Part 1. RAILROAD COMMISSION OF TEXAS

Chapter 2. INFORMAL COMPLAINT PROCEDURE

16 TAC §2.1

The Railroad Commission of Texas adopts new §2.1, relating to Informal Complaint Procedure, in new Chapter 2, entitled Informal Complaint Procedure, of Title 16 of the Texas Administrative Code, with changes to the proposed version published in the October 27, 2006, issue of the Texas Register (31 TexReg 8811).

Through a rider to the 2006 - 2007 appropriations bill, the Texas Legislature required the Railroad Commission of Texas to conduct a study that examines and determines the extent to which viable competition exists in the Texas natural gas pipeline industry from wellhead to burner tip. The study was required to recommend solutions to bring market competition to any non-competitive segments of the industry. The study was also required to include an assessment of the effectiveness of current laws, regulations, enforcement and oversight in addressing abuses of pipeline monopoly power and make recommendations for changes that may be necessary. In addition, the study was to include a comparative review of competition in the Texas interstate pipeline industry administered by the Federal Energy Regulatory Commission. The Railroad Commission was required to submit a report of its findings to the Legislative Budget Board and the Governor on or before November 1, 2006, and did so.

The Commission conducted a series of workshops to establish a dialogue between the Commission and representatives of all sectors of the natural gas industry; receive feedback from affected parties to determine the extent to which viable competition exists in the Texas natural gas pipeline industry; gather factual data; request input regarding solutions to identified problems; and encourage affected entities to use the Commission's informal complaint resolution process to resolve conflicts. Meetings were held in the following cities on the dates indicated: Amarillo (District 10), November 15, 2005; San Antonio (Districts 1, 2, and 4), November 17, 2005; Midland (Districts 8 and 8A), November 21, 2005; Abilene (Districts 7B and 7C), November 22, 2005; Houston (Districts 3 and 6), December 5, 2005; Dallas (Districts 5 and 9), December 7, 2005; and Kilgore (Districts 5 and 6), January 12, 2006.

In addition, by rule effective April 3, 2006, the Commission established the Natural Gas Pipeline Competition Study Advisory Committee. ( See Texas Register (31 TexReg 2850); 16 TAC §7.7201.) The purpose of the committee was to give the Commission the benefit of the members' collective business, technical, and operating expertise and experience to help the Commission review competition in the Texas intrastate pipeline industry, assess the effect of current statutes and rules on such competition, and develop recommendations for changes to statutes or rules that may be necessary. The Commission announced the appointment of the members of the Natural Gas Pipeline Competition Study Advisory Committee on April 11, 2006, and charged the Committee with evaluating, among other things, whether further improvements to the Commission's informal complaint process are warranted. The Committee met ten times between May 1 and June 30, 2006; submitted its report on June 30, 2006; and formally presented the report to the Commission in open meeting on July 31, 2006.

The report contained the Committee's recommendations regarding the Commission's informal complaint process, among them:

(1) that the Commission's proposed enhancements to the informal complaint procedure be adopted, with slight modifications proposed by the Committee;

(2) that the rule codifying the informal complaint procedure provide that the informal complaint process applies to all complaints about natural gas purchasing, selling, shipping, transportation, and gathering;

(3) that the informal complaint procedure allow the parties to agree to employ and pay an independent mediator rather than being required to use Commission staff;

(4) that the Commission publicize the informal complaint process in a manner it believes will be effective to reach a majority of natural gas producers, and inform and encourage producers and industry trade associations to promote the informal complaint process as a low-cost mechanism for resolving complaints regarding the transportation, treatment, and sale of natural gas; and

(5) that the Commission include a clear policy statement in the informal complaint procedure rule to assure all natural gas purchasers, sellers, shippers, transporters and gatherers that the Commission is committed to a process that is fair, timely, and affordable. The Committee included with its report a draft informal complaint procedure rule that incorporated its recommendations.

The Commission adopts the new rule to enhance the Commission's existing informal complaint resolution procedure, as recommended by the Committee. The rule codifies the existing procedure, and clarifies that it applies to all complaints about natural gas purchasing, selling, shipping, transportation, and gathering. The new rule includes a clear policy statement that assures all natural gas purchasers, sellers, shippers, transporters, and gatherers that the Commission is committed to a process that is fair, timely, and affordable.

The Commission received six comments. Five were from groups or associations (the Texas Oil & Gas Association ("TxOGA"); the Texas Pipeline Association ("TPA"); the Gas Processors Association ("GPA"); the Texas Independent Producers and Royalty Owners Association ("TIPRO"); the Texas Alliance of Energy Producers ("Alliance")); and one was from a business entity (SWEPI LP ("Shell")).

TxOGA commented generally that the issues raised (in the workshops and the rulemaking) carry a strong emotional component; however, that does not mean that there was presented credible evidence of any actual discrimination against producers. It was apparent at the workshops that there is no broad agreement among the industry as to the nature or existence of real widespread problems. It was also obvious that the most common problem is a lack of communication between some producers and their gatherer/pipeline service providers. TxOGA expressed the hope that the various associations and attorneys will begin encouraging the use of this low cost method of resolving issues. TxOGA strongly supports adoption of the rules as published in the Texas Register and encourages the Commission not to make substantive changes in the rules as a result of comments that are submitted during the public comment period.

The Commission agrees that the Advisory Committee performed a significant public service, and appreciates TxOGA's support of the proposed rules. The Commission points out that the workshops were not evidentiary hearings, thus the concept of workshop participants being required to produce "credible evidence" was not really applicable. While there may not be "credible evidence of actual discrimination," there is a widespread perception of discrimination by pipelines against producers. Further, whether there is or is not broad agreement among the industry as to the nature or existence of real widespread problems doesn't mean there are no real problems, widespread or not. Industry consensus is not required for the Commission to consider and resolve complaints within its jurisdiction. The Commission agrees that one problem is a lack of communication between some producers and their transportation providers; that may or may not be the most common problem, and it may not be the most serious problem. The Commission agrees with TxOGA's expressed hope that the informal complaint resolution process will be used more often to attempt to resolve disputes. The Commission appreciates TxOGA's support for the rules as proposed.

GPA observed that of particular importance to a beneficial impact of the complaint procedures on natural gas producers, gatherers, and pipelines is the well-constructed methodology of mediation described in the proposal. GPA believes that entities that give the stated mediation process a fair opportunity to assist them in resolving their dispute will find that the process meets everyone's desire for an efficient, fair, timely and inexpensive procedure. The Commission agrees with GPA's comment.

Shell requested clarification on two main issues: (1) whether the proposed rule demands participation in the informal complaint process as a prerequisite to initiating a formal complaint at the Commission, and (2) whether the language of the proposed rule expands the scope of the Commission's jurisdiction to economically regulate participants in the gas business. Regarding the first point, Shell contended that the proposed rule is unclear. If the informal complaint process is now mandatory prior to the initiation of a formal complaint, Shell disagrees with this approach, and commented that, at the very least, the rule should provide a procedure where the parties subject to the informal complaint can opt out of the process by agreement and proceed with the formal complaint process. Regarding the second point, the proposed rule should not operate to expand the Commission's jurisdiction to economically regulate aspects of the gas business that it is not currently regulating.

In response to the first comment by Shell, the Commission agrees that the rule needs a provision clarifying that the informal complaint resolution procedure is not a mandatory prerequisite to the filing of a formal complaint. However, if an informal complaint is filed, and the Commission determines that there is sufficient reason to go forward, the respondent will be required to participate, so from that perspective, the informal process will be mandatory. At any time prior to the mediator's issuance of the confidential memorandum, a complainant may unilaterally withdraw an informal complaint or a complainant and respondent may jointly agree to the dismissal of an informal complaint. The Commission has added this clarification in a new paragraph (3) in subsection (c).

With respect to Shell's second general comment, the Commission states that it recognizes that it cannot, through rulemaking, expand its jurisdiction. However, that the Commission traditionally has not regulated certain entities is largely a consequence of such entities not having invoked the Commission's authority to set rates or remedy alleged discrimination.

TPA commented that the proposed rule incorporates the suggestions made by the participants at the workshops and by the Advisory Committee, and that the resulting rule is both fair and workable. TPA commented that the proposed rule and the Advisory Committee's report address the issues the Commission was supposed to address. In TPA's view, the critics can be viewed as an extreme minority, and that the mainstream of the oil and gas industry is not in agreement with those critics. The Advisory Committee report and the proposed rule represent a consensus approach to resolving disputes based on the facts of each case. That consensus was based on numerous meetings of the Advisory Committee, which engaged in fact-finding, rational discussion and debate, and the mutual agreement to publish the findings and recommendations that are currently before the Commission. TPA observed that all of this was accomplished without giving weight to emotion-infused hearsay and rhetoric that is unsupported by facts.

The Commission agrees that the proposed rule incorporates the suggestions made by the participants at the workshops and by the Advisory Committee, and that the resulting rule is both fair and workable. However, the Commission would note that the workshops were not evidentiary proceedings, but instead were an opportunity for members of the industry to convey information to the Commission and to each other in an informal setting, to help find a process for resolving complaints that is less time-consuming and less expensive than formal hearings. The Commission does not in any way discount or disparage the information received in the workshops just because the delivery may have been accompanied by emotion.

TPA had one suggested change to the proposed rule. The Advisory Committee recommended, inter alia , that the rule apply to any matter within the Commission's jurisdiction so that it would be available to resolve any dispute. TPA acknowledged that the rule incorporates that suggestion, but pointed out that the preamble to the proposed rule speaks only to the types of complaints arising under the Code of Conduct (16 TAC §7.7001) and lists only certain sections of the Utilities Code and the Natural Resources Code as authorizing statutes. TPA views those sections of the statutes as authority only for complaints against natural gas transporters and purchasers. The rule specifically recites that it applies to any matter within the Commission's jurisdiction. Therefore TPA requested that the preamble be amended to clearly base the rule on all the jurisdictional statutes of the Commission. A recitation to the various Codes or Chapters, not necessarily all the individual sections, would be sufficient, according to TPA.

The Commission agrees that the scope of the rule as stated in the rule should be consistent with the statement of statutory authority in the adoption preamble. However, the Commission finds that the proposed rule language stating that the rule applies to any matter within the Commission's jurisdiction is not consistent with the intended purpose of the rule, which is to provide an alternative forum for resolving complaints about natural gas purchasing, selling, shipping, transportation, and gathering. Therefore, the Commission has clarified the statement of scope and jurisdiction in subsection (a) of the new rule to limit the applicability of the section to complaints within the Commission's jurisdiction about natural gas purchasing, selling, shipping, transportation, and gathering practices. The Commission has also clarified the source of statutory authority for this rulemaking in the adoption preamble.

GPA expressed its support of the Commission's existing informal complaint process for gas gathering disputes between gatherers and producers since the inception of the process ten years ago, and expressed its support of the proposed rule. The Commission appreciates GPA's support.

The Alliance commented that it endorsed a policy designed to curb the abuses of monopolistic intrastate natural gas pipelines against the independent gas producers of Texas. The Alliance stated that it is committed to those fundamental changes in the intrastate gas pipeline system which provide transparency and open access to the market place. The Alliance stated that the proposed rule does not do this, and in fact, may reduce the position of producers, and that the proposal from the Natural Gas Pipeline Study Advisory Committee appears to provide more power to the pipelines.

The Alliance further commented that the proposed rule is far from a neutral mediation process; it is a substantive process without the protections of the Texas Administrative Procedure Act. The proposed rule is contrary to well-accepted principles of mediation. Among other things, the Alliance commented, the proposed rule violates those principles by: (1) allowing the mediator to require a party to supply information, under pain of fine for not doing so; (2) providing for a "confidential memorandum" by the mediator, and (3) providing a lengthy period of delay before formal proceedings can be pursued. The Alliance contends that the proposed rule would provide a mechanism whereby pipelines can inflict costs and burdens on producers by initiation of the informal complaint process, and declared that the informal complaint process must in no manner deter, delay, or circumvent a producer's right to file a formal complaint at any time with the Commission, nor should such a process prejudice the matters of a formal proceeding. The Alliance observes that while advocates of the proposal tout that the new process promotes transparency, the proposal provides access to information only after the fact, after the problem has occurred. The provisions that require pipeline companies to transport gas ratably and allow producers to transport gas at just and reasonable rates are necessary to maintain a viable natural gas industry in the State of Texas. The Alliance concluded that it cannot support the proposed rule which does nothing to promote competition while reducing producers' rights.

The Commission disagrees with these comments. With respect to the comment that the rule allows the mediator to require a party to supply information, under pain of fine for not doing so, the Commission points out that there are no monetary penalties in the new rule. In addition, the Commission learned in the workshops that producers wanted an informal complaint resolution process "with teeth." With respect to the mediator submitting a "confidential memorandum," the Commission points out that this is a standard technique in alternative dispute resolution procedures. As to the third comment, that the rule imposes a lengthy period of delay before formal proceedings can be pursued, the Commission points out that the informal complaint resolution process is an option, not a requirement. Such proceedings are not a prerequisite to the filing of a formal complaint. That intent has been further clarified with the addition of new paragraph (3) in subsection (c). The Commission recognizes that this rule does not address all issues that were discussed in the workshops; however, it is one part of an ongoing effort to achieve a balance between the individual interests of the complainant and respondent (among those, minimizing the cost and delay attendant to formal proceedings) and those public interests which the Commission is statutorily obligated to protect. The public interest in having pipeline transportation services provided at fair rates and without the abuses that can attend a monopoly situation requires that the Commission have some objective basis on which to evaluate complaints and assist the participants in coming to a mutually agreeable resolution; hence the requirement that the participants provide information.

With respect to subsection (a), Shell commented that the Commission should clarify that (1) it is not expanding its jurisdiction to include the economic regulation of sellers and shippers, and (2) the proposed rule is limited to complaints in the Gas Services Division. Specifically, Shell stated that "shippers," "sellers" or "natural gas sellers" currently are not subject to the Commission's jurisdiction under the Commission's enabling statutes, which seek to protect the public from market power and monopoly abuse by pipelines by economically regulating such persons. By participating in the informal complaint process, shippers, sellers, and natural gas sellers should not be held to have submitted to any economic regulation by the Commission. In addition, Shell suggested that the term for a person that sells natural gas, whether "seller" or "natural gas seller" (as defined in subsection (b)(10)), should be consistent throughout the proposed rule, which it presently is not. Further, Shell commented that, by utilizing the word "any," the proposed rule arguably expands its effect to complaints filed in any section of the Commission, including the Oil and Gas Section. Shell does not believe the intent of the proposed rule is that the parties to any complaint, regardless of its subject, must complete the informal complaint process, and recommended that the rule language be tightened to specify to which Commission section this proposed rule applies. Shell's comment also requested clarification that the definition, by including the terms "sellers" and "shippers," does not subject those entities to the economic regulatory jurisdiction of the Commission. Moreover, the definition states that the process addresses "disputes among entities within the Commission's jurisdiction. . . ." This language should be clarified to read "complaints against entities within the Commission's jurisdiction. . . ."

The Commission agrees that through rulemaking it cannot expand its statutory jurisdiction. The Commission disagrees that the proposed rule is limited to complaints filed in the Gas Services Division. It is the Commission that has jurisdiction, not any particular division. Some natural gas shippers and natural gas sellers will be subject to Commission jurisdiction, but not necessarily all; the mere filing of a complaint at the Commission will not confer Commission jurisdiction over an entity. The scope of the Commission's jurisdiction in any given complaint will be based on whether the respondent and the actions that are the subject of the complaint come within the statutes administered by the Commission. The Commission agrees that terminology should be consistent throughout the rule, but the repeated use of the longer term "natural gas seller" can be awkward. Instead of using "natural gas seller" throughout the rule, the Commission has modified the definition in subsection (b)(10) so that the terms "natural gas seller" and "seller" have the same definition. The Commission also agrees that the wording "disputes among entities within the Commission's jurisdiction" should be changed to read "complaints against entities within the Commission's jurisdiction," and has made that change in subsections (b)(6) and (c)(2) of the adopted rule.

TIPRO recommended that, for consistency, the definitions of "transportation service" and "transporter" in subsection (b)(17) and (18) should be the same as those already established by the Commission in 16 TAC §7.115(35) and (36). These are comprehensive definitions and are well-settled law. There is a common understanding among TIPRO'S members of what these terms mean. TIPRO believes that unnecessarily redefining them will lead to confusion and legal questions. The Commission agrees with TIPRO's comment and has made the requested modification, with a grammatical correction in subsection (b)(18).

With respect to subsection (c)(1), Shell commented that the rule should recognize that it is the Commission's policy not only to resolve those disputes and complaints that prevent discrimination, but also those disputes and complaints involving the uniform abuse of a shipper. Also, the use of the wording "and other matters of dispute subject to the Commission's jurisdiction" may be too broad, as explained in previous comments.

The Commission disagrees with this comment. The Commission does not have statutory authority to resolve disputes alleging "uniform abuse of a shipper." The Commission does have authority to resolve claims of discrimination, for example, or that the rates charged by an entity within the Commission's jurisdiction are not just and reasonable. Entities within the Commission's jurisdiction, as set forth in the applicable statutes, are covered by the rule. The Commission's jurisdiction is defined in terms of both entities and activities, and it is not restricted to particular administrative divisions within the agency; thus the limitation that Shell suggests is not feasible.

TIPRO recommended that the wording in subsection (c)(1) be changed from ". . . prevent discrimination among similarly situated shippers and sellers" to ". . . prevent discrimination among similarly situated shippers and natural gas sellers." The Commission agrees with this in concept, but has addressed this by amending the definition of the term "natural gas seller" in subsection (b)(10) to include the more abbreviated term "seller."

Shell commented with respect to subsection (d)(2) that any information disclosed to a mediator, whether or not a Commission employee, becomes part of a record at the Commission. This record should be isolated from review by other Commission employees (who may act as an examiner in a subsequent proceeding regarding the subject of an informal complaint) or third parties and should not be used for any purpose beyond the informal complaint process. The Commission agrees that informal complaint resolution proceedings will be conducted in accord with the requirements of Texas Government Code, §2009.054, which provides, among other things, that a communication relevant to the dispute, and a record of the communication, made between an impartial third party and the parties to the dispute or between the parties to the dispute during the course of an alternative dispute resolution procedure are confidential and may not be disclosed unless all parties to the dispute consent to the disclosure, and the notes of an impartial third party are confidential except to the extent that the notes consist of a record of a communication with a party and all parties have consented to disclosure. It is not the intent of the Commission for any examiner presiding over a formal complaint to have access to any documents that may have been provided during the course of an informal complaint proceeding under the new rule.

Regarding both subsections (d)(4) and (e)(10), Shell commented that the subsection characterizes the information as "necessary" in one place, and "pertinent" in another, and recommends that these two potentially conflicting standards should be clarified. Additionally, this subsection is particularly broad in giving the mediator carte blanche to review a participant's documents. Shell suggested that the Commission should include a standard ( i.e ., reasonable and necessary) to limit a mediator's power in this instance. Shell also commented that the requirement that a participant submit information to a mediator on pain of being subject to an enforcement action by the Commission does not encourage full participation in and is generally not conducive to a productive, mediation process.

The Commission agrees that the term "necessary" is preferred to the term "pertinent," and has made that change in the adopted rule. The Commission disagrees with Shell's other suggestion; at least for the time being, the Commission is reluctant to include any particular standard on the ability of a mediator to compel the production of information in an informal complaint resolution proceeding. The Commission makes no change to the rule in response to Shell's observation that the provision requiring a participant to submit information to a mediator on pain of being subject to an enforcement action by the Commission does not encourage full participation in and is generally not conducive to a productive, mediation process. The Commission finds that some mechanism may be needed to compel certain entities to participate meaningfully in the process.

The Alliance commented (regarding subsection (d)(7)) that the proposal would legitimize pipeline action used to force producers to sign untenable contracts, including a claim of "insufficient capacity" and "no existing contractual agreement as to the price to be paid or fees charged for the production during the pendency of the informal complaint process." This is in direct conflict with the holding of the Texas Supreme Court in the Rio Grande Valley case, and with longstanding ratable take principles incorporated in Rule 34 (the ratable take rule at 16 TAC §3.34) and Rule 73 (the pipeline disconnect rule at 16 TAC §3.73). This provision is the most devastating conclusion of the report.

The Commission disagrees with this comment. There is no intent that the provisions of this rule be used to supersede the substantive law, including case law, that might apply in any particular situation. The Commission has added to subsection (d) a new paragraph (8), which states, "Notwithstanding anything in paragraph (7) of this subsection that may be construed to the contrary, that paragraph does not change the rights of the parties that are participating in the informal complaint proceeding that those parties have under state law or any other regulation of the Commission." Proposed paragraphs (8) and (9) in subsection (d) have been renumbered as (9) and (10).

TIPRO commented adding clarifying language to subsection (d)(7)(D) to address the situation in which a contract expires during the pendency of an informal complaint proceeding. Such a situation could fall under "no existing contractual agreement," and that is not the intent of the exception to the pendency protection. TIPRO recommended deleting subparagraph (D) or, alternatively, adding to the end of paragraph (7)(D) the following language: The occurrence of an absence of a contractual agreement due to the expiration of a contractual agreement during the pendency of a complaint is not covered under this exemption. The Commission agrees that this situation should be clarified, and has added wording to the subparagraph to clarify that the "no contract" exemption does not apply if there is a contract in effect on the date a complaint is filed at the Commission.

Regarding subsection (d)(8), TIPRO recommended replacing or adding the term "retaliate" for or in addition to the term "discriminate." Because "discrimination" is already prohibited under multiple rules and statutes, TIPRO asserted that the term "retaliate" better fits the intent of this section. The Commission disagrees with this comment. The Commission has statutory authority to remedy "discrimination," not "retaliation." A pipeline could "retaliate" against a shipper by poisoning the shipper's dog or slashing the tires on the shipper's vehicle, but those acts would not be within the authority of the Commission to remedy.

TIPRO recommended adding language in subsection (d)(9) to clarify that the Commission may initiate action in an instance of discrimination as well as in instances of non-compliance, so that this paragraph would read as follows:

(9) The Commission may commence an enforcement action, initiated by the director, for

(A) failure by the complainant or the respondent to comply with all provisions of the informal complaint proceeding ; or

(B) if a mediator concludes under (e)(13) that unjust, unreasonable or discriminatory action has occurred .

The Commission disagrees with this comment. Under subsection (e)(13), the director has the authority to initiate a show cause proceeding; with an additional change that the Commission adopts in subsection (e)(13), discussed in a subsequent paragraph, TIPRO's recommended change to subsection (d)(9) is unnecessary. In any event, the Commission finds that a determination to initiate an enforcement action would be more appropriate following the presentation of information in the informal complaint resolution process.

Shell and the Alliance also commented on subsection (d)(9). Shell reiterated its view that the Commission commencing an enforcement action against a participant because someone has alleged that participant is not undertaking the mediation meeting in "good faith" is not conducive to an effective mediation process. The Alliance commented more generally that the proposal would provide a mechanism whereby pipelines can inflict costs and burdens on producers by initiation of the informal complaint process.

The Commission disagrees with both comments. The enforcement provision does not require a determination of "good faith," only a determination that a participant has not complied with the requirements of the process. In the ten years that the Commission has had an informal complaint resolution process available, there have been no instances of a pipeline initiating a complaint against a producer.

TIPRO recommended deleting language in subsection (e)(7) relating to the "good faith" of the complainant and respondent in attempting to resolve a dispute. The proposed language "good faith attempt" requires a determination and another process, such as a hearing to present evidence for the determination of "good faith effort." Deciding the factors to be considered and how long they have to do so could drag the process out for either party indefinitely. The Commission agrees that this wording should be changed to eliminate the requirement that there be a determination of "good faith," and has made the recommended change in the adopted rule.

TIPRO commented that in subsection (e)(13), the list of possible conclusions a mediator may reach covers all scenarios except the finding of a legitimate complaint. TIPRO recommended adding language to include that possibility, either at the beginning of subsection (e)(13)(C) or as a separate subsection (e)(13)(D). For example: (D) the complaint does involve a violation of a Commission rule or statute. Also, on subsection (e)(13), TIPRO recommended adding "the director" to the list of recipients of the mediator's confidential memorandum that states the mediator's conclusions. This step has been included in numerous past legislative efforts and Advisory Committee discussions and should be included.

The Commission recognizes that the omission in subsection (e)(13) seems not to make sense in light of the other findings that a mediator might make, but disagrees with TIPRO's suggestions. The Commission finds that it is not appropriate for a mediator to state any conclusions regarding whether a complaint does or does not involve a violation of a statute administered by the Commission or of a Commission rule. The Commission has instead adopted clarified wording in subsection (e)(13). As adopted, the paragraph now authorizes a mediator to conclude that there are specific actions which, if taken by either the respondent or the complainant or both, could result in resolution of the complaint; that a formal evidentiary hearing may be warranted; or that a formal evidentiary hearing may not be warranted. The Commission adopts a new subsection (f) to provide that a formal evidentiary hearing may be initiated by the director as a show cause proceeding or requested by either the complainant or the respondent. Proposed subsection (f) has been re-designated as subsection (g).

TIPRO recommended adding a new subsection (g) to require a publicly available summary report that includes total number of complaints filed, a listing of complainants and respondents, final dispositions and other information deemed by the Commission as a useful performance measure in evaluating the success of the informal complaint process. Confidential information should, of course, be excluded. A modification of the Commission's existing summaries would fulfill the intent of this recommendation.

The Commission disagrees with this comment. The information regarding the number of complaints filed, disposition, and other information is already maintained in a summary format and is available on request. The metrics that are currently included are sufficient to be useful in determining the success of the informal complaint resolution procedure.

The Commission on its own motion has made additional clarifying changes to new §2.1 as adopted. The Commission adopts new §2.1 in new Chapter 2 to help ensure that the rule is easy to find for both complainants and respondents. New subsection (a) states the scope and jurisdiction. The new section will apply to complaints within the Commission's jurisdiction about natural gas purchasing, selling, shipping, transportation, and gathering practices. This section does not apply to matters arising under Texas Utilities Code, Chapter 103, entitled "Jurisdiction and Powers of Municipality," or initiated under Texas Utilities Code, Chapter 104, Subchapter C, entitled "Rate Changes Proposed by Utility," or Subchapter G, entitled "Interim Cost Recovery and Rate Adjustment."

New subsection (b) contains definitions of 18 terms. Many of the terms are defined here the same or similarly as in the Commission's rule 16 TAC §7.115, relating to Definitions, and are used in 16 TAC §7.7001, relating to Natural Gas Transportation Standards and Code of Conduct. New terms defined in this new rule include "gatherer" (a person providing gathering service for a fee for a third party); "gathering service" (use of a pipeline to collect gas and bring it to a common point); "mediator" (the individual who conducts an informal complaint resolution mediation); and "monitor" (the Commission employee appointed by the director to manage an informal complaint proceeding and/or assist a mediator who is not a Commission employee in the management of an informal complaint proceeding; a monitor may also be a mediator). Upon adoption, the definitions of the terms "transporter" and "transportation service" have been amended to conform to the existing definitions of these terms found in 16 TAC §7.115(35) and (36), with a grammatical correction in subsection (b)(18).

New subsection (c) states the Commission's policy, which is to encourage affordable, expeditious, and fair settlement of disputes regarding natural gas purchasers, sellers, transporters, and gatherers. The Commission will not tolerate discrimination among similarly situated shippers and sellers as is prohibited by the Texas Natural Resources Code, Chapter 111, entitled "Common Carriers, Public Utilities, and Common Purchasers," and Texas Utilities Code, Title 3, Subtitle A, entitled "Gas Utility Regulatory Act," and Subtitle B, entitled "Regulation of Transportation and Use," and other matters of dispute subject to the Commission's jurisdiction. This section is adopted in furtherance of that policy.

To accomplish the policy set out in this section, Commission employees, acting pursuant to the new section, will attempt to facilitate, encourage, and promote resolution and settlement of complaints against natural gas purchasers, sellers, shippers, transporters, gatherers, and other persons subject to the Commission's jurisdiction consistent with the public interest and without lengthy and potentially expensive formal proceedings. The informal complaint procedure is intended to establish a forum for communication, with the goal of achieving mutually acceptable compromise and resolution that is in the public interest. Filing a complaint pursuant to this section is not a prerequisite to the filing of a formal complaint. The informal complaint resolution process is an optional method for resolving complaints. However, if an informal complaint is filed and the Commission determines that there is sufficient reason to go forward, the respondent must participate in the process. At any time prior to the mediator's issuance of the confidential memorandum pursuant to subsection (e)(13), a complainant may unilaterally withdraw an informal complaint or a complainant and respondent may jointly agree to the dismissal of an informal complaint.

New subsection (d) sets forth the general requirements and limitations. The Commission will not process anonymous complaints under the new section. The communications, records, conduct, and demeanor of the participants in each informal complaint proceeding will be confidential and handled in accordance with Texas Government Code, §2009.054, entitled "Confidentiality of Certain Records and Communications."

A mediator must have completed 40 hours of Texas mediation training that meets the standards of the Texas Alternative Dispute Resolution Procedures Act, as set out in Texas Government Code, §154.052, and must follow the ethical guidelines for mediators adopted by the Alternative Dispute Resolution Section of the State Bar of Texas. A mediator may be either a Commission employee or a non-Commission employee. If the complainant and respondent submit a written request to the director agreeing to share all costs of mediation, they may retain a non-Commission employee to conduct the mediation, and the director will appoint a Commission employee as a monitor. The monitor will act as a technical advisor to the non-Commission employee mediator and may, at the direction of the non-Commission employee mediator, participate in the informal complaint proceeding. A non-Commission employee mediator will have the same duties and obligations of a Commission employee mediator and may, in his or her sole discretion, compel the complainant and respondent to provide information.

Mediators and monitors may not communicate with a Commission hearings examiner or a Commissioner about any material or substantive aspect of a complaint or reply filed pursuant to this section. Each complainant and respondent in an informal complaint proceeding must cooperate fully in gathering and disclosing information requested by the mediator or monitor and must participate in good faith in all aspects of the informal complaint proceeding.

A natural gas purchaser, transporter, or gatherer may not discontinue or deny service to a shipper or seller during the pendency of an informal complaint proceeding in which both are participants unless one of the stated reasons applies for discontinuing service or unless the mediator determines that there is good cause in a particular case. Notwithstanding anything that may be construed to the contrary, this provision does not change the rights of the parties that are participating in the informal complaint proceeding that those parties have under state law or any other regulation of the Commission. A transporter, gatherer, or purchaser may not discriminate against a shipper or seller because the shipper or seller has, in good faith, filed an informal complaint at the Commission; filed a formal complaint at the Commission; instituted or caused to be instituted at the Commission any enforcement proceeding against a purchaser, transporter, or gatherer based on alleged violations of any rule or statute; or made inquiry to the Commission as to the facts or circumstances surrounding operation of a purchaser's, transporter's, or gatherer's system. The Commission may commence an enforcement action, initiated by the director of the Gas Services Division, for failure by the complainant or the respondent to comply with all provisions of the informal complaint proceeding.

New subsection (e) describes the steps in the informal complaint process. An informal complaint proceeding is initiated by filing a complaint with the Commission by either calling the Commission Helpline or submitting a written complaint by mail, fax, or Internet submission. The Commission adopts subsection (e) with a change from the proposal; the Helpline telephone number in the proposed rule did not have a voice mail feature. As adopted, the Helpline telephone number will have voice mail, allowing callers to leave a message for Commission staff. A complaint must include all the information specified in the rule. The director of the Gas Services Division will assign a complaint to a monitor, who will promptly contact the complainant to confirm receipt of the complaint, obtain any additional relevant and supporting documentation pertaining to the complaint, and advise the complainant of its right to have the complaint mediated by a Commission employee or by a non-Commission employee mediator.

After the monitor determines that the complainant has provided all required information, the monitor will notify the respondent of the complaint by mail and will include notice to the respondent of its right to have the matter heard by a non-Commission employee mediator pursuant to the agreement of the complainant and the respondent. The respondent must reply in writing to both the monitor and the complainant within 14 calendar days from the date of the monitor's notification letter and must address the substance of the complaint and either propose a solution or explain why the complaint is incorrect. The complainant and the respondent will be given 14 calendar days from the date of the respondent's reply to resolve the complaint without the participation of a mediator. If the complainant and the respondent have been unable to reach an agreement, the monitor will determine whether either the complainant or the respondent or both want the matter referred to a Commission or non-Commission mediator and shall refer the matter back to the director of the Gas Services Division for appointment of a mediator.

Within 14 calendar days of being appointed, the mediator must review all information received from the complainant and respondent. The mediator may request additional information as necessary. At any time during an informal complaint procedure, the mediator may request and review documents or information the mediator considers necessary in evaluating the complaint. The mediator will then furnish the complainant and respondent with a written summary of all relevant documents and information reviewed. The mediator's summary must not disclose confidential information.

The monitor will schedule a mediation meeting with the complainant and respondent, which the mediator will conduct, to occur within 14 calendar days after the date of the mediator's written summary, and will notify the complainant and respondent of the date, time and location of the meeting, which may be conducted at the headquarters of the Commission in Austin, Texas, in the Commission's offices in the district in which the complaint arises, or at any other location by agreement of the participants. The complainant and respondent are required to participate in the mediation meeting and undertake in good faith to settle all issues raised in the complaint. The complainant and respondent are required to make available during the mediation meeting, in person, representatives who are empowered to make decisions on their behalf.

If the mediation process does not result in a settlement of all issues during the period for mediation provided, after completing the mediation, the mediator will promptly send a confidential memorandum to the complainant, the respondent, the monitor (unless the monitor is the mediator), and the director that states one or more of the following conclusions, based on the information reviewed by the mediator. The mediator may conclude that there are specific actions which, if taken by either the respondent or the complainant or both, could result in resolution of the complaint; that a formal evidentiary hearing may be warranted; or that a formal evidentiary hearing may not be warranted. New subsection (f) (originally proposed as part of subsection (e)(13)) provides that such a hearing may be either initiated by the director as a show cause proceeding or requested by either the complainant or the respondent.

New subsection (g) (originally proposed as subsection (f)) provides that the director of the Gas Services Division will maintain an internal report of all complaints received. The report will be circulated no less often than once every six months to the Commissioners, the executive director, and the general counsel. The specific points of the participants' discussions and any negotiated resolution will not be included in this internal report.

The Commission adopts the new section pursuant to its authority under Texas Natural Resources Code, Title 3, and Texas Utilities Code, Title 3.

Texas Natural Resources Code, Title 3, and Texas Utilities Code, Title 3, are affected by the new section.

Statutory authority: Texas Natural Resources Code, Title 3, and Texas Utilities Code, Title 3.

Cross-reference to statutes: Texas Natural Resources Code, Title 3, and Texas Utilities Code, Title 3.

Issued in Austin, Texas, on February 23, 2007.

§2.1.Informal Complaint Procedure.

(a) Scope and jurisdiction. This section applies to complaints within the Commission's jurisdiction about natural gas purchasing, selling, shipping, transportation, and gathering practices. This section does not apply to matters arising under Texas Utilities Code, Chapter 103, entitled "Jurisdiction and Powers of Municipality," or initiated under Texas Utilities Code, Chapter 104, Subchapter C, entitled "Rate Changes Proposed by Utility," or Subchapter G, entitled "Interim Cost Recovery and Rate Adjustment."

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

(1) Common purchaser--Has the same meaning as is given that term in Texas Natural Resources Code, §111.081.

(2) Complainant--A person who submits a complaint to the Commission pursuant to this section.

(3) Director--The director of the Gas Services Division of the Railroad Commission of Texas or the director's delegate.

(4) Gatherer--A person providing gathering service for a fee for a third party.

(5) Gathering service--Use of a pipeline to collect gas and bring it to a common point.

(6) Informal complaint proceeding--The process set out in this section for addressing complaints against entities within the Commission's jurisdiction, including but not limited to natural gas purchasers, sellers, shippers, transporters, and gatherers.

(7) Mediator--The individual who conducts an informal complaint resolution mediation.

(8) Monitor--The Commission employee appointed by the director to manage an informal complaint proceeding and/or assist a mediator who is not a Commission employee in the management of an informal complaint proceeding. A monitor may also be a mediator.

(9) Natural gas purchaser--A person that purchases natural gas.

(10) Natural gas seller or seller--A person that sells natural gas, including but not limited to a producer.

(11) Natural gas utility--Has the same meaning as is given that term in Texas Utilities Code, §101.003 and §121.001.

(12) Participant--A complainant, respondent, monitor, or mediator in an informal complaint proceeding.

(13) Person--An individual, corporation, partnership, joint venture, or other legal entity of any kind.

(14) Respondent--A person who is the subject of a complaint submitted to the Commission pursuant to this section.

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

(16) Similarly-situated shipper--A shipper that seeks or receives transportation service 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.

(17) Transportation service--The receipt of a shipper's natural gas at a point or points on the facilities of a transporter, and re-delivery of a shipper's natural gas by the transporter at another point or points on the facilities of the transporter, or on another person's facilities, 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.

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

(c) Policy.

(1) The Commission encourages affordable, expeditious, and fair settlement and resolution of disputes regarding natural gas purchasers, sellers, transporters, and gatherers. The Commission will not tolerate discrimination among similarly situated shippers and sellers as is prohibited by Texas Natural Resources Code, Chapter 111, entitled "Common Carriers, Public Utilities, and Common Purchasers," and Texas Utilities Code, Title 3, Subtitle A, entitled "Gas Utility Regulatory Act," and Subtitle B, entitled "Regulation of Transportation and Use," and other matters of dispute subject to the Commission's jurisdiction. This section is adopted in furtherance of that policy.

(2) To accomplish the policy set out in this section, Commission employees, acting pursuant to this section, will attempt to facilitate, encourage, and promote resolution and settlement of complaints against natural gas purchasers, sellers, shippers, transporters, gatherers, and other persons subject to the Commission's jurisdiction consistent with the public interest and without lengthy and potentially expensive formal proceedings. The informal complaint procedure is intended to establish a forum for communication, with the goal of achieving mutually acceptable compromise and resolution that is in the public interest.

(3) Filing a complaint pursuant to this section is not a prerequisite to the filing of a formal complaint. The informal complaint resolution process is an optional method for resolving complaints. However, if an informal complaint is filed and the Commission determines that there is sufficient reason to go forward, the respondent shall participate in the process. At any time prior to the mediator's issuance of the confidential memorandum pursuant to subsection (e)(13) of this section, a complainant may unilaterally withdraw an informal complaint or a complainant and respondent may jointly agree to the dismissal of an informal complaint.

(d) General requirements and limitations.

(1) The Commission will not process anonymous complaints under this section.

(2) The communications, records, conduct, and demeanor of the participants in each informal complaint proceeding are confidential and handled in accordance with Texas Government Code, §2009.054, entitled "Confidentiality of Certain Records and Communications."

(3) A mediator shall have completed 40 hours of Texas mediation training that meets the standards of the Texas Alternative Dispute Resolution Procedures Act, as set out in Texas Government Code, §154.052, and must follow the ethical guidelines for mediators adopted by the Alternative Dispute Resolution Section of the State Bar of Texas.

(4) A mediator may be either a Commission employee or a non-Commission employee. If the complainant and respondent submit a written request to the director agreeing to share all costs of mediation, they may retain a non-Commission employee to conduct the mediation. If the complainant and respondent are unable to agree on whether to engage a non-Commission employee as the mediator, or in the absence of a request for a non-Commission employee mediator, the director shall appoint a Commission employee to conduct the mediation. If the mediator is not a Commission employee, then the director shall appoint a Commission employee as a monitor. The monitor will act as a technical advisor to the non-Commission employee mediator and may, at the direction of the non-Commission employee mediator, participate in the informal complaint proceeding. A non-Commission employee mediator shall have the same duties and obligations of a Commission employee mediator and may, in his or her sole discretion, compel the complainant and respondent to provide information pursuant to subsection (e)(10) of this section.

(5) Mediators and monitors shall not communicate with a Commission hearings examiner or a Commissioner about any material or substantive aspect of a complaint or reply filed pursuant to this section.

(6) Each complainant and respondent in an informal complaint proceeding shall cooperate fully in gathering and disclosing information requested by the mediator or monitor and shall participate in good faith in all aspects of the informal complaint proceeding.

(7) A natural gas purchaser, transporter, or gatherer shall not discontinue or deny service to a shipper or seller during the pendency of an informal complaint proceeding in which both are participants unless one of the following reasons applies for discontinuing service:

(A) There is insufficient capacity on the respective facility or facilities, provided, however, that the purchaser, transporter, or gatherer provide any partial capacity that may be available from time to time.

(B) The natural gas does not meet the quality specifications of the purchaser, transporter, gatherer, or downstream processors, pipelines, or customers. However, if the natural gas is flowing under an agreement and, at the impending termination of that agreement, there is sufficient capacity, and non-specification gas is being blended for other shippers or sellers in the area, and the acceptance of such volumes from the shipper or seller will not jeopardize downstream market deliverability of the gas, then the purchaser, transporter, or gatherer shall continue to take the gas until the conclusion of the informal complaint process, charging blending fees applicable to similarly situated shippers.

(C) Continuing to take the natural gas would:

(i) create a safety or environmental risk;

(ii) cause a violation of a safety or environmental regulation or permit; or

(iii) interfere with necessary maintenance and repairs of facilities.

(D) There is no existing contractual agreement in effect on the date the complaint is filed at the Commission as to the price to be paid or fees charged for the production during the pendency of the informal complaint process, provided, however, that the production will be taken if the complainant and respondent agree that the price or fees will be determined at a later date.

(E) There is such good cause as the mediator may determine in the particular case.

(8) Notwithstanding anything in paragraph (7) of this subsection that may be construed to the contrary, that paragraph does not change the rights of the parties that are participating in the informal complaint proceeding that those parties have under state law or any other regulation of the Commission.

(9) A transporter, gatherer, or purchaser shall not discriminate against a shipper or seller because the shipper or seller has, in good faith:

(A) filed an informal complaint at the Commission;

(B) filed a formal complaint at the Commission;

(C) instituted or caused to be instituted at the Commission any enforcement proceeding against a purchaser, transporter, or gatherer based on alleged violations of any rule or statute; or

(D) made inquiry to the Commission as to the facts or circumstances surrounding operation of a purchaser's, transporter's, or gatherer's system.

(10) The Commission may commence an enforcement action, initiated by the director, for failure by the complainant or the respondent to comply with all provisions of the informal complaint proceeding.

(e) Informal complaint process.

(1) An informal complaint proceeding is initiated by filing a complaint with the Commission by:

(A) calling the Commission Helpline at (512) 463-7288 Commission staff will answer calls to the Helpline from 8:00 a.m. to 5:00 p.m. on regular Commission business days. A voice mail system will be in place to receive calls during non-business hours; or

(B) submitting a complaint in writing by:

(i) regular United States mail to the following address: Director, Gas Services Division, P. O. Box 12967, Austin, Texas 78711-2967;

(ii) facsimile transmission (fax) to the following number: (512) 463-7962; or

(iii) internet submission by accessing the following URL: http://www.rrc.state.tx.us/divisions/gs/mos/complaints/icp.html.

(2) Each complaint shall include the following information:

(A) the name of the individual submitting the complaint;

(B) the complainant's name, mailing address, telephone number, and, if applicable, e-mail address and fax number;

(C) the respondent's name, mailing address, telephone number, and if applicable, e-mail address and fax number;

(D) a factual description of the events that are the basis of the complaint, including the onset or duration of such events;

(E) a statement of the current status of negotiations between the complainant and the respondent and a description of any actions the complainant has taken to resolve the dispute;

(F) a statement of the relief sought by complainant; and

(G) all supporting documentation, unless the complaint is made by telephone, in which case the documentation shall be supplied at a later time.

(3) The director shall assign a complaint to a monitor who shall promptly contact the complainant to confirm receipt of the complaint and to obtain any additional relevant and supporting documentation pertaining to the complaint. The monitor shall advise the complainant of its right to have the complaint mediated by a Commission employee or by a non-Commission employee mediator. If the complainant has submitted the complaint by telephone and wishes to pursue the matter, the monitor shall direct the complainant to submit the complaint by e-mail, facsimile, or letter, along with supporting documentation.

(4) After the monitor determines that the complainant has provided all required information, the monitor shall notify the respondent of the complaint by mailing to the respondent, via certified mail, return receipt requested, a copy of the complaint and all supporting documentation. This notification shall include notice to the respondent of its right to have the matter heard by a non-Commission employee mediator pursuant to the agreement of the complainant and the respondent.

(5) The respondent shall reply in writing to both the monitor and the complainant within 14 calendar days from the date of the monitor's notification letter. The respondent's reply shall address the substance of the complaint and either propose a solution or explain why the complaint is incorrect.

(6) The complainant and the respondent will be given 14 calendar days from the date of the respondent's reply to resolve the complaint without the participation of a mediator.

(7) If the complainant and the respondent have not reached an agreement, the monitor shall determine within seven days after expiration of the period allowed for informal resolution in paragraph (6) of this subsection whether either the complainant or the respondent or both want the matter referred to a Commission or non-Commission mediator and shall refer the matter back to the director.

(8) In the event the complainant and respondent agree upon a non-Commission employee mediator, then the monitor shall notify the agreed upon mediator. In the event the complainant and respondent desire to use a non-Commission employee mediator and are unable to agree upon the selection of a non-Commission employee mediator, each party shall each submit the name of its preferred mediator and the preferred mediators so designated shall choose a third mediator who will preside over the process.

(9) In accordance with the procedure set forth in subsection (d)(4) of this section, the director shall appoint a mediator within seven days after receipt of the information in paragraph (7) of this subsection.

(10) The mediator shall, within 14 calendar days after the appointment provided in paragraph (8) of this subsection, review all information received from the complainant and respondent. The mediator may request additional information as the mediator deems necessary. At any time during an informal complaint procedure, the mediator may request and review documents or information the mediator considers necessary in evaluating the complaint. The mediator shall furnish the complainant and respondent with a written summary of all relevant documents and information reviewed. The mediator's summary shall not disclose confidential information.

(11) The monitor shall schedule a mediation meeting with the complainant and respondent, which the mediator shall conduct, to occur within 14 calendar days after the date of the mediator's written summary. The monitor shall promptly notify the complainant and respondent of the date, time and location of the meeting, which may be conducted at the headquarters of the Commission in Austin, Texas; in the Commission's offices in the district in which the complaint arises; or at any other location by agreement of the participants.

(12) The complainant and respondent shall participate in the mediation meeting and undertake in good faith to settle all issues raised in the complaint. The complainant and respondent shall make available during the mediation meeting, in person, representatives who are empowered to make decisions on their behalf.

(13) If the mediation process does not result in a settlement of all issues during the period for mediation provided, after completing the mediation, the mediator shall promptly send a confidential memorandum to the complainant, the respondent, the monitor (unless the monitor is the mediator), and the director that states one or more of the following conclusions, based on the information reviewed by the mediator. The mediator may conclude that:

(A) there are specific actions which, if taken by either the respondent or the complainant or both, could result in resolution of the complaint;

(B) a formal evidentiary hearing may be warranted; or

(C) a formal evidentiary hearing may not be warranted.

(f) A formal evidentiary hearing may be:

(1) initiated by the director as a show cause proceeding; or

(2) requested by either the complainant or the respondent

(g) Internal report. The director shall maintain an internal report of all complaints received.

(1) The report shall be circulated no less often than once every six months to the Commissioners, the executive director, and the general counsel.

(2) The specific points of the participants' discussions and any negotiated resolution shall not be included in this internal report.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 23, 2007.

TRD-200700750

Mary Ross McDonald

Managing Director

Railroad Commission of Texas

Effective date: March 15, 2007

Proposal publication date: October 27, 2006

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

16 TAC §§7.6001 - 7.6007

The Railroad Commission of Texas adopts new §§7.6001 - 7.6007, relating to General Provisions; Procedure for Filing and Service of an Appeal, Obligation of City to Respond, and Intervention; Contents of Appeal; Contents of Response; Contents of Motion to Intervene; Standards for Determining an Appeal; and Procedure for Determining and Sharing of the Commission's Costs, in 16 Texas Administrative Code, Chapter 7, new Subchapter F, to be entitled "Pipeline Appeal of City Assessment of Annual Charge." The Commission adopts new §7.6001 and §7.6002 with changes, and adopts §§7.6003 - 7.6007 without changes to the proposal published in the August 25, 2006, issue of the Texas Register (31 TexReg 6605).

The Commission adopts the new subchapter to implement the provisions of new Texas Natural Resources Code, §117.102, and new Texas Utilities Code, §121.2025, enacted by Senate Bill 480 and House Bill 951, 79th Legislature, Regular Session (2005). These new provisions give the Railroad Commission exclusive jurisdiction to determine whether a city's annual charge is authorized under Texas Natural Resources Code, §117.102(b)(1), or Texas Utilities Code, §121.2025(b)(1). These statutory provisions authorize cities to assess a reasonable annual charge for the placement, construction, maintenance, repair, replacement, operation, use, relocation, or removal by an owner or operator of a hazardous liquid, carbon dioxide, or natural gas pipeline facility on, along, or across the public roads, highways, streets, alleys, streams, canals, or other public ways located within the city and maintained by the city. This charge may not exceed the cost to the city of administering, supervising, inspecting, and otherwise regulating the location of the pipeline facility, including maintaining records and maps of the location of the pipeline facility. An owner or operator of a pipeline facility may appeal the assessment of a charge under Texas Natural Resources Code, §117.102(b)(1), or Texas Utilities Code, §121.2025(b)(1), to the Commission, which must hear the appeal de novo . Unless the city that assessed the charge establishes that the charge is authorized by one or both of these sections, the Commission must declare the charge invalid or reduce the charge to an amount authorized by the sections. The owner or operator of the pipeline facility and the city are required to share equally the costs incurred by the Commission in connection with the appeal.

The Commission received five comments on the proposed new rules. Two associations, Texas Pipeline Association and Texas Energy Coalition, support the proposed rules and urge adoption. Three comments were from cities. The City of Houston, the City of Laredo, and the Atmos Cities Steering Committee ("ACSC," comprising the Cities of Abilene, Addison, Allen, Alvarado, Argyle, Arlington, Benbrook, Beverly Hills, Blue Ridge, Bowie, Boyd, Bridgeport, Brownwood, Buffalo, Burkburnett, Burleson, Carrollton, Celeste, Clyde, College Station, Colleyville, Colorado City, Comanche, Coolidge, Coppell, Corinth, Crowley, DeSoto, Duncanville, Eastland, Emory, Farmers Branch, Farmersville, Flower Mound, Fort Worth, Frisco, Frost, Gainesville, Grand Prairie, Grapevine, Harker Heights, Heath, Hewitt, Highland Park, Highland Village, Honey Grove, Iowa Park, Irving, Justin, Kaufman, Keene, Keller, Kemp, Kerens, Kerrville, Killeen, Lancaster, Little Elm, Mansfield, McKinney, Mesquite, Midlothian, Murphy, North Richland Hills, Northlake, Pantego, Paris, Plano, Prosper, Quitman, Richland Hills, Robinson, Rockwall, Roscoe, Rowlett, Sachse, Saginaw, San Angelo, Snyder, Southlake, Sweetwater, Terrell, The Colony, University Park, Vernon, Watauga, White Settlement, Whitesboro, and Woodway) filed detailed comments and recommended changes to the rules as proposed.

General Comments

The City of Laredo does not question the legislature's delegation of exclusive jurisdiction to the Commission on the issue of the validity of a municipality's right-of-way fees charged any single pipeline owner under Texas Natural Resources Code, §117.102(b)(1), or Texas Utilities Code, §121.2025(b)(1). The City of Laredo does challenge the proposed rules' encouragement that every proceeding be converted from a determination of the accuracy of the rates for a single pipeline owner into a comprehensive review of the validity of every charge for every pipeline in that municipality. According to the City of Laredo, this change will result in the Commission serving as a regulator of rates for all pipeline owners in a municipality rather than as an adjudicatory body in any individual appeal. No such delegation was made by the enabling legislation. The intent of the legislature was clear. The legislature wanted to afford any individual pipeline owner who felt that it was paying too much to have the ability to petition the Commission as a finder-of-fact. The proposed rules' expansive reading of legislative delegation of authority goes beyond this limited mission by self-appointing the Commission as the regulator of municipal pipeline right-of-way rates.

The Commission disagrees that the rules establish a comprehensive review of the validity of every municipal charge for every pipeline in a municipality. As proposed, the rules merely authorize a presiding examiner to require that a municipality give notice (it is not necessarily required), and then only to other pipelines that have been assessed an annual municipal charge--not every pipeline in or along a public right-of-way in a city. Further, only the charge assessed pursuant to Texas Natural Resources Code, §117.102(b)(1), or Texas Utilities Code, §121.2025(b)(1), will be reviewed, not every municipal charge to a pipeline.

The Commission also disagrees with the City of Laredo's characterization of the rules as "self-appointing (the Commission) as the regulator of municipal pipeline right-of-way rates." Because there is no body of information available to the Commission regarding municipal pipeline charges, there is no other way to evaluate whether a charge is authorized by the statutes, that is, whether it is reasonable, the standard stated in subsection (b)(1) of both statutory provisions, and does not exceed the cost to the municipality of administering, supervising, inspecting, and otherwise regulating the location of the gas pipeline facility, including maintaining records and maps of the location of the pipeline facility, the standard stated in subsection (c)(1) of both statutes. This analysis is more than just confirming the mathematical accuracy of the charge. The Commission is not setting rates for municipal rights-of-way, but without additional information, there is no way for the Commission to evaluate the cost basis and reasonableness of the charge.

The City of Laredo also seeks to inform the Commission of the deference entitled to every legislative action by a local government and that the grant of access to a municipality's rights-of-way is typically achieved by way of an enabling ordinance, a legislative action. The proposed rule is silent on the legal tenet that any legislative act by an elected body is entitled to deference by an adjudicatory body. Therefore, while the enacting legislation establishes the Commission as a court for purposes of establishing the validity of a right-of-way fee, the legislature did not free the Commission from its obligation to afford municipal legislative decisions from the deference entitled such actions. The City of Laredo suggests that the rule should be changed to reflect and acknowledge this tenet of Texas law. (The comment quotes numerous authorities for this proposition, which are here omitted.) The City of Laredo concludes that the Commission, therefore, must keep in mind that granting access to a municipality's rights-of-way and the price for that access is a result of legislative action by the municipality's legislative body. As such, the actions of the legislature are entitled to deference by the Commission.

The Commission neither agrees nor disagrees with the City of Laredo regarding the need to be informed of the deference entitled to legislative action taken by a local government. The Commission is simply implementing the statutory directives of the legislature, to the best of the agency's ability. There is nothing in the rules that purports to regulate a municipality's right-of-way acquisitions. If a pipeline does not appeal a municipal charge, the Commission has no jurisdiction to review it. The Commission does not seek to control (and has no authority to control) what a city might do with respect to its rights-of-way. Only when a pipeline files an appeal of a municipality's charge does the Commission have any authority, and then only to determine whether the charge assessed by the city meets the statutory standards. As an entity created and controlled by the legislature, the Commission lacks discretion to decide not to carry out a statutory mandate with respect to adjudicating whether a municipality's charge assessed against a pipeline is authorized, once an appeal has been filed. The Commission declines to make a change to the rules in response to this comment.

Comments on Specific Provisions of the New Rules

With respect to new §7.6001, the City of Houston recommends including language clarifying that the rules do not apply to charges under Texas Tax Code, §182.025, or Section 5 of Senate Bill 480. The City of Houston comments that Texas Natural Resources Code, §117.102, and Texas Utilities Code, §121.2025, expressly create an exception for the gross receipts tax authorized under Section 182.025 of the Tax Code. In addition, Section 5 of Senate Bill 480 includes a "savings clause" that excepts from the statutes (1) charges authorized under a contract entered into before the effective date of the Act, September 1, 2005; or (2) charges assessed by a city before September 2006, under an ordinance adopted on or before September 1, 2004. Gross receipts taxes and charges enumerated in the savings clause of Senate Bill 480 are not subject to the appellate procedures outlined by the proposed rules. To avoid any confusion or unnecessary expense by potential appeals of charges that are not subject to the proposed rules, the City of Houston suggests that the Commission should amend rule §7.6001 to include express language that the fees charged pursuant to Tax Code, §182.025, and Section 5 of Senate Bill 480 cannot be appealed to the Commission.

The Commission specifically disagrees with the statement that, as amended, Texas Natural Resources Code, §117.102, includes an exception for the gross receipts tax authorized under Texas Tax Code, §182.025. There is no such exception in that statute; the tax code exception appears only in Texas Utilities Code, §121.2025, as amended, because the referenced tax code provision pertains to distribution utilities' services within incorporated cities and towns. The Commission also disagrees with any suggestion that the rules purport to or could create authority for the Commission to entertain an appeal of charges that are excepted from the statutes. If a municipality determines that a pipeline's appeal includes charges that are excepted from the provisions of Texas Natural Resources Code, §117.102; Texas Utilities Code, §121.2025; or Section 5 of Senate Bill 480, the municipality should include that information in its responsive filing. However, the Commission agrees that including the wording from Section 5 of Senate Bill 480 and Section 9 of House Bill 951 will clarify for potential appellants the municipal charges over which the Commission does and does not have jurisdiction, and the Commission has made that clarifying change in §7.6001(c).

Regarding §7.6001(d), the City of Houston recommends that the Commission delete the phrase "and the Commission's general standards for establishing just and reasonable rates." The municipal charge that may be appealed pursuant to the proposed rules is not a "rate" charged by a gas utility and should not be subject to the same standards analysis employed by the Commission in a gas utility rate case. A "rate" is defined in Section 101.003(12)(A) of the Texas Utilities Code as "any compensation, tariff, charge, fare, toll, rental, or classification that is directly or indirectly demanded, observed, charged, or collected by a gas utility for a service, or commodity described in the definition of gas utility in this section." The charge authorized under the statutes clearly does not fall within definition of a "rate" and should not be subject to regulation as such. The charges authorized by the statutes are for certain proprietary functions of a city to protect and maintain city property and to protect the public. When imposing these charges on pipelines, a city is not acting in its capacity as a public utility regulatory authority, and the charges should not be reviewed using utility rate case standards, according to the City of Houston.

The Commission agrees in part and disagrees in part with this comment. The Commission agrees that the municipal charge that may be appealed is not a rate. The Commission disagrees, however, that it is attempting to regulate the charge as a utility rate. Nevertheless, the standards for determining whether an annual municipal charge assessed against a pipeline is reasonable and cost-based are remarkably similar to the standards employed in utility ratemaking. Such analyses necessarily go beyond mathematical computations. The Commission is not proposing to "set a rate," but only to use commonly recognized analytical principles to determine whether a charge is cost-based and reasonable. The statute sets out the costs that a charge may recoup, so the Commission has limited discretion with respect to the components of a charge. The Commission recognizes that a charge is not a "utility rate," and has not defined the charge as a "rate." However, the underlying principles that inform any analysis cost basis and reasonableness are not restricted to utility ratemaking. The Commission makes no change in the rule text based on this comment.

The City of Houston recommends revision of the notice provisions in §§7.6001(d), 7.6002(e) and 7.6004(b), which allow the Commission to require that a city provide notice to every pipeline that is located in or along a public right-of-way in the city. The City believes that the notice provisions in the proposed rules are beyond the scope of the statutes and are calculated to lead to a more expensive and complicated hearing. The statutes do not expressly require that all of the pipelines located within a city be notified of an appeal. For a city the size of the City of Houston, which covers 617 square miles and lies in three counties, the notice requirements of the proposed rules are unreasonably broad and burdensome. Gathering all of the data required in the city's response, such as mileage and all charges assessed, could be an enormous task for some cities and it may make it very difficult for a city to file a response with the Commission within 30 days.

The Commission disagrees with the comments of the City of Houston for several reasons. First, the Commission's goal is, clearly, not to create "a more expensive and complicated hearing." To the contrary: if the Commission is going to be required to entertain and decide an appeal and a city is going to be required to participate in the proceeding, then it is far more efficient to have one proceeding rather than multiple sequential proceedings. The annual charges assessed by a city against pipelines in its municipal rights-of-way would necessarily involve common issues of law and fact, and the more parties there are in a single proceeding, the smaller will be each party's proportionate share of the Commission's costs. Second, the rules simply authorize the presiding examiner to require that a city give notice; it is not required in every appeal. Third, the examiner is authorized to require the city to notify other pipelines that have been assessed an annual municipal charge, not every pipeline in or along a public right-of-way in a city. Finally, the Commission does not agree that it is unreasonably burdensome for a city to notify every pipeline that has been assessed an annual charge within the prior year; the city should have the names and addresses of those pipelines in its tax records.

Based on these and other comments, the Commission adopts the rules with a change; the presiding examiner may require a municipality to give notice to those pipelines that have been assessed an annual charge within one year prior to the filing of any appeal, rather than two years preceding the appeal, as was proposed. Further, the adopted rules also extend the time that a municipality has to respond to an appeal from 30 days to 90 days. This should be sufficient time for a municipality to gather and compile the materials it surely must already have regarding the municipal charge and the pipelines that have been assessed an annual charge in the previous year.

The City of Laredo questions as both inequitable and not reflected in the delegation of authority from the legislature the provision in §7.6001(d) requiring a municipality to incur the expense and labor to invite all pipeline occupants in the city to be joined in any appeal. By permitting an examiner to expand every proceeding from an individual hearing to a rate setting proceeding for the use of a municipality's rights-of-way, the City of Laredo contends that the Commission unlawfully expands the delegation of authority found in the enacting legislation. The City of Laredo points out that nowhere in the enacting legislation is the Commission authorized to encourage filings nor do anything more that to address the proceedings brought before it. If a pipeline owner feels that it has been unfairly charged, then--and only then--should it come before the Commission. The City of Laredo concludes that this proposed expanded reading would turn every appeal into a witch-hunt for lower rates.

The City of Laredo is also troubled that, by inviting all pipeline owners to a single proceeding, the Commission assumes that every pipeline owner should pay an identical rate. The City of Laredo reminds the Commission that pipelines are of varying sizes and present varying maintenance and management challenges to a municipality. The consolidation of all pipeline owners in any given proceeding is not justified by the enabling statute and could lead to misleading conclusions. The City of Laredo therefore can only conclude the Commission's proposal to include all pipeline owners has more the feel of a municipal witch-hunt rather than an economic consolidation of proceedings.

The Commission disagrees with the City of Laredo's comments. First, there is no requirement that a municipality "invite all pipeline occupants in the city to be joined in any appeal." As noted in previous paragraphs, the rule as proposed would have authorized a presiding examiner to require a city to notify only those pipelines that had been assessed an annual charge within the previous two years, not all pipelines. Although giving notice to all pipelines might well be the consequence of that provision, that was not the scope of the examiner's authority as set forth in the proposed rules. Based on these and other comments, however, the rules as adopted would authorize an examiner to require a city to notify those pipelines that have been assessed an annual charge in the year prior to the filing of an appeal but, again, not necessarily all pipelines that occupy that city's municipal rights-of-way. Further, as set forth in response to comments by the City of Houston, if the Commission is going to be required to entertain and decide an appeal and a city is going to be required to participate in the proceeding, then it is far more efficient to have one proceeding rather than multiple sequential proceedings. The pipeline charges would necessarily involve common issues of law and fact, and the more parties there are in a single proceeding, the smaller will be each party's proportionate share of the Commission's costs. The Commission does not agree that it is unreasonably burdensome for a city to notify every pipeline that has been assessed an annual charge within the prior year; the city should have the names and addresses of those pipelines in its tax records.

The Commission disagrees that there is anything in the rules that would even suggest, much less require, that all pipelines pay the same charge. The Commission agrees that it does not need to be reminded that pipelines vary in size and have differing maintenance and management requirements. The consolidation of all pipelines into a single proceeding has the advantage of reducing costs to both the municipality and the Commission, while at the same time allowing all pipelines and the Commission to understand the basis on which the charges were made, particularly if the charges are different. If a city has assessed different annual charges against pipelines based on size, variations in maintenance or management requirements, or other similar objective factors, but has met the statutory standard of limiting the charges to the cost of administering, supervising, inspecting, and otherwise regulating the location of a pipeline, including maintaining records and maps, then there is no reasonable inference from the statute or the rules that the charges must be equal. The Commission reiterates that such a proceeding is not a rate setting for municipal rights-of-way; it is a review to determine whether a particular charge is authorized by the statute. Only the filing of an appeal by a pipeline will invoke this review; the Commission has no independent authority to initiate a review of any municipality's annual charge assessed against any pipeline.

Finally, the Commission specifically disagrees with the City of Laredo's characterization of the appeal proceedings as a "witch hunt." The Commission finds the use of such terminology to be counterproductive in the effort to craft a procedure that both complies with the statutes and is not unduly burdensome for any one participant. The Commission acknowledges the objections of the City of Laredo but disagrees with them for the reasons stated.

ACSC agrees with the provisions in proposed §7.6002(a) that require a pipeline filing an appeal under this subchapter to do so in writing no later than one year after the pipeline receives the invoice for the charge being appealed. ACSC believes that it is appropriate to require the pipelines to act promptly to bring their appeals. However, ACSC comments, proposed §7.6001(d) is at cross purposes with the one-year requirement by requiring the city to notify all pipelines who have paid the fee within two years preceding the filing of any appeal. If any pipeline receiving such a notice has not, itself, filed its appeal within the one year time frame, it should not be permitted to piggy-back onto another pipeline company's appeal. For that reason, it should not be left to the examiners' discretion to allow intervention by pipelines that did not exercise their right to appeal within the one-year time frame. ACSC suggests that if a city is required to notify other pipeline companies, it should only be required to notify companies that were assessed an annual charge covering the same time period as the time period of the filed appeal. This time period should be within the 12 months preceding the filing of the appeal, according to proposed §7.6002(a).

The Commission agrees with this comment and adopts §7.6001(d) with the suggested change limiting the notice that an examiner may require a city to give to those pipelines that were assessed an annual charge within the year preceding the filing of the appeal.

The City of Laredo questions as both inequitable and not reflected in the delegation of authority from the legislature the requirement in §7.6001(e) that a municipality bear half the expenses of all proceedings regardless of the outcome.

The Commission disagrees with this comment. Neither the statutes nor the rules require a municipality to bear "half the expenses of all proceedings." However, both the statutes expressly require that a pipeline and a municipality share equally the costs incurred by the Commission in connection with the appeal. Texas Natural Resources Code, §117.102(d), states: "The owner or operator of the pipeline facility and the city shall share equally the costs incurred by the commission in connection with the appeal." Texas Utilities Code, §121.2025(d), states: "The owner or operator of the gas pipeline facility and the municipality shall share equally the costs incurred by the railroad commission in connection with the appeal." Neither statute authorizes the Commission to apportion its costs to the pipeline and the city based on the outcome of the appeal. Each side would bear its own expenses in addition to half the Commission's costs.

The City of Laredo comments that the Commission rules further appear to have an internal inconsistency with respect to the effective date of proceedings. The rules say at one point (in §7.6002(a)) that proceedings must be brought within a year, yet at other times (in §7.6001(d) and (e)), the rules empower an examiner to invite pipeline owners who paid access rates up to two years prior to the proceeding into a proceeding. The City of Laredo questions where the Commission finds in the enacting legislation the authority to look backward regarding rates. The City's reading of the enabling legislation is that it is purely prospective in nature. While the City cannot claim the one-year look-back is not warranted since it will be a year after the date of enactment by the time this rule is promulgated, the two-year look-back is plainly not warranted under the enabling legislation.

The City of Laredo further comments that the above-cited section of the proposed rule in which the examiner would be empowered to invite pipeline owners that have paid for use in the preceding two years not only runs counter to the time frames established in the enacting legislation, it also is inconsistent with the internal timing established in the proposed rule. In proposed §7.6002(a), the rule states: "A pipeline shall file an appeal under this subchapter in writing no later than one year after the pipeline receives the invoice for or a similar written notice of the charge being appealed." If any appeal must be made within one year of the invoice being received, why would the examiner be empowered to invite parties that might have paid a rights-of-way fee in the past two years? The City of Laredo concludes that the rules should be limited to parties that have received an invoice within one year of the promulgation of the final rules in this proceeding.

The Commission disagrees with the City of Laredo that the Commission should limit the rules to parties that have received an invoice within one year of the promulgation of the final rules in this rulemaking proceeding, as well as regarding the ability of the Commission to "look back." The enabling legislation does not contain any deadline by which an appeal must be filed or any limitation on how far back the Commission could review assessed annual charges. The only time frames established in the enabling legislation are those found in Section 5 of Senate Bill 480, which provides that the bill applies to an annual charge assessed by a municipality on or after September 1, 2005 (the effective date of the Act) under an ordinance adopted after September 1, 2004, and on or after September 1, 2006, under an ordinance regardless of the date of adoption of the ordinance. Once those requirements have been met, there does not seem to be any limitation on how far back the Commission could review a charge. There is certainly nothing in the statutes that would authorize the Commission to limit appeals to those entities that have received an invoice within 12 months of the effective date of these rules; that would effectively preclude any Commission review beyond the first year that the rules are in effect. For administrative efficiency, however, the Commission has adopted in §7.6002(a) a one-year limitation on the time that a pipeline has to file an appeal. Limiting the scope of the notice that a city may be required to provide to those pipelines that have been assessed an annual charge within the year preceding the filing of the appeal is consistent with that limitation and is reasonable.

The City of Laredo questions as both inequitable and not reflected in the delegation of authority from the legislature the requirement in §7.6002(d) of this rule that requires a municipality to assemble and file a response in 30 days, while a pipeline owner is given a year to determine if it wants to appeal a charge. This is just too short a time for a city to acknowledge receipts of the claim, assemble all the required defense materials outlined in the Commission's proposed rules, and forward the tome to the Commission. While the City of Laredo might agree that 30 days is a sufficient amount of time to file a responsive pleading to the allegations contained in the appeal, it is not what the proposed rules require. The proposed rules require that the municipality in essence provide a defense brief and supporting material in response to a motion for summary judgment; 30 days is just not a sufficient time period to do so, or at least not the first time that an appeal is brought.

The City of Laredo suggested that the Commission might require that a municipality file a response and then set a briefing schedule whereby the city might assemble its materials. This additional time does not prejudice the pipeline owner as the Commission has the right to require any reduction in access fees be reduced back as far as a year prior to the filing. Also in the spirit of fairness and equity, the City of Laredo commented that the Commission should recognize that its rule provides a pipeline owner a year in which to determine whether it should bring an appeal, yet a municipality is provided only a month to assemble its response and defense.

The Commission agrees with this comment and has adopted §7.6002(d) with a change to allow a city 90 days to assemble and file its response. This should be ample time for a municipality to gather and compile the materials it surely must already have regarding the municipal charge and the pipelines that have been assessed an annual charge in the previous year.

With respect to new §7.6004, the City of Laredo recommends that the Commission open a parallel docket to seek comment on the types and the size of expenses associated with acquiring, maintaining, and managing the right-of-way. The City of Laredo offers the Commission a limited list of the categories of costs that the Commission must consider if it is to fairly price rights-of-way access costs.

The Commission disagrees with this comment. There is no need to open such an expansive and potentially unnecessary inquiry; there have been no appeals filed at the Commission since the statutes became effective on September 1, 2005. There is no basis for assuming that the Commission will need to review such data for even one city, much less all cities in the State of Texas. Further, each city can have its own method for determining the annual charge to be assessed against pipelines. In fact, each city can charge the pipelines in its right-of-way differently, as long as there is some objective basis on which it can be determined that the distinctions yield charges that are reasonable and cost-based.

With respect to new §7.6004(b)(2) and (3), the City of Houston comments that the requirements that a city provide the type and distance of each pipeline facility located within a public right-of-way in the city and the total mileage for and charges assessed against all pipeline facilities located within a public right-of-way in the city are also onerous. Further, this information may be irrelevant to a city's charges subject to the statutes. Some cities, including the City of Houston, charge a flat fee rather than a mileage-based fee. There is no reason to assume that a city's costs subject to the statutes are related to mileage. Although it could be a factor, costs could just as likely be a result of the location of the pipeline (i.e., downtown, suburban, or industrial area), the age of the pipeline facilities, the state of repair of the pipeline facilities, or other factors.

The Commission agrees in part and disagrees in part with this comment. The Commission agrees that the requested information may be irrelevant, but disagrees that it will never be relevant. The Commission agrees that there is no basis for assuming that the city's costs are related to mileage; the Commission disagrees that the rules are based on that assumption, and they do not state that. However, the city has the burden of proving both the reasonableness of the charge and that it is cost-based. The Commission considers all listed categories of information to be relevant to that determination.

With respect to new §7.6005(a), the City of Laredo questions where in the enabling legislation the Commission finds the authority to encourage filings by entities other than the appellant. The enabling legislation sought to address only the proceedings brought to the Commission.

The Commission disagrees with this comment. As set forth in response to comments by the City of Houston, if the Commission is going to be required to entertain and decide an appeal and a city is going to be required to participate in the proceeding, then it is far more efficient to have one proceeding rather than multiple sequential proceedings. The pipeline charges would necessarily involve common issues of law and fact, and the more parties there are in a single proceeding, the smaller will be each party's proportionate share of the Commission's costs. The Commission does not agree that it is unreasonably burdensome for a city to notify every pipeline that has been assessed an annual charge within the prior year; the city should have the names and addresses of those pipelines in its tax records. The consolidation of all pipelines into a single proceeding has the advantage of reducing costs to both the municipality and the Commission, while at the same time allowing all pipelines and the Commission to understand the basis on which the charges were made, particularly if the charges are different.

With respect to new §7.6006, the City of Laredo inquires what the Commission's experience is with establishing the validity of rights-of-way costs, and suggests that before establishing the rule, the Commission should open a parallel proceeding to seek guidance as to how to make these assessments. The City of Laredo suggests, for instance, that the Commission offer a recognition of the types of expenses that a municipality needs to recover in the form of fees paid by pipeline owners and other rights-of-way occupants.

The City of Laredo comments that a pipeline owner operating with a franchise gains three types of property rights, all of which impose costs on the municipality. First, a pipeline owner gains an option to place facilities in the rights-of-way, which imposes the cost to the city of a burden of potential use. Second, a pipeline owner gains a right to construct and maintain facilities already installed in the rights-of-way. This right imposes actual costs to local governments' burden on the rights of way. Finally, the pipeline owner obtains an ongoing right of use or occupation of the rights-of-way to do business. The City of Laredo explains that these three different burdens are met with three different kinds of compensation. The option to access the rights-of-way is typically paid for with an annual option payment, usually a fixed sum. The payment for facilities actually installed is typically recovered on a linear or cubic measure. Finally, the ongoing right to occupy the rights-of-way is covered by a fee that offsets the lost opportunity costs to use that space for other rights-of-way occupants. The types of expenses that need to be captured in a right-of-way fee include: acquisition costs for obtaining rights-of-way; administrative or processing costs; inspection costs; costs of safety precautions for right-of-way work; costs of locates and conflict resolution; cost of repairing and maintaining the right-of-way; construction costs for right-of-way improvements; costs to community from delays, etc.

The Commission disagrees with the comment of the City of Laredo regarding opening a parallel proceeding to seek guidance regarding the validity of right-of-way costs. There is no need to open such an expansive and potentially useless inquiry; there have been no appeals filed at the Commission since the statutes became effective on September 1, 2005; there is no basis for assuming that the Commission will need to review such data for even one city, much less all cities in the State of Texas. The Commission has no authority with respect to municipal annual charges assessed against pipelines unless and until a pipeline files an appeal at the Commission. Further, each city can have its own method for determining the annual charge to be assessed against pipelines. In fact, each city can charge each pipeline in its right-of-way differently, as long as there is some objective basis on which it can be determined that the distinctions result in reasonable, cost-based annual charges.

With respect to the City of Laredo's comment regarding acquisition of and costs for municipal rights-of-way, the Commission neither agrees nor disagrees. The Commission will receive evidence of a city's actual basis for an annual charge to determine whether it is both reasonable and cost-based. The Commission does have extensive experience in evaluating investments, costs of capital, and operating expenses, and in evaluating the cost basis, reasonableness, and necessity of such expenditures.

The City of Houston believes that the Commission should revise subsections (c) and (d) of §7.6006, which provide standards for determining whether an annual charge is reasonable and whether an annual charge exceeds the city's costs of regulating pipeline facilities. The statutes merely provide that the city may assess a reasonable annual charge for certain activities and that the charge may not exceed the "cost to the municipality" of certain activities. The statutes do not include the standards enumerated in §7.6006(c) - (d). On an appeal under the statutes, the standard that should be employed by the Commission is whether a city's total charges exceed the city's total costs of administering, supervising, inspecting, and otherwise regulating the location of the pipeline facilities. There is no statutory authority for the Commission to review how such costs are allocated, how much other cities are charging pipelines within their municipal limits, whether certain pipelines should be exempt or excluded from the charges, how these charges have historically been assessed, or how the charges compare to city right-of-way charges to persons other than franchised public utilities. Introducing the additional criteria in subsections (c) and (d) will result in more complicated and expensive hearings. The burden and expense will fall on the city to obtain data on its current and historical charges, as well as data on what other Texas cities are charging for similar activities. The increased complexity and expense associated with the appeal process will make it far more likely that pipelines will appeal assessments made by cities under the statutes because the cost to the cities to defend these charges will be prohibitive. Confronted with the likelihood of unduly burdensome and expensive appeals on an annual basis, cities will be discouraged from assessing the legitimate charges allowed under the statutes. The City of Houston concludes that surely the Texas Legislature's purpose for including an appellate provision in Senate Bill 480 was not to discourage Texas cities from imposing the charges authorized under the statutes.

ACSC also expressed some concern about the standard for reasonableness imposed by proposed §7.6006(c). The statutory requirement is correctly set forth in §7.6006(b), which is that the charge may not exceed the cost to the city of administering, supervising, inspecting, and otherwise regulating the location of the pipeline facility, including maintaining records and maps of the location of the facility. Because each city's pipeline charge must stand or fall on its own merits, ACSC concludes that there is no basis in the statute for determining the reasonableness of the charges by comparing them to other cities or to charges imposed on other users of the right-of-way. Each city will potentially have different systems in place for regulating the pipelines, and it should not be expected that small cities will have the same charges as much larger cities. The cities understand the burden is on them to establish the reasonableness of the charges, and they must do so based upon their own particular administrative and supervisory systems. Cities will also not necessarily impose the same inspection or mapping requirements, therefore their costs will differ.

ACSC also points out that different users of the right-of-way will cause the city to incur different costs. For example, cable television operators are not franchised public utilities, although they have traditionally been franchised by cities and have paid franchise fees to cities based upon their gross receipts obtained from selling their product in the city through use of the public right-of-way. (ACSC notes that cable television providers are now being authorized by the Public Utility Commission of Texas, through certificates of franchise authority, to occupy public right-of-way within municipalities. The providers continue to pay franchise fees to the cities based upon their gross receipts. See , Chapter 66, Tex. Util. Code.) In contrast, a city's charge imposed upon a pipeline might take the form of a fee per linear foot or a flat fee. The form of the charge will be determined by each individual city, but in any event it will most likely not be a fee based upon the pipeline's gross receipts, and therefore will not be commensurate with fees charged to at least one type of non-public utility user of the right-of-way. Because comparability is not a standard mentioned in the statutes, ACSC believes that the requirement that pipeline charges be measured by charges assessed to other users or by other cities is beyond the authority granted to the Commission by the statutes. ACSC therefore suggests that proposed §7.6006 should be revised to remove the comparability standards.

In response to the comments of both the City of Houston and ACSC regarding new §7.6006, the Commission points out that the key standard is in subsection (b)(1) of both statutes, which authorize a city to assess a reasonable annual charge for certain costs associated with managing the location of a pipeline. This evaluation involves more than just checking the city's mathematical calculations. An analysis of the reasonableness of a municipality's annual charge must include the allocation of the city's costs. Each city can have its own methodology for assessing charges against pipelines. In fact, each city can assess different annual charges against the pipelines in its right of way differently, as long as there is some objective basis on which it can be determined that the distinctions result in annual charges that are reasonable and cost-based.

It may be unfortunate that cities could be required to expend additional sums to defend their charges in appeals brought before the Commission; however, it is not a certainty that any appeals will be filed. It seems likely that a pipeline will not appeal the assessment of an annual charge that the pipeline perceives to be reasonable and cost-based. The more transparent a city can make the development of its charges, the less likely that cities, pipelines, or the Commission will be required to engage in appeal proceedings.

In response to the City of Houston's comment regarding legislative intent, the Commission agrees that it is likely that the legislature did not intend to inhibit cities' assessments of authorized charges. However, the Commission must recognize that there was some basis for the legislature to enact these statutes; it seems fair to conclude that the legislature did intend to limit the charges that cities could assess against pipelines to those that meet the requirements of the statutes. The Commission further points out that regardless of the inhibiting effect of the statutes, the Commission lacks discretion not to implement them.

Commenting on new §7.6006, the City of Laredo notes that §7.6003, which establishes the contents of an appeal, does not require a pipeline owner to list any amount it is paying for access to any rights-of-way in any other community within Texas or any other state for access to rights-of-way. While the City agrees that such a listing is not dispositive as to the costs incurred by a municipality in acquiring rights-of-way, as well as maintaining and managing the risks associated with any individual pipeline owner, such a list would provide the Commission with insights into what a range of costs should be. The Commission agrees that this information might be helpful in evaluating the reasonableness of municipal annual charges assessed against pipelines. A pipeline's appeal might include this information; if it does not, the city could certainly request it in any discovery that the presiding examiner might permit.

Regarding new §7.6007, the City of Laredo questions both the legal authority and the policy justification for requiring a municipality to bear half of the expenses in a proceeding that it did not initiate, especially in cases in which a municipality successfully defends its pricing. The City of Laredo suggests that should it or another municipality be forced to defend its rights-of-way pricing, it should only be made to bear any expense if it is found to be over-pricing access to the rights-of-way. The City of Laredo states that the enacting legislation did not provide for shared costs and therefore the Commission is free to establish its own rule. From a public policy standpoint, the City of Laredo contends, the Commission should recognize that if a municipality is forced to underwrite half of the proceedings, regardless of their outcomes, the Commission will in fact be encouraging the filing of appeals. That was not the intent of the legislature in establishing the enacting legislation, nor should it be the Commission's intent.

The Commission disagrees with this comment, noting that the enacting legislation expressly provides for shared costs. Texas Natural Resources Code, §117.102(d), states: "The owner or operator of the pipeline facility and the city shall share equally the costs incurred by the commission in connection with the appeal." Texas Utilities Code, §121.2025(d), states: "The owner or operator of the gas pipeline facility and the municipality shall share equally the costs incurred by the railroad commission in connection with the appeal." Neither the statutes nor the rules require a municipality to bear "half the expenses of all proceedings." However, both statutes and the rules require that a pipeline and a municipality share equally the Commission's costs. Each side would bear its own expenses in addition to half the Commission's costs. Neither statute authorizes the Commission to apportion its costs to the pipeline and the city based on the outcome of the appeal. The Commission has no discretion to apportion its costs other than equally between the pipeline(s) and the city.

ACSC's comment on new §7.6007 states that the rule assumes that but for the pipeline's appeal of the city's charges, the Commission would not be open for business and it would not have a paid staff of employees. Clearly, that is not the case. The preamble to the proposed rules does not state that the Commission will have to hire additional employees to handle the appeals, nor does it imply that existing staff will work only on the appeals that are filed. If, as the preamble asserts, "the net fiscal impact to the state is expected to be zero," then the pipelines and the city should only be expected to reimburse the Commission for its out-of-pocket expenses that would not have been incurred but for the filing of the appeal. If the parties are required to reimburse the Commission for the staff employees' salaries and benefits, and a portion of the Commission's costs incurred simply to keep its doors open for business ( i.e. , overhead costs associated with having telephones, computers, and fax machines, as well as hearing rooms, available), then the result will be that the net fiscal impact to the Commission will be positive, not zero.

ACSC states that the reimbursement of out-of-pocket costs is consistent with Commission practice in other proceedings. For example, in gas distribution rate cases, the statute authorizes municipal regulatory authorities to be reimbursed for their rate case expenses incurred in reviewing a tariff application and in participating at the appeal of their rate orders at the Commission. The Commission's practice has been to approve the reimbursement of the municipalities' out-of-pocket expenses, but not those expenses that the cities would have incurred even in the absence of the rate case, such as time spent by a city attorney advising the municipality. The cities in the pipelines' appeals will not be voluntary participants in tariff filings, and will not be affirmatively seeking relief from the Commission. ACSC concludes that it is not reasonable to have them reimburse the Commission for costs that the Commission will incur regardless of whether the cities' pipeline charges are appealed.

The Commission agrees in part and disagrees in part with ACSC's comment. The Commission agrees that the net fiscal impact to the State of Texas is not zero; the net fiscal impact to the state is positive and would be in the amount that the municipalities and the pipelines reimburse the Commission. The net fiscal impact to the Railroad Commission would be zero, however, because the reimbursement payments would simply displace the current general revenue funding for the Commission's costs. The Commission disagrees with ACSC regarding apportionment of costs; the Commission has no discretion to apportion its costs other than equally between the pipeline(s) and the city.

The City of Houston raises a number of constitutional issues. Although the City of Houston acknowledges that the Commission cannot address the constitutionality of a statute in a rulemaking, it believes it is important to point out potential constitutional concerns with Senate Bill 480 and the Statutes. The City of Houston recognizes that the legislature has delegated certain functions to the Commission in Senate Bill 480, and therefore it is necessary for the Commission to enact rules concerning how it will carry out those functions. However, the City of Houston points out, implementing rules will not cure any constitutional defects in the statutes.

The City of Houston notes that, as a state agency, the Commission is part of the executive branch of state government. An executive-branch agency can exercise powers properly delegated to it by the legislature, provided that the powers are executive branch powers and further provided that the statute provides sufficient criteria and guidance. As a practical matter, executive branch agencies exercise some quasi-legislative powers (rulemaking under a statute) and some quasi-judicial powers (contested case adjudication). However, a legislative agency cannot exercise a judicial function such as resolving property rights or ruling on the legality of constitutional provisions, statutes, or municipal ordinances.

The City of Houston is a home rule city. As such, it exercises legislative powers through enactment of ordinances. Whether a City of Houston ordinance is legal or constitutional is a judicial question, reviewable by a court of law. The City does not know of any instance in which a state agency can make a " de novo " legal determination as to the legality of an ordinance or other legislation.

The City of Houston notes that there is a distinction from utility regulation. In the area of gas utility regulation, the state has created a hybrid system in which cities have original jurisdiction to regulate the rates of gas utilities operating within their jurisdiction. A city's ratemaking decisions about a private gas utility can be appealed de novo to the Commission, but the Commission's decision in turn is reviewable by a district court under the substantial evidence rule. The City of Houston notes that two things distinguish this scenario from Senate Bill 480 review: (1) the Commission is reviewing a utility rate decision, which draws on an extensive body of law as to what is and is not correct ratemaking by a city, and (2) the Commission's decision on appeal is reviewable by a court of law. Under Senate Bill 480, the Commission will not be reviewing a utility rate decision or order. It will review legislative enactments of a city (in the case of Houston, a home rule city's ordinance setting conditions and charges for use of city streets). The city will not be acting as a utility rate regulator, but as a sovereign governmental body exercising a proprietary function: control of its streets and rights of ways.

The City of Houston also points out that it is significant that Senate Bill 480 has no provision for judicial review. Where agencies exercise authority in contested cases, as in utility ratemaking, a provision for judicial review may be necessary for the statute to be constitutional. In the absence of judicial review, an agency decision becomes a final decision. Texas cases that upheld agency ratemaking authority have stressed that judicial review was essential for the powers delegated to an executive branch agency to be lawful.

Further, the City of Houston asserts that under Senate Bill 480, the Commission is expressly granted authority to "declare the charge invalid or reduce the charge to an amount authorized by this statute." This raises an additional constitutional issue. A reviewing agency or court must normally send a matter back to the original decision maker to be corrected if the rate or charge is improper. For instance, if the Commission sets a gas rate at an unlawful level, a district court cannot set the rate at a correct level. It must remand the rate case to the Commission. Under Senate Bill 480, the Commission, an executive branch agency, would be adopting rates for street use in municipalities--a legislative and proprietary function of the municipality.

Additionally, the City of Houston observes that the closest regulatory scheme to Senate Bill 480 is probably the Local Government Code Chapter 402 provision for local drainage utilities. Before cities can charge landowners drainage fees, the city must take specified steps to create a drainage utility, and the rates charged by the city must meet certain utility standards for reasonableness, allocation and recovery of cost. A city's drainage utility fee is not appealable to a state agency. If a landowner thinks the drainage utility fee is not consistent with statute, he must go to court to challenge its legality. The difference between the local drainage utility statute and Senate Bill 480 is that the former declares the municipal charge in question to be a utility charge, it requires the municipality to create a "utility", and it has precise standards for lawful charges. Even then, the legality of the charges is not subject to agency review, but only judicial review.

Finally, the City of Houston notes that, although the city and the pipeline are required under Senate Bill 480 to pay the hearing costs incurred by the Commission, the City believes that this requirement may be unconstitutional. The City is not aware of any other statute in Texas under which a private party and a municipality or any other parties before an agency must bear the agency's cost in a contested case hearing. This is properly a cost to be borne by the State.

The Commission acknowledges the Constitutional issues raised by the City of Houston, and neither agrees nor disagrees with the city's statements. The Commission agrees that it cannot address the constitutionality of a statute in a rulemaking and is obligated to implement the statutes.

Summary of New Rules as Adopted

The Commission adopts new §7.6001, relating to General Provisions, to implement the authority of the Commission to hear an appeal from a pipeline that has been assessed an annual charge pursuant to Texas Natural Resources Code, §117.102(b)(1), or Texas Utilities Code, §121.2025(b)(1). Under Texas Natural Resources Code, §117.102(d), and Texas Utilities Code, §121.2025(d), the Commission has exclusive jurisdiction to determine whether a city's annual charge is authorized under Texas Natural Resources Code, §117.102(b)(1), or Texas Utilities Code, §121.2025(b)(1). In this subchapter, "pipeline" means an owner or an operator of a hazardous liquid, carbon dioxide, or natural gas pipeline facility that is located in a public right-of-way in the city; "city" means the city or the municipality that assessed an annual charge pursuant to Texas Natural Resources Code, §117.102(b)(1), or Texas Utilities Code, §121.2025(b)(1); "regulating a pipeline facility" means administering, supervising, inspecting, and otherwise regulating the location of a pipeline facility, including maintaining records and maps of the location of the pipeline facility; "public right-of-way in the city" means public roads, highways, streets, alleys, streams, canals, or other public ways located within a city and maintained by the city; and "director" means the director of the Gas Services Division or the director's delegate.

The Commission will hear an appeal filed under this subchapter de novo . The appeal will be handled by a legal examiner and a technical examiner pursuant to this subchapter; the Commission's rules of Practice and Procedure, 16 Texas Administrative Code Chapter 1; and the Commission's general standards for establishing just and reasonable rates. The examiners may require that the city send notice of an appeal filed under this subchapter to all pipelines that the city identifies as having been assessed an annual charge within one year preceding the filing of the appeal. The examiners may exercise their discretion in deciding whether to permit intervention by another pipeline or to join another pipeline as a necessary party to an appeal. A pipeline that files or intervenes in an appeal under this subchapter and the city that assessed the charge being appealed shall share the costs incurred by the Commission in connection with the appeal, pursuant to proposed new §7.6007, relating to Procedure for Determining and Sharing of the Commission's Costs.

The Commission adopts new §7.6002, relating to Procedure for Filing and Service of an Appeal, Obligation of City to Respond, and Intervention. As proposed, a pipeline must file an appeal under this subchapter in writing no later than one year after the pipeline receives the invoice for or a similar written notice of the charge being appealed. The pipeline must file the appeal with the director, who assigns a docket number. Thereafter, all documents relating to the appeal must include the assigned docket number and must be filed in the Office of General Counsel Docket Services. The pipeline is required to mail or deliver a copy of the appeal to the city attorney, the city secretary, or any other city official authorized to receive service of process in civil proceedings within 5 days of the date the pipeline files the appeal at the Commission. The city has 90 days from the date it receives an appeal to file its response to the appeal, in writing, at the Commission. The city is required to simultaneously serve a copy of the response on the pipeline. The examiners assigned to an appeal may require the city to mail notice of the appeal to each pipeline identified in the city's response, at the address stated in the response, stating that the pipeline may intervene in the appeal. Another pipeline with a pipeline facility within public right-of-way in the city may file a motion to intervene in the appeal within 30 days after any notice of the appeal is mailed to the pipelines.

The Commission adopts new §7.6003, relating to Contents of Appeal. In its appeal, a pipeline must include the name, mailing address, and telephone number, and facsimile transmission number and electronic mail address, if available, of the pipeline and any authorized representative of the pipeline and the city attorney, the city secretary, or any other city official authorized to represent the city in an appeal filed under this subchapter. The pipeline must describe the charge assessed by the city against the applicable pipeline facilities; state the basis for the pipeline's claim that the charge is not authorized under Texas Natural Resources Code, §117.102(b)(1), or Texas Utilities Code, §121.2025(b)(1); and include all supporting documentation and citations to authority. The pipeline or its authorized representative must sign the appeal in ink.

The Commission adopts new §7.6004, relating to Contents of Response. The city must include the name, mailing address, and telephone number, and facsimile transmission number and electronic mail address, if available, of every pipeline that has been assessed an annual charge under Texas Natural Resources Code, §117.102(b)(1), or Texas Utilities Code, §121.2025(b)(1). In addition, the city must provide a detailed explanation of its methodology for calculating the annual charge assessed against the applicable pipelines, including but not limited to a detailed explanation of and the specific cost elements for regulating the applicable pipeline facilities and all other pipeline facilities located on, along, or across public right-of-way in the city, based on historical costs actually incurred adjusted for known and measurable changes; a list of every owner or operator of pipeline facilities that are located on, along, or across public right-of-way in the city, the type and distance of each pipeline facility within public right-of-way in the city, and the name, mailing address, and telephone number, and facsimile transmission number and electronic mail address, if any, of each such pipeline and its authorized representative contained in city records; the total mileage for and charges assessed against all pipeline facilities of each type located on, along, or across public right-of-way in the city; and for those pipeline facilities that are located on, along, or across public right-of-way in the city but that were not assessed an annual charge, a detailed explanation of the reason for not assessing the annual charge.

The Commission adopts new §7.6005, relating to Contents of Motion to Intervene. A pipeline seeking to intervene in an appeal filed by another pipeline must include the name, mailing address, and telephone number, and facsimile transmission number and electronic mail address, if available, of the movant pipeline and any authorized representative of the movant pipeline. A pipeline seeking to intervene must describe the charge assessed by the city against the movant pipeline facilities; state the basis for the pipeline's claim that the charge is not authorized under Texas Natural Resources Code, §117.102(b)(1), or Texas Utilities Code, §121.2025(b)(1); include all supporting documentation and citations to authority; and state the movant pipeline's justiciable interest in the appeal in which the movant pipeline seeks to intervene. The movant pipeline or its authorized representative must sign the motion to intervene in ink.

The Commission adopts new §7.6006, relating to Standards for Determining an Appeal. In an appeal brought under this subchapter, the city has the burden of establishing that every annual charge at issue is authorized by Texas Natural Resources Code, §117.102, or Texas Utilities Code, §121.2025. If the city fails to demonstrate that any annual charge at issue is authorized by Texas Natural Resources Code, §117.102, or Texas Utilities Code, §121.2025, the Commission must either declare the annual charge invalid in its entirety or reduce the annual charge to an amount authorized by Texas Natural Resources Code, §117.102, or Texas Utilities Code, §121.2025. A city may assess a reasonable annual charge for the placement, construction, maintenance, repair, replacement, operation, use, relocation, or removal by an owner or operator of a pipeline facility on, along, or across public right-of-way in the city. This charge may not exceed the cost to the city of regulating the pipeline facility.

In determining whether an annual charge is reasonable, the Commission may consider whether the charges assessed by the city against pipeline facilities are commensurate with charges assessed for other uses of public right-of-way in the city, other than by franchised public utilities; whether the charges assessed by the city are commensurate with charges assessed against pipeline facilities in public right-of-way by other cities in Texas; and whether total costs of regulating pipeline facilities within the city are fairly allocated among all pipeline facilities, including whether the exclusion of any pipelines from the charges is reasonable.

In determining whether an annual charge exceeds costs of regulating pipeline facilities the Commission may consider historical costs attributable to regulating pipeline facilities adjusted for known and measurable changes, including out-of-pocket expenses and an allocable portion of the capital depreciation of specialized equipment and salaries, employee benefits, and reasonable overhead for city officials and employees engaged in and fairly attributable to regulating pipeline facilities; whether any costs advanced by the city to support the charge are attributable to the costs of activities other than regulating public right-of-way in the city, such as safety regulation, emergency response, or other action that is not required to administer, supervise, inspect, or otherwise regulate the location of a pipeline facility in public right-of-way in the city, whether or not authorized to be performed by the city; and whether charges assessed against pipeline facilities in the aggregate exceed the city's actual or reasonably expected costs of regulating pipeline facilities in public right-of-way in the city.

The Commission adopts new §7.6007, relating to Procedure for Determining and Sharing of the Commission's Costs. The pipelines and a city that are parties to an appeal under this subchapter must reimburse the Commission for its costs incurred in connection with the appeal. In each appeal, the city must pay half of the Commission's costs and each pipeline that files or intervenes in the appeal must pay an equal share of the half of Commission's costs. The Commission will determine its costs as follows: First, the director and the Commission's General Counsel will require employees assigned to an appeal under this subchapter to keep records of time spent on each appeal. These will be filed with and made part of the record in each appeal docket. Then, from time to time, the Commission will specify an hourly rate as its costs for each employee hour devoted to appeals under this subchapter. The rate is based on the employee's hourly compensation and multiplied by a factor to cover employment benefit costs and fairly allocable overhead costs (use of copiers, faxes, telephones, computers, hearing room, etc.).

The director will invoice the pipelines and the city for Commission costs, based on the hours recorded by Commission employees and their hourly rates, together with any out-of-pocket expenses not included in the overhead factor, within 30 days after the disposition of an appeal. The pipelines and the city must each remit to the Commission the invoiced costs within 30 days after receipt of notice of the total amount or after disposition of any appeal from the invoice, whichever is later. Any pipeline or the city may contest the amount of the costs invoiced to it by filing with the director a written request for reconsideration within 30 days after the date of the invoice, stating the basis for reconsideration. The director will forward any recommendation to the Commission with the record, and the Commission will determine to approve or adjust the invoiced costs within 30 days.

The Commission adopts the new rules to implement the provisions of new Texas Natural Resources Code, §117.102, and new Texas Utilities Code, §121.2025, enacted by Senate Bill 480 and House Bill 951, 79th Legislature, Regular Session (2005), which give the Commission exclusive jurisdiction to determine whether a city's annual charge is authorized under Texas Natural Resources Code, §117.102(b)(1), or Texas Utilities Code, §121.2025(b)(1); and pursuant to Texas Natural Resources Code, §81.052, which authorizes the Commission to adopt all necessary rules for governing and regulating persons and their operations under the jurisdiction of the Commission.

Texas Natural Resources Code, §81.052 and §117.102, and Texas Utilities Code, §121.2025, are affected by the new rules.

Statutory authority: Texas Natural Resources Code, §81.052 and §117.102, and Texas Utilities Code, §121.2025.

Cross-reference to statutes: Texas Natural Resources Code, §81.052 and §117.102, and Texas Utilities Code, §121.2025.

Issued in Austin, Texas, on February 23, 2007.

§7.6001.General Provisions.

(a) The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise:

(1) City--The city or the municipality that assessed an annual charge pursuant to Texas Natural Resources Code, §117.102(b)(1), or Texas Utilities Code, §121.2025(b)(1).

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

(3) Pipeline--An owner or an operator of a hazardous liquid, carbon dioxide, or natural gas pipeline facility that is located in a public right-of-way in the city.

(4) Public right-of-way in the city--Public roads, highways, streets, alleys, streams, canals, or other public ways located within a city and maintained by the city.

(5) Regulating a pipeline facility--Administering, supervising, inspecting, and otherwise regulating the location of a pipeline facility, including maintaining records and maps of the location of the pipeline facility.

(b) This subchapter implements the authority of the Commission to hear an appeal from a pipeline that has been assessed an annual charge pursuant to Texas Natural Resources Code, §117.102(b)(1), or Texas Utilities Code, §121.2025(b)(1).

(c) Under Texas Natural Resources Code, §117.102(d), and Texas Utilities Code, §121.2025(d), the Commission has exclusive jurisdiction to determine whether a city's annual charge is authorized under Texas Natural Resources Code, §117.102(b)(1), or Texas Utilities Code, §121.2025(b)(1). Texas Natural Resources Code, §117.102, and Texas Utilities Code, §121.2025, do not affect the validity or enforceability of a contract entered into before September 1, 2005, by a municipality and the owner or operator of a hazardous liquid, carbon dioxide, or gas pipeline, or the enforceability of a charge assessed by a municipality before September 1, 2006, under an ordinance adopted on or before September 1, 2004. Texas Natural Resources Code, §117.102, and Texas Utilities Code, §121.2025, apply to a charge assessed by a municipality on or after September 1, 2005, under an ordinance adopted after September 1, 2004; and on or after September 1, 2006, under an ordinance regardless of the date of adoption of the ordinance.

(d) The Commission will hear an appeal filed under this subchapter de novo . The appeal will be handled by a legal examiner and a technical examiner pursuant to this subchapter; the Commission's rules of Practice and Procedure, 16 Texas Administrative Code Chapter 1; and the Commission's general standards for establishing just and reasonable rates. The examiners may require that the city send notice of an appeal filed under this subchapter to all pipelines that the city identifies as having been assessed an annual charge within one year preceding the filing of the appeal. The examiners may exercise their discretion in deciding whether to permit intervention by another pipeline or to join another pipeline as a necessary party to an appeal.

(e) A pipeline that files or intervenes in an appeal under this subchapter and the city that assessed the charge being appealed shall share the costs incurred by the Commission in connection with the appeal, pursuant to §7.6007 of this title, relating to Procedure for Determining and Sharing of the Commission's Costs.

§7.6002.Procedure for Filing and Service of an Appeal, Obligation of City to Respond, and Intervention.

(a) A pipeline shall file an appeal under this subchapter in writing no later than one year after the pipeline receives the invoice for or a similar written notice of the charge being appealed.

(b) The pipeline shall file the appeal with the director, who shall assign a docket number. Thereafter, all documents relating to the appeal shall include the assigned docket number and shall be filed in the Office of General Counsel Docket Services.

(c) The pipeline shall mail or deliver a copy of the appeal to the city attorney, the city secretary, or any other city official authorized to receive service of process in civil proceedings within 5 days of the date the pipeline files the appeal at the Commission.

(d) The city shall have 90 days from the date it receives an appeal to file its response to the appeal, in writing, at the Commission. The city shall simultaneously serve a copy of the response on the pipeline.

(e) The examiners may require the city to mail notice of the appeal to each pipeline identified in the city's response, at the address stated in the response, stating that the pipeline may intervene in the appeal.

(f) Another pipeline with a pipeline facility within public right-of-way in the city may file a motion to intervene in the appeal within 30 days after any notice of the appeal is mailed to the pipelines pursuant to subsection (e) of this section.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 23, 2007.

TRD-200700710

Mary Ross McDonald

Managing Director

Railroad Commission of Texas

Effective date: March 15, 2007

Proposal publication date: August 25, 2006

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

Chapter 25. SUBSTANTIVE RULES APPLICABLE TO ELECTRIC SERVICE PROVIDERS

The Public Utility Commission of Texas (commission) adopts the amendments to §25.5, relating to Definitions; §25.472, relating to Privacy of Customer Information; §25.473, relating to Non-English Language Requirements; §25.474, relating to Selection of Retail Electric Provider; §25.481, relating to Unauthorized Charges; §25.491, relating to Record Retention and Reporting Requirements; and §25.493, relating to Acquisition and Transfer of Customers from One Retail Electric Provider to Another and repeals §25.482, relating to Termination of Service without changes to the proposed text as published in the November 10, 2006, issue of the Texas Register (31 TexReg 9177). The commission adopts §25.475, relating to Information Disclosures to Residential and Small Commercial Customers; §25.478, relating to Credit Requirements and Deposits; §25.480, relating to Bill Payment and Adjustments; §25.483, relating to Disconnection of Service; §25.485, relating to Customer Access and Complaint Handling; §25.488, relating to Procedures for a Premise with No Service Agreement with changes to the proposed text as published in the November 10, 2006, issue of the Texas Register (31 TexReg 9177). The amendments and repeal, change or eliminate these sections to comport with §25.43, Provider of Last Resort (POLR), which detail when a customer may receive or be placed on POLR service. Recent amendments to §25.43 contemplated that all Retail Electric Providers (REPs) would request disconnection for customers who have not paid their bills, rather than continuing current procedures that permit a REP to transfer a non-paying customer to the Affiliated REP. The amendments also make other changes to conform various customer protection rules to the new §25.43. Theses rules are competition rules subject to judicial review as specified in Public Utility Regulatory Act (PURA) §39.001(e). Project Number 33025 is assigned to this proceeding.

The commission received comments from Alliance for Retail Markets, CPL Energy, LP, Direct Energy, LP, First Choice Power, LP, Gexa Energy, LP, Green Mountain Energy Company, Reliant Energy Retail Services, LLC, Stream Energy, Texas Energy Association for Marketers, TXU Energy Retail, LP, and WTU Retail Energy, LP (collectively "Retail Electric Provider (REP) Coalition"); and Texas Energy Association for Marketers, Liberty Power Texas, LLC, and Strategic Energy (collectively, "Competitive REPs").

Responses to the preamble question:

In the preamble, the commission requested that interested parties provide comments on the following question:

Is there any other language in the Substantive Rules not identified herein that needs to be amended so that it comports with §25.43, POLR? If so, please suggest how the language should be amended.

The REP Coalition noted that §25.475(f), Electricity Facts Label (EFL), prescribes language that must be included in the EFL for a variable rate product. The REP Coalition stated that because the POLR rate is variable, paragraph (1)(C) would seem to require disclosure of an average price for residential and small commercial (<0kW peak demand) customers. The REP Coalition claimed that due to the nature of POLR service, a meaningful average price is not known and historic prices are by no means indicative of what a customer might be billed while on a POLR rate. The REP Coalition pointed out that pursuant to §25.43(k)(1)(A) and §25.43(k)(1)(B), the minimum price for POLR service for residential and small commercial customers is known, and recommended that the disclosure language be modified to allow for the POLR EFL to indicate that the rates shown are the "minimum" rates for POLR service. The REP Coalition recommended that in the alternative, the rule should be amended so that no total cents per kWh price disclosure is required on any POLR EFL.

Commission response

The commission agrees with the REP Coalition's recommendation to modify the disclosure language to allow for the POLR EFL to indicate that the rates shown are the "minimum" rates for POLR service, and has made the recommended changes. As modified, this requirement still only applies to residential and small commercial POLR customer classes, and the change only applies to POLR service and not plans linked to POLR pricing.

The REP Coalition recommended a corresponding change to §25.475(f)(6), which details the format of the EFL. The REP Coalition recommended that for POLR customers, the language should be "Minimum price per kilowatt-hour" instead of "Average price per kilowatt-hour."

Commission response

The commission agrees with the REP Coalition and has made the recommended changes.

The REP Coalition included an additional issue in their response to the commission's question posed in the preamble, regarding the generic "Your Rights as a Customer" document provided on the PUC website. The REP Coalition suggested that once §25.482 is repealed upon conclusion of this project, the commission should consider removing the references to terminating service as it is allowed under this section.

Commission response

The commission agrees that such changes will need to be made upon conclusion of this project.

§25.475, Terms of service document

The REP Coalition proposed to delete §25.475(d)(5)(N)(ii). They argued that this no longer applies since a REP can no longer terminate service to a particular customer and transfer the customer to POLR based on changing market conditions.

Commission response

The commission disagrees with this proposed change. This language was originally located in §25.482 to protect customers from one sided contracting on the part of the REP. The commission previously determined that if the REP has the ability to terminate the service agreement if market conditions change, the customer should also have that ability and sees no need to eliminate that ability now. While it is true that the customer can no longer be transferred to the POLR in these circumstances, the customer should retain the right to be released from its service agreement if market conditions change and the REP has the ability to cancel the contract if market conditions change. Additionally, it needs to be clarified that §25.475(d)(5)(N) gives the customer the ability to terminate service "without penalty." This language currently appears in §25.482(i) but was inadvertently deleted when the subsection was moved from the current §25.482 to the proposed §25.475. The commission has re-inserted the "without penalty" language as the clarification is essential to the original intent of subparagraph (N).

§25.478, Credit Requirements and Deposits

The REP Coalition recommended that the word "terminate" not be deleted in §25.478(j)(3), as proposed. The REP Coalition explained that although the commission's rules under this instant project will no longer contemplate that a REP can terminate a customer and drop them to POLR, a customer could nonetheless terminate its own service. The REP Coalition proffered the example that any time a customer switches to another REP or cancels its service, service with the previous REP is terminated, and the REP should no longer be permitted to hold a deposit or letter of guarantee for amounts in excess of any unpaid bills for service.

Commission response

The commission agrees with the REP Coalition and has made the recommended changes with a minor modification to their proposed language. The commission alters the REP Coalition's recommended language from "or terminate by the customer" to "or the service is terminated by the customer," for clarity.

§25.480, Bill Payment and Adjustments

The REP Coalition suggested deleting the "as appropriate" language from §25.480(j)(6)(F). The REP Coalition stated that the parenthetical "as appropriate" was included in the existing rules to indicate that either "disconnection" or "termination" applied, depending on the REP's status with respect to disconnection rights. The REP Coalition commented that with the instant rule amendments, only disconnection applies and the parenthetical is no longer necessary.

Commission response

The commission agrees with the REP Coalition and has made the recommended changes.

§25.483, Disconnection of Service

The REP Coalition recommended deleting §25.483(b)(1). The REP Coalition claimed that as amended, subsection (b)(2) makes subsection (b)(1) superfluous, as all REPs will have the authority to authorize disconnection of all customers pursuant to commission rules. The REP Coalition stated that there is no longer a reason to bifurcate the authority to disconnect by customer classes. The REP Coalition further stated that §25.43 does not allow a REP to transfer its customer to the POLR for non-payment. The REP Coalition concluded that the provision in §25.483(b)(1), which allows medium and large non-residential customers still receiving service under a contract entered into prior to September 24, 2002, to be transferred to the POLR for non-payment, is no longer valid.

Commission response

The commission disagrees with the REP Coalition that §25.483(b)(1) should be deleted in its entirety. The authority to disconnect medium non-residential and large non-residential customers is differentiated from the authority to disconnect residential and small non-residential customers by the fact that the latter is contingent upon the satisfaction of the requirements given in subsections (b)(2)(A) through (b)(2)(C). If the commission were to delete subsection (b)(1) in its entirety, REPs seeking to disconnect medium non-residential and large non-residential customers would be committed to requirements that have not been in place up to this time. The commission sees no reason to impose such requirements at this time. The commission does note, however, that its Proposal for Publication of October 27, 2006, inadvertently proposed amendment of §25.483(b)(2) that would eliminate the fact that the requirements of subsections (b)(2)(A) through (b)(2)(C) only apply to disconnection authority related to residential and small non-residential customers. The commission has modified the proposed rule to address this inconsistency.

As for the REP Coalition's comment regarding the exception for customers receiving service under a contract entered into prior to September 24, 2002, the commission agrees that such an exception is no longer warranted. This exception was created pursuant to a previous version of §25.43, but was not included in the current POLR rule that became effective on July 31, 2006. If the exception in §25.483(b)(1) were retained, REPs would have no recourse against customers with such contracts who fail to pay. The REP could neither disconnect the customer nor terminate the customer to POLR, as POLRs are no longer required to serve customers for any reason other than the request of the customer or a mass transition. The rule language has been modified accordingly to reflect the REP Coalition's comment.

The REP Coalition suggested relocating and revising proposed §25.483(b)(2)(B), by creating a new §25.475(d)(5)(O). The REP Coalition stated that placing the notice requirement next to other requirements in the terms of service improves the organization of those requirements and will lessen the chance that a REP may inadvertently omit this notice when creating the terms of service document. The REP Coalition stated that the revised language recommended is designed to help this section comport with the continuation of §25.475(d)(5).

Commission response

The commission agrees with the REP Coalition and has made the recommended changes.

§25.485, Customer Access and Complaint Handling

The REP Coalition suggested deleting the "as appropriate" language from §25.485(e)(2)(A) and §25.485(e)(2)(B). The REP Coalition stated that the parenthetical "as appropriate" was included in the existing rules to indicate that either "disconnection" or "termination" applied, depending on the REP's status with respect to disconnection rights. The REP Coalition commented that with the instant rule amendments, only disconnection applies and the parenthetical is no longer necessary.

Commission response

The commission agrees with the REP Coalition and has made the recommended changes.

§25.488, Procedures for a Premise with No Service Agreement

The REP Coalition noted that the amended language in subsection (b)(2)(B) imposes the same requirement as subsection (b)(2)(A), and recommended that subsection (b)(2)(B) be deleted. The REP Coalition explained that since disconnection by a REP is the only option available under the instant rule amendments, all requirements are contained in subparagraph (A).

Commission response

The commission agrees with the REP Coalition and has made the recommended changes.

The REP Coalition suggested that the commission use the word "occupant" instead of "customer" when referring to a premise with no service agreement. The REP Coalition pointed out that a "customer" has a service agreement with the REP, whereas an occupant does not have a service agreement. The REP Coalition claimed that using the term "occupant" in §25.488, would reduce confusion and consistently apply the same term through the rule language.

Commission response

The commission agrees with the REP Coalition and has made the recommended changes.

The Competitive REPs recommended that the proposed rules be amended to recognize the ability of the REPs to disconnect a customer after the expiration of their contract, with proper notice. The Competitive REPs stated that such a modification would address the repeal of §25.482(b)(2), and ensure that this rulemaking does not mandate that a REP serve a customer after contract expiration or force a REP to renew a contract - thereby imposing an obligation to serve on all competitive REPs. The Competitive REPs suggested that given the structure of the rules as amended in this project, this issue would be best addressed by amending §25.488(b) to include the following language: ". . . or the occupant is a customer whose prior service agreement has expired or is no longer in effect."

Commission response

The commission agrees with the Competitive REPs and has made the recommended changes.

Subchapter A. GENERAL PROVISIONS

16 TAC §25.5

The amendments are adopted under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998, Supplement 2006) (PURA) which provides the commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction, and, in particular, §17.004 and §39.101, which direct the commission to implement customer protections for electric customers, and §39.106, which directs the commission to designate providers of last resort.

Cross Reference to Statutes: Public Utility Regulatory Act §§14.002, 17.004, 39.101 and 39.106.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 16, 2007.

TRD-200700613

Adriana A. Gonzales

Rules Coordinator

Public Utility Commission of Texas

Effective date: March 8, 2007

Proposal publication date: November 10, 2006

For further information, please call: (512) 936-7223

16 TAC §§25.472 - 25.475, 25.478, 25.480, 25.481, 25.483, 25.485, 25.488, 25.491, 25.493

The amendments are adopted under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998, Supplement 2006) (PURA) which provides the commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction, and, in particular, §17.004 and §39.101, which direct the commission to implement customer protections for electric customers, and §39.106, which directs the commission to designate providers of last resort.

Cross Reference to Statutes: Public Utility Regulatory Act §§14.002, 17.004, 39.101 and 39.106.

§25.475.Information Disclosures to Residential and Small Commercial Customers.

(a) Applicability. The requirements of this section apply to retail electric providers (REPs) and aggregators, when specifically stated, providing service to residential and small commercial customers.

(b) General disclosure requirements. All printed advertisements, electronic advertising over the Internet, direct marketing materials, billing statements, terms of service documents, and Your Rights as a Customer disclosures distributed by REPs and aggregators:

(1) shall be provided in a readable format, written in clear, plain, easily understood language;

(2) shall not be fraudulent, unfair, misleading, deceptive, or anti-competitive as prohibited by federal and state law; and

(3) upon receipt of a license or certificate from the commission, shall include the REP's certified name or the aggregator's registered name, and the number of the license or registration.

(c) Advertising and marketing materials. If a REP or aggregator advertises or markets the specific benefits of a particular electric product to a customer, then the REP or aggregator shall provide the name of the electric product offered in the advertising or marketing materials.

(1) Print advertisements. Print advertisements and marketing materials, including direct mail solicitations that make any claims regarding price or environmental quality for an electricity product of the REP with respect to a product offered by another REP shall include the Electricity Facts Label. In lieu of including an Electricity Facts Label, the following statement shall be provided: "You may obtain important standardized information that will allow you to compare this product with other offers. Call (name, telephone number, and website (if available) of the REP)." A REP shall provide an Electricity Facts Label (and terms of service document if requested by the customer), relating to a service or product being advertised to each person who requests it.

(2) Television and radio advertisements. A REP shall include the following statement in any television or radio advertisement that makes a specific claim about price or environmental quality for an electricity product of the REP with respect to a product offered by another REP: "You can obtain important standardized information that will allow you to compare this product with other offers. Call (name, telephone number and website (if available) of the REP)." This statement is not required for general statements regarding savings or environmental quality, but shall be provided if a specific price is included in the advertisement, or if a specific statement about savings or environmental quality compared to another REP is made. A REP shall provide an Electricity Facts Label (and terms of service if requested by the customer), to each person who requests it.

(3) Internet advertisements. Advertisements on the internet shall comply with the provisions of paragraph (2) of this subsection. Each REP shall prominently display the Electricity Facts Label for any products offered by the REP for enrollment on the website without the consumer having to enter any personal information other than zip code and type of service being sought (residential or commercial). The Electricity Facts Label shall be printable in a one-page format.

(4) Outdoor advertisements. Advertisements on outdoor signs such as billboards shall comply with the provisions of paragraph (2) of this subsection. If the REP's phone number is included on the advertisement, the phone number shall not be required in the disclaimer statement.

(d) Terms of service document.

(1) For each electric service or electric product that it offers to residential or small commercial customers, a REP shall create a terms of service document. Each terms of service document shall be subject to review by the commission and shall be furnished to the commission or its staff upon request.

(2) For services and products that a REP makes widely available to residential and small commercial customers, a REP shall assign an identification number to each version of its terms of service document, and shall publish the number on the terms of service document.

(3) The terms of service document shall be provided to new customers and, if the service or product is being made widely available to residential and small commercial customers, to any eligible customer that requests the terms of service. An updated terms of service document shall also be provided to current customers at any time that the REP materially changes the terms and conditions of service with its customers. Upon request, a customer may receive an additional copy of the terms of service document under which it is receiving service.

(4) A REP shall retain a copy of each version of the terms of service during the time that the plan is offered and for two years after that version of the terms of service is no longer offered and no customer is being served under that version of the terms of service.

(5) The following information shall be conspicuously contained in the terms of service document:

(A) The REP's certified name, mailing address, Internet website address (if applicable), and a toll-free telephone number (with hours of operation and time-zone reference);

(B) The Electricity Facts Label as specified in subsection (f) of this section, unless the Electricity Facts Label is provided as a separate document at the same time as the terms of service document is provided;

(C) A statement as to whether there is a minimum term of service, any automatic renewal provisions, how service can be cancelled, and any fees associated with cancellation of service;

(D) A statement as to whether there are penalties to terminate service before the end of the minimum term of service, and the amount of those penalties, and whether there are any conditions under which those penalties will not apply;

(E) If the REP requires deposits from its customers:

(i) a description of the conditions that will trigger a request for a deposit;

(ii) the maximum amount of the deposit or the manner in which the deposit amount will be determined;

(iii) a statement that interest will be paid on the deposit at the rate approved by the commission, and the conditions under which the customer may obtain a refund of a deposit;

(iv) an explanation of the conditions under which a customer may establish satisfactory credit pursuant to §25.478(a) of this title (relating to Credit Requirements and Deposits);

(v) the right of a customer or applicant who qualifies for the rate reduction program to pay a required deposit that exceeds $50 in two equal installments pursuant to §25.478(e)(3) of this title; and

(vi) for an affiliate REP or Provider of Last Resort (POLR), the customer's right to post a letter of guarantee in lieu of a deposit pursuant to §25.478(i) of this title.

(F) The description of any charges resulting from a move-in or switch that may be passed through by the transmission and distribution utility (TDU) and paid by the customer, including but not limited to an out-of-cycle meter read, and connection or reconnection fees;

(G) The itemization of any services that are included in the customer's terms of service, including:

(i) the specific methods and prices by which the customer will be charged for electric service and

(ii) the price for each service or product other than electric service. If a REP has bundled the charges for these other services together, the total price for services other than electric service;

(H) The itemization of any quantifiable charges and fees that may be imposed on the customer by the REP, such as an application fee, charges and fees for default, late payment, returned checks, cancellation of service, and termination of service;

(I) A description of payment arrangements and bill payment assistance programs offered by the REP;

(J) All other material terms and conditions, including, without limitation, exclusions, reservations, limitations, and conditions of the terms of services offered by the REP;

(K) In a conspicuous and separate paragraph or box:

(i) A description of the right of a new customer to rescind service without fee or penalty of any kind within three federal business days after receiving the terms of service document pursuant to §25.474(j) of this title (relating to Selection of Retail Electric Provider); and

(ii) Detailed instructions for rescinding service, including the telephone number and, if available, facsimile machine number or email address that the customer may use to rescind service.

(L) A statement informing the customer that the REP cannot deny service or require a prepayment or deposit for service based on a customer's race, creed, color, national origin, ancestry, sex, marital status, lawful source of income, level of income, disability, familial status, location of a customer in a economically distressed geographic area, or qualification for low income or energy efficiency services;

(M) A description of any collection fees or costs that may be assessed to the customer by the REP and that cannot be quantified in the terms of service document;

(N) A statement of customer's ability to terminate service without penalty in the event:

(i) The customer moves to another premises;

(ii) Market conditions change and the terms of service document allows the REP to terminate service without penalty in response to changing market conditions; or

(iii) A REP notifies the customer of a material change in the terms and conditions of the service agreement; and

(O) A statement informing the customer of the REP's authority to order disconnection of the customers for non-payment.

(e) Notice of changes in terms and conditions of service.

(1) A REP shall provide written notice to its customers at least 45 days in advance of any material change in the terms of service document. The notice shall identify the material change and clearly specify what actions the customer needs to take to terminate the terms of service agreement without a penalty, the deadline by which such action must be taken, and the ramifications if such actions are not taken within the specified deadline. This notice may be provided in or with the customer's bill or in a separate document, but shall be clearly and conspicuously labeled with the following statement: "Important notice regarding changes to your terms of service." The notice shall clearly state that the customer may decline any material change in the terms of service and terminate the terms of service agreement without a penalty. Notice of the change is not required for material changes that benefit the customer or for changes that are mandated by a regulatory agency. Notice is not required for changes in rates if the terms of service clearly specify the manner in which rates may be adjusted (i.e., variable rate products).

(2) A REP may utilize an automatic renewal clause. Any service renewed through the activation of an automatic renewal clause shall be in effect for a maximum of 31 days and such clause may be repeatedly activated unless cancelled by the customer or unless the REP materially changes the terms of service.

(f) Electricity Facts Label.

(1) Pricing disclosures. Pricing information disclosed by a REP in an Electricity Facts Label shall include:

(A) For the total cost of electric services, exclusive of applicable taxes:

(i) If the billing is based on prices that will not vary by season or time of day, the total average price for electric service reflecting all recurring charges, including generation, transmission and distribution, and other flat rate charges expressed as cents per kilowatt hour rounded to the nearest one-tenth of one cent for the following usage levels:

(I) For residential customers, 500, 1,000, and 1,500 kilowatt hours per month; and

(II) For small commercial customers, 1,500, 2,500, and 3,500 kilowatt hours per month;

(ii) If the billing is based on prices that vary by season or time of day, the average price for electric service, reflecting all recurring charges and based on the applicable load profile approved by the commission, expressed as cents per kilowatt hour rounded to the nearest one-tenth of one cent for each usage level as follows:

(I) For residential customers, 500, 1,000, and 1,500 kilowatt hours per month; and

(II) For small commercial customers, 1,500, 2,500, and 3,500 kilowatt hours per month;

(iii) If a REP combines the charges for electric service with charges for any other product, the REP shall:

(I) If the electric services are sold separately from the other products, disclose the total price for electric service separately from other products; and

(II) If the REP does not permit a customer to purchase the electric service without purchasing the other products, state the total charges for all products as the price of the total electric service.

(B) If the pricing plan includes prices that will vary according to the season or time of day, the statement: "This price disclosure is an example based on average usage patterns - your actual price for electric service may be different depending on how and when you use electricity."

(C) If the pricing plan envisions prices that will vary during the term of the service because of factors other than season and time of day, the statement: "This price disclosure is an example based on average service prices - your average price for electric service will vary according to your usage and (insert description of the basis for and the frequency of price changes during the service period)." Not withstanding the forgoing, for POLR service the disclosure shall state the following: "This price disclosure is an example based on minimum service prices - your average price for electric service will vary according to your usage and (insert description of the basis for and frequency of price changes during the service period.)"

(D) If the price of electric service will not vary, the phrase "fixed price" and the length of time for which the price will be fixed;

(E) If the price of electric service will vary, the phrase "variable price" and a description of how the prices will change and when; and

(F) The criteria used to calculate the average pricing disclosures for residential customers.

(2) Service terms disclosures. Specific service terms that shall be disclosed on the Electricity Facts Label are:

(A) The minimum service term, if any; and

(B) Early termination penalties, if any.

(3) Fuel mix disclosures. The Electricity Facts Label shall contain a table depicting, on a percentage basis, the fuel mix of the electricity product supplied by the REP in Texas. The table shall also contain a column depicting the statewide average fuel mix. The break-down for both columns shall provide percentages of net system power generated by the following categories of fuels: coal and lignite; natural gas; nuclear; renewable energy (comprising biomass power, hydropower, solar power and wind power); and other sources. Fuel mix information shall be based on generation data for the most recent calendar year.

(A) The percentage used shall be rounded to the nearest whole number. Values less than 0.5% and greater than zero may be shown as "<.5%".

(B) Any source of electricity that is not used shall be listed in the table and depicted as "0.0%."

(4) Emissions and waste disclosures. The Electricity Facts Label shall contain a bar chart that depicts the amounts of carbon dioxide, nitrogen oxide, sulfur dioxide, particulate emissions and nuclear waste attributable to the aggregate known sources of electricity identified in paragraph (3) of this subsection. Emissions and waste disclosures shall be based on data for the most recent calendar year.

(A) Emission rates for carbon dioxide, nitrogen oxide, sulfur dioxide and particulates shall be calculated in pounds per 1,000 kilowatt-hours (lbs/1,000 kWh), divided by the corresponding statewide system average emission rates, and multiplied by 100 to obtain indexed values.

(B) Rates for nuclear waste shall be calculated in pounds of spent fuel per 1,000 kilowatt-hours, divided by the corresponding statewide system average rate, and multiplied by 100 to obtain indexed values.

(C) The registration agent shall calculate the statewide system average rates to be used in accordance with this subsection.

(5) Renewable energy claims. A REP may verify its sales of renewable energy by requesting that the program administrator of the renewable energy credits trading program established pursuant to §25.173(d) of this title (relating to Goal for Renewable Energy) retire a renewable energy credit for each megawatt-hour of renewable energy sold to its customers.

(6) Format of Electricity Facts Label. Each Electricity Facts Label shall be printed in type no smaller than ten points in size and shall be formatted as shown in this paragraph:

Figure: 16 TAC §25.475(f)(6) (.pdf)

(7) Distribution of Electricity Facts Label. A REP shall distribute its Electricity Facts Label to its customers no less than once in a 12-month period and to the commission upon request. A REP is not required to distribute its Electricity Facts Label to a customer pursuant to this paragraph if it has provided a new Electricity Facts Label to that customer in the past six months.

(g) Your Rights as a Customer disclosure. In addition to the terms of service document required by this section, a REP shall develop a separate disclosure statement for residential customers and small commercial customers entitled "Your Rights as a Customer" that summarizes the standard customer protections provided by the rules in this subchapter.

(1) This disclosure shall initially be distributed at the same time as the REP's terms of service document and shall accurately reflect the REP's terms of service.

(2) The REP shall distribute an update of this disclosure no less than once in a 12-month period to its customers.

(3) Each REP's Your Rights as a Customer disclosure is subject to review and approval by the commission, upon request.

(4) The disclosure shall inform the customer of the following:

(A) The REP's complaint resolution policy pursuant to §25.485 of this title (relating to Customer Access and Complaint Handling);

(B) The customer's right to have the meter tested pursuant to §25.124 of this title (relating to Meter Testing), or in accordance with the tariffs of a transmission and distribution utility, a municipally owned utility, or an electric cooperative, as applicable, and the REP's ability in all cases to make that request on behalf of the customer via the standard electronic market transaction, and the customer's right to be instructed on how to read the meter, if applicable;

(C) Disclosures concerning the customer's ability to dispute unauthorized charges on the customer's bill as set forth in §25.481 of this title (relating to Unauthorized Charges);

(D) Notice of any special services such as readers or notices in Braille or TTY services for hearing impaired customers;

(E) Special actions or programs available to those residential customers with physical disabilities, including residential customers who have a critical need for electric service to maintain life support systems;

(F) Non-English language requirements pursuant to §25.473 of this title (relating to Non-English Language Requirements);

(G) Cancellation of terms of service with or without penalty;

(H) Unauthorized switch protections applicable under §25.495 of this title (relating to Unauthorized Change of Retail Electric Provider);

(I) Protections relating to disconnection of service pursuant to §25.483 of this title (relating to Disconnection of Service);

(J) Availability of financial and energy assistance programs for residential customers;

(K) Availability of a Do Not Call List pursuant to §25.484 of this title (relating to Do Not Call List) and §26.37 (relating to Texas No-Call List);

(L) Availability of discounts for qualified low-income residential customers;

(M) Payment arrangements and deferred payments pursuant to §25.480 of this title (relating to Bill Payment and Adjustments);

(N) Procedures for reporting outages;

(O) Privacy rights regarding customer proprietary information as provided by §25.472 of this title (relating to Privacy of Customer Information);

(P) Availability of POLR service and how to contact the POLR; and

(Q) The steps necessary to have service restored or reconnected after involuntary suspension or disconnection.

§25.478.Credit Requirements and Deposits.

(a) Credit requirements for residential customers. A retail electric provider (REP) may require a residential customer or applicant to establish and maintain satisfactory credit as a condition of providing service pursuant to the requirements of this section.

(1) Establishment of satisfactory credit shall not relieve any customer from complying with the requirements for payment of bills by the due date of the bill.

(2) The credit worthiness of spouses established during shared service in the 12 months prior to their divorce will be equally applied to both spouses for 12 months immediately after their divorce.

(3) A residential customer or applicant seeking to establish service with an affiliated REP or provider of last resort (POLR) can demonstrate satisfactory credit using one of the criteria listed in subparagraphs (A) through (E) of this paragraph.

(A) A residential customer or applicant may be deemed as having established satisfactory credit if the customer or applicant:

(i) has been a customer of any REP or an electric utility within the two years prior to the request for electric service;

(ii) is not delinquent in payment of any such electric service account; and

(iii) during the last 12 consecutive months of service was not late in paying a bill more than once.

(B) A residential customer or applicant may be deemed as having established satisfactory credit if the customer or applicant possesses a satisfactory credit rating obtained through a consumer reporting agency, as defined by the Federal Trade Commission.

(C) A residential customer or applicant may be deemed as having established satisfactory credit if the customer or applicant is 65 years of age or older and the customer is not currently delinquent in payment of any electric service account.

(D) A residential customer or applicant may be deemed as having established satisfactory credit if the customer or applicant has been determined to be a victim of family violence as defined in the Texas Family Code §71.004, by a family violence center as defined in Texas Human Resources Code §51.002, by treating medical personnel, by law enforcement personnel, by the Office of a Texas District Attorney or County Attorney, by the Office of the Attorney General, or by a grantee of the Texas Equal Access to Justice Foundation. This determination shall be evidenced by submission of a certification letter developed by the Texas Council on Family Violence. The certification letter may be submitted directly by use of a toll-free fax number to the affiliated REP or POLR.

(E) A residential customer or applicant seeking to establish service may be deemed as having established satisfactory credit if the customer is medically indigent. In order for a customer or applicant to be considered medically indigent, the customer or applicant must make a demonstration that the following criteria are met. Such demonstration must be made annually:

(i) the customer's or applicant's household income must be at or below 150% of the poverty guidelines as certified by a governmental entity or government funded energy assistance program provider; and

(ii) the customer or applicant or the spouse of the customer or applicant must have been certified by that person's physician as being unable to perform three or more activities of daily living as defined in 22 TAC §224.4, or the customer's or applicant's monthly out-of-pocket medical expenses must exceed 20% of the household's gross income. For the purposes of this subsection, the term "physician" shall mean any medical doctor, doctor of osteopathy, nurse practitioner, registered nurse, state-licensed social workers, state-licensed physical and occupational therapists, and an employee of an agency certified to provide home health services pursuant to 42 U.S.C. §1395 et seq.

(4) A residential customer or applicant seeking to establish service with a REP other than an affiliated REP or POLR can demonstrate satisfactory credit using one of the criteria listed in subparagraphs (A) through (B) of this paragraph. Notice of these options for customers or applicants shall be included in any written or oral notice to a customer or applicant when a deposit is requested. A REP other than an affiliated REP or POLR may establish additional methods by which a customer or applicant not meeting the criteria of subparagraphs (A) or (B) of this paragraph can demonstrate satisfactory credit, so long as such criteria are not discriminatory pursuant to §25.471(c) of this title (relating to General Provisions of Customer Protection Rules).

(A) The residential customer or applicant is 65 years of age or older and the customer is not currently delinquent in payment of any electric service account.

(B) The customer or applicant has been determined to be a victim of family violence as defined in the Texas Family Code §71.004, by a family violence center as defined in Texas Human Resources Code §51.002, by treating medical personnel, by law enforcement personnel, by the Office of a Texas District Attorney or County Attorney, by the Office of the Attorney General, or by a grantee of the Texas Equal Access to Justice Foundation. This determination shall be evidenced by submission of a certification letter developed by the Texas Council on Family Violence. The certification letter may be submitted directly by use of a toll-free fax number to the REP.

(5) Pursuant to the Public Utility Regulatory Act (PURA) §39.107(g), a REP that requires pre-payment for metered residential electric service may not charge an amount for electric service that is higher than the price charged by the POLR in the applicable transmission and distribution service territory.

(6) The REP may obtain payment history information from any REP that has served the applicant in the previous two years or from a consumer reporting agency, as defined by the Federal Trade Commission. The REP shall obtain the customer's or applicant's authorization prior to obtaining such information from the customer's or applicant's prior REP. A REP shall maintain payment history information for two years after a customer's electric service has been terminated or disconnected in order to be able to provide credit history information at the request of the former customer.

(b) Credit requirements for non-residential customers. A REP may establish nondiscriminatory criteria pursuant to §25.471(c) of this title to evaluate the credit requirements for a non-residential customer or applicant and apply those criteria in a nondiscriminatory manner. If satisfactory credit cannot be demonstrated by the non-residential customer or applicant using the criteria established by the REP, the customer may be required to pay an initial or additional deposit. No such deposit shall be required if the customer or applicant is a governmental entity.

(c) Initial deposits for applicants and existing customers.

(1) If satisfactory credit cannot be demonstrated by a residential applicant, a REP may require the applicant to pay a deposit prior to receiving service.

(2) An affiliated REP or POLR shall offer a residential customer or applicant who is required to pay an initial deposit the option of providing a written letter of guarantee pursuant to subsection (i) of this section, instead of paying a cash deposit.

(3) A REP shall not require an initial deposit from an existing customer unless the customer was late paying a bill more than once during the last 12 months of service or had service terminated or disconnected for nonpayment during the last 12 months of service. The customer may be required to pay this initial deposit within ten days after issuance of a written disconnection notice that requests such deposit. The disconnection notice may be combined with or issued concurrently with the request for deposit. The disconnection notice shall comply with the requirements in §25.483(m) of this title (relating to Disconnection of Service).

(d) Additional deposits by existing customers.

(1) A REP may request an additional deposit from an existing customer if:

(A) the average of the customer's actual billings for the last 12 months are at least twice the amount of the original average of the estimated annual billings; and

(B) a termination or disconnection notice has been issued or the account disconnected within the previous 12 months.

(2) A REP may require the customer to pay an additional deposit within ten days after the REP has requested the additional deposit.

(3) A REP may disconnect service if the additional deposit is not paid within ten days of the request, provided a written disconnection notice has been issued to the customer. A disconnection notice may be combined with or issued concurrently with the written request for the additional deposit. The disconnection notice shall comply with the requirements in §25.483(m) of this title.

(e) Amount of deposit.

(1) The total of all deposits, initial and additional, required by a REP from any residential customer or applicant:

(A) shall not exceed an amount equivalent to the greater of

(i) one-fifth of the customer's estimated annual billing; or

(ii) the sum of the estimated billings for the next two months.

(B) A REP may base the estimated annual billing for initial deposits for applicants on a reasonable estimate of average usage for the customer class. If a REP requests additional or initial deposits from existing customers, the REP shall base the estimated annual billing on the customer's actual historical usage, to the extent that the historical usage is available. After 12 months of service with a REP, a customer may request that a REP recalculate the required deposit based on actual historical usage of the customer.

(2) For the purpose of determining the amount of the deposit, the estimated billings shall include only charges for electric service that are disclosed in the REP's terms of service document provided to the customer or applicant.

(3) If a customer or applicant qualifies for the rate reduction program under §25.454 of this title (relating to Rate Reduction Program), then such customer or applicant shall be eligible to pay any deposit that exceeds $50 in two equal installments. Notice of this option for customers eligible for the rate reduction program shall be included in any written notice to a customer requesting a deposit. The customer shall have the obligation of providing sufficient information to the REP to demonstrate that the customer is eligible for the rate reduction program. The first installment shall be due no sooner than ten days, and the second installment no sooner than 40 days, after the issuance of written notification to the applicant of the deposit requirement.

(f) Interest on deposits. A REP that requires a deposit pursuant to this section shall pay interest on that deposit at an annual rate at least equal to that set by the commission in December of the preceding year, pursuant to Texas Utilities Code §183.003 (relating to Rate of Interest). If a deposit is refunded within 30 days of the date of deposit, no interest payment is required. If the REP keeps the deposit more than 30 days, payment of interest shall be made from the date of deposit.

(1) Payment of the interest to the customer shall be made annually, if requested by the customer, or at the time the deposit is returned or credited to the customer's account.

(2) The deposit shall cease to draw interest on the date it is returned or credited to the customer's account.

(g) Notification to customers. When a REP requires a customer to pay a deposit, the REP shall provide the customer written information about the provider's deposit policy, the customer's right to post a guarantee in lieu of a cash deposit if applicable, how a customer may be refunded a deposit, and the circumstances under which a provider may increase a deposit. These disclosures shall be included either in the Your Rights as a Customer disclosure or the REP's terms of service document.

(h) Records of deposits.

(1) A REP that collects a deposit shall keep records to show:

(A) the name and address of each depositor;

(B) the amount and date of the deposit; and

(C) each transaction concerning the deposit.

(2) A REP that collects a deposit shall issue a receipt of deposit to each customer or applicant paying a deposit or reflect the deposit on the customer's bill statement. A REP shall provide means for a depositor to establish a claim if the receipt is lost.

(3) A REP shall maintain a record of each unclaimed deposit for at least four years.

(4) A REP shall make a reasonable effort to return unclaimed deposits.

(i) Guarantees of residential customer accounts. A guarantee agreement in lieu of a cash deposit issued by any REP, if applicable, shall conform to the following requirements:

(1) A guarantee agreement between a REP and a guarantor shall be in writing and shall be for no more than the amount of deposit the provider would require on the customer's account pursuant to subsection (e) of this section. The amount of the guarantee shall be clearly indicated in the signed agreement. The REP may require, as a condition of the continuation of the guarantee agreement, that the guarantor remain a customer of the REP, have no past due balance, and have no more than one late payment in a 12-month period during the term of the guarantee agreement.

(2) The guarantee shall be voided and returned to the guarantor according to the provisions of subsection (j) of this section.

(3) Upon default by a residential customer, the guarantor of that customer's account shall be responsible for the unpaid balance of the account only up to the amount agreed to in the written agreement.

(4) If the guarantor ceases to be a customer of the REP or has more than one late payment in a 12-month period during the term of the guarantee agreement, the provider may treat the guarantee agreement as in default and demand a cash deposit from the residential customer as a condition of continuing service.

(5) The REP shall provide written notification to the guarantor of the customer's default, the amount owed by the guarantor, and the due date for the amount owed.

(A) The REP shall allow the guarantor 16 days from the date of notification to pay the amount owed on the defaulted account. If the sixteenth day falls on a holiday or weekend, the due date shall be the next business day.

(B) The REP may transfer the amount owed on the defaulted account to the guarantor's own electric service bill provided the guaranteed amount owed is identified separately on the bill as required by §25.479 of this title (relating to Issuance and Format of Bills).

(6) The REP may initiate disconnection for nonpayment of the guaranteed amount only if the disconnection of service was disclosed in the written guarantee agreement, and only after proper notice as described by paragraph (5) of this subsection or §25.483 of this title.

(j) Refunding deposits and voiding letters of guarantee.

(1) A deposit held by a REP shall be refunded when the customer has paid bills for service for 12 consecutive residential billings or for 24 consecutive non-residential billings without having any late payments. A REP may refund the deposit to a customer via a bill credit. REPs shall comply with this provision as soon as practicable, but no later than August 31, 2004.

(2) Once the REP is no longer the REP of record for a customer or if service is not established with the REP, the REP shall either transfer the deposit plus accrued interest to the customer's new REP or promptly refund the deposit plus accrued interest to the customer, as agreed upon by the customer and both REPs. The REP may subtract from the amount refunded any amounts still owed by the customer to the REP. If the REP obtained a guarantee, such guarantee shall be cancelled to the extent that it is not needed to satisfy any outstanding balance owed by the customer. Alternatively, the REP may provide the guarantor with written documentation that the contract has been cancelled to the extent that the guarantee is not needed to satisfy any outstanding balance owed by the customer.

(3) If a customer's or applicant's service is not connected, or is disconnected, or the service is terminated by the customer, the REP shall promptly void and return to the guarantor all letters of guarantee on the account or provide written documentation that the guarantee agreement has been voided, or refund the customer's or applicant's deposit plus accrued interest on the balance, if any, in excess of the unpaid bills for service furnished. Similarly, if the guarantor's service is not connected, or is disconnected, or the service is terminated by the customer, the REP shall promptly void and return to the guarantor all letters of guarantee or provide written documentation that the guarantees have been voided. This provision does not apply when the customer or guarantor moves or changes the address where service is provided, as long as the customer or guarantor remains a customer of the REP.

(4) A REP shall terminate a guarantee agreement when the customer has paid its bills for 12 consecutive months without service being disconnected for nonpayment and without having more than two delinquent payments.

(k) Re-establishment of credit. A customer or applicant who previously has been a customer of the REP and whose service has been terminated or disconnected for nonpayment of bills or theft of service by that customer (meter tampering or bypassing of meter) may be required, before service is reinstated, to pay all amounts due to the REP or execute a deferred payment agreement, if offered, and reestablish credit.

(l) Upon sale or transfer of company. Upon the sale or transfer of a REP or the designation of an alternative POLR for the customer's electric service, the seller or transferee shall provide the legal successor to the original provider all deposit records.

§25.480.Bill Payment and Adjustments.

(a) Application. This section applies to a retail electric provider (REP) that is responsible for issuing electric service bills to retail customers, unless the REP is issuing a consolidated bill (both energy services and transmission and distribution services) on behalf of an electric cooperative or municipally owned utility. In addition, this section applies to a transmission and distribution utility (TDU) where specifically stated. This section does not apply to a municipally owned utility or electric cooperative issuing bills to its customers in its own service territory.

(b) Bill due date. A REP shall state a payment due date on the bill which shall not be less than 16 days after issuance. A bill is considered to be issued on the issuance date stated on the bill or the postmark date on the envelope, whichever is later. A payment for electric service is delinquent if not received by the REP or at the REP's authorized payment agency by the close of business on the due date. If the 16th day falls on a holiday or weekend, then the due date shall be the next business day after the 16th day.

(c) Penalty on delinquent bills for electric service.

(1) A REP may charge a one-time penalty not to exceed 5.0% on a delinquent bill for electric service. No such penalty shall apply to residential or small commercial customers served by the provider of last resort (POLR), or to customers receiving a low-income discount pursuant to the Public Utility Regulatory Act (PURA) §39.903(h). The one-time penalty, not to exceed 5.0%, may not be applied to any balance to which the penalty has already been applied.

(2) A bill issued to a state agency, as defined in Texas Government Code, Chapter 2251, shall be due as provided in Chapter 2251.

(d) Overbilling. If charges are found to be higher than authorized in the REP's terms and conditions for service or other applicable commission rules, then the customer's bill shall be corrected.

(1) The correction shall be made for the entire period of the overbilling.

(2) If the REP corrects the overbilling within three billing cycles of the error, it need not pay interest on the amount of the correction.

(3) If the REP does not correct the overcharge within three billing cycles of the error, it shall pay interest on the amount of the overcharge at the rate set by the commission.

(A) Interest on overcharges that are not adjusted by the REP within three billing cycles of the bill in error shall accrue from the date of payment by the customer.

(B) All interest shall be compounded monthly at the approved annual rate set by the commission.

(C) Interest shall not apply to leveling plans or estimated billings.

(4) If the REP rebills for a prior billing cycle, the adjustments shall be identified by account and billing date or service period.

(5) A bill issued to a state agency shall bear interest if overdue as provided in Texas Government Code Chapter 2251.

(e) Underbilling by a REP. If charges are found to be lower than authorized by the REP's terms and conditions of service, or if the REP fails to bill the customer for service, then the customer's bill may be corrected.

(1) The customer shall not be responsible for corrected charges billed by the REP unless such charges are billed by the REP within 180 days from the date of issuance of the bill in which the underbilling occurred The REP may backbill a customer for the amount that was underbilled beyond the timelines provided in this paragraph if:

(A) the underbilling is found to be the result of meter tampering by the customer; or

(B) the TDU bills the REP for an underbilling as a result of meter error as provided in §25.125 of this title (relating to Adjustments Due to Meter Errors).

(2) The REP may disconnect service pursuant to §25.483 of this title (relating to Disconnection of Service) if the customer fails to pay the additional charges within a reasonable time.

(3) If the underbilling is $50 or more, the REP shall offer the customer a deferred payment plan option for the same length of time as that of the underbilling. A deferred payment plan need not be offered to a customer when the underpayment is due to theft of service.

(4) The REP shall not charge interest on underbilled amounts unless such amounts are found to be the result of theft of service (meter tampering, bypass, or diversion) by the customer. Interest on underbilled amounts shall be compounded monthly at the annual rate, as set by the commission. Interest shall accrue from the day the customer is found to have first stolen the service.

(5) If the REP adjusts the bills for a prior billing cycle, the adjustments shall be identified by account and billing date or service period.

(f) Disputed bills. If there is a dispute between a customer and a REP about the REP's bill for any service billed on the retail electric bill, the REP shall promptly investigate and report the results to the customer. The REP shall inform the customer of the complaint procedures of the commission pursuant to §25.485 of this title (relating to Customer Access and Complaint Handling).

(g) Alternate payment programs or payment assistance.

(1) Notice required. When a customer contacts a REP and indicates inability to pay a bill or a need for assistance with the bill payment, the REP shall inform the customer of all applicable payment options and payment assistance programs that are offered by or available from the REP, such as bill payment assistance, deferred payment plans, disconnection moratoriums for the ill, or low-income energy assistance programs, and of the eligibility requirements and procedure for applying for each.

(2) Bill payment assistance programs.

(A) All REPs shall implement a bill payment assistance program for residential electric customers. At a minimum, such a program shall solicit voluntary donations from customers through the retail electric bills.

(B) Each REP shall provide an annual report on June 1 of each year to the commission summarizing:

(i) the total amount of customer donations;

(ii) the amount of money set aside for bill payment assistance;

(iii) the assistance agency or agencies selected to disburse funds to residential customers; and

(iv) the amount of money disbursed by the REP or provided to each assistance agency to disburse funds to residential customers.

(C) A REP shall obtain a commitment from an assistance agency selected to disburse bill payment assistance funds that the agency will not discriminate in the distribution of such funds to customers based on the customer's race, creed, color, national origin, ancestry, sex, marital status, lawful source of income, disability, familial status, location of customer in an economically distressed geographic area, or qualification for the low-income discount program or energy efficiency services.

(h) Level and average payment plans. A REP shall offer a level or average payment plan to its customers who are not currently delinquent in payment to the REP. Consistent with the REP's terms of service, the REP may bill or credit any overbilling or underbilling, as appropriate, at least once every twelve months. A REP may collect under-recovered costs from a customer annually, or upon termination of service to the customer. A REP shall refund any over-recovered amounts to customers annually, or upon termination of service to the customer. A REP may initiate its normal collection activity if a customer fails to make a timely payment according to such a plan. All details concerning a levelized or average payment program shall be disclosed in the customer's terms of service document.

(i) Payment arrangements. A payment arrangement is any agreement between the REP and a customer that allows a customer to pay the outstanding bill after its due date, but before the due date of the next bill. If the REP issues a disconnection notice before a payment arrangement was made, that disconnection should be suspended until after the due date for the payment arrangement. If a customer does not fulfill the terms of the payment arrangement, service may be disconnected after the later of the due date for the payment arrangement or the disconnection date indicated in the notice, without issuing an additional disconnection notice.

(j) Deferred payment plans. A deferred payment plan is an agreement between the REP and a customer that allows a customer to pay an outstanding bill in installments that extend beyond the due date of the current bill. A deferred payment plan may be established in person or by telephone, but all deferred payment plans shall be confirmed in writing by the REP.

(1) A REP shall offer a deferred payment plan to customers, upon request, for bills that become due during an extreme weather emergency, pursuant to §25.483(j) of this title.

(2) A REP shall offer a deferred payment plan to a customer who has been underbilled, as described in subsection (e) of this section.

(3) For customers who have expressed an inability to pay, a REP shall offer a deferred payment plan unless the customer:

(A) has been issued more than two termination or disconnection notices during the preceding 12 months; or

(B) has received service from the REP for less than three months, and the customer lacks:

(i) sufficient credit; or

(ii) a satisfactory history of payment for electric service from a previous REP (or its predecessor electric utility).

(4) Any deferred payment plans offered by a REP shall not refuse a customer participation in such a program on any basis set forth in §25.471(c) of this title (relating to General Provisions of Customer Protection Rules).

(5) A deferred payment plan offered by a REP for customers who have expressed an inability to pay and have received a disconnection notice shall provide that the delinquent amount be paid in equal installments over at least three billing cycles, unless the customer requests a lesser number of installments. A REP may require an initial payment not to exceed 25% of the delinquent amount of the outstanding balance to initiate the agreement, with the remainder to be paid in equal installments over at least the next three billing cycles.

(6) A copy of the deferred payment plan shall be provided to the customer and:

(A) shall include a statement, in a clear and conspicuous type, that states "If you are not satisfied with this agreement, or if the agreement was made by telephone and you feel this does not reflect your understanding of that agreement, contact (insert name of REP)." In addition, where the customer and the REP's representative or agent meets in person, the representative shall read the preceding statement to the customer;

(B) may include a penalty not to exceed 5.0% for late payment but shall not include a finance charge;

(C) shall state the length of time covered by the plan;

(D) shall state the total amount to be paid under the plan;

(E) shall state the specific amount of each installment;

(F) shall allow for the disconnection of service if the customer does not fulfill the terms of the deferred payment plan, and shall state the terms for disconnection; and

(G) shall allow either the customer or the REP to initiate a renegotiation of the deferred payment plan if the customer's economic or financial circumstances change substantially during the time of the deferred payment plan.

(7) A REP may pursue disconnection of service if a customer does not meet the terms of a deferred payment plan. However, service shall not be disconnected until appropriate notice has been issued, pursuant to §25.483 of this title, notifying the customer that the customer has not met the terms of the plan. The requirements of subsection (j)(3) of this section shall not apply with respect to a customer who has received notice of a disconnection due to failure to meet the terms of a deferred payment plan.

(k) Allocation of partial payments. A REP shall allocate a partial payment by the customer first to the oldest balance due for electric service, followed by the current amount due for electric service. When there is no longer a balance for electric service, payment may be applied to non-electric services billed by the REP. Electric service shall not be disconnected for non-payment of non-electric services.

§25.483.Disconnection of Service.

(a) Disconnection and reconnection policy. Only a transmission and distribution utility (TDU), municipally owned utility, or electric cooperative shall perform physical disconnections and reconnections. Unless otherwise stated, it is the responsibility of a retail electric provider (REP) to request such action from the appropriate TDU, municipally owned utility, or electric cooperative in accordance with that entity's relevant tariffs, in accordance with the protocols established by the registration agent, and in compliance with the requirements of this section. If a REP chooses to have a customer's electric service disconnected, it shall comply with the requirements in this section. Nothing in this section requires a REP to request that a customer's service be disconnected.

(b) Disconnection authority.

(1) Any REP may authorize the disconnection of a medium non-residential or large non-residential customer, as that term is defined in §25.43 of this title (relating to Provider of Last Resort (POLR)).

(2) Except as provided in subsection (d) of this section, all REPs shall have the authority to authorize the disconnection of residential and small non-residential customers pursuant to commission rules. Prior to authorizing disconnections for non-payment in accordance with this paragraph, a REP shall:

(A) test all necessary electronic transactions related to disconnections and reconnections of service; and

(B) file an affidavit from an officer of the company, in a project established by the commission for this purpose, affirming that the REP understands and has trained its personnel on the commission's rule requirements related to disconnection and reconnection, and has adequately tested the transactions described in subparagraph (A) of this paragraph.

(c) Disconnection with notice. A REP having disconnection authority under the provisions of subsection (b) of this section, including the POLR, may authorize the disconnection of a customer's electric service after proper notice and not before the first day after the disconnection date in the notice for any of the following reasons:

(1) failure to pay any outstanding bona fide debt for electric service owed to the REP or to make deferred payment arrangements by the date of disconnection stated on the disconnection notice. Payment of the delinquent bill at the REP's authorized payment agency is considered payment to the REP;

(2) failure to comply with the terms of a deferred payment agreement made with the REP;

(3) violation of the REP's terms and conditions on using service in a manner that interferes with the service of others or the operation of nonstandard equipment, if a reasonable attempt has been made to notify the customer and the customer is provided with a reasonable opportunity to remedy the situation;

(4) failure to pay a deposit as required by §25.478 of this title (relating to Credit Requirements and Deposits); or

(5) failure of the guarantor to pay the amount guaranteed, when the REP has a written agreement, signed by the guarantor, which allows for disconnection of the guarantor's service.

(d) Disconnection without prior notice. Any REP or TDU may, at any time, authorize disconnection of a customer's electric service without prior notice for any of the following reasons:

(1) Where a known dangerous condition exists for as long as the condition exists. Where reasonable, given the nature of the hazardous condition, the REP, or its agent, shall post a notice of disconnection and the reason for the disconnection at the place of common entry or upon the front door of each affected residential unit as soon as possible after service has been disconnected;

(2) Where service is connected without authority by a person who has not made application for service;

(3) Where service is reconnected without authority after disconnection for nonpayment;

(4) Where there has been tampering with the equipment of the transmission and distribution utility, municipally owned utility, or electric cooperative; or

(5) Where there is evidence of theft of service.

(e) Disconnection prohibited. A REP having disconnection authority under the provisions of subsection (b) of this section shall not authorize a disconnection for nonpayment of a customer's electric service for any of the following reasons:

(1) Delinquency in payment for electric service by a previous occupant of the premises;

(2) Failure to pay for any charge that is not for electric service regulated by the commission, including competitive energy service, merchandise, or optional services;

(3) Failure to pay for a different type or class of electric service unless charges for such service were included on that account's bill at the time service was initiated;

(4) Failure to pay charges resulting from an underbilling, except theft of service, more than six months prior to the current billing;

(5) Failure to pay disputed charges, except for the amount not under dispute, until a determination as to the accuracy of the charges has been made by the REP or the commission, and the customer has been notified of this determination;

(6) Failure to pay charges arising from an underbilling due to any faulty metering, unless the meter has been tampered with or unless such underbilling charges are due under §25.126 of this title (relating to Meter Tampering); or

(7) Failure to pay an estimated bill other than a bill rendered pursuant to an approved meter-reading plan, unless the bill is based on an estimated meter read by the TDU.

(f) Disconnection on holidays or weekends

(1) A REP having disconnection authority under the provisions of subsection (b) of this section shall not request disconnection of a customer's electric service for nonpayment on a holiday or weekend, or the day immediately preceding a holiday or weekend, unless the REP's personnel are available on those days to take payments, make payment arrangements with the customer, and request reconnection of service.

(2) Unless a dangerous condition exists or the customer requests disconnection, a TDU shall not disconnect a customer's electric service on a holiday or weekend, or the day immediately preceding a holiday or weekend, unless the personnel of the TDU are available to reconnect service on all of those days.

(g) Disconnection of ill and disabled. A REP having disconnection authority under the provisions of subsection (b) of this section shall not authorize a disconnection for nonpayment of electric service at a permanent, individually metered dwelling unit of a delinquent customer when that customer establishes that disconnection of service will cause some person residing at that residence to become seriously ill or more seriously ill.

(1) Each time a customer seeks to avoid disconnection of service under this subsection, the customer shall accomplish all of the following by the stated date of disconnection:

(A) Have the person's attending physician (for purposes of this subsection, the "physician" shall mean any public health official, including medical doctors, doctors of osteopathy, nurse practitioners, registered nurses, and any other similar public health official) call or contact the REP by the stated date of disconnection;

(B) Have the person's attending physician submit a written statement to the REP; and

(C) Enter into a deferred payment plan.

(2) The prohibition against service disconnection provided by this subsection shall last 63 days from the issuance of the bill for electric service or a shorter period agreed upon by the REP and the customer or physician.

(3) If, in the normal performance of its duties, a TDU obtains information that a customer scheduled for disconnection may qualify for delay of disconnection pursuant to this subsection, and the TDU reasonably believes that the information may be unknown to the REP, the TDU shall delay the disconnection and promptly communicate the information to the REP. The TDU shall disconnect such customer if it subsequently receives a confirmation of the disconnect notice from the REP. Nothing herein should be interpreted as requiring a TDU to assess or to inquire as to the customer's status before performing a disconnection, or to provide prior notice of the disconnection, when not otherwise required.

(h) Disconnection of energy assistance clients.

(1) A REP having disconnection authority under the provisions of subsection (b) of this section shall not authorize a disconnection for nonpayment of electric service to a delinquent residential customer for a billing period in which the REP receives a pledge, letter of intent, purchase order, or other notification that the energy assistance provider is forwarding sufficient payment to continue service provided that such pledge, letter of intent, purchase order, or other notification is received by the due date stated on the disconnection notice, and the customer, by the due date on the disconnection notice, either pays or makes payment arrangements to pay any outstanding debt not covered by the energy assistance provider.

(2) If an energy assistance provider has requested monthly usage data pursuant to §25.472(b)(4) of this title (relating to Privacy of Customer Information), the REP shall extend the final due date on the disconnection notice, day for day, from the date the usage data was requested until it is provided.

(3) A REP shall allow at least 45 days for an energy assistance provider to honor a pledge, letter of intent, purchase order, or other notification before submitting the disconnection request to the TDU.

(4) A REP may request disconnection of service to a customer if payment from the energy assistance provider's pledge is not received within the time frame agreed to by the REP and the energy assistance provider, or if the customer fails to pay any portion of the outstanding balance not covered by the pledge.

(i) Disconnection during extreme weather. A REP having disconnection authority under the provisions of subsection (b) of this section shall not authorize a disconnection for nonpayment of electric service for any customer in a county in which an extreme weather emergency occurs. A REP shall offer residential customers a deferred payment plan upon request by the customer that complies with the requirements of §25.480 of this title (relating to Bill Payment and Adjustments) for bills that become due during the weather emergency.

(1) The term "extreme weather emergency" shall mean a day when:

(A) the previous day's highest temperature did not exceed 32 degrees Fahrenheit, and the temperature is predicted to remain at or below that level for the next 24 hours anywhere in the county, according to the nearest National Weather Service (NWS) reports; or

(B) the NWS issues a heat advisory for a county, or when such advisory has been issued on any one of the preceding two calendar days in a county.

(2) A TDU shall notify the commission of an extreme weather emergency in a method prescribed by the commission, on each day that the TDU has determined that an extreme weather emergency has been issued for a county in its service area. The initial notice shall include the county in which the extreme weather emergency occurred and the name and telephone number of the utility contact person.

(j) Disconnection of master-metered apartments. When a bill for electric service is delinquent for a master-metered apartment complex:

(1) The REP having disconnection authority under the provisions of subsection (b) of this section shall send a notice to the customer as required by subsection (k) of this section. At the time such notice is issued, the REP, or its agents, shall also inform the customer that notice of possible disconnection will be provided to the tenants of the apartment complex in six days if payment is not made before that time.

(2) At least six days after providing notice to the customer and at least four days before disconnecting, the REP shall post a minimum of five notices in English and Spanish in conspicuous areas in the corridors or other public places of the apartment complex. Language in the notice shall be in large type and shall read: "Notice to residents of (name and address of apartment complex): Electric service to this apartment complex is scheduled for disconnection on (date), because (reason for disconnection)."

(k) Disconnection notices. A disconnection notice for nonpayment shall:

(1) not be issued before the first day after the bill is due;

(2) be a separate mailing or hand delivered notice with a stated date of disconnection with the words "disconnection notice" or similar language prominently displayed. The REP may send the disconnection notice concurrently with the request for a deposit;

(3) have a disconnection date that is not a holiday, weekend day, or day that the REP's personnel are not available to take payments, and is not less than ten days after the notice is issued; and

(4) include a statement notifying the customer that if the customer needs assistance paying the bill by the due date, or is ill and unable to pay the bill, the customer may be able to make some alternate payment arrangement, establish a deferred payment plan, or possibly secure payment assistance. The notice shall also advise the customer to contact the provider for more information.

(l) Contents of disconnection notice. Any disconnection notice shall include the following information:

(1) The reason for disconnection;

(2) The actions, if any, that the customer may take to avoid disconnection of service;

(3) The amount of all fees or charges which will be assessed against the customer as a result of the default;

(4) The amount overdue;

(5) A toll-free telephone number that the customer can use to contact the REP to discuss the notice of disconnection or to file a complaint with the REP, and the following statement: "If you are not satisfied with our response to your inquiry or complaint, you may file a complaint by calling or writing the Public Utility Commission of Texas, P.O. Box 13326, Austin, Texas, 78711-3326; Telephone: (512) 936-7120 or toll-free in Texas at (888) 782-8477. Hearing and speech impaired individuals with text telephones (TTY) may contact the commission at (512) 936-7136. Complaints may also be filed electronically at www.puc.state.tx.us/ocp/complaints/complain.cfm;"

(6) If a deposit is being held by the REP on behalf of the customer, a statement that the deposit will be applied against the final bill (if applicable) and the remaining deposit will be either returned to the customer or transferred to the new REP, at the customer's designation and with the consent of both REPs;

(7) The availability of deferred payment or other billing arrangements, from the REP, and the availability of any state or federal energy assistance programs and information on how to get further information about those programs; and

(8) A description of the activities that the REP will use to collect payment, including the use of consumer reporting agencies, debt collection agencies, small claims court, and other remedies allowed by law, if the customer does not pay or make acceptable payment arrangements with the REP.

(m) Reconnection of service. Upon a customer's satisfactory correction of the reasons for disconnection, the REP shall request the TDU, municipally owned utility, or electric cooperative to reconnect the customer's electric service as quickly as possible. The REP shall inform the customer of the approximate reconnection time in accordance with this subsection. If a REP submits a reconnection order with no priority or same day reconnect request and the TDU completes the reconnect the same day, the TDU shall not assess a priority reconnect fee. A TDU may assess a priority reconnect fee only when the customer expressly requests it. A customer's service shall be reconnected no later than the timelines set forth below:

(1) For payments made between 8:00 a.m. and 12:00 p.m. on a business day, a REP shall send a reconnection request to the TDU no later than 2:00 p.m. on the same day. The TDU shall reconnect service to that customer that day if possible, but no later than the end of the next utility field operational day after the reconnection request was received by the TDU.

(2) For payments made after 12:00 p.m., but before 5:00 p.m. on a business day, a REP shall send a reconnection request to the TDU by 7:00 p.m. on the same day. The TDU shall reconnect service to that customer the next day if possible, but no later than the end of the next utility field operational day after the reconnection request was received by the TDU.

(3) For payments made after 5:00 p.m., but before 7:00 p.m. on a business day, a REP shall send a reconnection request to the TDU by 9:00 p.m. The TDU shall reconnect service to that customer as soon as possible, but no later than the end of the next utility field operational day after the reconnection request was received by the TDU.

(4) For payments made after 7:00 p.m., but before 8:00 a.m. on the next business day, a REP shall send a reconnection request to the TDU by 2:00 p.m. on the next business day. The TDU shall reconnect service to that customer no later than the end of the next utility field operational day after the reconnection request was received by the TDU.

(5) For payments made on a weekend day or a holiday, a REP shall send a reconnection request to the TDU by 2:00 p.m. on the first business day after the payment was made. The TDU shall reconnect service to that customer no later than the end of the next utility field operational day after the reconnection request was received by the TDU.

(6) In no event shall a REP fail to send a reconnection notice within 48 hours after the customer's satisfactory correction of the reasons for disconnection as specified in the disconnection notice.

(7) In no event shall a TDU fail to reconnect service within 48 hours after a reconnection request is received.

§25.485.Customer Access and Complaint Handling.

(a) The purpose of this section is to ensure that retail electric customers have the opportunity for impartial and prompt resolution of disputes with REPs or aggregators.

(b) Customer access.

(1) Each retail electric provider (REP) or aggregator shall ensure that customers have reasonable access to its service representatives to make inquiries and complaints, discuss charges on customer's bills, terminate competitive service, and transact any other pertinent business.

(2) Telephone access shall be toll-free and shall afford customers a prompt answer during normal business hours.

(3) Each REP shall provide a 24-hour automated telephone message instructing the caller how to report any service interruptions or electrical emergencies.

(4) Each REP and aggregator shall employ 24-hour capability for accepting a customer's rescission of the terms of service by telephone, pursuant to rights of cancellation in §25.474(j) of this title (relating to Selection of Retail Electric Provider).

(c) Complaint handling. A residential or small commercial customer has the right to make a formal or informal complaint to the commission, and a terms of service agreement cannot impair this right. A REP or aggregator shall not require a residential or small commercial customer as part of the terms of service to engage in alternative dispute resolution, including requiring complaints to be submitted to arbitration or mediation by third parties. A customer other than a residential or small commercial customer may agree as part of the terms of service to engage in alternative dispute resolution, including requiring complaints to be submitted to arbitration or mediation by third parties. However, nothing in this subsection is intended to prevent a customer other than a residential or small commercial customer to file an informal or formal complaint with the commission if dissatisfied with the results of the alternative dispute resolution.

(d) Complaints to REPs or aggregators. A customer or applicant for service may submit a complaint in person, or by letter, facsimile transmission, e-mail, or by telephone to a REP or aggregator. The REP or aggregator shall promptly investigate and advise the complainant of the results within 21 days. A customer who is dissatisfied with the REP's or aggregator's review shall be informed of the right to file a complaint with the REP's or aggregator's supervisory review process, if available, and, if not available, with the commission and the Office of Attorney General, Consumer Protection Division. Any supervisory review conducted by the REP or aggregator shall result in a decision communicated to the complainant within ten business days of the request. If the REP or aggregator does not respond to the customer's complaint in writing, the REP or aggregator shall orally inform the customer of the ability to obtain the REP's or aggregator's response in writing upon request.

(e) Complaints to the commission.

(1) Informal complaints.

(A) If a complainant is dissatisfied with the results of a REP's or aggregator's complaint investigation or supervisory review, the REP or aggregator shall advise the complainant of the commission's informal complaint resolution process and the following contact information for the commission: Public Utility Commission of Texas, Customer Protection Division, P.O. Box 13326, Austin, Texas 78711-3326; (512) 936-7120 or in Texas (toll-free) 1-888-782-8477, fax (512) 936-7003, e-mail address: customer@puc.state.tx.us, Internet website address: www.puc.state.tx.us, TTY (512)936-7136, and Relay Texas (toll-free) 1-800-735-2989.

(B) Complainants should include sufficient information in a complaint to identify the complainant and the company for which the complaint is made and describe the issue specifically. The following information should be included in the complaint:

(i) The account holder's name, billing and service addresses, and telephone number;

(ii) The name of the REP or aggregator;

(iii) The customer account number or electric service identifier (ESI-ID);

(iv) An explanation of the facts relevant to the complaint;

(v) The complainant's requested resolution; and

(vi) Any documentation that supports the complaint, including copies of bills or terms of service documents.

(C) All REPs and aggregators shall provide the commission an email address to receive notification of customer complaints from the commission.

(D) The REP or aggregator shall investigate all informal complaints and advise the commission in writing of the results of the investigation within 21 days after the complaint is forwarded to the REP or aggregator.

(E) The commission shall review the complaint information and the REP or aggregator's response and notify the complainant of the results of the commission's investigation.

(2) While an informal complaint process is pending:

(A) The REP or aggregator shall not initiate collection activities, including disconnection of service or report the customer's delinquency to a credit reporting agency with respect to the disputed portion of the bill.

(B) A customer shall be obligated to pay any undisputed portion of the bill and the REP may pursue disconnection of service for nonpayment of the undisputed portion after appropriate notice.

(3) The REP or aggregator shall keep a record for two years after closure by the commission of all informal complaints forwarded to it by the commission. This record shall show the name and address of the complainant, the date, nature and adjustment or disposition of the complaint. Protests regarding commission-approved rates or rates and charges that are not regulated by the commission, but which are disclosed to the customer in the terms of service disclosures, need not be recorded.

(4) Formal complaints. If the complainant is not satisfied with the results of the informal complaint process, the complainant may file a formal complaint with the commission within two years of the date on which the commission closes the informal complaint. This process may include the formal docketing of the complaint as provided in §22.242 of this title (related to Complaints).

§25.488.Procedures for a Premise with No Service Agreement.

(a) Applicability. This section applies to all retail electric providers (REPs).

(b) Service to premise with no service agreement. If a REP finds that a current occupant at a premise for which the provider is shown as the REP of record in the ERCOT or TDU system is not the customer with whom the REP currently has a service agreement for retail electric service or the occupant is a customer whose prior service agreement has expired or is no longer in effect:

(1) the REP may establish service with the occupant. The REP shall obtain verification of the occupant's authorization to establish service with the REP consistent with the requirements of §25.474 of this title (relating to Selection or Change of Retail Electric Provider); or

(2) the REP with disconnection authority may issue a disconnection notice to the current occupant. The notice shall contain the following:

(A) The date the disconnection will occur, provided that the date shall not be sooner than ten days from the date the notice is issued;

(B) What actions the occupant must take if that occupant believes the notice is in error or desires to establish service with the REP; and

(C) A statement that informs the occupant of the right to obtain service from another licensed REP and that information about other REPs can be obtained from the commission.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 16, 2007.

TRD-200700614

Adriana A. Gonzales

Rules Coordinator

Public Utility Commission of Texas

Effective date: March 8, 2007

Proposal publication date: November 10, 2006

For further information, please call: (512) 936-7223

16 TAC §25.482

The repeal is adopted under the Public Utility Regulatory Act, Texas Utilities Code Annotated §14.002 (Vernon 1998, Supplement 2006) (PURA) which provides the commission with the authority to make and enforce rules reasonably required in the exercise of its powers and jurisdiction, and, in particular, §17.004 and §39.101, which direct the commission to implement customer protections for electric customers, and §39.106, which directs the commission to designate providers of last resort.

Cross Reference to Statutes: Public Utility Regulatory Act §§14.002, 17.004, 39.101 and 39.106.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 16, 2007.

TRD-200700612

Adriana A. Gonzales

Rules Coordinator

Public Utility Commission of Texas

Effective date: March 8, 2007

Proposal publication date: November 10, 2006

For further information, please call: (512) 936-7223

Chapter 402. CHARITABLE BINGO ADMINISTRATIVE RULES

Subchapter D. LICENSING REQUIREMENTS

16 TAC §402.400

The Texas Lottery Commission (Commission) adopts amendments to 16 TAC §402.400 relating to General Licensing Provisions with changes to the proposed text as published in the December 29, 2006, issue of the Texas Register (31 TexReg 10502).

The adopted amendments set forth new application guidelines which allow an authorized organization to submit an original application to conduct bingo without noting playing location, days, times, and starting date if the authorized organization is requesting a determination of eligibility status for a license to conduct bingo.

The Bingo Interest Group and several individuals submitted comments in support of the proposed rule amendments. In response to a comment received, the following changes will be made in this adopted version:

In subsection (r)(2), after the word "schedules", the following language will be added, ", except Schedule F-Bingo Financial Summary,".

In subsection (r)(6), the word "and" will be deleted before the words "starting date". Also in subsection (r)(6), after the word, "date", the following language will be added: "and Schedule F-Bingo Financial Summary,".

The amendments are adopted under Occupations Code, §2001.054, which authorizes the Commission to adopt rules to enforce and administer the Bingo Enabling Act.

The amendments implement Occupations Code, Chapter 2001.

§402.400.General Licensing Provisions.

(a) Any person who wants to engage in a bingo related activity shall apply to the Commission for a license. The application must be on a form prescribed by the Commission and all required information must be legible, correct and complete. An application is incomplete if the following information is not provided:

(1) All information requested on the application form and applicable schedules;

(2) All supplemental information requested during the pre-licensing investigation period;

(3) The applicable license fee;

(4) The required bond or other security, if applicable; and

(5) Authorized signatures as required by the Commission.

(b) Information submitted by an applicant in the form of an applicable schedule shall be considered to be part of the application. Supplemental information should be submitted on a form prescribed by the Commission and all information required must be correct and complete.

(c) Information submitted by an applicant in a format other than an applicable schedule must be legible and must include the following:

(1) the name and address of the organization as it appears on the application;

(2) the Texas taxpayer identification number; or, if sole owner, the individual's social security number;

(3) a statement identifying the information submitted;

(4) the signature, printed name and telephone number of the person authorized to submit the information; and

(5) All supplemental information requested during the pre-licensing investigation period.

(d) Within 14 days after the Commission has received the application, the Commission will review the application and;

(1) notify the applicant if additional information is required;

(2) notify the applicant in writing why the application is being denied; or

(3) issue the license.

(e) If an application is incomplete, the Commission will notify the applicant. The applicant must provide the requested information within 14 days of such notification. Failure to provide the requested information within the 14 day time line will result in the denial of the license application.

(f) Notwithstanding the provisions of subsection (e) of this section, failure to submit all required information within 45 days from the date the application is received by the Commission will result in the denial of the application.

(g) Prior to the issuance of a license, the Commission may require an applicant to attend a pre-licensing interview. The Commission will identify the person or persons for the applicant who must attend the pre-licensing interview. The pre-licensing interview will consist of, at a minimum, the following:

(1) review of the Bingo Enabling Act;

(2) review of the Charitable Bingo Administrative Rules;

(3) licensee responsibilities;

(4) process pertaining to the different types of license application;

(5) bookkeeping and record keeping requirements as it involves bingo; and

(6) a statement from the person or persons attending the pre-licensing interview that they understand and the licensee will comply with the provisions of the Bingo Enabling Act and Charitable Bingo Administrative Rules.

(h) The Commission may deny an application based on information obtained that indicates non-compliance with the provisions of the Bingo Enabling Act and/or the Charitable Bingo Administrative Rules in connection with a pre-licensing interview and/or location inspection.

(i) Each licensed organization and organization issued a temporary authorization is required to file timely and complete required reports, as applicable to the type of current license held.

(j) An organization may withdraw an application at any time. Once the written request for withdrawal is received by the Commission, all processing of the application will cease and the withdrawal is considered final. If the organization wants to reapply for a license, a complete new application is required.

(k) Voluntary surrender of a license. A licensee may surrender its license for cancellation provided it has completed and submitted to the Commission the "Notice of Surrender of Bingo License". The cancellation of the license shall be final and effective upon receipt by the Charitable Bingo Operations Division of a copy of the resolution, or other authoritative statement of the licensee, requesting cancellation of the license and providing a requested effective date. The cancellation is effective as of the date identified in the letter. If no date is identified in the letter, the effective date shall be the date the Commission receives the letter. Notwithstanding cancellation of the license, the licensee must file all reports, returns and remittances required by law. The licensee shall surrender the license to the Commission on the effective date of the surrender. The Commission will send the licensee a letter confirming the surrender and resulting cancellation of the license.

(l) Administrative Hold. A licensee may place its license in administrative hold. The placement of a license in administrative hold shall be effective upon receipt by the Commission of a copy of the resolution, or other authoritative statement of the licensee, requesting administrative hold and citing a requested effective date. The licensee shall submit the license to the Commission on the effective date of the placement of the license in administrative hold. Once the license has been placed in administrative hold, all bingo activity (i.e. leasing, conducting bingo) must cease until the licensee files an amendment and the amended license is issued by the Commission and received by the licensee.

(m) Notwithstanding placement of the license in administrative hold, the licensee must file all reports, returns and remittances required by law. The licensee must also file a timely and complete application for renewal of the license each time the license is ripe for renewal.

(n) Each person required to be named in an application for license under the Bingo Enabling Act will have a criminal record history inquiry at state and/or national level conducted. Such inquiry may require submission of fingerprint card(s). FBI fingerprint cards are required for an individual listed in an application for a distributor, system service provider, or manufacturer's license and for an individual listed on an application who is not a Texas resident.

(o) Timely Renewal of License.

(1) An annual bingo license expires one calendar year from date of issuance.

(2) Each licensee is solely responsible for the timely renewal of its annual license.

(3) Failure of the licensee to receive the renewal notice(s) mailed by the Commission is not a mitigating circumstance in timely renewal. The renewal notice is merely a reminder and not a prerequisite to a licensee's ability to submit a renewal application.

(4) A licensee that has not submitted a renewal application timely must cease all bingo activity until properly licensed.

(5) Notwithstanding any other provision in the Charitable Bingo Administrative Rules, to be considered timely, the renewal application must be filed with the Commission no later than the license expiration date. A licensee may mail the renewal application but the postmark must clearly show a date that is no later than the license expiration date. To be timely filed, the Commission must receive the mailed application within seven days of the postmarked date of the mailed application and the postmarked date must clearly show a date that is no later than the license expiration date. Additionally, if the Commission does not receive the renewal application within seven days of the postmarked date of the mailed application, the renewal application is not timely filed. In computing the period of time for filing renewal applications, the last day of the period so computed is to be included, unless it is a Saturday, Sunday, or legal holiday, in which event the period runs until the end of the next day which is not a Saturday, Sunday, or legal holiday.

(p) Notification of changes. Each licensee must promptly notify the Commission in writing within ten working days of any change to information contained in a filed application regardless of whether the cause of the change is because information filed with the Commission has become inaccurate, or additions or deletions are necessary to reflect changes in the circumstances of the licensee. Examples of such changes may include the names of the organizational officers, the amount of rent charged for leased premises, the name of a member responsible for the conduct of games, or the name of an individual connected with a commercial lessor that would affect its eligibility to hold a license and, in the case of lessors, the name of a new authorized organization that intends to lease premises from it for the purpose of conducting bingo.

(q) Representation; personal receipt of documents. For purposes of this subsection, an individual shall be recognized by the Commission as an applicant or licensee's authorized representative only if the applicant or licensee has filed with the Commission a form prescribed by the Commission identifying the individuals currently listed as directors, officers, or operators, or if they are identified on the completed form "Schedule E Authorization of Representation". A person is not an authorized representative of the applicant or licensee unless specifically named on a form prescribed by the Commission as part of the application, or in the "Schedule E Authorization of Representation" that is on file with the Commission. Only those persons specifically named on a form prescribed by the Commission or in the "Schedule E Authorization of Representation" as an authorized representative shall be recognized by the Commission concerning any matter relating to the licensing process or license. Only the applicant or licensee or its authorized representative may receive from the Commission documents relating to the application or license without being required to submit a request under the Public Information Act.

(r) Eligibility determination pending identification of playing location, days, times, and starting date.

(1) An organization may submit an original application for a license to conduct bingo without including information on intended playing location, days, times, and starting date if requesting a determination of eligibility status.

(2) All other information requested on the application and the accompanying schedules, except Schedule F-Bingo Financial Summary, must be complete and in compliance with all other requirements of the Act and Rules before the Commission determines eligibility status.

(3) An organization requesting a determination of eligibility status must submit with its application $100 to be applied towards the organization's license fee.

(4) Upon a determination that the requirements in paragraph (2) and (3) of this subsection have been met, the Commission will provide to the authorized organization written notice of the eligibility status of the applicant.

(5) Within 180 days of the date the Commission provides notice of the eligibility status of an applicant, the authorized organization must inform the Commission on a form prescribed by the Commission of the intended playing location, days, times, and starting date of the occasions. If the authorized organization fails to provide the information to the Commission within 180 days, the Commission will proceed with denial of the application.

(6) After review of the applicant's submitted intended playing location, days, times, starting date, and Schedule F-Bingo Financial Summary, and upon request by the applicant, the Commission may issue temporary authorization to conduct bingo for a period of 60 days if the Commission determines that the intended playing location, days, times, and starting date comply with the Bingo Enabling Act.

(7) In order to receive a regular license to conduct bingo, an authorized organization that has received an eligibility determination and informed the Commission of its intended playing location, days, times, and starting date of the occasions must also submit the required bond or security, any remainder of the appropriate license fee, and confirmation of the accuracy of information provided on the application to conduct bingo. The Commission will notify the applicant of the required license fee and bond amounts within 14 calendar days of receipt of the organization's intended playing location, days, times, and starting date.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on February 23, 2007.

TRD-200700705

Kimberly L. Kiplin

General Counsel

Texas Lottery Commission

Effective date: March 15, 2007

Proposal publication date: December 29, 2006

For further information, please call: (512) 344-5113