TITLE 16.ECONOMIC REGULATION

Part 2. PUBLIC UTILITY COMMISSION OF TEXAS

Chapter 25. SUBSTANTIVE RULES APPLICABLE TO ELECTRIC SERVICE PROVIDERS

Subchapter J. COSTS, RATES, AND TARIFFS

1. RETAIL RATES

16 TAC §25.242

The Public Utility Commission of Texas (commission) proposes an amendment to §25.242 relating to Arrangements Between Qualifying Facilities and Electric Utilities. The proposed amendment addresses the sale and purchase of electricity between qualifying facilities (QFs) and retail electric providers (REPs) with the price to beat obligation (PTB REPs) and REPs serving as providers of last resort (POLRs) in the restructured electric market that takes effect on January 1, 2002. The amendment retains the applicability of the rule pertaining to arrangements between qualifying facilities and electric utilities in the parts of Texas in which the electric market has not yet been restructured. This amendment is proposed in commission Project Number 24365.

When commenting on specific subsections of the proposed rule, parties are encouraged to describe "best practice" examples of regulatory policies, and their rationale, that have been proposed or implemented successfully in other states already undergoing electric industry restructuring, if the parties believe that Texas would benefit from application of the same policies. The commission is interested in receiving only "leading edge" examples which are specifically related and directly applicable to the Texas statute, rather than broad citations to other state restructuring efforts.

Gerardo Huerta, Attorney, Legal Division, has determined that for each year of the first five-year period the proposed section is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the section.

Mr. Huerta has determined that for each year of the first five years the proposed section is in effect the public benefit anticipated as a result of enforcing the section will be compliance with federal law. Furthermore, there will be no adverse economic effect on small businesses or micro-businesses as a result of enforcing this section. There is no anticipated economic cost to persons who are required to comply with the section as proposed.

Mr. Huerta has also determined that for each year of the first five years the proposed section is in effect there should be no effect on a local economy, and therefore no local employment impact statement is required under Texas Government Code §2001.022.

Comments on the proposed amendment (16 copies) may be submitted to the Filing Clerk, Public Utility Commission of Texas, 1701 North Congress Avenue, P.O. Box 13326, Austin, Texas 78711-3326, within 21 days after publication. Reply comments may be submitted within 30 days after publication. Comments should be organized in a manner consistent with the organization of the proposed rule. The commission invites specific comments regarding the costs associated with, and benefits that will be gained by, implementation of the proposed section. The commission will consider the costs and benefits in deciding whether to adopt the section. All comments should refer to Project Number 24365.

This amendment is proposed under the Public Utility Regulatory Act, Texas Utilities Code, Annotated, Title II, §§11.002, 14.002, and 35.061 (Vernon 1998 & Supplement 2002) (PURA); 16 U.S.C. §824a-3(f) (2000); and 18 C.F.R. Part 292 (2001). Section 11.002 states that the purpose of the Public Utility Regulatory Act is to grant the commission authority to make and enforce rules necessary to protect customers of electric services consistent with the public interest; §14.002 requires the commission to adopt and enforce rules reasonably required in the exercise of its powers and jurisdiction; §35.061 requires the commission to adopt and enforce rules to encourage the economical production of electric energy by qualifying facilities; and 16 U.S.C. §824a-3(f) (2000) and 18 C.F.R. Part 292 (2001), which require state regulatory authorities to implement federal Public Utility Regulatory Policies Act regulations addressing arrangements between certain entities that sell electric energy.

Cross reference to statutes: Public Utility Regulatory Act §§11.002, 14.002, and 35.061; 16 U.S.C. §824a-3; and 18 C.F.R. Part 292.

§25.242.Arrangements Between Qualifying Facilities and Electric Utilities.

(a) Purpose. The purpose of this section is to regulate the arrangements between qualifying facilities , retail electric providers with the price to beat obligation (PTB REPs), providers of last resort (POLRs), and electric utilities as required by federal and state law in a manner consistent with the development of a competitive wholesale power market.

(b) Application. This section shall apply to all PTB REPs, POLRs, transmission and distribution utilities (TDUs), and electric utilities in Texas. This section shall not apply to municipal utilities , river authorities, or electric cooperatives .

(c) Definitions--The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise:

(1) Avoided costs--The incremental costs to a PTB REP, POLR, or [ an ] electric utility of electric energy, which, but for the purchase from the qualifying facility or qualifying facilities, such PTB REP, POLR, or electric utility would generate itself or purchase from another source.

(2) Back-up power--Electric energy or capacity supplied [ by an electric utility ] to replace energy or capacity ordinarily generated by a qualifying facility's own generation equipment during an unscheduled outage of the qualifying facility.

(3) (No change.)

(4) Electric utility--For purposes of this section, an integrated investor-owned utility that has not unbundled in accordance with PURA §39.051.

(5) [ (4) ] Firm power--From a qualifying facility, power or power-producing capacity that is available [ to the electric utility ] pursuant to a legally enforceable obligation for scheduled availability over a specified term.

(6) [ (5) ] Host utility--The utility with which the qualifying facility is directly interconnected.

(7) [ (6) ] Maintenance power--Electric energy or capacity supplied [ by an electric utility ] during scheduled outages of the qualifying facility.

(8) Market price--The price of power purchases foregone by a PTB REP or POLR due to the purchase from a qualifying facility.

(9) [ (7) ] Non-firm power from a qualifying facility--Power provided under an arrangement that does not guarantee scheduled availability, but instead provides for delivery as available.

(10) [ (8) ] Parallel operation--A mode of operation which enables a qualifying facility to export automatically any electric capacity which is not consumed by the qualifying facility or the user of the qualifying facility's output. Parallel operation results in three possible states of operation at any point in time:

(A) The qualifying facility is generating an amount of capacity that is less than the customer's load. The customer is therefore a net consumer.

(B) The qualifying facility is generating an amount of capacity that is more than the customer's load. The customer is therefore a net producer.

(C) The qualifying facility is generating an amount of capacity that is equal to the customer's load. The customer is therefore neither a net producer nor a net consumer.

(11) [ (9) ] Purchase--The purchase of electric energy or capacity or both from a qualifying facility by a PTB REP, POLR, or [ an ] electric utility.

(12) [ (10) ] Purchasing utility--The utility that is purchasing a qualifying facility's capacity and/or energy.

(13) [ (11) ] Quality of firmness of a qualifying facility's power--The degree to which the capacity offered by the qualifying facility is an equivalent quality substitute for firm purchased power or an electric [ the ] utility's own generation [ or firm purchased power ]. At a minimum the following factors should be considered in determining quality of firmness:

(A) reliability of generation and interconnection;

(B) forced outage rate;

(C) availability during peak periods;

(D) the terms of any contract or other legally enforceable obligation, including, but not limited to, the duration of the obligation, performance guarantees, termination notice requirements, and sanctions for noncompliance;

(E) maintenance scheduling;

(F) availability for system emergencies, including the ability to separate the qualifying facility's load from its generation;

(G) the individual and aggregate value of energy and capacity from qualifying facilities on the electric utility's system;

(H) other dispatch characteristics;

(I) reliability of primary and secondary fuel supplies used by the qualifying facility; and

(J) impact on utility system stability.

(14) Retail electric provider with the price to beat obligation (PTB REP)--A REP that makes available a PTB pursuant to Public Utility Regulatory Act (PURA) §39.202.

(15) [ (12) ] Sale--The sale of electric energy or capacity or both supplied [ by an electric utility ] to a qualifying facility.

(16) [ (13) ] Supplementary power--Electric energy or capacity [ supplied by an electric utility, ] regularly used by a qualifying facility in addition to that which the facility generates itself.

(17) [ (14) ] System emergency--A condition on a utility's system that is likely to result in imminent significant disruption of service to customers or is imminently likely to endanger life or property.

(18) Transmission and distribution utility (TDU)--As defined in §25.5 of this title (relating to Definitions).

(d) Negotiation and filing of rates.

(1) Negotiated rates or terms. Nothing in this section shall:

(A) limit the authority of any PTB REP, POLR, or electric utility or any qualifying facility to agree to a rate for any purchase, or terms or conditions relating to any purchase, which differs from the rate or terms or conditions that would otherwise be required by this section; or

(B) affect the validity of any contract entered into between a qualifying facility and a PTB REP, POLR, or [ an ] electric utility for any purchase before the adoption of this section.

(2) (No change.)

(e) (No change.)

(f) PTB REP, POLR, and electric [ Electric ] utility obligations.

(1) Obligation to purchase from qualifying facilities.

(A) In accordance with this subsection and subsection [ subsections (f) and ] (g) of this section, each PTB REP, POLR, and electric utility shall purchase any energy that is made available from a qualifying facility:

(i) directly to the PTB REP, POLR, or electric utility; or

(ii) indirectly to the PTB REP, POLR, or electric utility in accordance with paragraph (4) of this subsection.

(B) (No change.)

[ (C) An electric utility is not required to purchase firm capacity from a qualifying facility unless it wins an integrated resource planning solicitation pursuant to Subchapter H of this chapter (relating to Electrical Planning).]

(2) Obligation to sell to qualifying facilities. In accordance with subsection (k) of this section, each electric utility shall sell any energy and capacity requested to any qualifying facility located within the electric utility's service area. Each PTB REP and POLR shall also sell any energy requested to any qualifying facility; however, those sales shall be at market based rates. Nothing shall restrict the ability of any qualifying facility to purchase energy from any REP.

(3) Obligation to interconnect. The obligation of electric utilities and TDUs to interconnect with qualifying facilities is set forth in Subchapter I of this chapter (relating to Transmission and Distribution) with respect to qualifying facilities seeking to interconnect with TDUs in the Electric Reliability Council of Texas (ERCOT), and in the respective electric utility's Open Access Transmission Tariff for electric utilities in non-ERCOT power regions.

(4) (No change.)

(5) PTB REP and POLR scheduling with qualifying facilities. A PTB REP or POLR shall use dynamic resource scheduling or responsibility transfer in ERCOT with any qualifying facility that requests such scheduling, as permitted by ERCOT. The PTB REP's or POLR's cost of using dynamic resource scheduling or responsibility transfer attributable solely to purchases from qualifying facilities shall be charged to qualifying facilities that use such scheduling. If a qualifying facility uses static scheduling, the qualifying facility shall bear the costs for any imbalances resulting from the qualifying facility's failure to submit a schedule or to comply with the schedule.

(g) Rates for purchases from a qualifying facility.

(1) Rates for purchases of energy and capacity from any qualifying facility shall be just and reasonable to the customers of the electric utility , PTB REP, and POLR, and in the public interest, and shall not discriminate against qualifying cogeneration and small power production facilities.

(2) Rates for purchases of energy and capacity from any qualifying facility shall not exceed avoided cost. [ Avoided costs shall be determined through a competitive bidding process pursuant to Subchapter H of this chapter, and subject to the limitations of the Public Utility Regulatory Act (PURA) §34.054 (relating to Qualifying Facility Bids; Avoided Costs). ] Rates for purchase shall be [ In the case in which the rates for purchase are ] based upon a market-based determination of avoided costs over the specific term of the contract or other legally enforceable obligation, the rates for such purchase do not violate this subsection if the rates for such purchase differ from avoided cost at the time of delivery. Payments which do not exceed avoided cost shall be found to be just and reasonable operating expenses of the utility.

(h) (No change.)

(i) Tariffs setting out the methodologies for purchases of nonfirm power from a qualifying facility. Tariffs setting out the methodologies for purchases of nonfirm power from a qualifying facility shall be filed with the commission based on one of the following [ two ] approaches:

(1) Rates for purchases of nonfirm power may, by agreement of both the electric utility and the qualifying facility, be based on the utility's average avoided energy costs. Administrative, billing, and metering costs shall be recovered through a monthly customer charge to the qualifying facility.

(2) Rates for purchases of nonfirm power may, by agreement of both a PTB REP or POLR and the qualifying facility, be based on average market price over the period of sale by the qualifying facility. Administrative, billing, and metering costs shall be recovered through a monthly customer charge to the qualifying facility. Such agreements may include provisions to prevent the potential for arbitrage between this paragraph and paragraph (4) of this subsection.

(3) [ (2) ] Rates for purchases of nonfirm power may, at the option of the qualifying facility, be based on the full cost at the time of delivery of decremental energy that would have been incurred by the electric utility had the qualifying facility not been in operation.

(A) The following factors should be considered in the calculation of the cost of decremental energy:

(i) fuel costs;

(ii) variable operating and maintenance costs;

(iii) line losses;

(iv) heat rates;

(v) cost of purchases from other sources;

(vi) other energy-related costs;

(vii) capacity costs, if, as a class, qualifying facilities providing nonfirm energy offer some predictable capacity; and

(viii) for short term energy purchases, the time and quantity of energy furnished.

(B) If practical, the avoided cost should be determined by calculating by time period, using the utility's economic dispatch model (or comparable methodology), the difference between the cost of the total energy furnished by both the qualifying facility and the utility, computed as though the energy furnished by the qualifying facility had been furnished by the utility, and the actual cost of energy furnished by the utility.

(C) The economic dispatch model should take into consideration the following factors:

(i) fuel costs;

(ii) variable operating and maintenance costs;

(iii) line losses;

(iv) heat rates;

(v) purchased power opportunity;

(vi) system stability; and

(vii) operating characteristics.

(D) Time periods should be hourly if the utility has an automated economic dispatch model available; otherwise the shortest reasonable time period for which costs can be determined should be used.

(E) Administrative, billing, and metering costs shall be recovered through a monthly customer charge to the qualifying facility.

(4) Rates for purchases of nonfirm power may, at the option of the qualifying facility, be based on the market price of energy purchases that would have been incurred by the PTB REP or POLR had the qualifying facility not been in operation. Administrative, billing, and metering costs shall be recovered through a monthly customer charge to the qualifying facility.

(5) PTB REPs and POLRs shall file with the commission a description of the methodology that will be used in calculating these rates for purchase.

(j) Periods during which purchases not required.

(1) Any PTB REP, POLR, or electric utility which gives notice to each affected qualifying facility in time for the qualifying facility to cease delivery of energy or capacity to the PTB REP, POLR, or electric utility will not be required to purchase electric energy or capacity during any period during which, due to operational circumstances, including resource ramp rate limitations that could cause imbalances, purchases from qualifying facilities will result in costs greater than those which the utility would incur if it did not make such purchases, but instead generated an equivalent amount of energy itself, provided, however, that this subsection does not override contractual obligations of the PTB REP, POLR, or electric utility to purchase from a qualifying facility.

(2) Any PTB REP, POLR, or electric utility which fails to give notice to each affected qualifying facility in time for the qualifying facility to cease the delivery of energy or capacity to the PTB REP, POLR, or electric utility will be required to pay the same rate for such purchase of energy or capacity as would be required had the period of greater costs not occurred.

(3) A claim by PTB REP, POLR, or an electric utility that such a period has occurred or will occur is subject to such verification by the commission either before or after the occurrence.

(k) (No change.)

(l) Interconnection costs. The establishment and reimbursement of interconnection costs are set forth in Subchapter I of this chapter with respect to qualifying facilities seeking to interconnect with TDUs in ERCOT, and in the respective utility's Open Access Transmission Tariff for electric utilities in non-ERCOT power regions .

(m) (No change.)

(n) Enforcement. A proceeding to resolve a dispute between an electric utility , PTB REP, or POLR, and a qualifying facility arising under this section may be instituted by filing of a petition with the commission. Electric utilities , PTB REPs, POLRs, and qualifying facilities are encouraged to engage in alternative dispute resolution prior to the filing of a complaint.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on December 21, 2001.

TRD-200108205

Rhonda G. Dempsey

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: February 3, 2002

For further information, please call: (512) 936-7308


Chapter 26. SUBSTANTIVE RULES APPLICABLE TO TELECOMMUNICATIONS SERVICE PROVIDERS

Subchapter P. TEXAS UNIVERSAL SERVICE FUND

16 TAC §26.421, §26.422

The Public Utility Commission of Texas (commission) proposes new §26.421, relating to Designation of Eligible Telecommunication Provider to Provide Service to Uncertificated Areas and new §26.422, relating to Subsequent Petitions for Service in Uncertificated Areas. These sections implement House Bill 2388, 77th Legislature (HB 2388) which authorizes the commission to designate a telecommunications provider to provide voice-grade services to permanent residential or business premises that are not included within the certificated area of a holder of certificate of convenience and necessity and for the reimbursement of costs from the Texas Universal Service Fund (TUSF). HB 2388 amends the Public Utility Regulatory Act, Texas Utilities Code Annotated (Vernon 1998, Supplement 2002) (PURA) §§51.002, 56.001, 56.021 and 56.023 and adds new Chapter 56, Subchapter F. Project Number 24519 is assigned to this proceeding.

The proposed new sections outline the procedures for residents or businesses in uncertificated areas to petition the commission for voice-grade telecommunications services. Section 26.421 explains the factors that the commission would consider in approving or denying the petition, and if necessary, the procedures for conducting an evidentiary hearing. Section 26.421 also describes the method for recovery of actual construction costs and monthly recurring costs from the Texas Universal Service Fund (TUSF). In addition, §26.421 provides guidelines to the commission on issuing an order granting or denying a petition. Proposed §26.422 provides guidelines for petitions requesting service for premises within a reasonable proximity to premises that were the subject of an earlier approved petition. Section 26.422 also describes the method for cost recovery relating to later filed petitions.

Ms. Jennifer Fagan, Attorney, Legal Division and Mr. Elango Rajagopal, Policy Analyst, Telecommunications Division, have determined that for each year of the first five-year period the proposed sections are in effect, there will be no fiscal implications for state or local governments as a result of enforcing or administering the sections.

Ms. Fagan and Mr. Rajagopal have determined that for each year of the first five years the proposed sections are in effect the public benefit anticipated as a result of enforcing the sections will be that persons previously unable to obtain voice-grade telecommunications service because they are located outside the certificated area of any local exchange carrier, will be afforded an opportunity to obtain such services. There will be no effect on small businesses or micro-businesses as a result of enforcing these sections. There is no anticipated economic cost to persons who are required to comply with these sections as proposed.

Ms. Fagan and Mr. Rajagopal have also determined that for each year of the first five years the proposed sections are in effect, there should be no effect on a local economy. Therefore, no local employment impact statement is required under Administrative Procedure Act, §2001.022.

Written comments on the proposed rules (16 copies) may be submitted to the Filing Clerk, Public Utility Commission of Texas, 1701 North Congress Avenue, P.O. Box 13326, Austin, Texas 78711-3326, within 30 days after publication. Reply comments may be submitted within 45 days after publication. The commission invites comments regarding the costs associated with, and benefits that will be gained by, implementation of the proposed rules. The commission will consider the costs and benefits in deciding whether to adopt these sections. All comments should refer to Project Number 24519.

The commission staff will conduct a public hearing on this rulemaking, pursuant to Texas Government Code §2001.029, at the commission's offices located in the William B. Travis Building, 1701 North Congress Avenue, Austin, Texas 78701 on Tuesday, February 12, 2002, at 1:30 p.m.

These new sections are proposed under the Public Utility Regulatory Act, Texas Utilities Code Annotated, §14.002 (Vernon 1998, Supplement 2002), which provides the Public Utility Commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction. These sections are also proposed under §56.202, which grants the commission the authority to designate a telecommunications provider to provide services in uncertificated areas of the state.

Cross Reference to Statutes: Public Utility Regulatory Act §§14.002, 56.001, 56.021, 56.023, and 56.201-56.213.

§26.421.Designation of Eligible Telecommunication Provider to Provide Service to Uncertificated Areas.

(a) Purpose. The provisions of this section establish the procedures for the commission to designate an eligible telecommunications provider (ETP) to provide voice-grade services to permanent residential or business premises that are not included within the certificated area of a holder of a certificate of convenience and necessity (CCN), and for the reimbursement of costs from the Texas Universal Service Fund (TUSF).

(b) Definitions. The following words and terms, when used in this section, shall have the following meaning unless the context clearly indicates otherwise:

(1) Designated provider--A telecommunications provider designated by the commission to provide services to premises located within an uncertificated area

(2) Eligible telecommunication provider (ETP)--A telecommunications provider designated by the commission pursuant to §26.417 of this title (relating to Designation as Eligible Telecommunications Providers to Receive Texas Universal Service Funds (TUSF)).

(3) Permanent residential or business premises--A premises that has permanent facilities for water, wastewater, and electricity.

(4) Preferred provider--A designated provider for any permanent residential or business premises within reasonable proximity to those petitioning premises for later petitions filed under §26.422 of this title (relating to Subsequent Petitions for Service in Uncertificated Areas).

(c) Application. This section applies to telecommunications providers that have been designated ETPs by the commission pursuant to §26.417 of this title.

(d) Petition for service.

(1) Eligibility. Persons residing in permanent residential premises or owners of permanent residential or business premises that are not included within the certificated area of a holder of a CCN may petition the commission to designate an ETP to provide to those premises voice-grade services supported by state and federal universal service support mechanisms.

(2) Contents of petition. A petition for designation of an ETP must:

(A) State with reasonable particularity the locations of the permanent residential or business premises for which the petitioner(s) are requesting service;

(B) Establish that the premises are within reasonable proximity to one another so that the petitioners possess a sufficient community of interest;

(C) Nominate as potential providers of service, not more than five telecommunications providers serving territory that is contiguous to the location of the permanent residential or business premises using wireless or wireline facilities, resale, or unbundled network elements; and

(D) Include as an attachment or an appendix, documentation indicating the required residence or ownership, such as a state-issued license or identification, tax records, deeds, or voter registration materials.

(3) Eligibility of petitioner(s). Except as provided by paragraph (4) of this subsection, the petition must be signed by at least five persons who:

(A) Are not members of the same household;

(B) Reside in the permanent residential premises or are the owners of the permanent residential or business premises for which service is sought;

(C) Desire service to those premises;

(D) Commit to pay the aid to construction charges for service to those premises as determined by the commission; and

(E) Commit to enter into an assignable agreement for subscription to basic local service to the premises for a period of time determined by the commission.

(4) Number of petitioners. The commission may accept a petition that is signed by fewer than five persons if the petitioner(s) provides an affidavit stating that the petitioner(s) has taken all reasonable steps to secure the signatures of the residents of permanent residential premises or the owners of permanent residential or business premises within reasonably close proximity to the petitioner's premises who are not receiving telephone service when the petition is filed and who want telephone service initiated.

(5) Form. The petitioner(s) shall file the petition using the commission-approved forms.

(e) Completeness of petition.

(1) Commission action. Upon receipt of a petition, the commission shall review the petition for completeness. Within 15 working days from the date of receipt of the petition, the commission shall determine if the petition is complete and has been filed consistent with subsection (d) of this section.

(2) Petition complete. If the commission determines the petition is complete, the commission will send a notice of completeness to the petitioner(s) and to all telecommunications providers identified in the petition. In its notice, the commission shall seek volunteers to provide telecommunications services in the permanent residential or business premises. The commission shall also include with its notice a copy of the petition.

(3) Petition denied. If a petition is denied, the commission shall send a notice of denial explaining the reason(s) for denial to the petitioner(s).

(f) Responding to notice of approval.

(1) Response. Telecommunication providers shall respond to the commission's notice of approval and request for volunteers within 21 business days after receipt of the notice. A provider may respond by:

(A) Stating that it is not eligible to be designated to serve the premises under this section;

(B) Volunteering to provide service to the premises; or

(C) Refusing to provide service to the premises.

(2) Volunteering to serve. A provider volunteering to provide service to the premises shall respond to the commission by providing a proposal that includes:

(A) An affidavit duly signed by an officer of the company;

(B) A description of the technology proposed for deployment;

(C) An estimate of the costs for deployment and the recurring monthly costs of service; and

(D) An estimated timeline for deployment of facilities and a date by which service will be extended to the premises.

(3) Commission action. Upon receipt of a volunteering provider's proposal, the commission may:

(A) Approve a proposal administratively and permit the ETP to serve the uncertificated area and recover its costs pursuant to subsection (k) of this section; or

(B) Reject a proposal and proceed to a hearing pursuant to subsection (g) of this section.

(g) Evidentiary hearing. If the petition cannot be processed administratively, the commission shall conduct an evidentiary hearing to determine:

(1) If an ETP is willing to be designated to provide service to the petitioner(s); or

(2) The ETP that is best able to serve the petitioner(s).

(h) Commission decision. The commission should consider all relevant factors, including, but not limited to:

(1) The original cost to be incurred by a designated provider to deploy service to the petitioning premises, and the effect of reimbursement of those costs on the state universal service fund;

(2) The number of access lines requested by the petitioners for the petitioning premises;

(3) The size of the geographic territory in which the petitioning premises are included;

(4) The proximity of existing facilities and the existence of a preferred designated provider under the Public Utility Regulatory Act (PURA) §56.213; and

(5) Any technical barriers to the provision of service.

(i) Commission order. The commission shall issue an order granting or denying a petition within 180 days of the filing of the petition. In any order granting a petition the commission shall include the following:

(1) Description of the facilities to be deployed;

(2) Estimated costs of deployment;

(3) Aid to construction fee to be paid by the petitioner(s);

(4) Monthly recurring charge to be paid by the petitioner(s);

(5) Estimated cost to be recovered from the TUSF;

(6) Recurring, monthly per line fee to be recovered from the TUSF;

(7) Date by which services must be extended to the premises; and

(8) Schedule of cost recovery consistent with the following:

(A) Not later than the third anniversary of the date of the order, for a deployment with an estimated original cost of $1 million or less;

(B) Not later than the fifth anniversary of the date of the order, for a deployment with an estimated original cost of more than $1 million, but not more than $2 million; and

(C) Not later than the seventh anniversary of the date of the order, for a deployment with an estimated original cost of more than $2 million.

(j) Cost recovery. A designated provider may recover from the TUSF the provider's actual costs of providing service to the premises, including the provider's original cost of deployment and actual recurring costs, not recovered from the petitioner(s) either through an aid to construction charge or through a monthly recurring charge.

(1) The original cost of deployment includes the cost of the provider's facilities installed in, or upgraded to permit the provision of service to, the premises, as determined by the financial accounting standards applicable to the provider, including an amount for the recovery of all costs that are typically included as capital costs for accounting purposes.

(2) The provider is permitted to recover interest at the prevailing commercial lending rate on its original costs of deployment.

(3) Actual recurring costs include maintenance and the ongoing operational costs of providing service after deployment of the facilities to the premises and a reasonable operating margin.

(k) Cap on TUSF reimbursements. The commission may not authorize or require any services to be provided under this section during a fiscal year if the total amount of required reimbursements, together with interest and obligations from preceding years, would equal an amount that exceeds 0.02% of the annual gross revenues reported to the TUSF during the preceding fiscal year.

§26.422.Subsequent Petitions for Service in Uncertificated Areas.

(a) If the commission approves a petition requesting service, residents of permanent residential premises or owners of permanent residential or business premises in reasonable proximity to the premises that were the subject of an approved petition who did not sign the prior petition requesting service are not entitled to receive service under the Public Utility Regulatory Act (PURA), Chapter 56, Subchapter F, prior to the fifth anniversary of the date the prior petition was filed, unless the residents or owners file a new petition and agree to pay aid to construction charges on the same terms as applicable to the prior petitioner(s).

(b) The designated provider shall receive reimbursement for the original cost of deployment and actual recurring costs of providing service to those additional residents in the same manner as the provider received reimbursement of those costs in relation to the prior petitioner(s). The provider may not receive reimbursement for the original cost of deployment under a subsequent petition if the provider previously received complete reimbursement for those costs from the Texas Universal Service Fund (TUSF). If the TUSF has completely reimbursed the original cost of deployment as provided by §26.421 of this title (relating to Designation of Eligible Telecommunication Provider to Provide Service to Uncertificated Areas), each subsequent petitioner must pay into the TUSF an amount equal to the aid to construction charge paid by each prior petitioner.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on December 20, 2001.

TRD-200108136

Rhonda Dempsey

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: February 3, 2002

For further information, please call: (512) 936-7308


16 TAC §26.423

The Public Utility Commission of Texas (commission) proposes new §26.423, relating to a High Cost Universal Service Plan for Uncertificated Areas where an Eligible Telecommunications Provider (ETP) Volunteers to Provide Basic Local Telecommunications Service. The proposed new section will provide guidelines concerning universal service fund reimbursement for high cost assistance for the voluntary provision of voice-grade telecommunications service in uncertificated areas of the state, thereby enhancing the provision of telecommunications service throughout the state by providing a mechanism for Universal Service Fund support to be available for basic local telephone service in areas where the service has not otherwise been provided. Project Number 24527 is assigned to this proceeding.

John Costello, Senior Telecommunications Analyst, Telecommunications Division, has determined that for each year of the first five-year period the proposed section is in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the section.

Mr. Costello has determined that for each year of the first five years the proposed section is in effect the public benefit anticipated as a result of enforcing the section will be an increase in the number of voice-grade telecommunication services provided to residential and single-line business customers in the state of Texas. There will be no adverse effect on small businesses or micro-businesses as a result of enforcing this section. There is no anticipated economic cost to persons who are required to comply with the section as proposed.

Mr. Costello has also determined that for each year of the first five years the proposed section is in effect there should be no effect on a local economy, and therefore no local employment impact statement is required under Administrative Procedure Act §2001.022.

In addition to comments on the proposed new rule, the commission requests comments on the following question: "Is there a different approach other than that provided within the proposed rule which would provide incentives for a carrier to voluntarily provide service to an uncertificated area?"

The commission staff will conduct a public hearing on this rulemaking under Texas Government Code §2001.029 in the Commissioners' Hearing Room, located in the William B. Travis Building, 1701 North Congress Avenue, Austin, Texas 78701, on Tuesday, February 12, 2002 at 9:00 a.m.

Comments on the proposed new section (16 copies) may be submitted to the Filing Clerk, Public Utility Commission of Texas, 1701 North Congress Avenue, P.O. Box 13326, Austin, Texas 78711-3326, within 30 days after publication. Reply comments may be submitted within 45 days after publication. Comments should be organized in a manner consistent with the organization of the proposed rules. The commission invites specific comments regarding the costs associated with, and benefits that will be gained by, implementation of the proposed section. The commission will consider the costs and benefits in deciding whether to adopt the section. All comments should refer to Project Number 24527.

This new section is proposed under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998, Supplement 2002) (PURA), which provides the Public Utility Commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction; and PURA §56.021 which requires the commission to adopt and enforce rules relating to the universal service fund.

Cross Reference to Statutes: Public Utility Regulatory Act §14.002 and Chapter 56.

§26.423.High Cost Universal Service Plan for Uncertificated Areas where an Eligible Telecommunications Provider (ETP) Volunteers to Provide Basic Local Telecommunications Service.

(a) Purpose. This section establishes the guidelines for financial assistance to ETPs that serve uncertificated areas of the state where an ETP volunteers to provide basic voice-grade telecommunications service to permanent residential and single-line business premises.

(b) Definitions. The following words and terms, when used in this section, shall have the following meaning unless the context clearly indicates otherwise:

(1) Eligible line--A residential line and a single-line business line as defined by §26.403 of this title (relating to Texas High Cost Universal Service Plan (THCUSP)).

(2) Eligible Telecommunications provider (ETP)--A telecommunications provider designated by the commission pursuant to §26.417 of this title (relating to Designation as Eligible Telecommunications Providers to Receive Texas Universal Service Funds (TUSF)).

(3) Permanent residential or business premises--A premise as defined pursuant to §26.421 of this title (relating to Designation of Eligible Telecommunication Provider to Provide Service to Uncertificated Areas).

(4) Uncertificated areas--An area of the state that is not included within the certificated area of a holder of a certificate of convenience and necessity (CCN).

(c) Application. This section applies to telecommunications providers that have been designated ETPs by the commission pursuant to §26.417 of this title.

(d) Service to be supported by the High Cost Universal Service Plan for uncertificated areas where an ETP volunteers to provide basic local telecommunications service. The High Cost Universal Service Plan for uncertificated areas shall support the provision by ETPs of basic local telecommunications services as defined in §26.403(d) of this title.

(e) Support for uncertificated areas where an ETP volunteers to provide service. The TUSF administrator shall disburse monthly support payments to ETPs qualified to receive support pursuant to this section. The amount of support available to each ETP shall be calculated using the base support amount available as provided under paragraph (1) of this subsection as adjusted by the requirements of paragraph (3)(B) of this subsection.

(1) Determining base support amount available to ETPs. The monthly per-line support available for uncertificated areas shall be determined by calculating the average of the per-line support amount approved for all local telephone company exchanges of CCN holder's that are contiguous to the uncertificated area for which reimbursement is requested.

(2) Proceedings to determine support amount.

(A) Initial determination for uncertificated areas.

(i) Upon petition by an ETP, the commission shall establish a monthly per-line support amount for an uncertificated area as identified by the ETP.

(ii) The review shall be accomplished in an administrative or docketed proceeding initiated by the ETP requesting support for the provision of single-line residence or business service within an uncertificated area.

(B) Subsequent determination of support amount.

(i) The commission shall subsequently review the support for uncertificated areas consistent with the review provided for under §26.403 and §26.404 of this title (relating to Small and Rural Incumbent Local Exchange Company (ILEC) Universal Service Plan).

(ii) The commission may initiate review of the support for uncertificated areas and base support amounts under this section on its own motion at any time.

(3) Calculating amount of support payments to individual ETPs. After the monthly per-line amount is determined, the TUSF administrator shall make the following adjustments each month in order to determine the actual support payment that each ETP may receive each month.

(A) Payments. The payment to each ETP shall be computed by multiplying the per-line amount established by paragraph (1) of this subsection for a given uncertificated area by the number of eligible lines served by the ETP in such uncertificated area for the month.

(B) Adjustment for federal USF support. The base support amount an ETP is eligible to receive shall be decreased by the amount of federal universal service high cost support received by the ETP.

(f) Reporting requirements.

(1) An ETP eligible to receive support under this section shall provide the TUSF administrator with the following information:

(A) A report of the total number of eligible lines served by the ETP in a designated uncertificated area to the TUSF Administrator on a monthly basis;

(B) The telecommunications provider's tariffed residence and single-line business rates, as of the provisioning date for service;

(C) The average per-line assistance for each local exchange telephone company exchange contiguous to the area in question; and

(D) A calculation of the base support in accordance with the requirements of this subsection and subsection (e) of this section.

(2) Upon request by the commission, the telecommunications provider awarded support under this section shall explain the basis on which it is establishing rates under this section.

(3) An ETP shall report any other information required by the commission and the TUSF Administrator, including any information necessary to assess contributions to and disbursements from the TUSF.

(g) Initial support provided pursuant to this section. Initial payment of support under this section shall be retroactive to the latter of the date on which a telecommunications provider either:

(1) Petitions the commission for THCUSP assistance; or

(2) Begins providing basic local telephone service to the residence or business location approved for support.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on December 20, 2001.

TRD-200108132

Rhonda Dempsey

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: February 3, 2002

For further information, please call: (512) 936-7308


Part 4. TEXAS DEPARTMENT OF LICENSING AND REGULATION

Chapter 75. AIR CONDITIONING AND REFRIGERATION CONTRACTOR LICENSE LAW

16 TAC §§75.10, 75.21, 75.22, 75.24, 75.30, 75.40, 75.70, 75.80, 75.100

Texas Department of Licensing and Regulation proposes amendments to §§75.10, 75.21, 75.22, 75.24, 75.30, 75.40, 75.70, 75.80, and 75.100 concerning air conditioning and refrigeration contractors. The proposed amendments rearrange, consolidate, and revise existing language for clarification.

The proposed amendments to §75.10 add a definition of "Executive Director" and amend "Business affiliation" to make the definition easier to understand, and add a definition of "filed" to clarify the date that documents are deemed to have been filed with the Department.

The justification for the proposed amendments to §75.10 is to conform its wording to Texas Occupations Code, Chapter 51, and to clarify the meaning of terms used in the rules.

The amendments proposed to §75.21 specify that requests for special accommodations on examinations must be on a form approved by the Department rather than provided by the Department, and delete the requirement to specify the type of special accommodation requested. The justification for the changes to §75.21 is that the Department may accept requests provided in formats other than the Department's form.

The amendments proposed to §75.22 delete the statement that it is unlawful for any unlicensed person, partnership, firm, or corporation to perform or offer to perform air conditioning and refrigeration contracting, move the section dealing with limits on general contractors' rights to bid on jobs that require a license under Texas Civil Statutes, Article 8861 (the Act), to §75.30, and move the sections dealing with responsibilities of an air conditioning and refrigeration contracting company to §75.70, which concerns responsibilities of the licensee and the company. The justification for the amendments to §75.22 is that the provision that unlicensed persons, partnerships, firms, or corporations may not perform or offer to perform air conditioning and refrigeration contracting is now in the statute, the section on general contractors fits better into an exempt category than in licensing requirements, and that the requirements for air conditioning and refrigeration contractors and contracting companies will now be found in one section.

The proposed amendments to §75.24 replace the requirement for certificates of insurance with a requirement for evidence of insurance on a form provided by the Department, add a section providing that renewal requests that do not meet all requirements within 30 days will be denied, and provide that the licensee may not perform contracting under a license that has expired or which has been denied renewal.

The justification for the amendments to §75.24 is to simplify the renewal process by allowing the licensee to provide evidence of insurance on the renewal form rather than through submittal of a certificate of insurance. The justification for denying renewal on incomplete renewal request is that licensees who do not complete renewals in a timely manner should not be permitted to continue to perform or offer to perform air conditioning and refrigeration contracting services.

The amendments proposed to §75.30 exempt persons who perform air conditioning contracting on boats used for pleasure from licensure requirements, and define the exemption from licensing for general contractors. The justification is that pleasure boats are considered to be similar to recreation vehicles, which are considered motor vehicles and are exempt from licensure in the Act, and clarify the exemption from licensure for general contractors.

The amendments proposed to §75.40 delete the allowance for self-insurance, change the requirement to provide a certificate of insurance each time an insurance policy is renewed to a requirement to provide a certificate or other evidence satisfactory to the Department with requests for initial licenses, with license revisions in which the licensee assigns his license to a different company, and upon any request from the Department. The amendments also rearrange the sections for clarity, delete the requirement that a licensee must furnish a certificate to each municipality in which he or she registers her license, and add a section requiring a licensee to furnish insurance information to any customer that requests it.

The justification for the amendment to §75.40 relating to disallowing self- insurance is that provision of certified financial statements in lieu of insurance coverage does not adequately protect the public. The justification for removing the requirement that certificates of insurance be provided each time the insurance is renewed is that information on coverage will be required on the license renewal form and that this will eliminate the need for the Department to input insurance information separately from renewal information, which will increase the efficiency of the Department. The justification for deleting the requirement that the licensee furnish a certificate of insurance to municipalities is that the municipalities have the right to require a certificate under their own authority. The justification for requiring a licensee to furnish insurance information upon request to any customer is to better protect and assist the public both in selecting contractors and in resolving damage claims brought by consumers.

The amendments proposed in §75.70 add a requirement for licensees and air conditioning and refrigeration contracting companies to furnish assumed name registration from the Secretary of State or the County Clerk's office to the Department, add the sections on responsibilities of air conditioning and refrigeration contracting companies that have been moved from §75.22, clarify the responsibility of the licensee when using licensed subcontractors, decrease the amount of time a licensee has in which to notify the Department of a change in the licensee's license information from 30 days to 10 days, and direct the licensee to destroy the license instead of returning it to the Department when revising the license. The justification for the amendments in §75.70 is that requiring copies of assumed-name registrations of companies will make it easier for the Department to identify air conditioning and refrigeration contracting companies and responsible persons in those companies for regulatory concerns and for public protection, to make it easier to keep track of licensees when they make a change, and to simplify the revision process.

The amendments to §75.80 clarify the language and change the fee for examinations from $50 to $90 for each examination. The justification for the increased examination fee is that the fee formerly paid to the contracted testing location is now to be paid to the Department.

The amendments to §75.100 change the adoption of standards to require the most current edition of codes rather than the 2000 edition, state that the Department considers the International Mechanical Code and the Uniform Mechanical Code equal in strictness, and specify that, in areas where no code has been adopted by a municipality, the contractor performing the work must choose one of the codes to follow.

The justification is that the amendment will provide a reasonable method for contractors to determine which code must be followed in a specific location.

Jimmy Martin, Director of the Enforcement Division, Texas Department of Licensing and Regulation, has determined that for the first five-year period these sections are in effect there will be no fiscal implications for any municipality as a result of enforcing or administering the proposed changes.

Mr. Martin also has determined that for each year of the first five years these sections are in effect the public benefit anticipated as a result of enforcing the sections will be better enforcement of the licensing requirement, which will result in greater safety for the public.

There is no economic cost anticipated for licensee's for complying with the amendments as proposed. There will be no other additional cost to small businesses or to persons who may be required to comply with the sections as proposed.

Comments on the proposal may be submitted to Jimmy Martin, Director of the Enforcement Division, Texas Department of Licensing and Regulation, P. O. Box 12157, Austin, Texas 78711, facsimile (512) 475-2872, or electronically: jimmy.martin@license.state.tx.us. The deadline for comments is 30 days after publication in the Texas Register .

The amendments are proposed under Texas Revised Civil Statutes Annotated, Article 8861, which authorizes the Commissioner of the Texas Department of Licensing and Regulation to promulgate and enforce a code of rules and take all action necessary to assure compliance with the intent and purpose of the article.

The Article and Code affected by the proposed amendments are Texas Revised Civil Statutes Annotated, Article 8861 and Texas Occupations Code, Chapter 51. No other statutes, articles, or codes are affected by the proposed amendments.

§75.10.Definitions.

The following words and terms have the following meanings:

(1) Advertising or Advertisement -- Any commercial message which promotes the services of an air conditioning and refrigeration contractor.

(2) Air conditioning and refrigeration subcontractor -- A person or firm who contracts with a licensed air conditioning contractor for a portion of work requiring a license under the Act. The subcontractor contracts to perform a task according to his own methods, and is subject to the contractor's control only as to the end product or final result of his work.

(3) Air conditioning or heating unit - A stand-alone system with its own controls that conditions the air for a specific space and does not require a connection to other equipment, piping, or ductwork in order to function.

(4) Assumed name -- As defined in the Business and Commerce Code, Title 4, Chapter 36, Subchapter A, Section 36.02.

(5) Biomedical Remediation -- The treatment of ducts, plenums, or other portions of air conditioning or heating systems by applying disinfectants, anti-fungal substances, or products designed to reduce or eliminate the presence of molds, mildews, fungi, bacteria, or other disease-causing organisms.

(6) Boiler -- As defined in the Health and Safety Code, Title 9, Subtitle A, Chapter 755.Boilers.

(7) Business affiliation -- The business organization to [ with ] which a licensee elects to assign his or her license [ affiliate ].

(8) Cheating -- Attempting to obtain, obtaining, providing, or using answers to examination questions by deceit, fraud, dishonesty, or deception.

(9) Commissioner -- As used in Texas Civil Statutes, Article 8861, and in these rules, has the same meaning as Executive Director.

(10) Contracting -- Agreeing to perform work, either verbally or in writing, or performing work, either personally or through an employee or subcontractor.

(11) Cryogenics -- Refrigeration that deals with producing temperatures ranging from:

(A) -250 degrees F to Absolute Zero (-459.69 degrees F);

(B) -156.6 degrees C to -273.16 degrees C;

(C) 116.5 K to 0 K; or

(D) 209.69 degrees F to 0 degrees R.

(12) Design of a system -- making decisions on the necessary size of equipment, number of grilles, placement and size of supply and return air ducts, and any other requirements affecting the ability of the system to perform the function for which it was designed.

(13) Direct personal supervision -- Directing and verifying the design, installation, construction, maintenance, service, repair, alteration, or modification of an air conditioning, refrigeration, process cooling, or process heating product or equipment for compliance with mechanical integrity.

(14) Employee -- An individual who performs tasks assigned him by his employer. The employee is subject to the deduction of social security and federal income taxes from his pay. An employee may be full time, part time or seasonal. Simultaneous employment with a temporary employment agency, a staff leasing agency, or other employer does not affect his status as an employee for the purpose of this Act .

(15) Employer -- One who employs the services of others, pays their wages, deducts the required social security and federal income taxes from the employee's pay, and directs and controls the employees performance.

(16) Executive Director -- as used in Texas Civil Statutes, Article 8861, and in these rules, has the same meaning as Commissioner.

(17) Filed -- a document is deemed to have been filed with the department on the date that the document has been received by the department or, if the document has been mailed to the department, the postmark date of the document.

(18) [ (17) ] Full time employee -- An employee who is present on the job 40 hours a week, or at least 80% of the time the company is offering air conditioning and refrigeration contracting services to the public, whichever is less.

(19) [ (18) ] Licensee -- An individual holding a license of the class and endorsement appropriate to the work performed under the Act and these rules.

(20) [ (19) ] Permanent office -- Any business location at which contractual agreements to perform work requiring a license under the Act are arranged and where supervising control for those contracts originate. Temporary construction sites or other locations at which employees of a licensee work under contract to provide service, maintenance and repair work are not permanent offices.

(21) [ (20) ] Primary process medium -- a refrigerant or other primary process fluid that is classified in the current ANSI/ASHRAE Standard 34 as Safety Group A1, A2, B1, or B2. Safety Groups A3 and B3 refrigerants are specifically excluded.

(22) [ (21) ] Proper installation -- installing air conditioning and refrigeration equipment in accordance with:

(A) applicable municipal ordinances and codes adopted by a municipality where the installation occurs;

(B) the most stringent current Uniform Mechanical Codes, Standard Mechanical Code, Standard Gas Code, International Mechanical Code, and International Fuel Gas Code in areas where no code has been adopted;

(C) the manufacturer's instructions; and

(D) all requirements for safety and the proper performance of the function for which the equipment or product was designed.

(23) [ (22) ] Repair work -- diagnosing and repairing problems with air conditioning, commercial refrigeration, or process cooling or heating equipment, and remedying or attempting to remedy the problem. Repair work does not mean simultaneous replacement of the condensing unit, furnace and evaporator coil.

§75.21.Licensing Requirements - Examinations.

(a) A passing grade is 70%.

(b) The examinations [ exam ] will be administered to applicants in a format determined by the Department.

(c) Subject to the following provisions, an [ An ] applicant may request an accommodation [ based on disability, ]in accordance with the Americans with Disabilities Act or [ , and/or ] language translation [ needs ].

(1) The request must be in writing on a form approved by the Department .

[(2) Requests must specify the type of special accommodation needed and the reason.]

(2) [ (3) ] Proof of disability may be required.

(3) [ (4) ] Language translation costs shall be paid by the applicant.

(d) [ (5) ] An applicant who does not show up for a scheduled examination [ exam ] will forfeit the examination [ exam ] fee.

(e) [ (d) ] Cheating on an examination is grounds for denial, suspension, or revocation of a license and/or an administrative penalty.

(f) [ (e) ] An applicant who has passed an examination [ exam ]for a particular class and endorsement and has been licensed or is eligible for licensure in that class and endorsement, may not retake that examination.

§75.22.Licensing Requirements - General.

(a) An air conditioning and refrigeration contracting company shall not [ Unless licensed under the provisions of the Act, with a license of the class and endorsement appropriate for the work described or advertised, it is unlawful for any person, partnership, firm, or corporation to perform or offer to perform air conditioning and refrigeration contracting or to ] use a license number that is not assigned to that company [ person, partnership, firm, or corporation ].

(b) All air conditioning and refrigeration contractor's licenses expire one year after the date issued, renewed, or reissued.

(c) A license number is not transferable.

(d) Endorsement Codes are as follows: Environmental Air Conditioning- E; Commercial Refrigeration & Process Cooling and Heating - R; Combined Endorsements - C. License numbers shall have the following form: Title/Class/Number/Endorsement code-TACL/A/000000/C.

(e) A holder of a Class B license may design, install, construct, maintain, service, repair, alter, or modify individual units of 25 tons or less of cooling capacity or 1.5 million Btu/h or less of heating capacity. In a building or a complex of buildings having more than one air conditioning or heating unit, the combined cooling capacity may exceed 25 tons and heating capacity may exceed 1.5 million Btu/h, as long as each complete individual unit does not exceed the capacities stated above.

(f) Any contractor who has a Class B license with one or two endorsements may upgrade either endorsement by passing the Class A examination for that endorsement.

(g) A contractor who wishes to have endorsements of different classes must have a separate license for each endorsement. The licenses will not have concurrent expiration dates unless both are issued on the same date.

(h) A contractor may have only one endorsement per license when he has two licenses. Both licenses must have the same business affiliation and permanent and business addresses.

(i) The insurance requirement for separate licenses can be met with a single policy with limits at least as high as those required for a Class A license. A waiver of insurance for one license automatically applies to both licenses.

(j) Any violation of the law or the rules and regulations resulting in disciplinary action for one license may result in disciplinary action for the other license.

[(k) Unlicensed persons who operate as general contractors and subcontract work requiring a license under the Act may not bid or contract for a job that consists solely of work requiring a license under the Act unless the person or company has a bona fide employee whose license is assigned to the company. If a general contractor advertises that air conditioning, heating, or commercial refrigeration work is available as part of a job, the ad must state that air conditioning work will be performed by a licensed contractor.]

(k) [ (l) ] Altering a license in any way is prohibited and is grounds for a sanction and/or penalty.

(l) [ (m) ] If a licensee contracts with a general contractor or a home warranty company to provide installation or service that requires a license under the Act, the licensee remains responsible for the mechanical integrity of that work.

(m) [ (n) ] The wallet card is the actual license and will include, but is not limited to, the licensee's name, business name and address, license number, endorsements, and effective revision [ , ] (if any) [ , ] and expiration dates of the license. A wall certificate will be issued to a new licensee.

[(o) An air conditioning and refrigeration contracting company shall request removal of the company name from the Department's records within ten business days for any employee whose license is affiliated with the company when the employment ends.]

[(p) A person or an air conditioning and refrigeration contracting company that performs air conditioning and refrigeration contracting shall:]

[(1) provide proper installation, service, or mechanical integrity;]

[(2) not knowingly and intentionally misrepresent necessary services, services to be provided, or services that have been provided;]

[(3) not make a fraudulent promise or false statement to influence, persuade, or induce an individual or a company to contract for services.]

§75.24.Licensing Requirements - Renewal.

(a) The request for the renewal must be filed by the expiration date.

[(a) A license that has expired for a period of less than six months may be reissued upon meeting the conditions of a license renewal.]

(b) A license that has expired or has been denied for a period of less than six months may be reissued upon meeting the conditions of a license renewal, as outlined in this section, and payment of the late renewal fee.

[(b) The request for renewal must be postmarked by the expiration date. Any request postmarked after the expiration date will be assessed a late fee of $50.]

(c) A renewal request must contain:

(1) the licensee's name, license number, permanent address and telephone number;

(2) the name, physical address and telephone number of the business with which the licensee is affiliated;

(3) all appropriate fees; and

(4) evidence of the applicable insurance requirement on a form provided by the Department [ if a Certificate is not on file, including any past due Certificates, ] or a request for a waiver of insurance , if applicable.

(d) A renewal request that is filed within thirty days of the expiration date without all conditions for renewal being met will be denied.

(e) A licensee shall not perform work requiring a license under the Act with an expired license or a license that has been denied renewal.

§75.30.Exemptions.

(a) Licensure requirements under the Act and these Rules do not apply to:

(1) persons who conduct air conditioning and refrigeration contracting, are employed by a regulated public utility facility and perform those services in connection with the utility business in which the person is employed;

(2) an individual who performs air conditioning and refrigeration maintenance work on equipment and property owned by him if he does not engage in the occupation of air conditioning and refrigeration contracting for the general public. This exemption applies only to the property owner and not to others who may attempt to assist the owner ; [ . ]

(3) those who hold a valid Certificate of Authorization issued by the American Society of Mechanical Engineers or The National Board of Boiler and Pressure Vessel Inspectors that are:

(A) appropriate for the scope of work to be performed, and

(B) performed solely on boilers as defined in the Health and Safety Code, Title 9, Subtitle A, Chapter 755. Boiler; [ or ]

(4) a person who performs air conditioning contracting on unducted fireplace stoves ; and [ . ]

(5) persons who perform air conditioning contracting on ducted or unducted environment air conditioning equipment of three tons or less on non-commercial boats.

(b) Unlicensed general contractors may bid or contract for a job that includes air conditioning or refrigeration if the job does not consist solely of work requiring a license under the Act.

§75.40.Insurance Requirements.

(a) Class A licensees shall maintain commercial general liability insurance at all times during a license period:

(1) of at least $300,000 per occurrence (combined for property damage and bodily injury);

(2) of at least $300,000 aggregate (total amount the policy will pay for property damage and bodily injury coverage);

(3) of at least $300,000 aggregate for products and completed operations, and

(4) with a deductible no higher than $1,000.

(b) Class B licensees shall maintain commercial liability insurance at all times during a license period:

(1) of at least $100,000 per occurrence (combined for property damage and bodily injury);

(2) of at least $100,000 aggregate (total amount the policy will pay for property damage and bodily injury coverage);

(3) of at least $100,000 aggregate for products and completed operations, and

(4) with a deductible no higher than $500.

(c) Insurance must be obtained from an admitted company or an eligible surplus lines carrier, as defined in the Texas Insurance Code, Article 1.14-2, or other insurance companies that are rated by A.M. Best Company as B+ or higher.

[(d) If a deductible exceeds the level allowed for a Class A or a Class B license, the contractors' business affiliation is considered to be self-insured. Any contractor whose business affiliation is self-insured must provide an affidavit of responsibility and a certified financial statement showing a net worth of at least the amount required by the deductible for that particular license.]

(d) [ (e) ]A license applicant or licensee shall file with [ furnish to ] the Department a completed certificate of insurance or other evidence satisfactory to [ on a form provided by ] the Department when applying for an initial license, and upon request of the Department. [ not later than 30 days after expiration of the previous certificate. The certificate shall be furnished to each municipality in which the licensee registers his/her license. ]

[(f) Insurance coverage specified in this section shall be maintained during the license period.]

(e) [ (g) ] Requests to waive the insurance requirements because the license holder does not contract with the public shall:

(1) be submitted in writing to the Department;

(2) contain a detailed explanation of the conditions under which the waiver is requested; and

(3) be accompanied by a confirmation of employment by the current employer when working under the license of another contractor as an employee.

(f) [ (h) ] A licensee who has received a waiver of insurance shall not perform or offer to perform air conditioning and refrigeration contracting under his or her license with the general public unless exempted under §6(g) of the Act. [ Air conditioning and refrigeration contracting shall not be performed, or offered to be performed, with the public by a licensee that has received a waiver of insurance. ]

(g) A licensee or an air conditioning and refrigeration contracting company shall furnish the name of the insurance carrier, policy number, name, address, and telephone number of the insurance agent with whom the licensee or company is insured to any customer who requests it.

(h) Failure to maintain insurance or failure to provide a certificate of insurance when requested is grounds for administrative penalties and license sanctions.

§75.70.Responsibilities of the Licensee and the Air Conditioning and Refrigeration Contracting Company.

(a) The licensee shall:

(1) if affiliated with a business, assign his or her license to [ choose ] one company or one permanent office of the company [ business affiliation ] that will use the [ licensee's ] license;

(2) be a bona fide employee or owner of the air conditioning and refrigeration contracting company [ business affiliation, ] and must work full time at the company [ business affiliation, ] or permanent office of the company [ business affiliation ];

(3) use his license for one business affiliation and one permanent office at any one given time;

(4) furnish the Department with his or her permanent mailing address and the name, physical address, and telephone number of the company [ business affiliation ]; and

(5) furnish to the Department [ , ] copies of assumed name registrations from the Secretary of State and/or County Clerk's office .

(b) An Air Conditioning and Refrigeration Contracting Company shall:

(1) notify the Department of all licensees who have assigned their licenses to the company, and shall notify the Department within ten business days when any licensee whose license is assigned to the company has left their employ; and

(2) furnish to the Department copies of assumed name registrations from the Secretary of State and/or County Clerk's office.

(c) A person or an air conditioning and refrigeration contracting company that performs air conditioning and refrigeration contracting shall:

(1) provide proper installation, service, and mechanical integrity;

(2) not knowingly and intentionally misrepresent the need for services, services to be provided, or services that have been provided; and

(3) not make a fraudulent promise or false statement to influence, persuade, or induce an individual or a company to contract for services.

(d) [ (b) ] A licensee may subcontract portions of work requiring a license under the Act to unlicensed persons, firms, or corporations as long as:

(1) the licensee actively provides work or service which requires a license, either in person or with the licensee's bona fide employees;

(2) the work or service provided in person or with the licensee's bona fide employees consists of more than accepting a contract or request for service, scheduling the work, and providing supervision of the work; and

(3) the licensee is ultimately responsible to the customer for all work performed by the subcontractor.

(e) [ (c) ] The design of a system may not be subcontracted to an unlicensed person, firm, or corporation.

(f) A licensee who subcontracts work requiring a license under the Act is responsible to the customer for all work performed by the subcontractor.

[(d) A licensee who subcontracts with an air conditioning and refrigeration contracting company other than his own, must work under the license of the other air conditioning and refrigeration business. The work must be billed by the other air conditioning and refrigeration contracting company, and the licensee working as a subcontractor must be paid by the other company. The licensee who is the contractor is responsible for all subcontracted work.]

(g) [ (e) ] Each air conditioning and refrigeration contracting company shall have a licensee employed full time in each permanent office operated in Texas. All work requiring a license under the Act shall be under the direct personal supervision of the licensee for that office.

(h) [ (f) ] The licensee is responsible under the Act for all work performed under his or [ / ] her supervision, regardless of whether or not the owners, officers, or managers of the air conditioning and refrigeration contracting company allow the licensee the authority to supervise, train, or otherwise control compliance with the Act.

(i) [ (g) ] If an air conditioning and refrigeration contracting company uses locations other than a permanent office, those locations shall be used only to receive instructions from the permanent office on scheduling of work, to store parts and supplies, and/or to park vehicles. These locations may not be used to contract air conditioning sales or service. The air conditioning and refrigeration contracting company shall provide the address of these other locations to the Department no later than 30 days after the locations are established or changed.

(j) [ (h) ] A licensee may not permit a person or any company with which his or her license is not affiliated, and by whom he or she is not employed, to use his or her license for any purpose.

(k) [ (i) ] Each licensee and air conditioning and refrigeration contracting company shall display the license number and company name in letters not less than two inches high on both sides of all vehicles used in conjunction with air conditioning and refrigeration contracting. When an unlicensed subcontractor is at a job site not identified by a marked vehicle, the site shall be identified either by a temporary sign on the subcontractor's vehicle or on a sign visible and readable from the nearest public street containing the contractor's license number and company name.

(l) [ (j) ] All advertising by licensees and air conditioning and refrigeration contracting companies designed to solicit air conditioning or refrigeration business shall include the licensee's license number. The following advertising does not require the license number:

(1) nationally placed television advertising, in which a statement indicating that license numbers are available upon request is used in lieu of the licensee's license number;

(2) telephone book listings that contain only the name, address, and telephone number;

(3) manufacturers' and distributor's telephone book trade ads endorsing an air conditioning and refrigeration contractor;

(4) telephone solicitations, provided the solicitor states that the company is licensed by the state. The license number must be provided upon request of a consumer;

(5) promotional items of nominal value such as ball caps, tee shirts, and other gifts;

(6) letterheads and printed forms for office use; and

(7) signs located on the contractor's permanent business location.

(m) [ (k) ] An invoice shall be provided to the consumer for all work performed. The company name, address, and phone number shall appear on all proposals and invoices. The licensee's license number shall appear on all proposals and invoices for that office. The following information: "Regulated by The Texas Department of Licensing and Regulation, P. O. Box 12157, Austin, Texas 78711, 1-800-803-9202, 512-463-6599" shall be listed on:

(1) proposals and invoices;

(2) written contracts; and

(3) a sign prominently displayed in the place of business if the consumer or service recipient may visit the place of business for service.

(n) [ (l) ] A licensee or an air conditioning and refrigeration contracting company that also acts as a general contractor may provide a one-time notice stating the information above to customers for whom they provide services requiring a license under the Act.

(o) [ (m) ] A [ If information provided to the Department by the licensee changes, the ] licensee shall:

(1) notify the Department, in writing, within ten [ 30 ] days of any change in permanent mailing address, company [ business affiliation, business ] location, [ or ] company [ business ] telephone number or change in assignment of license ; and

(2) if the information is printed on the license:

(A) destroy [ return ] the current original license [ to the Department ] ;

(B) pay the appropriate revision fee required in §75.80 of this title (relating to Fees); and

(C) provide a revised insurance certificate to the Department within ten days of a change in the [ if the business affiliation ] name or address of the company to which the license is assigned [ has changed ].

(p) [ (n) ] The permanent address shall be considered the licensee's permanent mailing address and address of record. All correspondence from the Department will be mailed to that address.

§75.80.Fees.

(a) Non-refundable application fee is $50. [ Exam Fees. Class A and Class B exam fees are: ]

[(1) application fee is $50 per applicant; the application fee is not refundable; and]

(b) [ (2) ] Examination [ exam and re-exam ] fee is $90 [ $50 ] for each examination [ exam ] requested.

(c) [ (b) License Fees. ] License fees are:

(1) [ Class A or B ] initial license [ or renewal fee for one year ] is $125; [ and ]

(2) renewal fee is $125; and

(3) late renewal fee is $50.

(d) [ (c) ] Issuance of a revised or duplicate license or certificate is $25.

(e) [ (d) ] The addition of an endorsement to an existing license is $25 [ (current original license must be returned) ]. This fee may be waived if the reprint coincides with a renewal or revision, for which required fees are paid.

(f) [ (e) ] Certificate of Registration fee is $25.

§75.100.Technical Requirements.

(a) Electrical Connections.

(1) On new construction of environmental air conditioning, commercial refrigeration, and process cooling or heating systems, licensees shall connect the appliance to the electrical line or disconnect that is provided for that purpose.

(2) Licensees may replace and reconnect environmental air conditioning, commercial refrigeration, process cooling or heating systems, or component parts of the same or lesser amperage. On replacement environmental air conditioning, commercial refrigeration, process cooling or heating systems where the electrical disconnect has not been installed and is required by the current National Electrical Code, the licensee may install a disconnect directly adjacent to or on the replacement system and reconnect the system.

(3) Control wiring of 50 volts or less may be installed and serviced by a licensee.

(4) All electrical work shall be performed in accordance with standards at least as strict as that established by the current National Electrical Code.

(b) Piping.

(1) Fuel gas piping for new or replaced environmental air conditioning, commercial refrigeration, or process cooling or heating systems may be installed by a licensee. Fuel gas piping by a licensee is limited to the portion of piping between the appliance and the existing piping system, connected at an existing shut-off valve for such use. Existing piping systems, stops, or shut-off valves shall not be altered by a licensee.

(2) Drain piping associated with environmental air conditioning, commercial refrigeration, or process cooling or heating systems may be installed by a licensee if it terminates outside the building. If the piping terminates inside the building, a licensee may make the connection if the connection is on the inlet side of a properly installed trap. Such drain piping shall be installed in accordance with applicable plumbing and building codes.

(3) Mechanical piping associated with environmental air conditioning, commercial refrigeration, or process cooling or heating systems shall be installed by a licensee.

(c) Duct cleaning.

(1) Duct cleaning and air quality testing, including biomedical testing may be performed by an unlicensed person or company if:

(A) the task is limited to the air distribution system, from the discharge of the unit to the inlet of the unit;

(B) no cuts are made to ducts or plenums;

(C) no changes are made to electrical connections;

(D) the only disassembly of any part of the system is opening or removal of access panels or doors, return air grills, or registers that are removable without cutting or removing any other part of the system; and

(E) coils are cleaned in place and can be accessed without cutting or disassembly of any part of the system and no biomedical remediation is performed.

(2) Biomedical testing may be performed by an unlicensed person or company. Biomedical remediation requires a license.

(d) Process Cooling and Heating.

(1) Process cooling and heating work does not include cryogenic work.

(2) Process cooling and heating is limited to work performed on piping and equipment in the primary closed loop portions of processing systems containing a primary process medium. Once a primary closed loop process system has been deactivated and rendered inert, a non-licensed person may perform repairs on piping, heat exchangers, and vessels.

(e) Standards

(1) The standard for the practice of air conditioning and refrigeration in a municipality is the code the municipality adopted by ordinance, provided that the ordinance does not make the code less strict than the current edition of the code adopted.

(2) The Department has determined that, for the purpose of subsection 3(a) of the Act, the provisions of the International Mechanical Code and the Uniform Mechanical Code, taken in their entirety, are equally strict. The standard [ standards ] for the practice of air conditioning and refrigeration in an area where no code has been adopted shall be either the most current edition of the International Mechanical Code or the Uniform Mechanical Code, to be chosen by the contractor performing the work [ is the least strict applicable provision of the 2000 International Mechanical Code or the current Uniform Mechanical Code ].

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on December 20, 2001.

TRD-200108188

William H. Kuntz, Jr.

Executive Director

Texas Department of Licensing and Regulation

Earliest possible date of adoption: February 3, 2002

For further information, please call: (512) 463-7348