TITLE 16.ECONOMIC REGULATION

Part 1. RAILROAD COMMISSION OF TEXAS

Chapter 7. GAS UTILITIES DIVISION

The Railroad Commission of Texas proposes the repeal of §§7.1-7.11, relating to Subchapter A, Procedural Rules, and §§7.40-7.43, 7.46, 7.48, 7.50-7.52, 7.54-7.59, relating to Subchapter B, Substantive Rules, and proposes new §§7.110 and 7.115 in new subchapter A, relating to General Rules; new §§7.201, 7.205, 7.210, 7.220, 7.225, 7.230, 7.235, 7.240, and 7.245 in new subchapter B, relating to Special Procedural Rules; new §§7.301, 7.305, 7.310, and 7.351 in new subchapter C, relating to Records and Reports; Tariffs; Gas Utility Tax; new §§7.450, 7.455, and 7.465 in new subchapter D, relating to Customer Service and Protection; new §§7.501, 7.503, 7.5212, 7.5213, 7.5252, 7.5414, 7.5519, 7.5525, and 7.5530 in new subchapter E, relating to Rates and Rate-Setting Procedures; and new §7.7001 in new subchapter G, relating to Code of Conduct. The proposed new rules will join new §7.315 and §7.460 (as renumbered from their old rule numbers §7.44 and §7.60, respectively), proposed in separate rulemakings, regarding filing of tariffs and suspension of gas utility service disconnection during extreme weather emergency. The Commission also has planned other rulemakings for other subchapters within this new organizational scheme; these will be proposed in the future.

The Commission proposes the repeals and new sections to change the title of chapter 7 to Gas Services Division; to add new subchapters and reorganize the rules; to update statutory citations; to correct the names of the Gas Services Division and the Office of General Counsel; and other similar nonsubstantive changes such as changes in punctuation and wording to clarify the rule requirements such as specifically stating who must perform the activities discussed, etc.

The main changes are: New §7.115 (current §7.1) consolidates all the definitions, which had been scattered throughout the rules, into one rule to avoid duplication and possible conflict between definitions. In §7.115(5), the definition of "bulletin" is amended to correct the name of the Gas Services Division and to change the publication of this bulletin from paper copies which are mailed out to persons who have paid a fee for the service to publication on the Commission's web site, which is available at no cost to all persons. The Division will maintain paper copies for public inspection and copying, but will no longer mail out copies. In §7.115(25), a new definition of "person" has been added, which refers to the definition found in Texas Utilities Code, §101.003(10).

Another substantive change is found in §7.201 (current §7.2) which allows for filing of responsive pleadings and other documents by facsimile transmission at the discretion of the hearings examiner. The Commission finds that this will be a more efficient business practice for both the public and the Commission.

The Commission proposes eliminating the requirement in proposed new §7.210 (current §7.6) that the information be sworn to, but rather will require that certain information be included in a statement of intent. The Commission does not gain any added value by requiring that the information be sworn to and sees this requirement as an unnecessary burden on the applicant.

Proposed new §7.301 (current §7.40) incorporates additional components that essentially commemorate current Commission practice with respect to gas utility annual reports. Proposed new subsection (a) states a date certain, April 1, for filing annual reports, rather than the 90 days after December 31 in the current rule. Proposed new subsection (b) specifies that a utility must file one of three types of annual report (gathering, transmission, or distribution), and new subsection (c) provides a definition of "gas gathering utility" for the purpose of determining which annual report a utility must file. The definition for "gas gathering utility" combines the elements that are currently in §7.40(d), (e) and (f). Proposed new subsection (h) allows a utility to request an extension of time for filing its annual report.

Finally, in proposed new §7.245 (current §7.54), the Commission proposes to reflect the limitations imposed by the Texas Utilities Code on the effective date of Commission orders in municipal appeals by setting a specific time frame by which orders should become effective.

Jackie Standard, Research Specialist, Gas Services Division, has determined that, for each year of the first five years that the repeals and new sections are proposed to be in effect, there will be no fiscal implications for state or local governments.

Ms. Standard has also determined that, for each year of the first five years the repeals and new sections are proposed to be in effect, the public benefit anticipated as a result of enforcing the sections as proposed will be a clearer understanding of the Commission's rules because they will be better organized and more clearly worded.

There is no anticipated economic cost to individuals, small businesses, or micro-businesses required to comply with the proposed repeals and new sections, because the requirements have not change, only the organization of the rules.

The Commission simultaneously proposes the review of 16 TAC Chapter 7 in accordance with Texas Government Code, §2001.039. The agency's reasons for adopting the rules continue to exist. The notice of proposed review will be filed with the Texas Register concurrently with this proposal.

Comments on the proposal may be submitted to Jackie Standard, Research Specialist, Gas Services Division, Railroad Commission of Texas, P.O. Box 12967, Austin, Texas 78711-2967 or by electronic mail to jackie.standard@rrc.state.tx.us. Comments will be accepted for 30 days after publication in the Texas Register and should refer to Gas Utilities Docket No. 9281. For more information, email Ms. Standard or call her at (512) 463-7118.

Subchapter A. PROCEDURAL RULES

16 TAC §§7.1 - 7.11

(Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Railroad Commission of Texas or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The repeals are proposed under Texas Utilities Code, Titles 3 and 4, which authorize the Commission to regulate gas utilities, to protect the public interest inherent in the rates and services of gas utilities, and to assure rates, operations, and services that are just and reasonable to the consumers and to the utilities.

Texas Utilities Code, Titles 3 and 4, are affected by the proposed repeals.

Issued in Austin, Texas on April 22, 2002.

§7.1.Definitions.

§7.2.Filing of Documents.

§7.3.Communication by Gas Utilities with Members or Employees of the Railroad Commission.

§7.4.Procedure for Abandonment or Discontinuance of Service.

§7.5.Content of Statements of Intent and Petitions for Review of Municipal Action.

§7.6.Increasing Residential and Commercial Rates--Statement of Intent.

§7.7.Procedure To Increase Residential and Commercial Rates in Unincorporated Areas.

§7.8.Deadline for the Filing of Prepared Testimony and Exhibits by a Utility Seeking Appellate Review of Municipal Action and Statements of Intent To Increase a City Gate Rate.

§7.9.Contents of Notice.

§7.10.Publication and Service of Notice.

§7.11.Statement of Intent To Participate.

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 April 22, 2002.

TRD-200202475

Mary Ross McDonald

Deputy General Counsel

Railroad Commission of Texas

Earliest possible date of adoption: June 2, 2002

For further information, please call: (512) 475-1295


Subchapter B. SUBSTANTIVE RULES

16 TAC §§7.40 - 7.43, 7.46, 7.48, 7.50 - 7.52, 7.54 - 7.59

(Editor's note: The text of the following sections proposed for repeal will not be published. The sections may be examined in the offices of the Railroad Commission of Texas or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The repeals are proposed under Texas Utilities Code, Titles 3 and 4, which authorize the Commission to regulate gas utilities, to protect the public interest inherent in the rates and services of gas utilities, and to assure rates, operations, and services that are just and reasonable to the consumers and to the utilities.

Texas Utilities Code, Titles 3 and 4, are affected by the proposed repeals.

Issued in Austin, Texas on April 22, 2002.

§7.40.Annual Report.

§7.41.Curtailment Program for Natural Gas Transported and within the State.

§7.42.Gas Utility Tax.

§7.43.System of Accounts.

§7.46.Gas Distribution in Mobile Home Parks, Apartment Houses, and Apartment Units.

§7.48.Construction Work in Progress and Allowance for Funds Houses, and Apartment Units.

§7.50.Certain Matters To Be Submitted in Rate Hearings.

§7.51.Depreciation and Allocations.

§7.52.Lost and Unaccounted for Gas.

§7.54.Effective Date of Orders; Interest on Deferred Funds.

§7.55.Gas Cost Recovery.

§7.56.Advertising, Contributions, and Donations.

§7.57.Allowable Rate Case Expenses.

§7.58.Evidentiary Treatment of Uncontroverted Books and Records of Gas Utilities.

§7.59.Natural Gas Transportation Standards and Code of Conduct.

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 April 22, 2002.

TRD-200202476

Mary Ross McDonald

Deputy General Counsel

Railroad Commission of Texas

Earliest possible date of adoption: June 2, 2002

For further information, please call: (512) 475-1295


Chapter 7. GAS SERVICES DIVISION

Subchapter A. GENERAL RULES

16 TAC §7.110, §7.115

The new sections are proposed under Texas Utilities Code, Titles 3 and 4, which authorize the Commission to regulate gas utilities, to protect the public interest inherent in the rates and services of gas utilities, and to assure rates, operations, and services that are just and reasonable to the consumers and to the utilities.

Texas Utilities Code, Titles 3 and 4, are affected by the proposed new sections.

Issued in Austin, Texas, on April 22, 2002.

§7.110.Communication by Gas Utilities with Members or Employees of the Railroad Commission.

(a) The Commission shall maintain accurate logs of all personal contacts and telephone communications between gas utilities or their representatives and members of the Commission or employees of the Gas Services Division or Office of General Counsel. This log shall be available to the public for inspection during regular office hours. This log shall contain:

(1) the date of the communication;

(2) whether the communication was by telephone or personal contact;

(3) the name and address of the person initiating the contact and the gas utility represented, if applicable;

(4) the subject matter of the communication; and

(5) a statement of any action requested by a gas utility or its representative.

(b) The Commission shall maintain copies of all written correspondence between members of the Commission or employees of the Gas Services Division or Office of General Counsel and gas utilities or their representatives. These copies shall be available to the public for inspection during regular office hours.

(c) The form for recording personal contacts and telephone communications is adopted for the purpose of this section.

Figure: 16 TAC §7.110(c)

§7.115.Definitions.

The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Affiliate--Any affiliate as defined in Texas Utilities Code, §101.003.

(2) Allowance for funds used during construction (AFC)--The net cost of borrowed funds for the period of construction used for construction purposes and a reasonable rate on other funds when so used until included in the rate base.

(3) Apartment house--A building or buildings containing more than five dwelling units, all of which are rented or available to be rented primarily for nontransient use, with rental paid at intervals of one week or longer. The term "apartment house" shall include residential condominiums, whether rented or owner occupied.

(4) Apartment unit--A room or rooms suitable for occupancy as a residence containing kitchen and bathroom facilities.

(5) Bulletin--A Gas Services Division publication published twice monthly containing information about the Division such as notices of hearings, final orders and decisions, rules, and other information of general interest to the public. The Division shall publish the bulletin on the Commission's web site and shall make a paper copy available for public inspection and copying.

(6) Commission--The Railroad Commission of Texas, including its staff or delegate.

(7) Common purchaser of gas--Every common purchaser of gas as defined in Texas Natural Resources Code, §111.081(a)(2).

(8) Construction work in progress (CWIP)--Funds expended by a gas utility which are irrevocably committed to construction projects not yet completed or placed into service.

(9) Cost of service adjustment clause--Any rate provision other than a purchased gas adjustment clause provided for in §7.5519 of this title (relating to Gas Cost Recovery), which operates to increase or decrease rates without prior consent or authority of the appropriate regulatory authority.

(10) Director--The Director of the Gas Services Division or the Director's delegate.

(11) Discrimination--Any material difference in rates, service, rules and regulations, or conditions of service for transportation services which unreasonably disadvantages or prejudices similarly-situated shippers.

(12) Domestic use--The use of natural gas for cooking, clothes drying, space heating, or water heating.

(13) Environs rates--Residential and commercial rates for a gas utility applicable to natural gas sales and service in unincorporated areas adjacent to or near incorporated cities and towns.

(14) Gas-gathering utility--For the purposes of determining which annual report to file, a gas utility or public utility which employs a pipeline or pipelines and ancillary facilities thereto in the first taking or the first retaining of possession of gas produced by others which extends from any point where such gas is produced, purchased, or received to the trunk line or main line of transportation where such gas is sold or delivered, without regard to the size, the length, or the amount of such gas carried through such pipeline or pipelines to the trunk line or main line of transportation, thus having as its primary function the collecting or collecting and processing of gas produced by others as a preliminary incident to the transportation after it has been severed from the earth by production.

(15) Gas pipeline--Any gas pipeline under the provisions of Texas Utilities Code, Chapters 121 and 122.

(16) Gas Services Division or Division--The administrative subdivision of the Commission responsible for the regulation of the natural gas utility industry in Texas.

(17) Gas utility (utility)--Any gas utility or utility as defined in Texas Utilities Code, Title 3.

(18) Local distribution company--An entity that operates a retail gas distribution system.

(19) Lost and unaccounted for gas--The difference between the amount of gas metered into a distribution or transmission system and the amount metered out.

(20) Lost gas--The amount of gas which physically escapes into the ground or atmosphere from a distribution or transmission system, except for that gas which escapes as a part of an intentional testing procedure or purging operation performed during maintenance or construction activities.

(21) Master meter--A single large volume gas measurement device by which gas is metered and sold to a single purchaser who distributes the gas to one or more additional persons downstream from that meter.

(22) Mobile home--A structure, transportable in one or more sections, which is eight body feet or more in width and is 32 body feet or more in length, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air conditioning, and electrical systems contained therein.

(23) Mobile home or apartment resident--An occupant of a mobile home in a mobile home park or an occupant in an apartment house or apartment unit who is responsible for the payment rentals and receives gas through a submeter.

(24) Municipality--A city, incorporated village, or town, existing, created, or organized under the general, home-rule, or special laws of the state.

(25) Person--Has the same meaning as the definition in Texas Utilities Code, §101.003(10).

(26) Preference--Any material difference in rates, service, rules and regulations, conditions of service, or the dissemination or providing of information concerning transportation services which unreasonably advantages or favors similarly-situated shippers.

(27) Qualifying offer--An offer to convert all of the residential or commercial customers' gas burning facilities to the lowest cost available alternative energy source, including, at a minimum, a single tank of normal size for the customer's premises filled once with any liquid alternative energy source. At the customer's election, the qualifying offer shall be the cash equivalent of the cost of conversion to the lowest cost available alternative energy source.

(28) Shipper--Any person or corporation for which a transporter is currently providing, has provided, or has pending a written request to provide transportation services.

(29) Similarly-situated shipper--Any shipper that seeks or receives transportation services under the same or substantially the same, physical, regulatory, and economic conditions of service as any other shipper of a transporter. In determining whether conditions of service are the same or substantially the same, the Commission shall evaluate the significance of relevant conditions, including, but not limited to, the following:

(A) service requirements;

(B) location of facilities;

(C) receipt and delivery points;

(D) length of haul;

(E) quality of service (firm, interruptible, etc.);

(F) quantity;

(G) swing requirements;

(H) credit worthiness;

(I) gas quality;

(J) pressure (including inlet or line pressure);

(K) duration of service;

(L) connect requirements; and

(M) conditions and circumstances existing at the time of agreement or negotiation.

(30) Special rates--Residential and commercial rates for a gas utility applicable to natural gas sales and service established pursuant to Commission orders applicable only to service by a given utility within a specified area and not specifically keyed to the rates charged in any incorporated area.

(31) Submeter--A single gas measurement device by which gas is metered to a mobile home unit, apartment house, or apartment unit downstream of a master meter.

(32) Transportation service--The receipt of a shipper's gas at a point or points on the facilities of a transporter, and redelivery of a shipper's gas by the transporter at another point or points on the facilities of the transporter, including exchange, backhaul, displacement, and other methods of transportation, provided, however, that the term "transportation service" shall not include processing services or the movement of gas to which the transporter has title.

(33) Transporter--Any common purchaser of gas, gas utility, or gas pipeline that provides gas gathering and/or transmission transportation service for a fee.

(34) Unaccounted for gas--Lost and unaccounted for gas less lost gas.

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 April 22, 2002.

TRD-200202477

Mary Ross McDonald

Deputy General Counsel

Railroad Commission

Earliest possible date of adoption: June 2, 2002

For further information, please call: (512) 463-6684


Subchapter B. SPECIAL PROCEDURAL RULES

16 TAC §§7.201, 7.205, 7.210, 7.220, 7.225, 7.230, 7.235, 7.240, 7.245

The new sections are proposed under Texas Utilities Code, Titles 3 and 4, which authorize the Commission to regulate gas utilities, to protect the public interest inherent in the rates and services of gas utilities, and to assure rates, operations, and services that are just and reasonable to the consumers and to the utilities.

Texas Utilities Code, Titles 3 and 4, are affected by the proposed new sections.

Issued in Austin, Texas, on April 22, 2002.

§7.201.Filing of Documents.

(a) A person intending to initiate a proceeding before the Commission shall file two copies of such pleadings with the Director.

(b) A person filing pleadings or documents other than those initiating a proceeding shall file two copies. At the discretion of the hearings examiner, the person may file these pleadings or documents by facsimile transmission. If a person files a copy of a signed original, the person or the person's authorized representative shall maintain the signed original for examination by the Commission, the examiner, the Director, or any party to the proceedings.

(c) The mailing address of the Gas Services Division and the Office of General Counsel is: Railroad Commission of Texas, P.O. Box 12967, 1701 North Congress Avenue, Austin, Texas 78711-2967. The regular office hours of the Commission are 8:00 a.m. to 5:00 p.m., Monday through Friday. Offices are closed on Saturdays and Sundays and on certain state-observed holidays.

§7.205.Contents of Statements of Intent and Petitions for Review of Municipal Action.

(a) Contents. In addition to the information required in §1.25 of this title (relating to Form and Content of Pleadings), and any necessary additional information required by the Commission to evaluate the filing, all statements of intent to increase rates and petitions for review of action by municipality shall contain the following:

(1) the proposed revisions of rates and schedules;

(2) a statement specifying in detail each proposed change;

(3) the effect the proposed change is expected to have on the revenues of the applicant; and

(4) the classes and numbers of utility customers affected.

(b) Petitions for review. Any utility filing a petition for review appealing the decision of the governing body of a municipality to the Commission shall file its direct evidence to support its proposed rate increase, including those items required pursuant to §7.501 of this title (relating to Certain Matters to be Submitted in Rate Hearings), and prepared testimony of all of its witnesses and exhibits with the Director on the same date it files its petition for review.

(c) Compliance. The Commission may reject any filing which does not substantially comply with the requirements of this section at the time of filing or a reasonable time therefrom. The Commission shall not consider a statement of intent or petition for review of action by a municipality to be properly filed until all items listed in subsection (a) of this section have been filed with the Director.

§7.210.Increasing Residential and Commercial Rates--Statement of Intent.

(a) Contents. In addition to the information required in §7.205 of this title (relating to Contents of Statements of Intent and Petitions for Review of Municipal Action), the following information shall be included in each statement of intent to increase residential and commercial rates within the original jurisdiction of the Commission:

(1) a statement as to whether the proposed rates will or will not exceed 115% of the average of all rates for similar services of all municipalities served by the same utility within the same county;

(2) a statement as to whether the proposed change will or will not result in a "major change," as that term is defined in Texas Utilities Code, §104.101.

(b) Requirement of additional information for cost of service increases in adjacent municipalities. If the utility proposes a rate for residential and commercial rates within the original jurisdiction of the Commission that is the same rate as the rate in effect in the nearest incorporated area in Texas served by the same utility, and the rate change in the municipality is the result of a cost of service adjustment clause as defined in §7.115(9) of this title (relating to Definitions), the gas utility shall file with the Director, in addition to the information listed in subsection (a) of this section, the following information:

(1) all calculations used to derive the cost of service adjustment;

(2) the effect of the proposed rates on each affected customer class; and

(3) a copy of the cost of service adjustment clause in effect in the adjacent municipality.

§7.220.Environs Rates.

(a) Levels of environs rates.

(1) The environs rates may be the same rates as those in effect in the nearest incorporated area in Texas served by the same utility where gas is obtained from at least one common pipeline supplier or transmission system. The Commission, on application by a utility, on complaint by any affected person, or on its own motion may review the rate in or boundaries of a given environs area and may consent to or order an adjustment where appropriate.

(2) In addition to the definition of environs rates in §7.115(13) of this title (relating to Definitions), environs rates shall include any quality of service rules adopted by the Commission in subchapter D of this chapter (relating to Customer Service and Protection). Such quality of service rules shall apply to environs areas and become part of environs rates regardless of whether the same quality of service rules are in effect in the related incorporated areas.

(b) Rate increases for environs rates. Rate increases in environs shall be made in accordance with the following procedures.

(1) The gas utility shall file a statement of intent and shall give notice as required under Texas Utilities Code, §104.102, and §7.210 of this title (relating to Increasing Residential and Commercial Rates--Statement of Intent). In addition, when environs rates are to be increased at the same time and to the same extent as the related incorporated area (city) rate and the proposed change does not constitute a "major change," the statement of intent to increase such environs rates shall include (in completed form) the following statement: "This is a Statement of Intent to increase environs rates for the unincorporated areas in the vicinity of __________________, and contains rates identical with and to become effective upon the same date as rates contained in a similar Statement of Intent filed on or about this date by this utility with said city. This Statement of Intent is intended to produce the same residential and commercial rates as finally approved for the City of __________________ and applies to the rates set out herein or any lower rates finally approved for the City of __________________. Any rate changes pursuant to this Statement of Intent will not become effective until identical changes have become effective within the City of __________________." All rate schedules filed with the environs Statement of Intent shall bear the following statement: "Effective on the latter of _______________________ or such other date as new rates become effective in the City of __________________."

(2) The utility shall give notice of the filing of a statement of intent to increase environs rates as required by §7.235 of this title (relating to Publication and Service of Notice).

(3) Upon request and a showing of good cause by the utility, the environs rates may become effective upon the same date as the rates became effective in the municipality pursuant to Texas Utilities Code, §104.104. Environs rates shall not become effective any earlier than the filing date of the statement of intent to increase rates with the Director. If a utility appeals the rate to the Commission, and the Commission establishes rates the same as or less than those in the environs statement of intent, the rates established by the Commission in the city may become simultaneously effective in the environs area. If the Commission dismisses that appeal, any rates which have been established in the city may become effective in the environs area at the time of dismissal, provided that the rates established in the city are the same as or less than those in the environs statement of intent.

(4) No later than 60 days from the date of filing an environs statement of intent, the utility shall furnish a copy to the Commission of any action taken by the city with respect to the related statement of intent, the form of written notice mailed to affected environs area customers, and an affidavit of publication from the newspaper in which notice by publication was made, or an affidavit stating the manner in which notice was otherwise given pursuant to Texas Utilities Code, §104.103.

(c) Rate changes proposed pursuant to cost of service adjustment clause. The Commission shall review, on a cost of service basis, an increase in an environs rate that the utility proposes pursuant to a cost of service adjustment clause, as defined in §7.115(9) of this title (relating to Definitions). The cost of service adjustment clause in effect in the adjacent municipality shall not be applicable or put into effect for the affected environs area, although the utility may request the same rates that are in effect in the adjacent municipality for the environs area. The Commission may review the proposed rate increases pursuant to these clauses on an informal basis and will not schedule a formal hearing unless a complaint is received pursuant to subsection (b)(4) of this section or the Commission elects to conduct a formal hearing.

(d) Other rate changes. This section shall not apply to major rate changes or to changes in special rates.

§7.225.City Gate Rates.

Any utility filing a statement of intent to increase a city gate rate which is subject to the original jurisdiction of the Commission shall file its direct evidence to support its proposed rate increase, including those items required pursuant to §7.501 of this title (relating to Certain Matters to be Submitted in Rate Hearings), and prepared testimony of all of its witnesses and exhibits with the Director on the same date it files its statement of intent.

§7.230.Contents of Notice.

(a) Rate setting notice. In all proceedings involving rate setting, the gas utility's notice shall include the following information:

(1) the proposed revision of rates and schedules;

(2) a statement specifying in detail each proposed change;

(3) the effect the proposed change is expected to have on the revenues of the company;

(4) the classes and numbers of utility customers affected; and

(5) any other information required by the Commission.

(b) Environs notice. In addition to the information required in subsection (a) of this section, in all proceedings involving statements of intent to change environs rates, as that term is defined in §7.115(13) of this title (relating to Definitions), the gas utility's notice shall also include:

(1) the date of the filing of the statement of intent;

(2) a statement as to whether or not the proposed rates constitute a "major change";

(3) a statement that the proposed change in rates will not become effective until similar changes have become effective within the nearest incorporated city if the rates are sought to be at the same level as the city rates;

(4) the location where information concerning the proposed change may be obtained; and

(5) a statement that any affected person may file in writing comments or a protest concerning the proposed change in the environs rates with the Docket Services Section of the Office of General Counsel, Railroad Commission of Texas, P.O. Box 12967, Austin, Texas 78711-2967, at any time within 30 days following the date on which the change would or has become effective.

(c) If the gas utility gives notice by mail under the provisions of Texas Utilities Code, §104.103, such notice shall be printed in type large enough for easy reading and shall be the only information contained on the piece of paper on which it is written. A gas utility may give the notice required under either subsection (a) or (b) of this section by mailing or otherwise delivering the notice with its billing statements.

§7.235.Publication and Service of Notice.

(a) Rate setting proceedings.

(1) Notice. In all rate proceedings, notice shall be given in the following ways.

(A) The Commission shall publish the notice of hearing in the next Gas Services Division Bulletin published after the date of issuance of the notice of hearing.

(B) The gas utility shall give notice in accordance with §1.45 of this title (relating to Notice of Hearing in Nonrulemaking Proceedings) and, when applicable, §1.48 of this title (relating to Service in Protested Contested Cases).

(C) The gas utility shall give notice in all rate proceedings as required under Texas Utilities Code, §104.103.

(D) The Office of General Counsel may also require that a gas utility mail or deliver notice to other affected persons or agencies.

(2) Commission's appellate jurisdiction. In addition to the types of notice required in paragraph (1) of this subsection, a gas utility shall also give notice in rate proceedings involving only the Commission's appellate jurisdiction by serving all parties in the original rate proceeding and the affected municipality with a copy of the petition for review on the same date the utility files the petition for review with the Commission. If any person or entity intervenes, the utility shall furnish a copy of its direct evidence and prepared testimony filed with the Director to the intervenor within five days from the date the motion to intervene is granted.

(3) City gate rates. In addition to the types of notice required in paragraph (1) of this subsection, a gas utility shall also give notice in rate proceedings involving city gate rates by serving all directly affected customers with a copy of the statement of intent on the same date the gas utility files the statement of intent with the Commission. If any person or entity intervenes, the utility shall furnish a copy of its direct evidence and prepared testimony filed with the Director to the intervenor within five days from the date the motion to intervene is granted.

(b) Rulemaking proceedings. In rulemaking proceedings, notice shall be given in the following ways.

(1) The Commission shall give notice in accordance with §1.42 of this title (relating to Notice of Rulemaking Proceedings).

(2) The Office of General Counsel shall mail notice to all persons who have made timely written requests of the Commission for advance notice of its rulemaking proceedings.

(3) The Commission shall publish the notice of hearing in the next Gas Services Division Bulletin published after the date of issuance of the notice of hearing.

(4) The Office of General Counsel may require the applicant to mail or deliver notice to other affected persons or agencies.

(c) Proceedings other than rate setting or rulemaking proceedings. In proceedings other than rate setting or rulemaking, notice shall be given in the following ways.

(1) The Commission shall publish the notice of hearing in the next Gas Services Division Bulletin published after the date of issuance of the notice of hearing.

(2) The Office of General Counsel may require the applicant to mail or deliver notice to other affected persons or agencies.

§7.240.Statement of Intent to Participate.

If the Office of General Counsel receives a letter or other communication from an affected person concerning a statement of intent filed pursuant to Texas Utilities Code, §104.105, the Office of General Counsel shall, within a reasonable time thereafter, forward to such affected person a form for filing a complaint and statement of intent to participate. The affected person shall complete the complaint and statement of intent to participate form and shall include the complainant's name, address, the utility and the rate increase that is the subject of the complaint, how the affected person will be impacted by the proposed rate increase, and a statement that the complainant or an authorized representative shall appear and participate through the presentation of evidence and arguments if a hearing is held to consider the rate increase. The affected person shall properly complete and return the complaint and statement of intent to participate form to the Office of General Counsel within 14 days after the mailing by the Office of General Counsel, or the Commission shall not consider it to be a properly filed complaint pursuant to Texas Utilities Code, §104.105. If the initial complaint is received before the deadline in Texas Utilities Code, §104.105, and the complaint and statement of intent to participate form is received after that date but in a timely manner pursuant to this rule, the form shall be deemed to be filed as of the date of the filing of the original complaint.

§7.245.Effective Date of Orders.

(a) The Commission may provide that an order in a rate proceeding, other than an order issued in a municipal rate appeal, be effective from some date after Commission jurisdiction has attached. When the effective date of an order is prior to the date of issuance, the Commission may permit a utility to recover or require a utility to refund an amount equal to any revenue granted in the order that differs from that actually collected for the period from the effective date of the order to the date of issuance. Interest on the revenue so collected or refunded shall be allowed at a rate equivalent to that established by statute for the courts of the state for judgments wherein the rate of interest is not established by an underlying contract, or at any reasonable rate as determined by the Commission for the specific rate proceeding. All amounts recovered by the utility under this section shall be collected by way of a surcharge to the normal customer bill.

(b) In municipal rate appeals, the Commission shall enter a final order establishing rates the Commission determines the municipality should have set in the ordinance to which the appeal applies. If the Commission fails to enter a final order within 185 days after the date the appeal is complete, the rates proposed by the gas utility are considered to be approved by the Commission and take effect on the expiration of the 185-day period.

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 April 22, 2002.

TRD-200202478

Mary Ross McDonald

Deputy General Counsel

Railroad Commission of Texas

Earliest possible date of adoption: June 2, 2002

For further information, please call: (512) 475-1295


Subchapter C. RECORDS AND REPORTS; TARIFFS; GAS UTILITY TAX

16 TAC §§7.301, 7.305, 7.310, 7.351

The new sections are proposed under Texas Utilities Code, Titles 3 and 4, which authorize the Commission to regulate gas utilities, to protect the public interest inherent in the rates and services of gas utilities, and to assure rates, operations, and services that are just and reasonable to the consumers and to the utilities.

Texas Utilities Code, Titles 3 and 4, are affected by the proposed new sections.

Issued in Austin, Texas, on April 22, 2002.

§7.301.Annual Report.

(a) Each gas utility, public utility, or utility under the jurisdiction of the Commission shall file with the Commission each year a gathering, transmission, or distribution annual report showing that information required by the Commission to enable it to properly regulate natural gas utilities within the state. The annual report shall be made on a form approved by the Gas Services Division, printed or otherwise made available to all gas utilities by the Division. The annual report shall be made on a calendar year basis with the reports being due not later than April 1 of each calendar year for the preceding calendar year. The annual report shall be filed with the Gas Services Division.

(b) All intrastate gas utilities shall file either a gathering, transmission or distribution annual report with the Gas Services Division of the Commission. Gas gathering utilities, as defined in subsection (c) of this section, shall file the Gathering Annual Report. The Transmission Annual Report shall be filed by those gas utilities that do not meet the definition of a gas gathering utility and are not engaged in the distribution of natural gas to residential and commercial end users. The Distribution Annual Report shall be filed by those gas utilities that are engaged in the retail distribution of gas to end users.

(c) For the purpose of determining which annual report to file, a "gas gathering utility" shall be defined as a gas utility or public utility which employs a pipeline or pipelines and ancillary facilities thereto in the first taking or the first retaining of possession of gas produced by others which extends from any point where such gas is produced, purchased, or received to the trunk line or main line of transportation where such gas is sold or delivered, without regard to the size, the length, or the amount of such gas carried through such pipeline or pipelines to the trunk line or main line of transportation, thus having as its primary function the collecting or collecting and processing of gas produced by others as a preliminary incident to the transportation after it has been severed from the earth by production.

(d) Any utility under the regulation of the Federal Energy Regulatory Commission (FERC) which alleges that it makes no intrastate sales and engages in no intrastate transportation may file a copy of its FERC Form 2 or such other annual report as may be required by that agency in lieu of the annual report form prescribed by this section. The utility shall include an affidavit that the utility makes no intrastate sales and engages in no intrastate transportation and shall provide any other information required by the Division. If, upon examination, the Gas Services Division determines that a utility filing under this section should properly have filed an annual report on the form prescribed by the Division, the Division shall notify the utility in writing and the utility shall file the appropriate report within 30 days.

(e) The definition of the "gas gathering utility" system described herein shall apply regardless of whether a gas plant is located on the pipeline or pipelines comprising a gas gathering utility system and regardless of ownership of any such gas plant.

(f) In determining whether a utility meets the definition of gas gathering utility in subsection (c) of this section, the Commission shall determine if the primary function of the pipeline or pipelines is gathering rather than relying solely on the configuration or location of the facilities comprising the system.

(g) This section is made to comply with the orders issued in Gas Utilities Docket Numbers 1, 2, 5, and 6, which orders are hereby incorporated into this section.

(h) If a gas utility is unable to meet the deadline for filing an annual report, the utility may request an extension of time to file. The utility shall make such a request in writing filed with the Division, and shall state the reason or reasons the utility cannot meet the filing dead line and the date by which the utility will file the annual report. The Division will notify the utility of the new dead line, as approved.

§7.305.Curtailment Program.

All gas utilities within the state shall file curtailment programs with the Commission. Curtailment programs shall comply with the order issued in Gas Utilities Docket Number 489, as that order is hereby incorporated into this section, or the applicable curtailment order by the Commission for a specific gas utility.

§7.310.System of Accounts.

Except as provided in this section, each gas utility, as defined in §7.115(17) of this title (relating to Definitions), shall utilize the National Association of Regulatory Utility Commissioners (NARUC) Uniform System of Accounts for Class A and B Utilities (1976 edition or as subsequently amended) for all operating and reporting purposes. However, a utility also required to report to the Federal Energy Regulatory Commission (FERC) under that agency's system of accounts may limit the use of the NARUC accounts to any reporting or audit requirements of the Railroad Commission of Texas. Any utility operating under the FERC account system pursuant to this provision shall maintain a readily accessible cross-reference system between that system and the NARUC account system. Such accounts shall be used regardless of any conflicting classification of such utility by virtue of its annual gas-operating revenues. Further, those gas-gathering utilities, as defined in §7.115(14) of this title (relating to Definitions), shall not be required to operate under the National Association of Regulatory Utility Commissioners (NARUC) Uniform System of Accounts for Class A and B Utilities (1976 edition or as subsequently amended), but shall be required to report under those accounts for annual report purposes pursuant to §7.301 of this title (relating to Annual Report). This uniform system of accounts shall be applicable to all gas utility and gas utility related operations regardless of location, except for those utilities permitted to file a FERC Form 2 in lieu of an annual report required by §7.301 of this title (relating to Annual Report) or those gas-gathering utilities as described in this section.

§7.351.Gas Utility Tax.

(a) Tax imposed. Every gas utility as described in Texas Utilities Code, §122.001(1), shall report and pay a gas utility tax as required by Texas Utilities Code, Chapter 122. The gas utility tax is imposed on the gross income received from all activity performed by the gas utility in Texas pursuant to Texas Utilities Code, §121.001(a)(2). The rate of the tax is one-half of 1.0% of the gross income subject to the tax.

(b) Tax payment. Each gas utility subject to this tax shall report and pay the tax imposed to the Commission by February 20, May 20, August 20, and November 20 of a year for the preceding calendar quarter. The gas utility tax report shall be of a form and content as established by the Commission and shall be properly completed. The payment shall be made payable to the Railroad Commission of Texas. The Commission shall consider a gas utility tax report and payment timely filed if it is received by the Gas Services Division on or before the applicable date or is sent to the Division by first-class United States mail in an envelope or wrapper properly addressed and stamped and postmarked on or before the deadline and received not more than 10 days later. A legible postmark affixed by the United States Postal Service shall be prima facie evidence of the date of mailing.

(c) Gross income and gross receipts.

(1) Gross income shall be equal to the total gross receipts from any activity described in Texas Utilities Code, §122.001(2), less a deduction of the costs paid to another person for purchasing, treating, or storing natural gas or for gathering or transporting natural gas to the facilities of the gas utility. Treating shall be any process designed to make gas of pipeline quality.

(2) Gross receipts shall be equal to the total revenue received from the sale and/or transportation of gas. Revenue from residential sales, commercial and industrial sales, other sales to public authorities, sales for resale, interdepartmental sales, and revenues from transportation of gas of others (corresponding to Account Numbers 480, 481, 482, 483, 484, and 489 of the National Association of Regulatory Utility Commissioners (NARUC) uniform system of accounts as they existed on January 16, 1991), as well as any other applicable revenue items determined by the Commission, shall be subject to the gas utility tax. If a gas utility that engages in both transmission and distribution of natural gas makes an allocation of costs to the transmission function which is approved by the Commission, then no additional gas utility tax shall be paid on costs allocated to the distribution function. If no such allocation is made, then such gas utility shall be required to pay gas utility tax on sales to end-use customers. A properly authorized gate rate shall be deemed to constitute a sufficient allocation of transmission costs.

(d) Nontaxable receipts. The following revenues shall not be included in the computation of gross receipts:

(1) revenues received from first sales of gas by a producer thereof exclusively. If the sale by a producer of gas includes both produced and purchased gas, then the total revenues from the sale of produced gas shall be exempt from the gas utility tax. However, the total revenues from the sale of purchased gas shall be subject to the tax;

(2) revenues received from burnertip sales by a gas utility engaged solely in retail gas distribution;

(3) revenues derived from transporting, delivering, selling, or otherwise making available natural gas for fuel, either directly or indirectly, to irrigation wells or from the sale, transportation, or delivery of natural gas for any other direct use in agricultural activities;

(4) revenues received from interstate transactions or sales of gas which are subject to the jurisdiction of the Federal Energy Regulatory Commission under the provisions of the Natural Gas Act, 15 United State Code §717 et seq., and the Natural Gas Policy Act, 15 United States Code §3301 et seq.; or

(5) revenues received from brokerage or off-system sales.

(e) Deductions. To determine taxable gross income, deductions from gross receipts for certain costs incurred are allowed. Deductions may be used to reduce current tax liability to zero. Current deductions may not be carried forward and deducted from gross receipts in the next quarter. Allowable deductions shall be those costs associated with gas processed by others, natural gas wellhead purchases, natural gas field line purchases, natural gas gasoline plant outlet purchases, natural gas city gate purchases, exchange gas, purchased gas expenses, the transmission and compression of gas by others (corresponding to NARUC Account Numbers 777, 800, 801, 802, 803, 804, 806, 807, 824, and 858 as they existed on January 16, 1991), and any other applicable expenses as determined by the Commission. A deduction shall also be allowed for the cost of labor, materials used and expenses incurred in operating underground storage plant, and other underground storage operating expenses, including research and development expenses. The balances of gas withdrawn from storage (corresponding to NARUC Account Number 808 as it existed on January 16, 1991) (debit), and gas delivered to storage (corresponding to NARUC Account Number 809 as it existed on January 16, 1991) (credit) shall be netted. If the net is a debit balance, that balance shall also be deducted from the gross receipts. If the net is a credit balance, that balance shall reduce the allowable deductions.

(f) Enforcement and penalties. Each gas utility liable for the gas utility tax shall be subject to the enforcement and penalty provisions set forth in Texas Utilities Code, Chapter 122. A penalty in the amount of 5.0% of the tax due shall be imposed on any person who fails to make a report or pay a tax as required under law. An additional penalty of 5.0% of the tax due shall be imposed on any person who fails to make a report or pay a tax as required before the 30th day after the date the report or tax payment is due. If a person fails to both make the report and pay the tax for a reporting period, only the penalty and additional penalty, as applicable, for failure to make the report is imposed. If the amount of a penalty or additional penalty computed as otherwise provided by this subsection is less than $5.00, the amount of the penalty or additional penalty is $5.00. Any gas utility tax delinquent during the period commencing on or after January 1, 1994, shall draw simple interest, at the rate of 12% per year beginning on the 60th day after the date the tax becomes delinquent until the tax is paid. Any gas utility tax delinquent during the period commencing on September 1, 1991, and ending December 31, 1993, shall draw interest at the rate of 12% per year, compounded monthly, beginning on the 60th day after the date the tax became delinquent until December 31, 1993, or until the tax is paid, whichever is first. Any gas utility tax delinquent during any period before September 1, 1991, shall draw interest at the rate of 10% per year, beginning on the 60th day after the date the tax became delinquent until August 31, 1991, or until the tax is paid, whichever is first. The tax is considered paid when received by the Commission in accordance with subsection (b) of this section.

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 April 22, 2002.

TRD-200202479

Mary Ross McDonald

Deputy General Counsel

Railroad Commission of Texas

Earliest possible date of adoption: June 2, 2002

For further information, please call: (512) 475-1295


Subchapter D. CUSTOMER SERVICE AND PROTECTION

16 TAC §§7.450, 7.455, 7.465

The new sections are proposed under Texas Utilities Code, Titles 3 and 4, which authorize the Commission to regulate gas utilities, to protect the public interest inherent in the rates and services of gas utilities, and to assure rates, operations, and services that are just and reasonable to the consumers and to the utilities.

Texas Utilities Code, Titles 3 and 4, are affected by the proposed new sections.

Issued in Austin, Texas, on April 22, 2002.

§7.450.Gas Distribution in Mobile Home Parks, Apartment Houses, and Apartment Units.

(a) Applicability. This section shall not apply to any mobile home park, apartment house, or apartment unit within a municipality that has a municipal ordinance, charter, franchise agreement, or service rule in substantial compliance with the provisions of this section. Such ordinance, charter, franchise agreement, or service rule shall be subject to review by the Commission upon written complaint by an owner, operator, manager, or mobile home park resident, or resident of an apartment house or unit, that it does not substantially comply with the provisions of this section.

(b) Delivery of gas. An owner, operator, or manager of a mobile home park, apartment house, or apartment unit may purchase natural gas through a master meter and deliver that gas through a submeter to an individual mobile home or homes in the park or to apartment units within the apartment house for domestic use by residents or occupants for the purpose of fairly allocating the cost of each unit's gas consumption. The natural gas shall not be delivered, sold, or resold to resident or occupant at a profit. An owner, operator, or manager of a mobile home park, apartment house, or apartment unit may not allocate or charge a resident for common areas, such as laundry or recreational areas, unless the resident's or occupant's unit rate is calculated based on amount of total gas through the master meter.

(c) Charges. Any sale or resale made by such owner, operator, or manager shall be based solely on the monthly average cost of gas on a volumetric basis to the owner, operator, or manager and on the amount of usage by the mobile home park resident, or apartment house or apartment unit occupant, plus a submeter fee or surcharge for each bill rendered of not to exceed $3.00 per month. The computation of the average cost of gas shall not include any penalties charged to the owner, operator, or manager for late payment. No other charges shall be made to the mobile home resident, apartment house, or apartment unit occupant in connection with the delivery of natural gas to a submeter. The owner, operator, or manager shall prepare and deliver or send a bill to each mobile home resident, apartment house, or apartment unit occupant. The owner, operator, or manager, by contractual agreement only, may collect reasonable deposits for gas service, returned check fees, and late charges from its tenants. Any change in the initial deposit, fees, or charges shall be approved by the Commission.

(d) Recordkeeping. The owner, operator, or manager shall keep adequate records in connection with sales or resales of natural gas to mobile home residents, apartment house, or apartment unit residents. The owner, operator, or manager shall make these records available to the mobile home park, apartment house, or apartment unit during regular business hours. Such records shall include the following:

(1) the billings from the supplier of the gas to the owner, operator, or manager of the mobile home park for the current month and the 12 preceding months;

(2) the computation of the average cost of gas per month to the owner, operator, or manager for the current month and the 12 preceding months; and

(3) all submeter readings and mobile home park residents, apartment house residents, or apartment units residents billings for the current month and the 12 preceding months.

(e) Billings. The mobile home park resident's, apartment house resident's, or apartment unit resident's bill shall show all of the following information:

(1) the date of submeter reading and the reading on the resident's submeter at the beginning and at the end of the period for which the bill is rendered;

(2) the number and kind of units billed;

(3) the computer rate per unit billed;

(4) the total amount due for gas used;

(5) any surcharge, clearly identified;

(6) the name and address of the resident to whom the bill is applicable; and

(7) the date by which the resident must pay the bill.

(f) Enforcement. The records specified in this section shall be subject to inspection and audit by the Railroad Commission of Texas or its agents. Violations shall be subject to enforcement pursuant to Texas Utilities Code, Title 3.

§7.455.Curtailment Standards.

The following category shall be included as the lowest priority category on all curtailment plans of public utilities subject to the jurisdiction of the Commission: deliveries of natural gas or sales of natural gas to the interstate market under the provisions of the Natural Gas Policy Act, §311(b) and §312, and 18 Code of Federal Regulations §283.200.

(1) No sales pursuant to §311(b) shall be made unless a public utility is able to provide adequate service to all of its existing intrastate customers. Adequate service includes all requirements of existing customers, notwithstanding contractual limitations, and gas needed to fill storage reservoirs for anticipated peak usage or to build up "line pack" to fill expected customer requirements.

(2) No deliveries of natural gas which have been determined to be surplus pursuant to §312 shall be made except to the extent a public utility continues to comply with the requirements, including service to existing customers, imposed in the Commission order determining the amount of the surplus or in the contract of assignment of gas reserves from which the deliveries are being made.

(3) No sales of natural gas pursuant to 18 Code of Federal Regulations §284.200 shall be made except to the extent a public utility continues to comply with the requirements, including service to existing customers, contained in the contract under which deliveries are being made or in any report required to be filed with the Commission.

§7.465.Abandonment.

(a) Service to a local distribution company or city gate customer. A gas utility shall obtain written Commission approval prior to the abandonment or permanent discontinuance of service to any local distribution company or city gate customer that involves the removal or abandonment of facilities other than a meter.

(1) Except in pipeline safety emergencies, the gas utility shall file an application to abandon or permanently discontinue service to a local distribution company or city gate customer with the Director at least 60 days prior to the proposed effective date of the proposed abandonment or permanent discontinuance of service. In addition to the information required in §1.25 of this title (relating to Form and Content of Pleadings), the application shall state the following:

(A) the number of affected customers in each class;

(B) the names and addresses of the local distribution company or city gate customer affected;

(C) the specific reasons for the proposed abandonment or permanent discontinuance of service;

(D) a description, age, and condition of the pipeline or plant that the gas utility proposes to abandon or through which it proposes to permanently discontinue service;

(E) the revenue from and cost to continue the existing service to the affected local distribution company or city gate customers;

(F) all reasonable alternative energy sources available to the affected local distribution company or city gate customers, and the cost of such energy sources on an MMBtu equivalent basis;

(G) the cost per customer of each conversion to available alternative energy sources;

(H) any previous notice provided by the utility to the affected local distribution company or city gate customer;

(I) a statement that the application is subject to Commission approval; and

(J) a statement of the affected local distribution company or city gate customer's right to intervene in the application.

(2) The gas utility shall send a copy of the application to the affected local distribution company or the affected city gate customer on the same day that the gas utility files the application to abandon or discontinue service with the Director.

(A) If a person files a statement of intent to participate or motion to intervene with the Commission within 30 days from the date of the filing of the application, and the Commission grants party status, the Commission shall schedule a formal hearing within 60 days following the date on which the application is filed.

(B) If the Commission does not receive and grant a timely-filed statement of intent to participate or intervention pleading, then the Director shall act administratively on the application to abandon or permanently discontinue service within 45 days following the date on which the gas utility filed the application and shall notify all affected customers in writing of the decision. If the Director denies the application administratively, the gas utility, within 30 days of the date the Director administratively denies an application to abandon or permanently discontinue service, may request that a formal hearing be held within 60 days following the date on which the Director denies the application.

(3) If upon the granting of the application to abandon or permanently discontinue service the local distribution company would no longer provide service to any residential or commercial customer because of such abandonment, then the local distribution company shall file an application to abandon or permanently discontinue service under subsection (b) of this section.

(4) The Director shall have the authority to act administratively on abandonment or permanent discontinuance applications that satisfy the conditions of this subsection.

(5) Temporary termination of service due to a pipeline safety emergency shall not be considered to be abandonment or permanent discontinuance of service under the terms of this section. If the gas utility determines not to resume service as a result of a pipeline safety emergency, then the gas utility shall file an application under this section within 30 days of the temporary termination of service.

(6) The gas utility shall have the burden of proof to show that the proposed abandonment or permanent discontinuance of service is reasonable and necessary and is not contrary to the public interest. The Commission shall consider the following conditions when making a determination regarding an application for abandonment or permanent discontinuance of service:

(A) whether continued service is no longer economically viable for the gas utility;

(B) whether the potentially abandoned customers have any alternatives, how many, and at what cost;

(C) whether any customer has made investments or capital expenditures in reliance on continued availability of natural gas, where use of an alternative energy source is not viable;

(D) whether the utility has failed to properly maintain the facilities proposed for abandonment, rendering them unsalvageable due to neglect; and

(E) any other considerations affecting the potentially abandoned customers.

(b) Service to residential and commercial customers. A gas utility shall obtain written Commission approval prior to the abandonment or permanent discontinuance of service to any residential or commercial customer that involves the removal or abandonment of facilities other than a meter. This subsection shall not apply to discontinuance of service to residential or commercial customers for any of the reasons set forth in subchapter D of this chapter (relating to Customer Service and Protection).

(1) Except in pipeline safety emergencies, the gas utility shall file an application to abandon or permanently discontinue service with the Director at least 60 days prior to the proposed effective date of the proposed abandonment or permanent discontinuance of service to any residential or commercial customer involving the removal or abandonment of facilities other than a meter. In addition to the information required in §1.25 of this title (relating to Form and Content of Pleadings), the application shall state the following:

(A) the number of directly affected customers in each class of service;

(B) the names and addresses of all directly affected customers;

(C) the specific reasons for the proposed abandonment or permanent discontinuance of service;

(D) a description, age, and condition of the pipeline or plant that the gas utility proposes to abandon or through which it proposes to permanently discontinue service;

(E) the revenue from and cost to continue the existing service to the directly affected customers;

(F) all reasonable alternative energy sources available to the directly affected customers, and the cost of such energy sources on an MMBtu equivalent basis;

(G) the cost per customer of each conversion to available alternative energy sources;

(H) the terms of any agreements with, or offers, including qualifying offers, to, directly affected customers by the gas utility for the conversion of customers' appliances to enable the use of alternative energy sources;

(I) copies of any consents to abandonment or permanent discontinuance obtained by the utility from directly affected customers;

(J) any previous notice provided by the utility to the directly affected customer;

(K) a statement that the application is subject to Commission approval; and

(L) a statement of the directly affected customer's right to protest the application and the procedure for filing such a protest.

(2) The gas utility shall send a copy of the application to all directly affected customers on the same day that the gas utility files the application to abandon or permanently discontinue service with the Director.

(A) If any of the directly affected customers files a protest within 30 days following the date on which the application is filed, the Commission shall schedule a formal hearing within 60 days following the date on which the application is filed.

(B) If all of the directly affected customers have not consented to the abandonment or permanent discontinuance of service and if the gas utility has not given all of the directly affected customers a qualifying offer, as defined in §7.115(27) of this title (relating to Definitions), but none of the directly affected customers files a protest within 30 days following the date on which the application is filed, the Director shall act administratively on the application within 45 days following the date on which the application is filed and shall notify all directly affected customers in writing of the decision. The Director may seek additional information from the directly affected customers to determine whether they have received adequate information regarding the consequences of the proposed abandonment. If the Director denies the application administratively, the gas utility, within 30 days of the date the Director administratively denies an application to abandon or permanently discontinue service, may request that a formal hearing be held within 60 days following the date on which the Director denies the application.

(C) The Director shall act administratively on the application within 30 days following the date on which the gas utility files the application if either:

(i) all of the directly affected customers consent to the abandonment or permanent discontinuance of service and none of the directly affected customers files a protest within 15 days following the date on which the gas utility files the application; or

(ii) the gas utility has given all of the directly affected customers a qualifying offer, as defined in §7.115(27) of this title (relating to Definitions) and none of the directly affected customers files a protest within 15 days following the date on which the gas utility files the application. If the Director denies the application administratively, the gas utility may request that a formal hearing be held within 60 days following the request for a hearing. The gas utility shall file any request for a formal hearing within 30 days of the date the Director administratively denies an application to abandon or permanently discontinue service.

(3) The Director shall have the authority to act administratively on abandonment or permanent discontinuance applications that satisfy the conditions of this subsection.

(4) Temporary termination of service due to a pipeline safety emergency shall not be considered to be abandonment or permanent discontinuance of service under the terms of this section. If the gas utility determines not to resume service as a result of a pipeline safety emergency, then the gas utility shall file an application under this section within 30 days of the temporary termination of service.

(5) The gas utility shall have the burden of proof to show that the proposed abandonment or permanent discontinuance of service is reasonable and necessary and is not contrary to the public interest. The Commission shall consider the following conditions when making a determination regarding an application for abandonment or permanent discontinuance of service:

(A) whether continued service is no longer economically viable for the gas utility;

(B) whether the potentially abandoned customers have any alternatives, how many, and at what cost;

(C) whether any customer has made investments or capital expenditures in reliance on continued availability of natural gas, where use of an alternative energy source is not viable;

(D) whether the utility has failed to properly maintain the facilities proposed for abandonment, rendering them unsalvageable due to neglect; and

(E) any other considerations affecting the potentially abandoned customers.

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 April 22, 2002.

TRD-200202480

Mary Ross McDonald

Deputy General Counsel

Railroad Commission of Texas

Earliest possible date of adoption: June 2, 2002

For further information, please call: (512) 475-1295


Subchapter E. RATES AND RATE-SETTING PROCEDURES

16 TAC §§7.501, 7.503, 7.5212, 7.5213, 7.5252, 7.5414, 7.5519, 7.5525, 7.5530

The new sections are proposed under Texas Utilities Code, Titles 3 and 4, which authorize the Commission to regulate gas utilities, to protect the public interest inherent in the rates and services of gas utilities, and to assure rates, operations, and services that are just and reasonable to the consumers and to the utilities.

Texas Utilities Code, Titles 3 and 4, are affected by the proposed new sections.

Issued in Austin, Texas, on April 22, 2002.

§7.501.Certain Matters to be Submitted in Rate Hearings.

In any rate-setting hearing not expressly limited to the consideration of certain issues, the gas utility shall present, in addition to any other matters required or permitted to be presented, evidence on the following:

(1) all profits or losses resulting from the sale or lease of appliances, fixtures, equipment, or other merchandise; and the extent, if any, to which the profit or loss on such merchandise is integral to the provision of natural gas and natural gas service;

(2) the amount of any income tax savings or deferrals derived from the application of such methods as liberalized depreciation or amortization;

(3) the amount of any investment tax credit taken since 1971 on the property in question in the proceeding, stated according to the year in which it was taken; the original cost and depreciable life of any property on which any investment tax credit was taken, stated according to the year of acquisition; and whether the utility has made an election pursuant to 26 United States Code §46(e)(1);

(4) a statement of all payments of compensation (other than salary or wages subject to withholding of federal income tax) to residents of Texas, or with respect to legal or administrative matters in Texas, or for representation before the Texas Legislature or any governmental agency or body. This statement shall include the actual expense for the test year, with any adjustments for known changes, and the actual expenses for the last odd-numbered calendar year;

(5) a statement of the total amount expended during the test year for legislative advocacy, with any adjustments for known changes, and the actual amount of any such expenses for the last odd-numbered year; and

(6) the amounts expended during the test year, with the corresponding amount for each, for business gifts, entertainment, charitable or civic contributions; institutional advertising; conservational advertising; consumption-inducing advertising; and other advertising.

§7.503.Evidentiary Treatment of Uncontroverted Books and Records of Gas Utilities.

(a) In any proceeding before the Commission involving a gas utility that keeps its books and records in accordance with Commission rules, the amounts shown on its books and records as well as summaries and excerpts therefrom shall be considered prima facie evidence of the amount of investment or expense reflected when introduced into evidence, and such amounts shall be presumed to have been reasonably and necessarily incurred; provided, however, that if any evidence is introduced that an investment or expense item has been unreasonably incurred, then the presumption as to that specific investment or expense item shall no longer exist and the gas utility shall have the burden of introducing probative evidence that the challenged item has been reasonably and necessarily incurred. The gas utility shall be given a reasonable opportunity to prepare and present such additional evidence relevant to the reasonableness or necessity of any item so challenged. This section shall apply to the books and records of an affiliate of a gas utility engaged in a transaction with the gas utility as described in the Texas Utilities Code, §102.104.

(b) Nothing in this section shall prevent the examiner or any commissioner from requiring the gas utility to provide additional information to support any specific record, fact, or argument at any time, whether or not such was put in issue at the hearing.

§7.5212.Construction Work in Progress.

(a) A utility may be permitted to include CWIP in its rate base only where necessary to the financial integrity of the utility. CWIP shall be deemed necessary to the financial integrity of a utility only where shown by clear and convincing evidence that its inclusion is necessary in order to maintain a sufficient financial liquidity so as to meet all capital obligations and to allow the utility to raise needed capital or is necessary to prevent the impairment of a utility's service. A mere averment or demonstration that exclusion of CWIP would result in an increase in the cost of funds to the utility or general assertions that the financial integrity of the utility would be impaired shall not be deemed sufficient to permit such inclusion.

(b) A utility permitted to include CWIP pursuant to this section shall utilize as a rate base amount the expenditures for such projects as are reflected on its books as of the test year. The amount shall be determined in a manner consistent with the calculation of other rate base information to reflect a uniform treatment of the test year items.

§7.5213.Allowance for Funds Used During Construction.

A utility may be permitted, subject to any revenue adjustment required, to include AFC related to a project in its rate base in rate proceedings after completion of the project. If, pursuant to this section, a utility is permitted to include CWIP related to a project in its rate base, only that AFC accruing prior to such inclusion shall be permitted.

§7.5252.Depreciation and Allocations.

(a) Book depreciation and amortization for ratemaking purposes shall be computed on a straight-line basis over the useful life expectancy of the item of property or facility in question.

(b) In any rate proceeding where items of plant, revenues, expenses, taxes, or reserves are shared by or are common to the service area in question and any other service area, these items shall be allocated to fairly and justly apportion them between the area in question and any other service area of the utility.

(c) In any rate proceeding involving a gas utility that engages in both utility and nonutility activities, all items of plant, revenues, expenses, taxes, and reserves shall be allocated to fairly and justly apportion them between the utility operations and the nonutility operations. No items of plant, revenues, expenses, taxes, or reserves allocable to nonutility operations shall be included in any figures used to arrive at any rate to be charged by a gas utility for utility service, unless clearly shown to be integral to utility operations.

§7.5414.Advertising, Contributions, and Donations.

(a) Actual expenditures for advertising shall be allowed as a cost of service for ratemaking purposes provided that the total sum of such expenditures shall not exceed one-half of 1.0% of the gross receipts of the utility for utility services rendered in the public except as provided in this section.

(b) No expenditure for the following special items shall be allowed as a cost of service for ratemaking purposes:

(1) funds spent for advertising for the purpose of influencing public opinion with respect to legislative, administrative, or electoral matters, or with respect to any controversial issue of public importance, including funds spent to mail any such information;

(2) funds expended in support of or membership in social, recreational, fraternal, or religious clubs or organizations; or

(3) funds expended for contributions and donations to charitable, religious, or other nonprofit organizations or institutions.

(c) The limitations set forth in subsections (a) and (b) of this section shall not limit the following:

(1) advertising which informs natural gas consumers how they can conserve natural gas or can reduce peak demand for natural gas;

(2) advertising required by law or regulation, including advertising required under Part I of Title II of the National Energy Conservation Policy Act;

(3) advertising regarding service interruptions, safety measures, or emergency conditions;

(4) advertising concerning employment opportunities with such utility; or

(5) any explanation of existing or proposed rate schedules, or notifications of hearings thereon.

§7.5519.Gas Cost Recovery.

(a) Each gas utility subject to the original jurisdiction or which becomes subject to the appellate jurisdiction of the Commission may include a purchased gas adjustment clause in its rates to provide for the flow-through of part or all of its gas costs above or below the cost of gas contained in its rates, subject to proof, by a preponderance of the evidence, of certain criteria. Criteria to be used by the Commission in determining whether or not to grant a gas utility a purchased gas adjustment clause as well as the percentage thereof shall include but not be limited to:

(1) the ability of the gas utility to control prices for gas purchased as affected by competition and relative competitive advantage;

(2) the probability of continued frequent price changes; and

(3) the availability of alternate gas supply sources.

(b) This section shall be applied prospectively only to rate cases filed and only after notice and hearing pursuant to the Texas Utilities Code, Title 3. The gas utility shall have the burden of proof regarding the necessity, if any, of a purchased gas adjustment clause and any amount of adjustment. This section shall not impair the rights of existing contract gas customers in any manner except as otherwise provided by law.

(c) The Commission shall determine in each case the necessary reporting, filing, and other procedures to be followed by a gas utility in implementing a purchased gas adjustment clause, if any, as well as other items of expense that fluctuate with gas costs which may be included in such a clause.

§7.5525.Lost and Unaccounted for Gas.

(a) All lost and unaccounted for gas shall be presumed to be lost gas unless the portion represented by unaccounted for gas, including but not limited to losses to company used gas, liquids extraction, and meter errors due to inaccurate calibration or temperature and pressure fluctuations, is proven by a preponderance of the evidence in a given ratemaking proceeding.

(b) All expenses for lost gas in excess of the maximum allowable shall be disallowed for ratemaking purposes.

(1) The maximum allowable for a distribution system is 5.0% of the amount metered in, and the maximum allowable for a transmission system is 3.0% of the amount metered in, except as provided in subsection (c) of this section.

(2) The calculation of the percentage of lost and unaccounted for gas shall be based on an annual period. Notwithstanding the choice of test year for other aspects of ratemaking, and unless a more appropriate period can be demonstrated by a preponderance of the evidence in a given ratemaking proceeding, the annual period ends June 30, and is the most recent such period for which data is available.

(c) The Commission may allow a greater percentage of lost gas than that specified in subsection (b) of this section based on special facts and circumstances including, where appropriate, the cost of effecting a reduction of the actual amount of lost gas, as may be demonstrated in a given ratemaking proceeding.

(d) Nothing in this section shall be construed to limit the Commission's authority to evaluate the reasonableness of gas expense figures, including those for unaccounted for gas, and incorporating that evaluation into its rate setting orders.

§7.5530.Allowable Rate Case Expenses.

(a) In any rate proceeding, any utility and/or municipality claiming reimbursement for its rate case expenses pursuant to Texas Utilities Code, §103.022(b), shall have the burden to prove the reasonableness of such rate case expenses by a preponderance of the evidence. Each gas utility shall detail and itemize all rate case expenses and allocations and shall provide evidence showing the reasonableness of the cost of all professional services, including but not limited to:

(1) the amount of work done;

(2) the time and labor required to accomplish the work;

(3) the nature, extent, and difficulty of the work done;

(4) the originality of the work;

(5) the charges by others for work of the same or similar nature; and

(6) any other factors taken into account in setting the amount of the compensation.

(b) In determining the reasonableness of the rate case expenses, the Commission shall consider all relevant factors including but not limited to those set out previously, and shall also consider whether the request for a rate change was warranted, whether there was duplication of services or testimony, whether the work was relevant and reasonably necessary to the proceeding, and whether the complexity and expense of the work was commensurate with both the complexity of the issues in the proceeding and the amount of the increase sought as well as the amount of any increase granted.

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 April 22, 2002.

TRD-200202481

Mary Ross McDonald

Deputy General Counsel

Railroad Commission of Texas

Earliest possible date of adoption: June 2, 2002

For further information, please call: (512) 475-1295


Subchapter G. CODE OF CONDUCT

16 TAC §7.7001

The new sections are proposed under Texas Utilities Code, Titles 3 and 4, which authorize the Commission to regulate gas utilities, to protect the public interest inherent in the rates and services of gas utilities, and to assure rates, operations, and services that are just and reasonable to the consumers and to the utilities.

Texas Utilities Code, Titles 3 and 4, are affected by the proposed new sections.

Issued in Austin, Texas, on April 22, 2002.

§7.7001.Natural Gas Transportation Standards and Code of Conduct.

(a) Purpose. The purpose of this section is to specify standards of conduct governing the provision of gas transportation services in order to prevent discrimination prohibited by the Common Purchaser Act, Texas Natural Resources Code, §111.081, et seq.; the Texas Utilities Code, Titles 3 and 4, which if violated, as found by the Commission, may constitute evidence of unlawful discriminatory activity. Any exemptions provided in this rule do not diminish statutory prohibitions against discrimination.

(b) Code of conduct. A transporter that provides transportation services for any shipper (including affiliate shippers) shall:

(1) apply any tariff or contract provision for transportation services which provides for discretion in the application of the provision in a similar manner to similarly-situated shippers;

(2) enforce any tariff or contract provision for transportation services if there is no discretion stated in the tariff or contract in the application of the provision in a similar manner to similarly-situated shippers;

(3) not give any shipper preference in the provision of transportation services over any other similarly-situated shippers;

(4) process requests for transportation services from any shipper in a similar manner and within a similar period of time as it does for any other similarly-situated shipper; and maintain its books of account in such a fashion that transportation services provided to an affiliate can be identified and segregated.

(c) Exemptions.

(1) The distribution and transportation activities services performed by a local distribution company are exempt from this section.

(2) In the event that an entity transports only its own gas through its own system, as designated by the transporter's current T-4 permit on file with the Commission, then that system is exempt from this section.

(d) Other requirements. Any transporter subject to the provisions of this section shall make available to the Commission its books and records of transportation service for audit purposes. With at least ten working days notice by the Commission, the transporter shall provide the Commission access to records showing rates which the transporter is charging and any other contractual conditions of transportation service. The transporter shall provide the Commission access on a reasonable basis to information contained in the transporter's records regarding any other relevant conditions of transportation service.

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 April 22, 2002.

TRD-200202482

Mary Ross McDonald

Deputy General Counsel

Railroad Commission of Texas

Earliest possible date of adoption: June 2, 2002

For further information, please call: (512) 475-1295


Part 2. PUBLIC UTILITY COMMISSION OF TEXAS

Chapter 26. SUBSTANTIVE RULES APPLICABLE TO TELECOMMUNICATIONS SERVICE PROVIDERS

Subchapter R. PROVISIONS RELATING TO MUNICIPAL REGULATION AND RIGHTS-OF-WAY MANAGEMENT

16 TAC §26.468

The Public Utility Commission of Texas (commission) proposes new §26.468, relating to Procedures for Standardized Access Line Reports and Enforcement Relating to Quarterly Reporting. The proposed new rule will ensure that quarterly access line reporting pursuant to §26.467 of this title (relating to Rates, Allocation, Compensation, Adjustments, and Reporting) will be performed in a uniform and timely manner. Further, it applies the commission's already-existing enforcement procedures for failure to comply with quarterly reporting requirements. Project Number 24639 has been assigned to this proceeding.

Mr. Charles Johnson, Director, Legal Division and Mr. Elango Rajagopal, Senior Policy Analyst, Telecommunications Division have 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. Johnson and Mr. Rajagopal have 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 a new system that facilitates the filing of quarterly access line counts in a standardized manner. It is anticipated that the system will assist certificated telecommunications providers (CTPs) to comply with reporting requirements in a timely and efficient manner. Further, the system permits any Texas city real-time web-based access to quarterly reports of line counts filed by CTPs operating in that city. The ability to obtain line count information over the Internet is expected to reduce administrative burdens on municipal governments. There will be no 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. Johnson and Mr. Rajagopal have 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.

Comments on the proposed new section (16 copies) may be submitted to the Filing Clerk, Public Utility Commission of Texas, 1701 North Congress Avenue, PO Box 13326, Austin, Texas 78711-3326, within 20 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 24639.

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. This proposed rule is also authorized by Local Government Code §283.055 and §283.058, which requires CTPs to file a quarterly access line report and gives jurisdiction to the commission over municipalities and CTPs to enforce legal requirements in a competitively neutral and non- discriminatory manner.

Cross Reference to Statutes: Public Utility Regulatory Act §14.002, Local Government Code §283.055 and §283.058.

§26.468.Procedures for Standardized Access Line Reports and Enforcement Relating to Quarterly Reporting.

(a) Purpose. This section standardizes access line reports and implements enforcement procedures relating to quarterly reporting.

(b) Application. The section applies to all certificated telecommunications providers (CTPs) operating in municipalities in the State of Texas.

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

(1) Certificated telecommunications provider (CTP) -- As defined under Local Government Code §283.002.

(2) Municipal Access Line Reporting System (M.A.R.S.) -- An Internet Web application designed for the reporting of quarterly access line counts.

(d) Reporting procedures. All CTPs shall electronically file the Quarterly Access Line Reports using the M.A.R.S. as required under §26.467 of this title (relating to Rates, Allocation, Compensation, Adjustments, and Reporting).

(e) Failure to comply. Failure to comply with subsection (d) of this section is subject to administrative penalties pursuant to §22.246 of this title (relating to Administrative Penalties). In applying the administrative penalties, the commission shall take into consideration factors which include, but are not limited to:

(1) failure to report;

(2) inaccurate reporting;

(3) impact of inaccurate or delayed reporting on municipalities;

(4) history of previous violations; and

(5) the number of days the report was filed late.

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 April 19, 2002.

TRD-200202438

Rhonda Dempsey

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: June 2, 2002

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


Part 3. TEXAS ALCOHOLIC BEVERAGE COMMISSION

Chapter 33. LICENSING

Subchapter B. LICENSE AND PERMIT SURCHARGES

16 TAC §33.23

The Texas Alcoholic Beverage Commission proposes amendments to §33.23 concerning the annual surcharges for all holders of permits and licenses issued by the commission as required by the Texas Alcoholic Beverage Code, §5.50(b), effective September 1, 1993. The section is amended by changing surcharges for all licenses and permits.

Jeannene Fox, Director of License and Compliance, has determined, based upon an estimation of the number of licenses and permits the commission will issue within the fiscal year, that for state government the estimated revenue for each of the first five years is $9,352,326, with estimated additional cost being insignificant. There will be no fiscal implications for units of local government.

Jeannene Fox has determined the public benefit cost is that for each year of the first five years the regulated alcoholic beverage industry will bear the entire amount of the cost, including indirect administrative costs, of regulation by the Texas Alcoholic Beverage Commission. The effect on small businesses cannot be determined but is considered to be minimal and would not anticipate having a disproportionate impact on those in the alcoholic beverage industry. The anticipated economic cost to persons required to comply is the applicable surcharge.

Comments on the proposal may be submitted to Jeannene Fox, Director of License and Compliance, Texas Alcoholic Beverage Commission, P. O. Box 13127, Austin, Texas 78711.

The amendments are proposed under the Alcoholic Beverage Code, Subchapter B, §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 and §5.50(b) which specifically mandates the surcharges and the General Appropriations Act, 75th Legislature, Article V, Alcoholic Beverage Commission.

Cross reference to statute: Alcoholic Beverage Code, §11.32, §11.35 and §61.35.

§33.23.Alcoholic Beverage License and Permit Surcharges.

(a) A surcharge of all original or renewal permit or license fees set by the Texas Alcoholic Beverage Code shall be levied against all license and permit holders as follows:

Figure 1: 16 TAC §33.23(a)

(1) The surcharge shall apply to each brewpub licensed under Texas Alcoholic Beverage Code, Chapter 74, even though one or more are licensed under the same general management or ownership.

(2) An organization which meets the requirements for exemption from a private club registration permit under the Texas Alcoholic Beverage Code, §32.11, is also exempt from the surcharge.

(b) The surcharges shall be due and payable at the same time and in the same place and manner as the original or renewal permit, certificate, or license fee to which the surcharges apply.

(c) Failure or refusal to timely pay the license, certificate or permit surcharge shall be considered the same as failure to timely pay the original or renewal certificate, permit or license fee and the same penalties will apply.

(d) The amount of surcharge due shall be determined by the issue date of the permit or license and the surcharge in effect under this rule on the issue date of that license or permit.

(e) This section shall take effect September 1, 2002 [ October 1, 1997 ].

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 April 16, 2002.

TRD-200202349

Rolando Garza

Administrator

Texas Alcoholic Beverage Commission

Proposed date of adoption: September 1, 2002

For further information, please call: (512) 206-3204