Agency Highlights

United States Environmental Protection Agency (“EPA”)

EPA finalizes changes to the Lead and Copper Rule. On December 22, 2020, EPA released the pre-publication version of the Lead and Copper Rule under the Safe Drinking Water Act. The final rule deviates from the proposed rule in numerous ways, and for that reason, only a high-level overview of the changes is addressed here.

First, the final rule narrows the scope of lead sampling in schools and childcare facilities—community water systems must conduct sampling at 20% of elementary schools (previously, the rule proposed all K-12 schools) and 20% of childcare facilities per year over a single five-year cycle. Public water systems must also conduct sampling upon request by any childcare facility or school (including secondary schools). Second, the final rule expands certain public education requirements: systems must include instructions for accessing the lead service line (“LSL”) inventory and the results of all tap sampling in their Consumer Confidence Reports, and they must also translate public education materials into other languages upon customer request. The final rule also expands the “find-and-fix” steps for when an individual sample reflects lead concentrations over 15 µg/L, changes certain sampling procedures in individual homes, and adjusts the sample site collection tiering criteria.

The three-year deadline to complete LSL inventories remains the same, meaning that systems should expect to finalize inventories by within 3 years of the final rule publication. Likewise, while the final rule made minor changes to LSL replacement rules (like allowing systems up to 180 days to make a LSL replacement after a consumer replaces private lines), the main LSL replacement rate (3%) for systems above the action level remains the same. The final Lead and Copper Rule will take effect within 60 days after publication in the Federal Register.

EPA issues draft guidance applying County of Maui v. Hawaii Wildlife Fund. On December 4, 2020, EPA issued a draft guidance memorandum clarifying how regulated entities should comply with the Supreme Court’s Maui decision, an opinion issued in April dealing with Clean Water Act permits for discharges into groundwater. Maui held that a National Pollutant Discharge Elimination System (“NPDES”) permit is required if a discharge into groundwater is a “functional equivalent” of a direct discharge into navigable waters. The Maui decision articulated seven factors to determine whether a discharge into groundwater meets the “functional equivalent” test. EPA’s draft guidance provides context for applying Maui’s test under existing NPDES framework and identifies an eighth factor.

EPA’s memo notes that Maui did not modify the two threshold requirements that trigger a NPDES permit obligation: (1) there must be an actual discharge of a pollutant into a water of the United States, and (2) such discharge must be from a point source. The memo provides guidance for applying these requirements in the groundwater context—for example, hydrogeology or the nature of the aquifer may prevent an “actual discharge” from reaching a water of the United States. The memo notes that even if the two threshold requirements are met, factors like time and distance traveled can affect whether a discharge into groundwater is a “functional equivalent” of a direct discharge.

EPA’s memo also identifies an eighth factor to consider in conducting a “functional equivalent” analysis—the design and performance of the system or facility from which the pollutant is released. EPA explained that this factor may affect the composition and concentration of pollutants, the transit time of pollutants, the distance travelled by pollutants, and the amount of pollutant that a facility discharges. EPA will accept comments on the draft guidance until January 11, 2021.

EPA issues an interim strategy memorandum to address PFAS in NPDES permits. On November 22, 2020, EPA published a memo outlining the agency’s strategy to address Per- and Polyfluoroalkyl Substances (“PFAS”) in federally issued National Pollutant Discharge Elimination System (“NPDES”) permits. The memo details three recommendations for EPA regional administrators to follow while the agency’s Office of Water continues to develop a regulatory strategy. Though the memo applies only to jurisdictions where EPA authorizes NPDES permits (the District of Columbia, Massachusetts, New Hampshire, and New Mexico), state-level NPDES authorities—including the TCEQ—may refer to the memo for guidance.

First, the memo recommends that NPDES permit writers include phased-in PFAS monitoring and best management practices for point source wastewater discharges where PFAS are “expected to be present.” Second, the memo proposes the same monitoring and best management practices for municipal separate storm sewer systems (“MS4”) and industrial stormwater dischargers where PFAS are “expected to be present.” Third, the memo recommends that the EPA’s Office of Water publish a permitting compendium in the third quarter of 2021. The memo notes that any PFAS monitoring requirements in NPDES permits should use a “phased-in” approach that is triggered when the EPA publishes official monitoring methods for PFAS, which it expects will take place in 2021.

This interim guidance will apply while EPA develops analytical methods for detecting PFAS in drinking water, assesses PFAS treatment techniques, and “evaluat[es] statutory and regulatory mechanisms to manage adverse human health and environmental impacts from PFAS exposure.”

Final EPA Guidance Document Procedures Go Into Effect. In the October 2020 edition of The Lone Star Current, we reported on EPA’s proposed rulemaking to revise the agency’s practice of organizing, evaluating, and issuing guidance documents subject to an executive order titled, Promoting the Rule of Law Through Improved Agency Guidance Documents, in order to increase the transparency of its guidance practices and improve the process used to manage its guidance documents. EPA adopted a final rule that went into effect on November 18, 2020.

The stated purpose of the rule is to ensure EPA guidance documents:

• Are developed with appropriate review;
• Are accessible and transparent to the public;
• Are subject to public participation;
• Meet standards established for guidance documents and “significant guidance documents”; and
• Contain procedures allowing public petition to modify or withdraw an active document.

In addition, the final rule defines the term “active guidance document” to mean a guidance document in effect that EPA expects to cite, use, or rely upon. Any active guidance document not posted to an online EPA portal is considered to be rescinded under the rule. However, the final rule adds a procedure under which the public can petition the EPA for the reinstatement of a rescinded guidance document.

EPA Announces Decision to Retain Current Particulate Matter Emissions Standards. On December 7, 2020, EPA announced that it completed its five-year review of the Primary and Secondary National Ambient Air Quality Standards (NAAQS) for Particulate Matter (PM). PM is a criteria air pollutant under the Clean Air Act. On December 18, 2020, EPA issued a final action to retain the current primary standards meant to protect against fine particle exposures (i.e., annual and 24-hour PM2.5 standards), the primary standard meant to protect against coarse particle exposures (i.e., 24-hour PM10 standard), and the secondary PM2.5 and PM10 standards.

EPA Administrator Andrew Wheeler supported the agency’s decision by emphasizing that PM levels across the country had improved in recent years and the decision is consistent with the Clean Air Scientific Advisory Committee’s (CASAC) consensus advice.

EPA last revised the PM standards in 2012 when the agency tightened the primary standard for PM2.5 from 15 micrograms per cubic meter to 12 micrograms per cubic meter. EPA also set the 24-hour fine particle standards at 35 micrograms per cubic meter in 2012. The 24-hour limit for PM10 has stayed at 150 micrograms per cubic meter since 1987. The recently announced final action will not change any of these standards. According to EPA, currently, 16 counties in the U.S. are in nonattainment of the primary PM2.5 NAAQS and 23 counties are currently in nonattainment of the primary PM10 NAAQS.

EPA Releases Interim Guidance on Destroying and Disposing of PFAS. On December 18, 2020, EPA released interim guidance on destroying and disposing of certain PFAS and PFAS-containing materials as part of its PFAS Action Plan. Please refer to the April and July 2019 editions of The Lone Star Current for more information about EPA’s PFAS (per- and polyfluoroalkyl substances) Action Plan, which seeks to regulate the “forever chemicals” and designate them as a hazardous substance under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), also known as Superfund. The interim guidance provides the current state of the science on techniques and treatments that may be used to destroy or dispose of PFAS and PFAS-containing materials from non-consumer products, including aqueous film-forming foam (AFFF) for firefighting. These techniques and treatments include incineration, landfill disposal, and underground injection technologies.

• Specifically, the interim guidance addresses PFAS and PFAS-containing materials, including:
• AFFF;
• Soil and biosolids;
• Textiles, other than consumer goods, treated with PFAS;
• Spent filters, membranes, resins, granular carbon, and other waste from water treatment;
• Landfill leachate containing PFAS; and
• Solid, liquid, or gas waste streams containing PFAS from facilities manufacturing or using PFAS.

However, the interim guidance is not intended to address destruction and disposal of PFAS-containing consumer products, such as non-stick cookware and water-resistant clothing. EPA announced that it will accept comments on the interim guidance for 60 days following publication in the Federal Register. EPA will then consider and incorporate comments, as appropriate, into a revised document. EPA has not published notice in the Federal Register at the time of this writing.

EPA Publishes Final Rule Reforming New Source Review Applicability Regulations. On November 24, 2020, EPA published a final rule revising the agency’s New Source Review (NSR) applicability regulations to clarify when the requirement to obtain a major NSR permit applies to a source proposing to undertake a physical change or a change in the method of operation (i.e., a project) under the major NSR preconstruction permitting programs. Under these programs, an existing major stationary source proposing to undertake a project must determine whether that project will constitute a major modification subject to the major NSR preconstruction permitting requirements by following a two-step applicability test. The first step involves determining whether a proposed project will cause a significant emissions increase of a regulated NSR pollutant and if it would, then the second step determines whether there will be a significant net emissions increase of the same pollutant.

Under the final rule, facilities will be able to include both emissions increases and decreases in Step 1 (a method EPA refers to as “Project Emissions Accounting”), which some critics argue will enable facilities to avoid triggering NSR requirements and allow them to make modifications that will significantly increase source wide emissions. In response to such criticism, EPA has stressed that the rule incentivizes installation of new technologies that can both improve operator efficiency and reduce air pollution.

The final rule became effective December 24, 2020 and will apply to EPA and permitting authorities that have been delegated NSR federal authority. State and local air agencies that implement the NSR programs through EPA-approved State Implementation Plans (SIPs) are not required to modify their SIPs to comply with the final rule, but have the discretion to adopt the changes.

EPA Finalizes Clean Air Act Cost-Benefits. On December 9, 2020, EPA finalized a procedural rule to improve the rulemaking process under the Clean Air Act (CAA) cost-benefits rule by establishing requirements for evaluating the benefits and costs of regulatory decisions. The final rule codifies best practices for benefit-cost analysis (BCA) in rulemaking and, according to EPA, will provide clarity for states, local communities, industry, and other stakeholders regarding EPA’s rulemaking considerations. The primary requirements include: (1) EPA preparing a BCA for all significant proposed and final regulations under the CAA; (2) EPA developing BCAs in accordance with best practices from the economic, engineering, physical, and biological sciences; and (3) EPA increasing transparency in how it presents the costs and benefits resulting from significant CAA regulations.

EPA Rescinds “Once In, Always In” Policy for Major Sources of HAPs in Final Rule. On November 19, 2020, EPA published a final rule rescinding the agency’s “Once In, Always In” policy for major sources of hazardous air pollutants (HAPs). More specifically, the rule finalizes amendments to the General Provisions that apply to National Emission Standards for Hazardous Air Pollutants (NESHAP). According to EPA, these amendments implement the plain language reading of the “major source” and “area source” definitions of section 112 of the Clean Air Act and provide that a major source can be reclassified to area source status at any time upon reducing its potential to emit HAPs to below the major source thresholds of 10 tons per year (tpy) of any single HAP and 25 tpy of any combination of HAPs. The rule also finalizes amendments to clarify the compliance dates, notification, and recordkeeping requirements that apply to sources choosing to reclassify to area source status and to sources that revert back to major source status, including a requirement for electronic notification.

The final rule goes into effect on January 19, 2021.

EPA Sets Greenhouse Gas Standards for Aircraft. On December 23, 2020, EPA issued a final rule to regulate greenhouse gas (GHG) emission standards emitted by aircraft, including certain new commercial airplanes and large passenger jets.

The new rule stems from EPA’s finding in 2016 that certain aircraft GHG emissions cause or contribute to elevated atmospheric concentrations of GHGs, endangering public health and welfare through climate change. Before this rule, aircraft were the single largest GHG-emitting transportation source not subject to GHG standards in the U.S., according to EPA.

In developing the new GHG standards for aircraft, EPA relied on the 2017 Airplane C02 Emission Standards established by the United Nations’ International Civil Aviation Organization (ICAO). According to EPA, the agency chose standards equivalent to ICAO because the standards have “substantial benefits for future international cooperation” on aircraft emissions, which the agency deemed “key for achieving worldwide emission reductions.” The new GHG standards apply to new type design airplanes and in-production airplanes on or after January 1, 2028. The standards do not apply to already manufactured airplanes that are currently in use.

Michael Regan nominated to lead EPA. On December 17, 2020, President-elect Joe Biden picked Michael Regan—the head of North Carolina’s environmental department—to serve as agency head for the EPA. Regan worked with EPA’s Office of Air for nearly ten years under the Clinton and George W. Bush administrations. After leaving the EPA, Regan worked as a director with the Environmental Defense Fund, focusing on climate and energy issues. Since 2017, Regan has served as the head of North Carolina’s Department of Environmental Quality (“NCDEQ”), where he has led major efforts including a cleanup of the Cape Fear River to address PFAS contamination and a multi-year negotiation with Duke Energy to mitigate a 2014 coal ash spill. Regan also formed the NCDEQ’s Environmental Justice and Equity Advisory Board, which aims to ensure that the agency fully considers the needs of communities that face disproportionate levels of environmental harm. If confirmed by the Senate, Regan would be the first black man to lead the EPA.

United States Fish and Wildlife Service (“FWS”)

FWS publishes a final rule defining “habitat” under the Endangered Species Act. On December 16, 2020, FWS joined the National Marine Fisheries Service and the National Oceanic and Atmospheric Administration to publish a final rule defining “habitat” for use in critical habitat designations under the Endangered Species Act (“ESA”). The new definition reads: “For the purposes of designating critical habitat only, habitat is the abiotic and biotic setting that currently or periodically contains the resources and conditions necessary to support one or more life processes of a species.”

The agencies note that this definition is broad enough to cover both “occupied areas” and “unoccupied areas,” which are terms included in the ESA’s statutory definition of “critical habitat.” The preamble to the final rule explains that the agencies added the term “periodically” to include ephemeral and seasonal habitats. The definition also references “one or more life processes” so that “habitat” can include areas that species use during a particular lifecycle phase (such as spawning habitat) or during a particular season (such as migratory habitat).

Importantly, the agencies note that the definition excludes areas that “do not currently or periodically contain the requisite resources and conditions, even if such areas could meet this requirement in the future after restoration activities or other changes occur.” However, the preamble indicates a degree of flexibility in habitat determinations: “[I]f areas are initially determined not to be habitat, they may be subsequently determined to be habitat.” Moreover, the preamble notes that if “conditions change or new information becomes available indicating that areas . . . not previously considered to be habitat have the necessary resources and conditions at that time in the future, critical habitat can be revised.”

The final rule includes language limiting the definition only to the area of critical habitat designations, which will prevent the definition from causing unintended consequences in other sections of the ESA or in other federal programs. The definition will apply only to relevant rulemakings published after the rule’s effective date of January 15, 2021.

Texas Commission on Environmental Quality (“TCEQ”)

TCEQ opens comment period for renewal of TPDES Stormwater Multi-Sector General Permit. The public comment period on TCEQ’s updated Stormwater Multi-Sector General Permit (“MSGP”) opened on December 11, 2020 and will close on January 10, 2021. TCEQ will hold a virtual public meeting on the proposed MSGP on January 11, 2021.

The updates to the previous version of the MSGP included both procedural changes and substantive changes. The proposed revisions to the MSGP include several procedural changes to reporting requirements (such as requiring a waiver for paper submissions), add several requirements for Notice of Intent (“NOI”) and a Notice of Change (“NOC”) forms, and require that facilities post proof of permit coverage on site. The proposed MSGP also requires a permittee to file a Delegation of Signatory form in the State of Texas Environmental Reporting System (“STEERS”) if signatory authority is delegated by an authorized representative. The proposed MSGP also includes certain substantive changes, like adding best management practices for facilities that handle pre-production plastic and lowering benchmark monitoring values for biological oxygen demand and total suspended solids.

After the comment period closes, TCEQ will make necessary changes and finalize the updated MSGP before the current version expires on August 14, 2021.

TCEQ appoints Laurie Gharis as Chief Clerk. On November 18, 2020, TCEQ appointed Laurie Gharis as the TCEQ’s Chief Clerk. Prior to this appointment, Gharis served as manager of the agency’s Watermaster Program. Before joining TCEQ, Gharis directed the Wisconsin Center for Environmental Education at the University of Wisconsin. She holds a Ph.D. in Forestry and Environmental Resources and a Master’s in Public Administration from North Carolina State University, and a B.S. from Texas A&M University.

TCEQ Proposes Rulemaking to Clarify Exemptions Under New Recycling Rules. On October 7, 2020, the TCEQ Commissioners approved a proposed rulemaking to repeal and replace 30 Texas Administrative Code §§ 328.203 and 328.204, concerning Waste Minimization and Recycling. Sections 328.203 and 328.204 comprise TCEQ’s new governmental entity recycling rules, which went into effect on July 2, 2020. The new rules generally require governmental entities to establish a recycling program and implement purchasing preference policies for recyclable materials.

The proposed rulemaking is aimed at restructuring the rules to provide additional clarity to Chapter 328; specifically, clarifying that the recycling rule exemptions also apply to the purchasing preference policy requirement, and not just the recycling program requirement. The proposed rulemaking will essentially flip the order of the current rules in order to provide this clarity, but it will not substantively change the rule language or requirements.

TCEQ anticipates adopting a final rule in March 2021. Please refer to the October 2020 edition of The Lone Star Current for further details about TCEQ’s new governmental entity recycling rules.

TCEQ adopts final rule allowing for the use of electronic mail for application deficiency notices and responses. On October 7, 2020, the TCEQ Commissioners adopted a final rule to amend section 281.18 of Title 30 of the Texas Administrative Code concerning Applications Processing in order to allow for the use of electronic mail for application deficiency notices and responses. Before the rulemaking, section 281.18 required that notices of application deficiencies be sent to the applicant via certified, return receipt mail. According to TCEQ, the adopted changes will: (1) modernize communications between the agency and applicants; (2) reduce TCEQ postage costs; and (3) improve the efficiency of application processing. TCEQ indicated that applicants will benefit from a more efficient permit processing time, especially those seeking new permits or amendments to existing permits.

TCEQ Adopts Rulemaking to Implement HB 1331, HB 1435, and HB 1953. On October 7, 2020, the TCEQ Commissioners adopted a final rulemaking to implement new legislation from this past session related to municipal solid waste (MSW). Specifically, the rulemaking makes changes to 30 Texas Administrative Code (TAC) Chapters 305 and 330 to implement HB 1331, HB 1435, and HB 1953.

Pursuant to HB 1331, the rulemaking amends 30 Texas Administrative Code (TAC) §§ 305.53(a)(7) and 330.59(h)(1) to increase the application fee for a permit, or major permit amendment, for an MSW facility from $100 to $2,000. This results in a total application fee of $2,050 as TCEQ rules also require that the application fee include an additional $50 to be applied toward notice costs.

Pursuant to HB 1435, the rulemaking amends 30 TAC § 330.73(c) to require the TCEQ to confirm information included in an application for a permit for an MSW management facility by performing a site assessment of the facility before the agency issues an authorization or issues a permit or a major permit amendment.

Pursuant to HB 1953, the rulemaking amends 30 TAC §§ 330.3 and 330.13 to add and amend definitions and activities to exempt pyrolysis and gasification of post-use polymers from regulation under Chapter 330. According to TCEQ, the rulemaking is aimed at reducing the regulatory burden to begin pyrolysis or gasification activities using recyclable materials.

In addition, the rulemaking repeals TCEQ rules determined to be obsolete as a result of the Quadrennial Rules Review of 30 Texas Administrative Code Chapter 330, Subchapter F, Analytical Quality Assurance and Quality Control. The rulemaking indicates that the repealed rules are no longer necessary because Subchapter F expired on January 1, 2009 and the agency uses other guidance documents to implement data quality controls and sampling guidelines.

TCEQ Renews Oil and Gas General Operating Permits and Requests Public Comment on Revisions. On October 15, 2020, TCEQ issued renewals to Oil and Gas General Operating Permits (GOPs) Numbers 511-514. Under the renewed GOPs, current permit holders are required to submit an application for a new authorization to operate (ATO), if any of the emission units, applicability determinations, or the basis for the applicability determinations are affected by the revisions in the renewed GOPs. If the revisions in the GOPs do not affect a particular site, a new ATO is not required. The renewed GOPs contain revisions based on recent federal rule changes, which include updates to 40 Code of Federal Regulations Part 60, Subpart OOOOa published in the September 14, 2020 and September 15, 2020 Federal Register. The revisions also correct typographical errors and update language for administrative preferences. TCEQ opened a comment period on the revisions, which ended on December 16, 2020. TCEQ also held a remote public hearing on December 11, 2020 concerning the revisions to the GOPs.

Public Utility Commission of Texas (“PUC”)

PUC Compares Electricity Utility Distribution Spending and Reliability. Each year, the Public Utility Commission (PUC) releases a report tracking the reliability-related spending of investor-owned electric utilities (IOUs) providing distribution service across the state of Texas. This year’s report covers the ten-year period from 2010-2019, providing data on (1) distribution system spending; (2) all investor-owned electric distribution utilities serving customers in Texas; (3) variations in spending and reliability data in graphical format; and (4) outage comparisons between utilities. Outage comparisons use the System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI) calculations to show the duration and frequency of interruptions.

The Commission’s report can be found at: http://interchange.puc.texas.gov/Documents/46735_26_1089530.PDF

Thomas Gleeson Appointed New PUC Executive Director. Public Utility Commission (PUC) Executive Director John Paul Urban III has resigned, effective immediately, the agency announced Wednesday, December 9, 2020. After serving as the PUC’s Legislative Director from 2011 to 2014, Urban returned two years ago as Executive Director.

At the December 17, 2020 open meeting, the Commissioners announced that Thomas Gleeson would be promoted to be the new Executive Director. Thomas has been with the PUC since 2008 in various roles. From 2015 to 2018, he served the Director of Finance and Administration, and from 2018 until now, he has served as the Chief Operating Officer.

The PUC Prepares for 2021 Legislative Session. The Public Utility Commission (PUC) has acknowledged that this is not the year for utility issues to take center stage at the Legislative Session, so it seems that expectations are low for any significant changes in 2021. In the PUC’s Biennial Report to the 87th Legislature (filed on December 10, 2020 in Docket No. 50475), the PUC provided a report on significant actions taken over the past two years, described emerging issues, and summarized its recommendations to the Legislature for potential water, electric, and telecommunications legislation. Based on this report and comments made by the Commissioners at the open meeting on December 17, 2020, the PUC recommends legislation on the following:

• Sale of Electricity at Charging Stations: As the cost of electric vehicles has dropped, more consumers have purchased them, with sales rates doubling year-over-year. With increased adoption of electric vehicles over fuel-based vehicles, there is a growing need for public-use charging stations to be located off of highways and in places such as large retail shopping centers or garages near office buildings. The sale of electricity through these charging stations could potentially bring the companies owning them under the definition of an “electric utility.” The PUC proposes that the Legislature clarify that the use of an electric vehicle charging station is not an electric utility or a retail electric provider.
• Texas Universal Service Fund (TUSF) Shortfall: The TUSF is funded through a surcharge based on an estimate of intrastate telecommunications service usage. A surcharge is assessed on the estimated intrastate voice service portion of telecom companies’ taxable receipts. In fiscal year 2019, wireless service providers reviewed their service packages and determined that a much smaller part of their packages was devoted to providing voice service than previously estimated. As a result, a smaller amount of taxable receipts is eligible for TUSF surcharge assessment. This has created an unanticipated, marked shortfall of TUSF revenues. Therefore, to maintain the solvency of the TUSF, either TUSF support must be reduced or collections must be increased. The PUC requests guidance from the Legislature regarding the State’s policy on the continuation of TUSF support and funding.
• Water: Since the transfer of economic regulation of water and sewer utilities, the PUC has identified many recommended revisions to the Texas Water Code. These revisions would clarify existing statutory ambiguities and, where appropriate, harmonize the regulation of water and sewer utilities with the PUC’s regulation of the electric industry. The PUC believes that a comprehensive review of the Texas Water Code, as it relates to economic regulation, is warranted.
• Filing Fees: The PUC is requesting the statutory authority to charge fees to certain parties that make paper filings with the PUC at a level not to exceed the costs incurred by the agency.

We will provide updates on how the 87th Legislature acts on the PUC’s recommendations later this year.

PUC Staff Recommends Elimination of TUSF Support for Certain Providers. The PUC has authority under PURA § 56.023(p) and (r) and 16 Texas Administrative Code (TAC) § 26.409 to determine whether TUSF support should be eliminated. When the number of access lines served by eligible telecommunications providers (ETPs) within an exchange decrease by at least 50% from the number served as of December 31, 2016, Staff is required to review the eligibility of the ETPs for receipt of TUSF. Once the PUC has identified exchanges that have met this threshold, the PUC must then determine whether TUSF support should be eliminated, applying the following criteria: (1) the total number of access lines in the exchange served by competitive ETPs receiving TUSF support; (2) the number of competitors providing comparable service in the exchange; and (3) whether continuing the TUSF support is in the public interest.

In exercising this review, the PUC Staff identified 10 exchanges where access lines decreased by at least 50%, and opened dockets to review each exchange (Dockets 51280 through 51289). As a result, Staff has recommended continuing TUSF support for the following wire centers: Briggs (Docket 51280), McDade (Docket 51284), Paige (Docket 51285), Telephone (Docket 51287), and Wallis (Docket 51288). In most of these cases, Staff pointed out either that ETPs are the only providers of service, or they provide unique services in the area. Staff also explained that these ETPs serve rural areas and provide access to 9 1 1, and that service would not be economically viable without TUSF support.

Staff recommended eliminating TUSF funding in the following wire centers: Falfurrias (Docket 51281), Jackson (Docket 51282), Lyford (Docket 51283), and Water Valley (Docket 51289). In many of these cases, Staff found there are no ETPs receiving TUSF support in the area, there are no access lines at the exchange, and that continued support to the ETPs would not be in the public interest. All of these dockets are pending further action by the Commission. In the remaining case involving the Santa Rosa Wire Center (Docket 51286), Staff has yet to file its recommendation.

PUC Audit of TUSF. At the end of July, Public Utility Commission (PUC) Chairman Walker directed Staff to audit companies receiving Texas Universal Services Fund (TUSF) monies to determine if they are using the funds correctly and to investigate which companies are actually laying down fiber using TUSF funds.

In its general investigative project to determine whether recipients of TUSF revenues are using such funds correctly (Docket No. 51433), the PUC Staff asked 55 questions of all such companies, inquiring into the use of TUSF funds, TUSF disbursements, revenues and expenses, accounting, allocation of expenses, services provided, advertising, the companies’ plans for continuing to provide services given the imminent reduction to the TUSF, and much more. Responses were due by December 3, 2020. Thus far, approximately 65 entities have responded.

As would be expected, the respondents are small companies or cooperatives serving rural areas. Their responses are generally the same, indicating that their trade groups were probably instrumental in drafting some of the responses. For instance, the last two questions were premised upon “the imminent reduction in the TUSF,” and asked the respondents to provide their plans for continuing basic local telecommunications services and non-regulated services that use the same plant assets as basic local telecommunications services. The respondents noted that until propounding the requests for information, the PUC had not made it clear that reductions are imminent, and the respondents were uninformed as to how the reductions would work: how much support will be cut; will cuts vary depending on type of providers or size; will support for all programs/service be cut, or just some; when will support cuts begin; for how long will support be cut; and will the providers be allowed an opportunity to recover lost support in a future proceeding? The companies also reminded Staff that much of the requested information is already on file with the PUC in annual reports that are very detailed in order to provide enough information to avoid the need for burdensome traditional regulatory rate cases at the PUC.

The companies’ responses generally illustrate that they use long-standing, well-vetted, mandatory regulated processes to ensure that only their regulated, intrastate telecommunications plant in service have any impact on their state returns or TUSF support. The companies’ responses to Staff’s questions are almost all voluminous, spanning hundreds of pages of information, explanations, and attachments.

The PUC Staff will now begin the arduous task of sifting through the tens of thousands of pages of responses to glean conclusions to report to the Commissioners. The PUC will likely try to present an analysis on its audit of TUSF recipients so that the TUSF shortfall issue can be properly addressed at the 87th Legislative Session that will soon commence at the beginning of 2021; however, this may be a tall task in such a short timeframe.

SPCOA Update. The number of cases in which companies are filing to relinquish their Service Provider Certificates of Operating Authority (SPCOA) are continuing to decline. Scientel Solutions, LLC (Scientel) out of Illinois filed an application for relinquishment of its SPCOA, stating that it is changing its service offerings (Docket No. 51448). Its application indicates that it never had any customers in the state and thus never provided any services. Scientel’s application was approved on December 21, 2020.

In other dockets, Voxbeam Telecommunications Inc. (Docket No. 51235) received final approval of its relinquishment application on December 8, 2020. Also, O1 Communications Inc.’s application for relinquishment (Docket No. 50748), as supplemented and amended, has been recommended for approval by PUC Staff.

TNMP Parent to Merge with AVANGRID Companies; Requires PUC Approval. On November 20, 2020, TNMP, NM Green Holdings, Inc. (Green Holdings), and Avangrid, Inc. (Avangrid) (collectively, Joint Applicants) filed their Joint Report and Application for Regulatory Approvals with the Public Utility Commission of Texas (PUC) in Docket No. 51547, detailing TNMP’s proposed new ownership.

Avangrid’s energy business features being the third-largest wind power operator in the United States, including projects in Texas. The merged company will serve more than 4 million electric and natural gas customers of 10 regulated utilities across New York, Connecticut, Maine, Massachusetts, New Mexico, and Texas. Therefore, the transaction is subject to PNM Resources shareholder approval, regulatory approvals from multiple federal and state regulatory bodies, including the PUC, and other customary closing conditions.

In their filing, the Joint Applicants described how the proposed transaction will benefit TNMP customers and Texas, providing:

• $8.6 million rate credit to electric delivery rates payable over three years after the closing;
• Better efficiency and cost-effective access to capital;
• Financial strength;
• Retention of local control and management, with the addition of extensive support; and
• Other commitments that will become PUC-enforceable.

On December 14, 2020, the administrative law judge (ALJ) granted the intervention of Cities Served by TNMP (Cities), the Office of Public Utility Counsel (OPUC), and Texas Industrial Energy Consumers (TIEC). Additionally, on December 14, TNMP filed a procedural schedule that the parties approved, which provides that intervenor testimony will be filed in February and the hearing on the merits will take place on March 24-26, 2021 at the State Office of Administrative Hearings (SOAH).

However, at the December 17, 2020 PUC open meeting, the Commissioners voiced their preference to keep the proceeding before the PUC instead of SOAH. The Joint Applicants have since filed a Motion to Suspend the Schedule Filing Requirement in order to suspend the requirement for a SOAH hearing. If the parties do not settle the case, the PUC will schedule a hearing to take place at an open meeting in late March or early April, 2021.

TNMP Advanced Meter System Update Recommended for Approval. As we have previously reported, on October 2, 2020, Texas-New Mexico Power Company (TNMP) filed a request at the Public Utility Commission (Commission) for approval to change the deployed advanced meter technology in its previously approved Advanced Metering System (AMS) Deployment Plan (Docket No. 51387). TNMP intends to upgrade the communication technology for 68% of its AMS meters in certain areas from cellular to radio frequency mesh (RF Mesh) because its current AT&T cellular 3G network will be completely decommissioned in February 2022.

On November 9, 2020, PUC Staff recommended approval of TNMP’s application. On November 17, 2020, TNMP and PUC Staff filed a Joint Notice of Approval and Proposed Order, with Cities being unopposed to the filing.

Because this is just considered an update to TNMP’s previously approved AMS Deployment Plan, it proceeds on an expedited schedule and was supposed to be administratively approved within 45 days of the application (November 16, 2020). However, in Order No. 7, the PUC’s administrative law judge (ALJ) extended the deadline for the Commission’s approval until January 14, 2021.

ETT Settles for Rate Decrease to Avoid Filing Full Rate Proceeding. On December 4, 2020, Electric Transmission Texas, LLC (ETT) filed an application for a good cause extension of its rate filing deadline, with support from the Staff of the Public Utility Commission of Texas (PUC or Commission), Office of Public Utility Counsel (OPUC), Texas Industrial Energy Consumers (TIEC), and the Gulf Coast Coalition of Cities (Cities) (collectively Parties).

Under the Commission’s rules, ETT is required to file a rate case at the PUC on or before the later of: (a) 48 months from the order in the utility’s most recent rate proceeding or “other proceeding in which the PUC approved a settlement agreement reflecting a rate modification that allowed the electric utility to avoid the filing of such a rate case”; or (b) the date listed in the rule, which for ETT is February 1, 2021. Because by February 1, 2021 it will have been longer than 48 months since a proceeding where the PUC has approved rates for ETT, the utility would be required to file a full rate case by February 1, 2021. In order to avoid the need for litigation of a full rate case proceeding, the utility has worked with the Parties to reach an agreement on its rates.

On December 9, 2020, ETT and the Parties reached an agreement and filed a request for a good cause waiver of the requirement for the utility to file a full rate review proceeding by February 1, 2021. The Stipulation provides:

• A revenue requirement of $311 million, which is a decrease of $8.3 million from ETT’s actual revenue of approximately $319.3 million for the twelve-month period ending September 30, 2020;
• ETT will make a tariff filing to implement rates that reflect the new revenue requirement with an effective date of February 1, 2021, if the agreement is approved by the PUC;
• ETT has agreed to forgo recovery of rate case expenses associated with preparation of its rate case and the Stipulation in this or any subsequent docket;
• The Signatories have agreed that a PUC order approving the Stipulation would constitute an order approving a settlement agreement reflecting a rate modification that allowed the electric utility to avoid the filing of a full rate case proceeding by February 1, 2021.

At the December 17, 2020 open meeting, the PUC approved the stipulation.

Railroad Commission of Texas (“RCT”)

Republican Jim Wright Elected Railroad Commissioner. In the 2020 general election, Republican Jim Wright defeated Democrat Chrysta Castañeda in the election for a seat at the Texas Railroad Commission (RRC), the state agency that regulates oil and gas production, as well as gas utility rates. The RRC consists of three commissioners who are elected for statewide, six-year, staggered terms.

“Agency Highlights” is prepared by Lauren Thomas in the Firm’s Water Practice Group; Sam Ballard in the Firm’s Air and Waste Practice Group; and Patrick Dinnin in the Firm’s Energy and Utility, Litigation, and Compliance and Enforcement Practice Groups. If you would like additional information or have questions related to these cases or other matters, please contact Lauren at 512.322.5850 or lthomas@lglawfirm.com, Sam at 512.322.5825 or sballard@lglawfirm.com, or Patrick at 512.322.5848 or pdinnin@lglawfirm.com.