applicants are trustworthy. The purpose of the proposed requirement of submitting criminal history records is to assist the department in its efforts against fraud and in its duty to comply with the statutory provisions regarding licensing of persons with felony convictions; and to enable the department to make more fair and efficient use of its time and resources. In the past, some persons have been licensed as agents who were later found to have lied about their criminal backgrounds. Examples of convictions applicants failed to reveal are bank fraud, mail fraud and felony theft. Had the department been aware of these convictions, it is unlikely that these individuals would have been licensed. Upon learning of these undisclosed convictions, the department expends valuable time and resources to revoke licenses. Requiring applicants to submit fingerprints at the time of application more efficiently achieves the department's purpose. The department does not believe that imposing tougher examination standards would help in determining whether an applicant has a criminal background. Comment: Some commenters object to the amount of time the sections will add to the application process; two commenters are particularly concerned about the additional time to applicants applying for temporary licenses. Commenters assert that the inconvenience, time and expense to the majority of honest applicants is not worth the effort of catching the few causing problems. A commenter believes that it intrudes on the privacy of law abiding citizens and legitimate agents and imposes expenses on them in an attempt to prevent a minute number of criminals from obtaining a license. The commenter believes the requirement is excessive and unnecessary and imposes moral and financial costs on legitimate agents. Commenters suggest that substantially increasing the penalty for filing a false application is a better solution since it would place the burden on the guilty parties. A commenter suggests the department consider imposing responsibility for licensing on the sponsoring company or requiring a bond. Another commenter supports the department's goal of combating insurance fraud through rules designed to keep individuals with criminal backgrounds from being licensed as insurance agents. The commenter believes, however, that the requirement of attaching a criminal history record to each application is burdensome. Commenters state this requirement may considerably slow the licensing process which may cause a hardship on the individual who cannot earn a living. A commenter believes it also imposes a hardship on the insurance company (some insurers pay their employees a salary until they are licensed as agents). The commenter suggests that applicants be allowed to submit their applications, be granted a temporary license and be allowed a reasonable amount of time to submit criminal histories before a permanent license is granted. The commenter is also concerned about the higher burden placed on nonresident insurance agents when that information is not required by other states. The commenter states that this defeats the purpose of reciprocity and is an unfair burden on individuals licensed in other states who desire to be licensed in Texas. Agency Response: The department acknowledges that the requirement of attaching a criminal history report will add time to the licensing process. Because of the time problems discovered by the department and the comments received, the department has changed the sections to require resident and nonresident applicants to submit completed fingerprint cards with their applications rather than criminal histories. The department estimates that this will add only three- five days to the license application process, rather than a few weeks. The department believes that requiring all applicants to submit fingerprint cards with their applications is less burdensome and worth the effort because it will benefit all insurance agents and consumers by discouraging fraudulent applications. This will enable the department to make more effective use of its resources and promote a more fair and efficient licensing and enforcement process. If it is discovered that an agent has a criminal background he has failed to disclose, the agent faces possible suspension or revocation of his license. This appears to be a substantial penalty for filing a false application yet it has not deterred untruthful applicants in the past. Nothing in the Insurance Code provides that the department may require that the sponsoring company be responsible for doing background checks on agent applicants. Further, posting a bond would not address the problem of licensing agents who have lied about their criminal backgrounds. Comment: A commenter opposes the fingerprint requirement and argues that fingerprints are not required of others who serve the public, such as barbers, attorneys, or accountants, and questions fingerprinting of other professionals. The commenter argues that out of least at 30 states, only one requires fingerprinting. Agency Response: While not all professions require fingerprints or criminal history reports to obtain a license, there are some which do have this requirement. For example, fingerprints or criminal history reports are required by the state securities board, the board of medical examiners, the board of law examiners, and in limited circumstances, the public accountancy board. The department is authorized by Insurance Code, Article 1.10C to request fingerprints from persons desiring to be licensed. In addition, there are at least 17 other states that require some type of criminal background check (including fingerprinting) for agent applicants. Among those states are Florida, California, New Jersey, and New York (for adjusters and bailbondsmen only). Comment: A few commenters believe that the department's blanket approach of requiring all applicants to submit fingerprints and criminal history reports is not in line with the language of Insurance Code, Article 1.10C. One commenter asserts that inclusion of the phrase "on request" in the statute indicates that the department should request fingerprints where they feel appropriate. The commenter believes this interpretation is consistent with the Government Code, sec.411.106 which states that the department "for good cause" may obtain criminal history reports from DPS. The commenter believes the department should request fingerprints on a case by case basis and that an across the boards approach is unauthorized by statute. Agency Response: The department believes that the language of Article 1.10C allows the department to request fingerprint cards of all applicants. The adopted sections provide that applicants submit fingerprint cards to the department, that the department will do the background checks, and that the department will request criminal history reports from DPS for those applicants whose checks reveal possible criminal backgrounds and there is any doubt that the applicant is the same person as the person with the criminal history. These provisions are in line with the provisions of Government Code, sec.411. 106. Further, the requirement for submission of completed fingerprint cards is not based solely on Article 1.10C. This requirement is also based on the general licensing provisions found in the Insurance Code which grant the commissioner broad authority to determine the form an application will take and what information will be requested on the application. Comment: One commenter states that sec.19.1806 provides that the department will determine whether a conviction disqualifies an applicant from licensure based upon standards set out in cited statutes. The commenter points out that the process by which the department makes that determination should be consistent with and meet the requirements of Section 320603 of the Federal Violent Crime Control and Enforcement Act of 1994. Section 320603 states that any individual who has been convicted of a felony involving dishonesty or breach of trust or any offense listed in the statute may engage in the business of insurance only if the person has received written consent to do so from an authorized insurance regulatory official. Agency Response: The department agrees and the adopted sections clarify that the department will comply with the requirements set out in the Federal Violent Crime Control and Enforcement Act of 1994. Comment: One commenter has concerns regarding the requirement that criminal histories be submitted with new applications for licensure. The commenter believes the department lacks the legal authority to require submission of criminal history reports as part of the application process because of the repeal of subsections (a)-(d) and (f)-(h) of Insurance Code, Article 1.10C by the legislature. The commenter believes this is also inconsistent with Insurance Code, Article 1.03A which provides that the commissioner may adopt rules and regulations only as authorized by a statute. The commenter suggests the issue should be submitted to the legislature for consideration during its next session. The commenter is also concerned with the confidentiality of the information. Agency Response: Subsections (a)-(d) and (f)-(h) of Article 1.10C were repealed to put in one place all the provisions concerning state agencies obtaining criminal history reports. Legislative testimony on Senate Bill 510 shows "the issue surrounding the criminal history information which was contained in many different statutes and for ease, they were transferred into one statute." (Senator Moncrief before the Senate Committee of State Affairs). Provisions in various state codes regarding criminal history reports were repealed and transferred to Subchapter F (regarding criminal history record information) of the Government Code, Chapter 411 for uniformity and ease of use. It is important to note that subsection (e) of Article 1.10C, which gives the department authority to request fingerprints from applicants, was not repealed. The language of Article 1.03A means that the department may adopt rules and regulations as long as it has been given regulatory authority in an area by statute. Since Article 1.10C provides that the department may request fingerprints, the department may adopt rules concerning this requirement. Further, these sections are adopted pursuant to the broad regulatory authority given to the Commissioner of Insurance under the various agent licensing statutes. These statutes grant the commissioner great leeway in determining the form and content of agent applications. The department believes that the completed fingerprint cards are confidential under sec.552.101 of the Open Records Act as confidential by law (by judicial decision). Comment: Several commenters agree with the requirement for criminal histories and other background checks. One commenter is concerned that an applicant who pays money to the Department of Public Safety (DPS) is not assumed to be employed by the commenter. This commenter accepts no responsibility or liability to an applicant for the applicant paying money to DPS. One commenter is concerned that applicants have adequate time and opportunity to be fingerprinted, citing possible problems with fingerprinting by some local law enforcement agencies. Another commenter suggests that the report from DPS could be sent directly to the department which would discourage anyone with a record from applying and also wants the process to be easy. Another commenter urges the department to follow through with fingerprinting applicants. Agency Response: The sections as adopted require applicants to submit fingerprint cards rather than criminal histories. Therefore, the additional time to the licensing process is greatly reduced. The sections make no attempt to address the responsibilities or liabilities of insurers regarding their agents. The department believes those are contractual and civil matters outside the scope of these sections. Proctors at the testing sites will be trained to fingerprint applicants whether or not an examination is required. In addition, the department will send out with its applications fingerprint cards preprinted with the department's identifying number. This preprinted fingerprint card should be acceptable to law enforcement agencies which perform fingerprinting services. The availability of fingerprinting services to applicants at 16 test sites around the state, along with the fingerprinting services provided by local law enforcement agencies should allow applicants to be easily fingerprinted. Comment: One commenter supports the sections as changed since they now require the submission of a fingerprint card and not a criminal history report. The commenter suggests, however, that language be added to the sections to clarify that nothing in the fingerprint provisions shall be construed as altering or affecting the process for seeking and receiving temporary licensure. Two commenters support the fingerprinting requirement for applicants for licensure. Agency Response: The department disagrees that clarification is necessary. The requirement that applicants submit completed fingerprint cards with their applications for licensure applies to applicants for temporary as well as permanent licenses. As noted previously, the department estimates that the fingerprint card requirement will add only three-five days to the licensing process. Comment: One commenter thinks it may be overkill for the department to require fingerprint cards because the Department of Public Safety (DPS) fingerprints applicants for driver's licenses. One commenter does not think that the $17.25 cost per fingerprint card is reflected in the fiscal note; another commenter thinks the cost to applicants and companies is not reflected in the fiscal note. Another commenter believes the fiscal note does not take into account the possible cost to the department from lawsuits filed if a departmental employee improperly discloses criminal history information without authority. One commenter also estimates that this requirement would add as much as $750,000 per year to licensing costs and two other commenters are concerned about the additional cost to applicants applying for temporary licenses. Another commenter disagrees with the department's conclusion in the fiscal note that there will be no fiscal implications for small businesses as a result of enforcing or administering this subchapter. The commenter argues that the fingerprint requirement will have an adverse impact on small businesses. Additionally, the commenter argues that the department has not taken into account all costs involved for applicants obtaining the fingerprint cards. These costs include: cost of mail or delivery of fingerprint cards to applicants; cost of returning completed fingerprint cards to the agency by applicants; cost of redoing improperly completed fingerprint cards; cost of fingerprinting services; and costs of delay associated with the fingerprint requirement. Agency Response: The department disagrees. DPS requires only thumbprints for new driver's licenses. The department will use complete fingerprint sets to ascertain that it is checking on the right applicant when the department requests criminal history reports from DPS. The department believes that the fiscal note in the published proposal is correct. The fee DPS charges to process requests for criminal history reports-$17.25 per applicant-is reflected in both the fiscal note and the public benefit/cost note. In the fiscal note, the number of never before licensed agents for fiscal year 1995 was multiplied by the $17.25 fee and then a range of $300,000 to $500,000 was estimated as the possible fees to be collected by DPS. The department also disagrees that the fingerprint requirement will have an adverse impact on small businesses. It must be noted that the applicant is responsible for the cost of providing the department a completed fingerprint card with his application, just as the applicant is responsible for paying his application fee. In the cost note, a cost range of $17.25 to $55 per applicant was estimated. The lower number is based on information received by the department that a few police agencies do not charge for fingerprints and therefore, the cost would be only the $17.25 fee from DPS. The higher number is based on a $10 fingerprinting fee plus the $17.25 DPS fee ($27.25) multiplied by 2 and rounded up. This accounted for those applicants who might not pass their qualifying exams before their criminal history reports became more than 90 days old. Those applicants would have had to request a new criminal history report. The department notes that it currently mails application packets to those persons requesting them; thus, the fingerprint cards will be added to the application packet. Additionally, applicants are already required to return their completed applications to the department; they will simply need to attach the fingerprint cards to their applications. The fiscal note and cost note numbers were based on the proposed sections which required the submission of criminal history record information. The adopted sections require the submission of fingerprint cards only. Therefore, the actual costs incurred will probably be less than the amounts published. The department does not believe that the possibility of lawsuits must be accounted for in the fiscal note. The sections state that the fingerprint cards are considered confidential by the department and will only be released by court order or written authorization of the applicant or applicant's representative. Comment: One commenter expressed concern about the fact that criminal histories can be created without anyone ever having been convicted of a crime. The commenter believes this will unfairly delay licensing for individuals who have records created through charges and accusations, but no convictions. Agency Response: The fingerprint requirement will not unfairly delay licensing only for individuals who have records created through charges and accusations, but no convictions. The requirement for submitting fingerprint cards applies to all applicants and will add only three-five working days to the application process. Currently, if an applicant indicates on an application that he or she has a criminal background, the department requests additional information from the applicant and criminal history record information from DPS. The adopted sections will not change that procedure nor cause additional delays. Comment: One commenter believes the fingerprint requirement is burdensome for agents who are bank employees because most banks do criminal investigations of their employees before they hire them. The commenter wants the department to exempt bank employees from the fingerprinting requirement. Agency Response: The department disagrees. An exemption for bank employees is not administratively feasible because it would be nearly impossible for the department to determine whether an applicant was going to be a bank employee, or how long the applicant would remain a bank employee. Further, bank employees who are insurance agents handle client's money the same as other agents. Thus, it is in the public interest that all new applicants submit to the fingerprint requirement. Comment: One commenter expressed concern whether criminal history reports received by the department would be current. The commenter stated that DPS had issued criminal history reports with disclaimers on it stating that the reports were two to three years old. Agency Response: The department is unaware of problems with the criminal history reports being current. The department currently receives criminal history reports that do not have disclaimers on them. Comment: A few commenters suggest the department not require that fingerprint cards be submitted with the application-one commenter suggests this for Group II applicants and two commenters suggest it for all applicants. Instead, the commenters suggest that the department request a fingerprint card only if a background check reveals a possible criminal history. Agency Response: Applicants intent on hiding a criminal background can alter their names or date of birth to avoid having their background revealed when a check is done on the National Crime Information Center (NCIC)/Texas Crime Information Center (TCIC) database. The department believes that requiring fingerprint cards up front will give applicants an incentive not to lie or alter their applications. Waiting until after a criminal background is indicated to request fingerprint cards would require more staff time and resources and additional time for the applicant. For example, the requests for fingerprints would have to be sent certified mail, return receipt requested to ensure the request reached the applicant. Further, 28 TAC sec.1.806 states that an incomplete license application may not be disapproved until 180 days have passed from the date of receipt. This would require the department to set up a tickler system to hold incomplete applications for 180 days and then send out disapproval letters to those applicants who do not send in fingerprint cards as requested. If a check on the NCIC/TCIC database reveals a possible criminal history on an applicant, an applicant with the same name, but no criminal history, may be alarmed when he or she receives the department's request for fingerprints. Insurance Code, Article 21.07, sec.10A(a) (regarding licensing of Group II agents) provides in part that "the department may not issue a license to act as an insurance agent if the applicant has been convicted of a felony involving moral turpitude or breach of fiduciary duty." Therefore, asking for the fingerprint card after the NCIC/TCIC database check will delay issuance of the license since the statute requires the department to determine whether an applicant has been convicted of a felony involving moral turpitude or breach of fiduciary duty before issuing a license. Requiring completed fingerprint cards for all applicants at the beginning of the application process is more fair and efficient than requesting fingerprint cards only if a background check reveals a possible criminal history. Sun Financial Group, Texas Association of Insurance Agents commented in favor of the adopted new sections. American General Life & Accident Insurance Company, Texas Association of Life Underwriters, HRH Insurance, Texas Life Insurance Association commented in favor with changes to the adopted new sections. Texas Legal Reserve Officials Association, Service Life & Casualty, Landmark Life Insurance Company commented neither for nor against the adopted new sections. Mims & Stephens Insurance, The Insurance Man & Associates, The GEM Agencies, Muir Agency, Inc., American General Corporation, Midland National Life Insurance Company, Transport Life Insurance Company, Provident American Insurance Company, Insurance Alliance of America, National Security Life & Accident commented against the adoption of the new sections. The new sections are adopted pursuant to the Insurance Code, Articles 1. 10C(e), 1.14-2, 3.75, 5.13-1, 9.36, 9.43, 20A.15, 20A.15A, 21.07, 21.07-1, 21. 07-2, 21.07-3, 21.07-4, 21.07-7, 21.14, 21.14-1, 21.14-2, 23.23, and 1.03A, and the Government Code, sec.411.083 and sec.411.085 and sec.sec.2001.004 et seq (Administrative Procedure Act). Article 1.10C(e) provides that the department may deny a license to an applicant for any license, permit, certificate of authority or registration if the applicant fails to provide a complete set of fingerprints on request. Articles 1.14-2, 3.75, 5.13-1, 9.36, 9.43, 20A.15, 20A.15A, 21.07, 21.07-1, 21.07-2, 21.07-3, 21.07-4, 21.07-7, 21.14, 21.14-1, 21.14-2, and 23.23 provide the various licensing and application procedures for surplus lines agents; variable contract agents; for-profit prepaid legal service contract agents; title insurance agents; escrow officers; HMO agents; single health care service plan agents; life, health and accident insurance agents; legal reserve life insurance agents; life insurance counselors; managing general agents; insurance adjusters; reinsurance intermediaries; local recording agents, solicitors, and insurance service representatives; risk managers; agricultural insurance agents; and non-profit legal services agents, respectively. These general licensing provisions of the various agent licensing statutes grant the commissioner broad authority to prescribe the form an application for license will take and what information will be requested on the application. Article 1.03A provides that the Commissioner of Insurance may adopt rules and regulations to execute the duties and functions of the Texas Department of Insurance only as authorized by a statute. The Government Code, sec.411.083 sets out to which persons the Texas Department of Public Safety may properly disseminate criminal history record information. The Government Code, sec.441.085 states that a person commits an offense if the person obtains, uses or discloses criminal history record information without authorization. The Government Code, sec. sec.2001.004 et seq authorize and require each state agency to adopt rules of practice setting forth the nature and requirements of available procedures and to prescribe the procedures for adoption of rules by a state agency. sec.19.1801. General Provisions. (a) Purpose and Scope. The purpose of this subchapter is to establish the requirement that persons who wish to apply for new licenses pursuant to the Insurance Code articles listed in sec.19.1803 of this subchapter (relating to Fingerprint Card Requirement) must submit with their applications completed, legible fingerprint cards. The subchapter also sets out the procedures to be followed by applicants to comply with this requirement. This subchapter applies to all individuals who submit new applications for licensure as insurance agents, adjusters, life insurance counselors, reinsurance intermediaries or risk managers as set out in sec.19.1803 of this subchapter (relating to Fingerprint Card Requirement). (b) Severability. Where any terms or provisions of this subchapter are determined by a court of competent jurisdiction to be inconsistent with any statutes of this state or to be unconstitutional, the remaining terms and provisions of this subchapter shall remain in effect. sec.19.1802. Definitions. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise. Applicant-A person who applies for a new license as an insurance agent, adjuster, life insurance counselor, reinsurance intermediary or risk manager; or, a person applying for a nonresident agent's license. Criminal history record information-For Texas residents, information provided to the department by the Texas Department of Public Safety regarding an applicant's criminal history background. For nonresidents, criminal history information provided to a person by an agency authorized to disseminate such information. Person-An individual. sec.19.1803. Fingerprint Card Requirement. (a) Any person residing in Texas who submits to the department a new application to be licensed under the Insurance Code must attach to the application a completed, legible fingerprint card. (b) Submission of an application containing a completed, legible fingerprint card is required for persons desiring to be licensed pursuant to Insurance Code, Articles 1.14-2 (surplus lines agents), 3.75 (variable contract agents), 5.13-1 (for profit prepaid legal service contract agents) 9. 36 (title insurance agents), 9.43 (escrow officers), 20A.15 (HMO agents), 20A. 15A (single health care service plan agents), 21.07 (life, health and accident insurance agents), 21.07-1 (legal reserve life insurance agents), 21.07-2 (life insurance counselors), 21.07-3 (managing general agents), 21.07-4 (insurance adjusters), 21.07-7 (reinsurance intermediaries), 21.14 (local recording agents, solicitors, and insurance service representatives), 21.14-1 (risk managers), 21.14-2 (agricultural insurance agents), or 23.23 (non-profit legal services agents). sec.19.1804. Exemptions from Fingerprint Card Requirement. (a) A completed, legible fingerprint card shall not be required of any person who meets the following criteria: (1) the person has already provided a completed, legible fingerprint card as part of an earlier application for license which has been granted and is applying for an additional license type; (2) the person is renewing a license; (3) the person is applying for an original emergency license pursuant to Insurance Code, Articles 21.07-3, 21.07-4 or 21.14; or (4) the person is applying for a title attorney's license pursuant to the Insurance Code, Article 9.56. (b) If the emergency licensee qualifies by examination for a license under Insurance Code, Articles 21.07-3 or 21.14, a completed, legible fingerprint card must be submitted. sec.19.1805. Nonresident Agents. An applicant for a nonresident agent's or nonresident adjuster's license who is licensed in another state must provide the following with the application: (1) if the applicant's home state requires submission of a fingerprint card or criminal history record information as part of its original application process, then the applicant must present a letter of certification from the insurance department of applicant's home state certifying that the applicant's license is in good standing; (2) if the applicant's home state does not require submission of a fingerprint card or criminal history record information as part of its application process, then the applicant must submit a completed, legible fingerprint card with the application. sec.19.1806. Effect of Requirement. (a) In determining whether an application for license will be granted or denied if a check of an applicant's background reveals a criminal conviction, the department shall use those standards set out in Insurance Code, Articles 21.01-2 (general provisions applicable to certain license holders); 21.07 (life, health and accident insurance agents), 21.07-1 (legal reserve life insurance agents), 21.07-2 (life insurance counselors), 21.07-3 (managing general agents), 21.07-4 (insurance adjusters), 21.07-7 (reinsurance intermediaries), 21.14 (local recording agents, solicitors, and insurance service representatives), 21.14-1 (risk managers), and 21.14-2 (agricultural insurance agents) and Texas Civil Statutes, Article 6252-13c (eligibility of persons with criminal backgrounds for certain occupations, professions, and licenses). The department shall also ensure that its licensing procedures comply with the requirements of 18 U.S.C. sec.1033 (crimes by or affecting persons engaged in the business of insurance whose activities affect interstate commerce). (b) If a check of an applicant on the National Crime Information Center (NCIC)/Texas Crime Information Center (TCIC) database indicates a possible criminal conviction, and there is any doubt that the applicant is the same person as the person with the criminal history, the department shall submit the applicant's fingerprint card to the Texas Department of Public Safety and request criminal history record information on the applicant. (c) The completed fingerprint cards received from applicants pursuant to these provisions shall not be used by the department in a discriminatory manner. sec.19.1807. Confidentiality and Custody of Fingerprint Cards. (a) A completed fingerprint card submitted by the applicant to the department is for the exclusive use of the department and shall be considered confidential unless a court of competent jurisdiction determines otherwise or the applicant or applicant's legal representative provides written authorization for release of the fingerprint card. (b) After the department has made a determination as to the issuance or denial of a license, the completed fingerprint card shall be sealed and kept separate from other records. The completed fingerprint cards shall be kept in the custody of the commissioner or the commissioner's designee. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on April 5, 1996. TRD-9604859 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: August 1, 1996 Proposal publication date: December 8, 1995 For further information, please call: (512) 463-6327 TITLE 40. SOCIAL SERVICES AND ASSISTANCE Part I. Texas Department of Human Services Chapter 47. Primary Home Care The Texas Department of Human Services (DHS) adopts amendments to sec.sec.47. 1901, 47.4901, and 47.4902, without changes to the proposed text as published in the October 6, 1995, issue of the Texas Register (20 TexReg 8184). Justification for the amendments is that DHS's rules on primary home care will follow the licensing law for home and community support services. The amendments will function by revising the type of license required to comply with amendments to the Health and Safety Code, Chapter 142, which require that agencies providing personal assistance services be licensed by the Texas Department of Health and change the name of those agencies to home and community support services agencies. DHS held a public hearing on December 11, 1995. In addition to comments received at the public hearing, DHS received 45 written comments regarding the adoption of the amendments, including comments from North Central Texas Home Care, the Texas Planning Council for Developmental Disabilities, Personal Attendant Services Task Force, Texas Respite Resource Network, Texas Association for Home Care, Lanoitan Home Health Care of Texas, Inc., United Cerebral Palsy Association of the Capitol Area, Inc., Crossroads Home Health, Interim Health Care, and several individuals. All of the comments concerned sec.47.1901. A summary of the comments and responses follows. Comment: Twenty-seven individual citizens oppose sec.47.1901 to discontinue requiring that Primary Home Care (PHC) provider agencies be licensed to provide licensed and certified home health services as well as personal assistance services. Commenters thought, by DHS adopting the Personal Assistance Services (PAS) licensure category, it would no longer require a registered nurse (RN) in the PHC program. Response: DHS wishes to clarify that although the PAS licensure category does not require RN supervision, agencies that contract with DHS to provide PHC services, are still required to have an RN in the PHC program. Comment: Several advocacy organizations support the adoption of sec.47.1901 as published. Commenters feel this will give clients more choices without sacrificing quality when they select a Home and Community Support Service Agency (HCSSA) and that to require any higher level of licensure to contract for PHC would only restrict who can provide services and limit the provider base by excluding potential providers of non-medical support services. Response: DHS appreciates the comments. Comment: The Texas Association of Home Care (TAHC) and several individual PHC provider agencies oppose sec.47.1901 as published. Commenters recommend that DHS continue to require PHC provider agencies be licensed to provide licensed and certified home health services as well as personal assistance services and that DHS should not remove the link to Medicare certified home health for PHC provider agencies because an agency serving only PHC clients, with limited knowledge of the Medicare program, would not likely identify a client's need for Medicare covered skilled services. Response: DHS does not agree with this comment. PHC services are non- technical physician ordered personal care services. Services provided in the program are provided under the category of Personal Assistance Services (PAS) under the HCSSA license. Therefore, DHS contends that the PAS category is adequate for DHS clients as well as private individuals served by HCSSAs. DHS suggests that because the Texas Department of Health (TDH) licensing standards require that HCSSAs ensure accountability of the client's health and safety that the Medicare/Medicaid link is no longer necessary for those agencies contracting to provide PHC. Additionally, DHS will continue to require an RN in the PHC program. The RN is the key individual for ensuring that a client is linked with an agency that can provide the necessary services. Comment: Opponents feel that the overall cost of service delivery will increase and adversely affect efforts to maximize federal funds. Response: DHS believes that expanding the provider base does not increase cost and that it gives clients greater flexibility to choose from a larger provider base. Federal funds will continue to be maximized because clients receiving personal care services, whose needs could not be met through the PHC program, will be referred to skilled care services. Comment: Opponents also believe that DHS will experience increased staffing costs for monitoring and auditing without this linkage. Response: DHS does not agree with this comment. Monitoring has actually been reduced because the TDH is now monitoring for previous DHS requirements. As a condition for contracting, DHS will require PHC, Client Managed Attendant Services, and Special Services to Persons with Disabilities-24 hour Attendant Care provider agencies to be licensed by the TDH as a HCSSA with one or any combination of the following licensing categories: Licensed and Certified Home Health Services, Licensed Home Health Services and/or Personal Assistance Services. DHS appreciates all comments received and wishes to thank those advocacy groups, associations, individuals, etc., that took the time to submit comments on this very important issue. General Provisions and Services 40 TAC sec.47.1901 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; and under Texas Government Code sec.531.021, which provides the Health and Human Services Commission with the authority to administer federal medical assistance funds. The amendment implements the Human Resources Code, sec. sec.22.001-22.030 and sec.sec.32.001-32.041. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604713 Glenn Scott General Counsel, Legal Services Texas Department of Human Services Effective date: May 1, 1996 Proposal publication date: October 6, 1995 For further information, please call: (512) 438-3765 Provider Contracts 40 TAC sec.47.4901, sec.47.4902 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; and under Texas Government Code sec.531.021, which provides the Health and Human Services Commission with the authority to administer federal medical assistance funds. The amendments implement the Human Resources Code, sec. sec.22.001-22.030 and sec.sec.32.001-32.041. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604714 Glenn Scott General Counsel, Legal Services Texas Department of Human Services Effective date: May 1, 1996 Proposal publication date: October 6, 1995 For further information, please call: (512) 438-3765 Chapter 48. Community Care for Aged and Disabled The Texas Department of Human Services (DHS) adopts amendments to sec.48. 2601 and sec.48.9302, without changes to the proposed text as published in the October 6, 1995, issue of the Texas Register (20 TexReg 8184). Justification for the amendments is that previously unlicensed agencies will have an opportunity to provide home and community support services. Also, the department's rule will follow the licensing law for home and community support services agencies. The amendments will function by adding license requirements to comply with amendments to the Health and Safety Code, Chapter 142, which require that agencies providing personal assistance services be licensed by the Texas Department of Health and change the name of those agencies to home and community support services agencies. No comments were received regarding adoption of the amendments. Client-Managed Attendant Services 40 TAC sec.48.2601 The amendment is adopted under the Human Resources Code, Title 2, Chapter 22, which provides the department with the authority to administer public assistance programs. The amendment implements the Human Resources Code, sec. sec.22.001-22.030. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604716 Glenn Scott General Counsel, Legal Services Texas Department of Human Services Effective date: May 1, 1996 Proposal publication date: October 6, 1995 For further information, please call: (512) 438-3765 Minimum Standards for Agencies Contracted to Provide Special Services to Persons with Disabilities 40 TAC sec.48.9302 The amendment is adopted under the Human Resources Code, Title 2, Chapter 22, which provides the department with the authority to administer public assistance programs. The amendment implements the Human Resources Code, sec. sec.22.001-22.030. This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on April 3, 1996. TRD-9604715 Glenn Scott General Counsel, Legal Services Texas Department of Human Services Effective date: May 1, 1996 Proposal publication date: October 6, 1995 For further information, please call: (512) 438-3765