Agency Highlights

United States Environmental Protection Agency (“EPA”)

EPA Proposes More Stringent Effluent Limits for Coal-fired Power Plants. EPA issued a proposed rule that would strengthen wastewater discharge standards for coal-fired power plants through tightened effluent limitation guidelines (“ELGs”). ELGs are technology-based limits created to represent the greatest pollution reductions achievable through economically feasible methods that are implemented by state and EPA-issued National Pollutant Discharge Elimination System permits. Coal-fired power plant ELGs were last revised in 2020. Since the 2020 revision, EPA has identified the possibility of further pollutant reductions through treatment technologies that have become more affordable and available. The proposed rule would establish a zero-discharge limit for all pollutants from flue gas desulfurization, bottom ash transport water, and combustion residual leachate. The proposed rule would also allow permit writers to use “best professional judgment” on limits for power plant “legacy” wastewaters—effluent produced prior to the rule’s effective date but stored in impoundments with the possibility of being released later. Non-zero numeric discharge limitations for mercury and arsenic in combustion residual leachate are also included in the proposed rule. Facilities operating under current requirements would be able to avoid these new requirements if they close by 2028, and facilities that have already complied with the 2020 rule would be allowed to keep current technologies without upgrading if they close by 2032. EPA estimates that the proposed rule will reduce discharges of pollutants by 584 million pounds per year.

EPA Accepted Nominations for the CCL 6. EPA sought nominations for the sixth drinking water Contaminant Candidate List (“CCL 6”) in February 2023, and the agency is now evaluating the nominations it received and other contaminant data to develop the draft CCL 6 for public review and comment. The CCL includes contaminants that are not subject to drinking water regulations but are likely to occur in public water systems. Contaminants on the list require regulation under the Safe Drinking Water Act in the future and are used by EPA to prioritize research and the determination of whether to regulate specific contaminants. Municipal water groups, including the Association of Metropolitan Water Agencies and the American Water Works Association, have called for EPA to overhaul the contaminant selection process. These stakeholder groups support this overhaul given the unmanageable extensive lists of substances and inclusion of entire chemical groups such as per- and poly-fluoroalkyl substances (“PFAS”), which include thousands of contaminants, in past CCLs. Similarly, after the CCL 5 consultation, EPA’s Science Advisory Board recommended that EPA explain its process for deciding which substances to include on the list and clarify why some chemical classes, such as PFAS, are grouped together, while others are not. Stakeholders also recommended that EPA use CCL 6 to communicate priority contaminants within subgroups in order to effectively advance research needs and priorities. EPA is currently evaluating received nominations to determine whether they should be included in the CCL 6 and will summarize the nominations when it publishes the draft CCL 6 in the Federal Register.

EPA Releases Funding Opportunities for Water Infrastructure. EPA recently announced the availability of several funding sources for water infrastructure projects. At the end of April 2023, EPA announced that $41 million is available for technical assistance funding under America’s Water Infrastructure Act to address wastewater concerns. This funding will primarily assist rural, small, and Tribal communities. Communities seeking funding may request assistance at EPA’s Water Technical Assistance webpage, available at: https://www.epa.gov/water-infrastructure/water-technical-assistance. Additional funding of more than $57 million from 2023 Clean Water State Revolving Funds will go towards southern states, including Texas, for water infrastructure improvements. Texas alone will receive more than $34 million. The funding is intended to help communities upgrade wastewater and stormwater systems, and approximately half of this funding is available as grants or principal forgiveness loans.

PFAS CERCLA Liability Exemption Bills Introduced in the Senate. EPA introduced a proposed rule that designates two PFAS—perfluorooctanoic acid and perfluorooctanesulfonic acid—as hazardous substances under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). The proposed rule would subject passive receivers of PFAS, such as water utilities and municipal landfills, to strict joint-and-several liability under CERCLA. In response to the proposed rule, water utility groups and other stakeholder groups exposed to liability under the proposed rule have pushed for a statutory exemption from such CERCLA liability. Although EPA has pledged to avoid holding passive receivers of PFAS liable under CERCLA, water utilities maintain that such efforts will not prevent third parties from suing to pass on cleanup costs. A Wyoming Senator, Sen. Cynthia Lummis, has introduced a suite of legislation that, if passed, would shield drinking water and wastewater facilities along with other entities from PFAS-related liability under CERCLA. The senator’s proposed legislation includes a resource management bill to shield solid waste management facilities from liability, as well as a water systems bill to protect public water systems, public and private treatment works, municipalities permitted for stormwater discharges, political subdivisions and special districts, and contractors performing management or disposal activities for these entities. The Senate Environment and Public Works Committee is also working to create a bipartisan bill addressing PFAS. It is uncertain whether this proposed legislation exempting water utilities and other entities from CERCLA liability will survive negotiations.

EPA Proposes Federal Baseline Water Quality Standards for Tribal Lands. On May 3, 2023, EPA proposed the first federal baseline water quality standards (“WQS”) for waterbodies on Native American reservations. The protections afforded by the Clean Water Act (“CWA”) are not currently extended to a majority of U.S. Tribes with Native American reservations. The proposed baseline standards would extend the CWA framework, which currently exists for most other waters of the United States, to include waters of more than 250 Tribes. EPA’s proposal comes after decades of coordination between EPA and Tribal communities, and EPA estimates that the proposed standards will provide increased protection for approximately 76,000 miles of rivers and streams and 1.9 million acres of other surface waters within Native American reservations. The proposed Tribal baseline WQS would provide a common set of designated uses and policies for Tribal waters, with the flexibility to enable EPA to tailor the standards to local circumstances. Several Tribal-affiliated organizations support the proposal and note that the Tribal baseline WQS will aid tribal communities in their existing efforts to protect waters on Tribal lands from pollution. EPA will accept comments on the proposed rule until August 3, 2023. EPA will also host two online public hearings for interested parties to provide oral comments, which are scheduled for June 27, 2023 and July 12, 2023.

EPA Requires Inclusion of Cybersecurity in Sanitary Surveys. EPA has issued a final memorandum requiring water utilities to consider cybersecurity vulnerabilities in “sanitary surveys” as part of the Biden Administration’s focus on cyber resiliency despite firm stakeholder opposition. The agency issued its final memorandum to state drinking water administrators in March 2023, which adopts a policy requiring periodic “sanitary surveys” to include a cyber security component. EPA has outlined requirements that provide options for water systems to choose from in order to comply with the new mandates and issued a guidance document providing resources to help with implementation. The memorandum and guidance document are available at: https://www.epa.gov/waterriskassessment/epa-cybersecurity-water-sector#rule. The EPA’s assistant administrator of the Office of Water has stated that cyber-attacks against critical infrastructure, like water systems, have been increasing and that such attacks have the potential to contaminate drinking water and threaten public health. However, industry groups oppose the use of sanitary surveys to address these cybersecurity concerns. They contend that the new mandate goes beyond providing regulatory clarity but rather establishes new regulatory requirements not otherwise imposed under the Safe Drinking Water Act, which requires that sanitary surveys be conducted. The memorandum provides three program options for states to implement additional cybersecurity considerations in order to comply with the new mandates so long as the programs are at least as stringent as a sanitary survey and effectively identify cybersecurity gaps.

EPA Must Complete Landfill Emission Review by January 2024. An April 2023 consent decree between EPA and conservation groups, emerging out of the case Environmental Integrity Project v. Reagan, No. 1:22-cv-02243 (D.D.C. March 23, 2023) (order granting joint motion to enter consent decree), requires the agency to take a renewed look at emission factors for municipal solid waste landfills. The conservation groups alleged that EPA failed to examine its emission factors to estimate the quantity of emissions of carbon monoxide, volatile organic compounds, and oxides of nitrogen from municipal solid waste landfills for three years. Per the consent decree, EPA must review and issue draft revisions to the emission factors or a draft determination that a revision is not necessary under Clean Air Act Section 130 by January 15, 2024, and must finalize the revisions or determination by August 15, 2024.

EPA Proposes Rule Changes to Legacy Coal Combustion Residuals (“CCRs”) Surface Impoundments and CCR Management Units. In May 2023, EPA proposed changes to CCR regulations for inactive surface impoundments at inactive electric utilities, referred to as “legacy CCR surface impoundments.” The proposed rule would require owners and operators of active legacy CCR surface impoundments to comply with requirements applicable to inactive CCR surface impoundments, except for location restrictions and liner design criteria. The proposed rule would also establish groundwater monitoring, corrective action, closure, and post-closure care requirements at all CCR management units. Comments are due on July 17, 2023.

EPA Changes Definition of “Municipal Waste Combustion Unit”. In 2020, EPA proposed to modify the Other Solid Waste Incineration definition of “municipal waste combustion unit” in 40 Code of Regulation Sections 60.2977 and 60.3078 by removing pyrolysis/combustion units from the definition, therefore drastically changing regulation of pyrolysis/combustion units. However, in June 2023, EPA withdrew the proposed change to the definition after reviewing comments on the proposed amendment. This decision maintains the regulated emission limits for municipal solid waste incinerators that combust less than 35 tons per day and stand-alone incinerators for institutional waste.

Federal Clean Air Act (“FCAA”) Fee Requirements for Non-Attainment Zones. On April 26, 2023, the Houston-Galveston Area Council of Governments hosted EPA and the Texas Commission on Environmental Quality to discuss federal requirements for major stationary point source penalty fees. The Houston-Galveston-Brazoria (“HGB”) was reclassified as a severe ozone nonattainment area in November 2022, and therefore major sources in the HGB area will be subject to a FCAA Section 185 fee if the area fails to attain the 2008 eight-hour National Ambient Air Quality Standard of 0.07 parts per million by July 20, 2027. The fee is required each year following the missed attainment date until the area is redesignated as attainment by EPA – meaning that the Section 185 fee could be imposed as early as 2028 and is estimated to total as much as $154 million. If the state fails to collect the fee, EPA will impose interest on the fee until collected.

Texas Commission on Environmental Quality (“TCEQ”)

TCEQ Repeals Suspension or Adjustment of Water Rights During Drought. TCEQ repealed Chapter 36 of the Texas Administrative Code (“TAC”) in its entirety, effective March 30, 2023. The repeal of this chapter comes after junior rights holders brought a lawsuit against TCEQ for the Executive Director’s suspension of only specific water rights for junior water rights holders pursuant to Chapter 36 in response to a priority call by The Dow Chemical Company during the severe drought conditions in 2013. Members of the Texas Farm Bureau were among those with suspended rights who sued TCEQ to challenge the validity of the drought rules under 30 TAC Chapter 36. The Thirteenth Court of Appeals at Corpus Christi, Texas affirmed the district court decision that declared the drought rules invalid. Due to this invalidation of the drought rules, TCEQ published the proposed repeal in the Texas Register in October 2022 and officially repealed Chapter 36 on March 30, 2023.

Public Utility Commission of Texas (“PUC”)

PUC Chair Peter Lake Resigns. On June 2, Governor Greg Abbott released a statement indicating that PUC Chair Peter Lake has resigned his post. Chairman Lake will remain at the PUC until July 1.

Chairman Lake was appointed to the PUC by Governor Abbott in April 2021 following the firing of former Chair DeAnn Walker in the aftermath of Winter Storm Uri. The aftermath of Winter Storm Uri prompted the PUC to pursue various ERCOT reform efforts, including the establishment of a new system of tradeable wholesale generation credits intended to incentivize new generation construction.

Lake, in a statement provided to the online Texas Tribune announcing his resignation, said he had inherited a vulnerable power grid but now expressed confidence in it. “Thanks to the hard work of the teams here and at ERCOT, and my fellow commissioners, today, our grid is more reliable than ever,” he said.

Commissioner Kathleen Jackson has been appointed by Governor Abbott to serve as Interim Chair of the PUC. Jackson was appointed as a commissioner on August 5, 2022, and confirmed by the Texas Senate on May 26, 2023.

AEP, CenterPoint, and TNMP File DCRF Applications with PUC. In April 2023, AEP Texas (“AEP”), CenterPoint Energy Houston Electric, LLC (“CenterPoint”), and Texas-New Mexico Power Company (“TNMP”) filed applications with the PUC to adjust their Distribution Cost Recovery Factor (“DCRF”) to recover new investment in distribution equipment.

AEP filed its DCRF Application on April 5 (Application of AEP Texas Inc., to Amend its Distribution Cost Recovery Factor and Implement Rider Mobile Temporary Emergency Electric Energy Facilities, Docket No. 54824 (pending)), requesting a DCRF revenue requirement of $142,543,876, an increase of distribution revenues by $39,703,105. AEP additionally requested authority to implement Rider Mobile Temporary Emergency Electric Energy Facilities (“TEEEF”), which results in a request of $30,670,219 associated with the leasing and operating of TEEEF, long-term lease payments, and associated carrying charges on the present value of minimum long-term lease payments. The proposed effective date for both Riders is September 1, 2023.

CenterPoint filed its DCRF Application on April 5 (Application of CenterPoint Energy Houston Electric, LLC for Approval to Amend its Distribution Cost Recovery Factor, Docket No. 54825 (pending)), requesting a DCRF revenue requirement of $162,548,833, an increase of distribution revenues by $84,571,868. In addition to its DCRF application, CenterPoint filed an application for approval to amend its TEEEF Rider (Application of CenterPoint Energy Houston Electric, LLC to Amend its Temporary Emergency Electric Energy Facilities Rider, Docket No. 54830 (pending)). In this Rider Application, CenterPoint requested a TEEEF revenue requirement of $187,875,401. The proposed effective date for both Riders is September 1, 2023.

TNMP filed its DCRF application on April 5, 2023 (Application of Texas-New Mexico Power Company to Amend its Distribution Cost Recovery Factor, Docket No. 54807 (pending)). TNMP requested a DCRF revenue requirement of $49,418,541, an increase of distribution revenues by $14,800,834. The proposed effective date for the proposed rates is September 1, 2023.

AEP, CenterPoint, Oncor, and TNMP File EECRF Applications with PUC. At the end of May and early June 2023, AEP, CenterPoint, Oncor Electric Delivery Company, LLC (Oncor), and TNMP filed applications with PUC to adjust their Energy Efficiency Recovery Cost Factor (“EECRF”) to reflect changes in program costs and bonuses, and to correct any over- or under- collection of energy efficiency costs resulting from the use of the EECRF.

On June 1, AEP filed its 2024 EECRF application with PUC (Application of AEP Texas, Inc. to Adjust its Energy Efficiency Cost Recovery Factor and Related Relief, Docket No. 55094 (pending)). AEP is seeking to adjust its EECRF to collect $24,833,529 in 2024.

On June 1, CenterPoint filed its 2024 EECRF application with PUC (Application of its CenterPoint Energy Houston Electric, LLC to Adjust its Energy Efficiency Cost Recovery Factor, Docket No. 55088 (pending)). CenterPoint is seeking to adjust its EECRF to collect $52,602,439 in 2024.

On May 31, Oncor filed its 2024 EECRF application with PUC (Application of Oncor Electric Delivery Company LLC to Adjust its Energy Efficiency Cost Recovery Factor¸ Docket No. 55074 (pending)). Oncor is seeking to adjust its EECRF to collect $72,399,769 in 2024.

On May 26, TNMP filed its 2024 EECRF application with PUC (Application of Texas-New Mexico Power Company to Adjust its Energy Efficiency Cost Recovery Factor and Related Relief, Docket No. 55034 (pending)). TNMP is seeking to adjust its EECRF to collect $6,625,905 in 2024.

Update on PUC Rulemaking Projects. PUC Staff’s current rulemaking calendar for 2023 can be found under Docket No. 54455. As of May 23, 2023, the following rulemaking projects are being prioritized:

• Project No. 52059 – Review of Commission’s Filing Requirements
• Project No. 54589 – Review of Chapter 26 – Substantive Rules Applicable to Telecommunications Service Providers
• Project No. 54233 – Technical Requirements and Interconnection Processes for Distributed Energy Resources (“DERs”)
• Project No. 53924 – Water and Sewer Utility Rates after Purchase or Acquisition
• Project No. 54932 – Review of § 24.101 – Water Rate Appeals
• Project No. 54844 – Minor and Conforming Rule Updates 2023

Other rulemaking projects that are being prioritized but do not yet have a determined schedule include:

• Project No. 53404 – Restoration of Electric Service After a Widespread Outage
• Project No. 54584 – Reliability Standard for the ERCOT Market
• Project No. 54585 – Emergency Pricing Program
• Project No. 52301 – ERCOT Governance and Related Issues
• Project No. 51888 – Critical Load Standards and Processes
• Project No. 53981 – Review of Wholesale Water and Sewer Rate Appeals
• Project No. 54224 – Cost Recovery for Service to DERs

Railroad Commission of Texas (“RRC”)

SiEnergy Files Statement of Intent to Increase Gas Utility Rates. On May 5, 2023, SiEnergy, LP (“SiEnergy”) filed its Statement of Intent to Increase Gas Utility Rates within the Unincorporated Areas Served by SiEnergy North Central and South Texas with RRC. The total revenue increase is approximately $9,692,854 on a system-wide basis, which results in a $2,667,058 increase in rates in the incorporated service areas served by SiEnergy. As a result of this increase, South and Central Texas Residential Customers will see an increase in customer charges of $8.00, and North Texas Residential Customers will see an increase in customer charges of $7.75. The cities of Grand Prairie, Mansfield, Waxahachie, and Houston Residential Customers will see a $10.00 increase in customer charges. In addition to increasing its rates, SiEnergy is requesting the approval of uniform base rates for all SiEnergy service areas.

The proposed effective date was June 9, 2023. On May 17, 2023, the RRC suspended the effective date for a period of 150 days. The new effective date is now November 6, 2023. More information can be found on the RRC website in Case No. 00013504.

Atmos Pipeline Files for Rate Increase. Atmos Pipeline Texas (“APT”), a division of Atmos Energy Corporation, filed a base rate case with the RRC on May 19 seeking a total base rate of approximately $4.2 billion, which constitutes a $119.4 million increase of annual revenue on a system-wide basis. If approved, the proposed rates will increase APT’s annual revenues by 14.40%.

Additionally, APT is requesting the RRC approve the continuation of two Riders and the approval of a new Rider, the System Safety and Integrity (“SSI”) Rider. The SSI Rider will allow APT to recover maximum allowable for operating pressure activities performed and testing costs, and expenses incurred to comply with other safety and integrity regulations adopted by the RRC and the Pipeline and Hazardous Materials Safety Administration. The SSI Rider accounting will begin on January 1, 2023.

The proposed effective date for this rate increase is June 23, 2023. On June 13, the RRC suspended the effective date by 150 days. More information can be found on the RRC website in Case No. 00013758.

Atmos Energy Releases Quarterly Earnings and Files for Rate Increases under Rate Review Mechanism. Atmos Energy (“Atmos”) released its quarterly earnings for the three-month period ending on March 31, 2023. These earnings include a consolidated operating income of $422.6 million (a $37.5 million increase from the $385.1 million reported during the corresponding prior-year period). Atmos credited rate case outcomes, increased customer consumption, and increased customer growth in its distribution segment for the higher revenues. Atmos additionally reported distribution operating income of $335.3 million (a $24 million increase from the corresponding prior-year period), and pipeline and storage income of $87.4 million (a $13.5 million increase from the corresponding prior-year period).

Additionally, on March 31, Atmos filed for rate increases for its Mid-Tex and West Texas service areas under an interim ratemaking process known as the Rate Review Mechanism (“RRM”). The proposed Mid-Tex filing, if approved, would increase Atmos Mid-Tex’s annual revenues for the RRM cities within that division by $141.7 million. This compares to $115 million last year. The proposed impact on an average residential customer is $7.41 per month. This compares to $4.60 per month last year.

The proposed West Texas filing, if approved, would increase Atmos West Texas’s revenues by $12.1 million. The company asserts that this charge would help it recover more than $140 million spent from January 2022 through December 2022. The proposed impact on an average residential customer would be
$5.88 per month. This compares to $6.72 million last year resulting in an average residential customer impact of $3.36 per month last year.

Atmos Cities Steering Committee and Atmos-West Texas Cities will begin settlement discussions with Atmos West Texas and Mid-Tex regarding the new RRM filings within the next couple of months. The RRMs are expected to be approved between early August and late September, and the new rates should go into effect by October 1.

“Agency Highlights” is prepared by Chloe Daniels in the Firm’s Water and Districts Practice Groups; Mattie Isturiz in the Firm’s Air and Waste Practice Group; and Samantha Miller in the Firm’s Energy and Utility Practice Group. If you would like additional information or have questions related to these agencies or other matters, please contact Chloe at 512.322.5814 or chloe.daniels@lglawfirm.com, or Mattie at 512.322.5804 or misturiz@lglawfirm.com, or Samantha at 512.322.5808 or smiller@lglawfirm.com.