Agency Highlights

United States Environmental Protection Agency (“EPA”)

EPA’s Proposed Definition for Per- and Polyfluoroalkyl Substances (“PFAS”) in Draft Fifth Contaminant Candidate List (“CCL 5”). EPA’s Science Advisory Board (“SAB”) has raised concerns about the narrow definition of PFAS in the draft CCL 5, which is identical to the definition used in the EPA’s proposed Toxic Substances Control Act reporting requirements. The draft CCL 5 includes 81 individual contaminants and several groups of chemicals such as PFAS, disinfection byproducts, and cyanotoxins.EPA would define PFAS based on a certain chemical structure, but would leave out perfluorooctanoic acid (“PFOA”) and perfluorooctanesulonic acid (“PFOS”) as it has already proposed a drinking water standard for the two better known PFAS. The proposed drinking water rule would be published in fall 2022 and be finalized by fall 2023, but the agency is still considering whether other PFAS should be included in the drinking water rule. Meanwhile, SAB and the American Water Works Association have voiced concerns that the chemical structure-based definition for CCL 5 would exclude PFAS that have been found in drinking water, such as perfluoro-2-methosyacetic acid (“PFMOAA”). The Association of State Drinking Water Administrators recommended that EPA revise the structural definition to match the definitions used by the Organization for Economic and Co-operation and Development (“OECD”) and the Interstate Technology Regulatory Council. The Natural Resources Defense Council has also encouraged EPA to mirror the definition of PFAS used by OECD.

EPA Engages the Public in PFAS Discussions. EPA scheduled virtual public meetings on March 2, 2022 and April 5, 2022 to discuss the development of the proposed PFAS National Primary Drinking Water Regulations (“NPDWR”). The meetings are an opportunity for EPA to share information about the proposed PFAS NPDWR and receive input on environmental justice considerations. EPA is also accepting written public comments on environmental justice considerations in the public Docket No. EPA-HQ-OW-2022-0114 until April 20, 2022. The agency has also invited public water systems serving less than 10,000 people to participate as Small Entity Representatives for a Small Business Advocacy Review Panel to help develop a PFAS NPDWR. EPA has not yet determined if the proposed NPDWR will have a significant economic impact on a substantial number of small public water systems, but due to the possibility of such effect it is proceeding with a Small Business Advocacy Review Panel. EPA also has plans to engage other stakeholder groups in 2022, including the National Drinking Water Advisory Council, state and local government officials, and tribal officials.

Federal Water Infrastructure Funding and Domestic Content Requirements. The Bipartisan Infrastructure Law (“BIL”) provides $50 million to EPA to fund clean water, drinking water, and stormwater infrastructure, 49% of which is eligible for grants or principal forgiveness loans. EPA will prioritize increasing investment in urban and rural disadvantaged communities, replacing lead service lines (“LSLs”), reducing PFAS and other emerging contaminants. The agency released a memo in March 2020 explaining how these funds would be dispersed through the Clean Water and Drinking Water State Revolving Funds (“SRFs”). The BIL also makes permanent the American iron and steel requirement for the Drinking Water SRF (already a permanent requirement for the Clean Water SRF since 2014). Further, the BIL incorporates parts of the Made in America Act such as expanding the “Buy America” requirements to include non-ferrous metals like copper, plastic, concrete, glass, lumber, and drywall; and new provisions requiring all manufacturing processes used in making the material be completed in the United States to qualify as “American made.” Water and wastewater utilities have previously voiced concerns that critical components for their systems do not have domestic supply chains. However, the BIL authorizes waivers under certain circumstances. The White House Office of Management and Budget is expected to issue guidance on the Made in America requirements soon, then EPA will outline a waiver process.

EPA Proposes Changes to Toxic Release Inventory (“TRI”) Reporting for De Minimis PFAS Releases. In March 2022, EPA announced its plans to propose a rule this summer that would call for stricter PFAS reporting under TRI. The agency recently released its 2020 TRI National Analysis Report, the first to include PFAS data, showing that only 38 facilities reported PFAS waste. EPA’s proposed rule would remove eligibility of the de minimis exception for PFAS which allows facilities that report under TRI to disregard certain minimal concentrations of PFAS in mixtures. EPA stated that this change would also remove the exemption with regard to providing supplier notifications to downstream TRI facilities for PFAS and persistent, bioaccumulative, and toxic chemicals. The agency explained that because PFAS is used at low concentrations in many products, removal of the de minimis exception will result in more complete data for these chemicals.

Status of Waters of the United States (“WOTUS”) Rulemaking. On February 7, 2022, the public comment period closed on EPA and Army Corps of Engineers’ (Corps) proposed rule to define WOTUS. The proposed rule put back into effect the pre-2015 definition of WOTUS, also referred to as the 1986 regulations, updated to reflect considerations of Supreme Court decisions such as Rapanos v. United States. GOP lawmakers and water utilities have asked EPA to hold off on its rulemaking efforts until the Supreme Court issues a decision in Sacket v. EPA in which they are considering whether the Court of Appeals for the 9th Circuit set forth the proper test for determining whether wetlands are “WOTUS.” However, EPA and the Corps have continued their rulemaking efforts and announced on February 24, 2022 ten roundtables to facilitate discussion on the implementation of WOTUS. These roundtables include agriculture, conservation groups, developers, drinking water and wastewater managers, environmental organizations, communities with environmental justice concerns, industry, Tribal nations, and state and local governments. The agencies plan to host these roundtables virtually this spring and summer.

Uncertainty Surrounding EPA’s Lead and Copper Rule Revisions (“LCRR”). On December 16, 2021, EPA’s LCRR went into effect with a compliance deadline of October 16, 2024. The LCRR includes many new requirements, including making an inventory of lead service lines (“LSLs”), developing a plan to replace LSLs, developing a tap sampling plan reflecting information about where LSLs are located, changing corrosion control requirements, and adding “find and fix” requirements for locations that exceed 15 micrograms per liter of lead. EPA says it does not expect to propose changes to the LSL inventory requirements or the October 16, 2024 compliance date, but it is considering changes to the LSL replacement plan and tap sampling plan requirements. These changes will be made through the proposed Lead and Copper Rule Improvement (“LCRI”) rulemaking, but EPA has not yet set a date for the proposed rule. The agency aims to complete its LCRI rulemaking before the LCRR compliance deadline so that public water systems can incorporate LCRI changes in their LCRR compliance efforts.

CEQ and EPA Release New Environmental Justice Screening Tools. On February 18, 2022, the White House Council on Environmental Quality (“CEQ”) released an early version of its Climate and Economic Justice Screening Tool (“CEJST”) to highlight disadvantaged communities using an interactive geospatial map in furtherance of the White House’s Justice40 Initiative, which aims to address Environmental Justice issues. In addition, on February 18, EPA released an updated version of its EJScreen environmental justice mapping and screening tool. CEQ and EPA developed these screening tools in direct response to a 2021 Executive Order on Tackling the Climate Crisis at Home and Abroad. Federal agencies will use the CEJST to implement the Justice40 Initiative goal of directing 40 percent of the overall benefits of certain federal investments to disadvantaged communities. EPA will use EJScreen for purposes of compliance and enforcement matters, as well as policy making. In addition, agencies may use EJScreen to identify the location and density of disadvantaged communities for purposes of permitting under the National Environmental Policy Act (“NEPA”).

EPA Makes Technical Revisions and Clarifications to NESHAP Rule for MSW Landfills. On February 14, 2022, EPA published a final rule to finalize technical revisions and clarifications for the National Emission Standards for Hazardous Air Pollutants (“NESHAP”) for MSW landfills, which EPA proposed in a March 26, 2020 rulemaking. The final rule also amends the New Source Performance Standards for MSW Landfills to clarify and align the timing of compliance for certain requirements involving installation of a gas collection and control system. In addition, the final rule revises the definition of “Administrator” in the MSW Landfills Federal Plan, which was promulgated on May 21, 2021, to clarify who has the authority to implement and enforce the applicable requirements. These technical revisions and clarifications went into effect on February 14.

EPA Proposes to Adopt New ASTM Standard for All Appropriate Inquiries Requirement Under CERCLA. On March 14, 2022, EPA released a proposed and direct final rule to adopt a new standard (E1527-21), issued by the American Society for Testing and Materials (“ASTM”) on November 1, 2021, for All Appropriate Inquiries (“AAI”) required under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). ASTM issued the new standard for conducting Phase I Environmental Site Assessments (“ESAs”). The proposed rule provides the option for prospective purchasers of property to use either the new standard or the existing standard (E1527-13) to comply with the AAI requirement in order to establish a defense to CERCLA liability. Notably, the new standard includes guidance on per- and polyfluoroalkyl substances (“PFAS”) for the first time. EPA is accepting comments until April 13, 2022. If EPA does not receive any adverse comment by that date, then EPA will take no further action on the proposed rule and the direct final rule will become effective on May 13, 2022. However, if EPA receives timely adverse comments, then EPA plans to withdraw the direct final rule and address public comments in a subsequent rulemaking.

EPA Proposes New, More Stringent Emissions Standards for Heavy Duty Vehicles. On March 28, 2022, EPA published a proposed rule aimed at reducing air pollution from highway heavy-duty vehicles and engines, including ozone, particulate matter, and greenhouse gases (“GHGs”). The proposed rule seeks to change the heavy-duty emission control program—including the standards, test procedures, useful life, warranty, and other requirements—to further reduce the air quality impacts of heavy-duty engines across a range of operating conditions and over a longer period of the operational life of heavy-duty engines. In addition, the proposed rule seeks to make targeted updates to the existing heavy-duty GHG Phase 2 program, proposing that further GHG reductions in the model year 2027 timeframe are appropriate considering lead time, costs, and other factors, including market shifts to zero-emission technologies in certain segments of the heavy-duty vehicle sector. The proposed rule also calls for limited amendments to the regulations that implement EPA’s air pollutant emission standards for other sectors (e.g., light-duty vehicles, marine diesel engines, and locomotives). EPA is holding a virtual public hearing on the proposed rule on April 12, 2022. The deadline to submit comments is May 13, 2022.

United States Army Corps of Engineers (“Corps”)

Army Corps of Engineers To Provide New Approved Jurisdictional Determinations (“AJDs”) In Light of Revised WOTUS Definition. On January 5, 2022, the Corps announced that it will require new and pending dredge-and-fill permits (“404 Permits”) to rely on new AJDs using the current, pre-2015 WOTUS definition. The Corps stated that it will not revisit 404 Permit decisions that rely on AJDs made under the Trump-Era definition, also known as the Navigable Waters Protection Rule (“NWPR”). The agency explained that it is governed by the WOTUS definition in effect at the time it completes an AJD, not by the date of the request for an AJD. Therefore, AJDs completed prior to the U.S. District Court for the District of Arizona’s August 30, 2021 decision vacating the NWPR are safe and will not be reopened until their expiration date. For new and pending permits, the Corps will discuss with applicants whether they would like to receive a new AJD under the pre-2015 WOTUS definition or to proceed in reliance on a preliminary determination or no determination whatsoever.

Texas Commission on Environmental Quality (“TCEQ”)

TCEQ Creates a LCRR Stakeholder Group. Following an informal survey to stakeholders at its January 11, 2022 Drinking Water Advisory Work Group meeting, TCEQ created a new stakeholder group to discuss EPA’s LCRR and help TCEQ develop its own rules. The first LCRR stakeholder meeting will be on April 19, 2022 at 1 p.m. Persons interested in joining can register at https://www.tceq.texas.gov/drinkingwater/dwawg/dwawg-lab-stakeholders-mtg-reg-form.

TCEQ Consolidates Texas Pollutant Discharge Elimination System (“TPDES”) Regulations. On March 30, 2022, TCEQ Commissioners approved the consolidation of TPDES rules in 30 Texas Administrative Code Chapters 308, 314, and 315, which contain adoption by reference of federal regulations, with Chapter 305. The adopted rulemaking will repeal Chapters 308, 314, and 315 and move them within Chapter 305, Subchapter P. However, Chapter 308, Subchapters C and J are simply repealed because they were determined to be obsolete. Lastly, the rulemaking also adopted by reference 40 Code of Federal Regulations Part 125, Subpart N. The new rules will take effect on April 21, 2022.

TCEQ’s IHW Generator and Management Fee Increases in Effect. In the January 2022 edition of The Lone Star Current, we reported on TCEQ’s final rule regarding industrial solid waste and municipal hazardous waste generator and management fee increases, adopted on November 3, 2021. That final rule is now in effect and as of March 1, TCEQ has begun implementing the fee increases on a phased fee schedule. The fee increases involve: (1) increasing the Industrial and Hazardous Waste (“IHW”) generation fee schedule from $0.50 to a maximum of $2.00 per ton for non-hazardous waste generation; and (2) increasing the fee schedule from $2.00 to a maximum of $6.00 per ton for hazardous waste generation. In addition, the Executive Director has the ability to adjust the actual IHW generator fee at or below the new fee schedule amounts.

TCEQ’s Amendments to ISW and MHW Rules to Maintain Equivalency with RCRA Revisions in Effect. In the January 2022 edition of The Lone Star Current, we reported on TCEQ’s final rule amending, repealing, and replacing a number of sections of 30 Texas Administrative Code (“TAC”) Chapter 335, Industrial Solid Waste (“ISW”) and Municipal Hazardous Waste (“MHW”), in order to maintain equivalency with Resource Conservation and Recovery Act (“RCRA”) revisions promulgated by EPA. TCEQ adopted the final rule on January 12, 2022, which went into effect on February 3.

• The most notable effective rule changes include:
• Revising the existing hazardous waste generator regulatory program by (1) reorganizing the regulations to improve their usability by the regulated community, and by (2) providing greater flexibility for hazardous waste generators to manage their hazardous waste in a cost-effective and protective manner;
• Revising existing regulations regarding the export and import of hazardous wastes from and into the United States by applying a confidentiality determination such that no person can assert confidential business information claims for documents related to the export, import, and transit of hazardous waste;
• Revising rules to adopt EPA’s methodology for determining the user fees applicable to the electronic and paper manifests to be submitted to the e-Manifest system;
• Revising rules to prohibit disposal of hazardous waste pharmaceuticals into the sewage system and codify the exemption for unused pharmaceuticals that are expected to be legitimately reclaimed from being classified as a solid waste; and
• Adding rules to add hazardous waste aerosol cans to the universal waste program.

Public Utility Commission of Texas (“PUC”)

ERCOT Finalizes New Board of Directors. Four new appointees have been named to the ERCOT Board of Directors, finalizing the entity’s new Board. On December 1, 2021, the ERCOT Board Selection Committee named John Swainson and Robert “Bob” Flexon as new directors. On December 28, 2021, ERCOT filled the remaining two Board seats, announcing the addition of Julie England and Peggy Heeg. Elaine Mendoza, who was previously appointed to the ERCOT Board on November 1, 2021, has since resigned due to a conflict issue. Mendoza sits on the board of regents for Texas A&M, which has a 50 megawatt power generation facility and has the ability to sell electricity into the ERCOT market. Accordingly, Texas A&M is a market participant, and market participants are prohibited from serving on the ERCOT Board.

The newest members will join ERCOT Chair Paul Foster, Vice Chair Bill Flores, Board Member Carlos Aguilar, Board Member Zin Smati, and Chairman of the PUC, Peter Lake, the Interim Public Counsel at the Office of Public Utility Counsel, Chris Ekoh, and the Interim CEO of ERCOT, Brad Jones. The new members were selected by the ERCOT Board Selection Committee, comprised of Arch “Beaver” Aplin, G. Brint Ryan, and Bill Jones, who were appointed by the Governor, Lieutenant Governor, and Speaker in accordance with Senate Bill 2, passed in the 87th regular session.

Market Redesign Update; ERCOT Seeks PUC Direction on Grid Reform Efforts. On December 1, 2021 the PUC adopted a number of “Phase I” regulatory changes to protect the grid against future weather emergencies. The agency also will continue considering a number of other “Phase II” changes during 2022.

• The “Phase I” changes the PUC adopted include the following:
• A decrease in the High System-Wide Offer Cap (“HCAP”) from $9,000 per megawatt hour to $5,000. The HCAP is the top price for which electric companies can offer to sell their power in the ERCOT wholesale market.
• An increase in the Minimum Contingency Level (“MCL”) to 3,000 megawatts as of January 1, 2022. The MCL is the minimum level of power reserves on the grid, after which ERCOT begins taking out-of-market actions.
• Changes to the Operating Reserve Demand Curve, which is an ERCOT-administered system that automatically creates price adders to wholesale energy offers.
• Allowances for the earlier deployment of Emergency Response Service (“ERS”), which is a service through which power consumers are paid to be willing to curtail load. Under the new rules, ERCOT can deploy ERS before an emergency alert is declared.
• Various changes to “Ancillary Services,” which ERCOT deploys to maintain system reliability on an hour-by-hour basis.

• The PUC signaled that it will also continue investigating a number of “Phase II” options during 2022. These options include:
• A “Load-Side Reliability Mechanism” through which retail electric providers, cooperatives, and municipal utilities would be obligated to procure commitments for sufficient capacity to serve forecasted peak-load.
• A “Dispatchable Energy Credits” program through which load-serving entities would be required to obtain sufficient dispatchable capacity to meet net peak-load (peak-load minus renewables) during a future period.
• A “Backstop Reliability Service,” which would be a new Ancillary Service to meet specific reliability needs not met by ERCOT’s real-time and Ancillary Service markets.
• Hybrid Models, which could include combinations of all other proposed Phase II mechanisms.

At the December 16, 2021 Open Meeting, the PUC instructed ERCOT to come up with an implementation schedule for the “Phase I” market design changes. In response, ERCOT reported it already had implemented some of the requested changes, but that others remain in the conceptual stage. ERCOT’s Vice President of Commercial Operations, Kenan Ogelman, filed a market redesign project update with the PUC on January 10, 2022. Regarding the “Phase I” market design, the update indicated that ERCOT has so many post-Winter Storm Uri projects underway that it wants regulators to step in and set priorities. Ogelman’s update cautioned that “ERCOT and its vendors cannot do all the work for each project simultaneously.” “Each task needs a priority to signal which items are the most important when managing constraints and risks within the portfolio of projects,” he wrote.

PUC Requires Utilities to File Emergency Operations Plans Under New Rule. On February 25, 2022, the PUC adopted a new 16 Texas Administrative Code (“TAC”) § 25.53 in Project No. 51841, Review of 16 TAC § 25.53 Relating to Electric Service Emergency Operations Plans (“EOPs”). The rule implements new standards for EOPs for electric utilities, transmission and distribution utilities, power generation companies, municipally owned utilities, electric cooperatives, retail electric providers, and ERCOT. The utilities were already required to develop EOPs, but the PUC adopted more comprehensive requirements in compliance with Senate Bill 3 in the 87th Texas Legislature. Utilities are required to file their EOPs with the PUC by April 15, 2022, including strategies for improved communications, robust supply chains, cold weather events, and cyberattacks. The PUC held a workshop on March 11 to assist utilities in interpreting the new rule’s requirements and to work out technical details related to the submission of the EOPs. Going forward, the annual EOPs will be due March 15 each year. Commissioner McAdams complimented the comprehensive nature of the new rule and said it will “establish the bones of a policy that we can grow in the future to adapt to any threat.”

PUC Pursues Enforcement Action Against Generation Resources. On December 10, 2021, ERCOT filed a report with the PUC, reporting on the number of generation resources who met the December 1 deadline to file Winter Weather Readiness Reports (“WWRRs”). According to ERCOT, 98% of the 847 generation resources met the deadline to file reports, representing more than 99% of the total installed generating capacity. One hundred percent (“100%”) of reports from transmission companies were submitted on time. The PUC’s Division of Compliance and Enforcement identified 13 separate generation resources owned by eight companies that missed the deadline. The 13 resources make up less than one percent of the state’s total installed capacity. The PUC is recommending more than $7.5 million in fines against those eight companies. About the enforcement action, the PUC’s Executive Director Thomas Gleeson said: “The PUCT cannot tolerate the failure of these companies to even file their readiness reports . . . We are recommending stiff administrative penalties against each of these entities. The Governor, Legislature and the Commission have consistently told PUC staff that they expect compliance with our new rules and that we must be swift and meaningful with our enforcement action. Today’s actions demonstrate just how seriously this agency takes its job to improve the reliability of the grid.” The purpose of the WWRRs is to ensure the generation fleet in Texas is better prepared to provide service through severe winter weather. Failure to timely file WWRRs does not indicate whether or not these companies have taken the steps to weatherize their facilities. Subsequent inspections by ERCOT are needed to verify that. Entities receiving violations have 20 days to respond to the notice of violation and can request a hearing.

Firm Fuel Product Plans Progress at ERCOT with PUC Oversight. A new program under which natural gas-fired generators would receive payments for having fuel stored on-site should become operational by winter 2023, under plans underway at ERCOT and the PUC. ERCOT and the PUC have spent the last several months working through details of the proposed “firm fuel product,” which policymakers see as one tool among several to prevent weather-related generation outages similar to those that incapacitated Texas last February. Experts have identified gas supply failures as major contributing factors for last February’s generation shortfalls. Under the program, ERCOT would issue periodic requests for proposals in which generators could receive payments in exchange for commitments for having on-site fuel available in advance of the winter season. Approximately 4,400 megawatts of such capacity already exists within ERCOT, but the program would incentivize the creation of more.

In parallel memos filed on January 26, PUC Commissioners Lori Cobos and Will McAdams laid out implementation guideposts for the new program. Although writing separately, both Commissioners agreed that only gas-fired generators with at least 48 hours of on-site fuel should be eligible for participation. Commissioner Cobos wrote that the ERCOT Board must approve new rules for the program by March so that the organization’s staff can begin work on its computerized settlement systems to accommodate the new firm-fuel product. “ERCOT should procure the product in a phased-in manner, which would require ERCOT to issue its first (request for proposal) no later than August 2022 to send a price signal to the market and launch the product by next winter,” wrote Commissioner Cobos. She added that ERCOT should then increase use of the product during future winters. Commissioner McAdams, in his separate memo, said ERCOT should enforce a yet-to-be-determined budget limit and cost cap as they issue requests for proposals. He wrote that implementation questions remain, such as how much growth in firm fuel resources should be targeted, and whether units with off-site but accessible fuel should be allowed to participate. “The over-arching objective is to have expedited implementation so that we know that we have our generators out there, building tanks, scouring tanks, purging tanks in the next two years,” said Commissioner McAdams during a discussion of the program at the PUC’s January 27 open meeting.

The new firm-fuel product is contemplated in Senate Bill 3, an omnibus energy reform bill that Texas lawmakers adopted last year in response to the Winter Storm Uri outages. The PUC Commissioners’ memos relating to the program—along with more information about the firm-fuel product in general and other issues relating to the ERCOT wholesale market design—can be found on the PUC website under Docket No. 52373.

Update on PUC Rulemaking Projects. PUC Staff maintains a rulemaking calendar under Project No. 51715, which helps track the Commission’s efforts to implement statutes adopted by the Legislature. The Commission opened a new project, Project No. 52935, which houses the updated rulemaking calendar. In a February 23, 2022 memo, the Commission’s Director of the Rules and Projects Division wrote that the calendar “does not capture the full breadth of Staff’s rulemaking activities.” He also noted that a number of rulemaking projects that were opened prior to the 87th Legislative Session have been removed from the calendar, but that doesn’t mean those projects were closed, rather “[t]he Commission’s current focus is on implementing the statutes adopted by the Legislature,” and those projects would be revisited at a later date, if appropriate.

• As of February 23, 2022, the following rulemaking projects are being prioritized:
• Project No. 51888, Review of Critical Load Standards and Processes
• Project No. 51841, Review of 16 TAC § 25.53 Relating to Electric Service Emergency Operations Plans
• Project No. 52287, Power Outage Alert Criteria
• Project No. 52301, ERCOT Governance and Related Issues
• Project No. 52312, Review of Administrative Penalty Authority
• Project No. 52313, Statutory Definitions
• Project No. 52757, Review of Chapter 25- Rules Applicable to Electric Service Providers
• Project No. 52845, Middle Mile Broadband
• Project No. 53191, Reorganization of 25.505
• Project No. 53169, Review of Transmission Rates for Exports From ERCOT
• Project No. 52796, Review of Market Entrant Requirements
• Project No. 52405, Review of Certain Water Customer Protection Rules
• Project No. 52059, Review of Commission Filing Requirements

• Other prioritized projects include:
• Weather Preparedness Standards Phase 2
• HB 2483 Implementation
• Consumer Benefits Test

Railroad Commission of Texas (“RRC”)

RRC Approves Securitization Financing Order. A $3.4 billion financing order to pay natural gas costs from Winter Storm Uri has been approved by the RRC. Under the February 8 regulatory action, ratepayers will end up paying potentially for decades for fuel they consumed during the weeklong storm. Although the RRC gave its initial approval in November, this latest decision pushes the process forward by directing a separate agency known as the Texas Public Finance Authority to issue the bonds within six months.

Atmos, CenterPoint, Texas Gas Service and 8 other gas utilities applied for financial recovery under the debt financing deal, which utilities promote as a method to help their customers avoid rate shock. Under ordinary circumstances, the cost of natural gas consumed by utility customers would have flowed directly into monthly bills. During last year’s Winter Storm Uri, however, gas prices spiked to intolerable levels and so gas utilities instead set aside those fuel costs as “regulatory assets” to deal with later. The new bond financing allows utilities to receive reimbursements for these expenses. The downside for ratepayers, however, is that they will have to pay off the bonds over many years—up to 30—and with interest. The size of the resulting bill charges still remains unclear.

Under the financing order, Atmos Energy can receive reimbursements under the bond financing arrangement for approximately $2 billion in fuel costs, CenterPoint can receive approximately $1.1 billion and TGS can receive $197.3 million. Other utilities to receive recovery include Bluebonnet, Corix, EPCOR, SiEnergy, UniGas, TGS West Texas Service Area and CoServ. The bond financing process received authorization in 2021 by the Texas Legislature, under House Bill 1520. By law, gas distribution utilities such as Atmos, CenterPoint and TGS cannot profit from the sale of the gas commodity, but instead must pass those costs directly to end users without markups.

Report: RRC Critical Gas Inspections Fall Short. Inspections of critical gas units since Winter Storm Uri have suffered major gaps, according to an inspection of RRC documents. In a February 7 report from the EnergyWire news service, journalists who examined regulatory documents obtained through a Freedom of Information Act request concluded that gas production and transmission facilities could not guarantee they can withstand another hard freeze. According to documents obtained by the news site, operators at about 40 percent of the pipeline and storage sites Texas deems critical either had not conducted a winterization test, or company officials did not know if one had been performed. The records indicated that state inspectors had not actually visited dozens of sites because of “time constraints,” according to the news site. Records examined by the reporters indicated that one gas-fired plant endured a forced shut down one month after state inspectors said its supply pipelines had passed inspection. In other cases, inspectors appeared to have overlooked important information, according to the report. Andrew Keese, a spokesperson for the RRC, in a response to the news site’s findings, said the records reviewed by the journalists represent only a snapshot of conditions. Keese said that companies had made progress since the filing of the regulatory reports. “In the fall, some of the sites had yet to finish winterizing or test winterization because they were coming off summer operations,” the spokesperson said in a statement. EnergyWire reports that its journalists reviewed data on more than 3,600 inspections of wells, pipelines and storage fields, obtained through a public records request.

CenterPoint GRIP Filings. In early March, CenterPoint Gas made Gas Reliability Infrastructure Program (“GRIP”) filings with the cities in their Houston and Texas Coast divisions. Under GRIP rules, the state’s natural gas utilities can periodically increase rates without substantial regulatory review.

For cities in the Houston Division, CenterPoint is seeking recovery of $193,152,387 in invested capital. This compares to $153,689,801 last year, $157,664,708 in 2020, $99,461,495 in 2019 and $112,238,512 in 2018. The current filing will increase rates to residential customers by $1.36 per month. This will increase the current residential customer charge from $18.38 to $19.74 per month. Last year the increase was $0.99 per month.

For cities in the Texas Coast Division, the Company is seeking recovery of $51,135,035 in invested capital. This compares to $45,065,113 last year, $37,937,732 in 2020, $46,935,293 in 2019 and $31,889,184 in 2018. The current filing will increase rates to residential customers by $1.32 per month. This will increase the current residential customer charge from $18.62 to $19.94 per month. Last year the increase was $0.88 per month. Increases in both divisions are currently scheduled to go into effect on May 2, 2022.

On March 3, CenterPoint Gas also made GRIP filings with the cities in its South Texas Division and Beaumont / East Texas Division. For cities in the South Texas Division, the current filing will increase rates to residential customers by $2.11 per month. This will increase the current residential customer charge from $24.92 to $27.03 per month. For cities in the Beaumont / East Texas Division, the current filing will increase rates to residential customers by $1.59 per month. This will increase the current residential customer charge from $20.38 to $21.97 per month. The increase is currently scheduled to go into effect on May 2, 2022.

Atmos Energy GRIP Filings. On February 25, Atmos Energy filed for GRIP rate adjustments for a number of its jurisdictions within Texas. In each case, the company based its proposed GRIP adjustments on the difference between the value of invested capital as of December 31, 2021 and the value of the invested capital as of December 31, 2020. The company also proposed an effective date of April 26, 2022 for each case. No recovery costs related to Winter Storm Uri from 2021 were included in the filings.

• Details of the new GRIP filings are as follows:
• The company proposed a GRIP rate adjustment for the unincorporated areas served by its Mid-Tex Division. Under it, the current monthly charge for residential customers will increase by $5.15, or 17.67 percent, from $29.14 to $34.29. Average bills will increase by 8.26 percent, from 62.36 to 67.51. For commercial users, monthly charges will increase by $16.47, from $77.77 to $94.24. For industrial users, the meter charge will increase by $309.07 per month, from $1,463.47 to $1,772.54. This is the fourth GRIP case for the unincorporated areas of the Mid-Tex Division since the setting of base rates under a previous rate case, designated Gas Utility Docket No. 10742.
• The company proposed a GRIP rate adjustment for the incorporated areas of the Atmos Texas Municipalities Coalition (“ATM Cities”). Under it, the current monthly charge for residential customers will increase by $5.15, from $30.99 to $36.14. For commercial users, monthly charges will increase by $16.47, from $81.27 to $97.74. For industrial users, the meter charge will increase by $309.07 per month, from $1,463.50 to $1,772.57. This is the fourth GRIP case for ATM Cities since the calculation of base rates in Gas Utility Docket No. 10779.
• The company proposed a GRIP rate adjustment for the incorporated areas of Amarillo, Lubbock, Dalhart, and Channings (“ALDC”) located in the utility’s West Texas Division. Under it, the current monthly charge for residential customers will increase by $2.83, from $15 to $17.83. For commercial users, the monthly charge will increase by $8.79, from $50.00 to $58.79. For industrial users, the meter charge will increase by $152.87 per month, from $525.00 to $677.87. This is the fourth GRIP case for ALDC since the calculation of base rates in Gas Utility Docket No. 10174. The company proposed a GRIP rate adjustment for the unincorporated areas of the utility’s West Texas Division. Under it, the current monthly charge for residential customers will increase by $3.20, from $24.79 to $27.99. For commercial customers, monthly charges will increase by $8.95, from $67.31 to $76.26. For industrial users, the meter charge will increase by $139.13 per month, from $782.88 to $922.01. This is the fourth GRIP case for the unincorporated areas of the West Texas Division since the calculation of base rates in Gas Utility Docket No. 10743.

In a separate filing from those referenced above, Atmos Pipeline-Texas on February 11 also filed for a GRIP rate increase—but one that applies to the utility’s entire pipeline system. Its effective date would be April 12, 2022. Under this filing, Atmos Pipeline-Texas proposes to increase capacity charges, which flow only in an indirect fashion to residential and business customers. In the utility’s Mid-Tex Division, the current capacity charge is $13.85726 per Metric Million British Thermal Unit (“MMBtu”). The company proposes to increase that charge by $2.08058, to $15.93784 per MMBtu. This is the sixth GRIP case for Atmos Pipeline-Texas since its base rates were set in Gas Utility Docket No. 10718.

“Agency Highlights” is prepared by Danielle Lam in the Firm’s Water and Districts Practice Groups; Jeff Reed in the Firm’s Air and Waste Practice Group; and Taylor Denison 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 Danielle at 512.322.5810 or dlam@lglawfirm.com, Jeff at 512.322.5835 or jreed@lglawfirm.com, or Taylor at 512.322.5874 or tdenison@lglawfirm.com.