Agency Highlights

United States Environmental Protection Agency (“EPA”)

Michael Regan Confirmed as EPA Administrator. On March 10, 2021, the U.S. Senate confirmed Michael Regan as EPA Administrator. Regan previously served as an environmental advocate with the Environmental Defense Fund and served as the Secretary of the North Carolina Department of Environmental Quality. During the confirmation process, Regan indicated that his priorities include regulating per- and polyfluoroalkyl substances (PFAS), addressing environmental justice issues, reducing greenhouse gas emissions, and tackling climate change.

EPA approves TCEQ takeover of oil and gas wastewater permitting. On January 15, 2021, EPA approved TCEQ’s request to administer the National Pollutant Discharge Elimination System (“NPDES”) program for oil and gas wastewater. The program—which covers discharges from produced water, hydrostatic test water, and gas plant effluent—previously fell under the jurisdiction of the Texas Railroad Commission. Texas legislators initiated this transfer of authority in 2019 when they passed House Bill 2771, which authorizes TCEQ to issue permits for the discharge of certain oil and gas effluents into waters in the state. TCEQ began accepting individual permit applications under this program in early January 2021. Additionally, TCEQ issued a general permit for hydrostatic test water, and it anticipates that two more general permits will be available in late summer 2021.

EPA announces a final determination to regulate PFOS and PFOA under the SDWA. On March 3, 2021, EPA published a final determination to regulate perfluorooctanesulfonic acid (“PFOS”) and perfluorooctanoic acid (“PFOA”) under the Safe Drinking Water Act (“SDWA”). In making its final determination to regulate PFOS and PFOA, EPA concluded that (1) both chemicals may cause adverse health effects; (2) both chemicals are known to occur, or there is a substantial likelihood that they will occur, in public water systems with a frequency and at levels of public health concern; and (3) regulation of both chemicals presents a meaningful opportunity for health risk reduction for persons served by public water systems.

EPA must propose National Primary Drinking Water Regulations (“NPDWRs”) for PFOS and PFOA within 24 months of proposal, and it must then take action on the final regulations within 18 months of the proposals. EPA noted that although the SDWA does not require additional regulatory determinations until 2026, EPA “is committing to making regulatory determinations in advance of the next SDWA deadline for additional PFAS.” Accordingly, public water systems should remain alert for additional PFAS-related regulatory determinations.

EPA delays the effective date of the Lead and Copper Rule Revisions; proposes additional delays. On March 12, 2021, EPA published a final rule to move the effective date of the Lead and Copper Rule Revisions from March 16, 2021 to June 17, 2021. On the same day, EPA also published a proposed rule seeking to delay the effective date until December 16, 2021 and to extend the rule’s deadline for compliance to September 16, 2024. These proposed delays seek to give EPA “sufficient time . . . to complete its review of the rule” and to give drinking water systems “adequate time to take actions needed to assure compliance.” EPA is accepting comments on the proposed delays until April 12, 2021.

EPA Plans to Issue Landfill Emissions Guidelines Rule in May 2021. EPA’s long-delayed landfill emissions guidelines (“EG”) rule may not be delayed for much longer. The 2016 EG rule is aimed at regulating air emissions from existing landfills. EPA had previously delayed implementation of the federal plan and delayed approval of state plans. On March 4, 2021, EPA filed an unopposed motion in the U.S. Court of Appeals for the D.C. Circuit, asking the court to vacate the earlier EPA rule that delayed implementation of the EG rules. EPA’s motion indicates that “EPA intends to issue a federal plan by May 2021 for any state that does not have an approved state plan.”
EPA Issues Final Authorization of Texas’s Hazardous Waste Management Program Revision. On March 5, 2021, EPA issued a Final Authorization of the State of Texas hazardous waste program. In December 2018, Texas had submitted a final complete program revision application seeking authorization of its program revision. EPA has now approved of those revisions after confirming that the program revisions satisfied all requirements needed to qualify for a final authorization.

With this final authorization, a facility in Texas subject to the Resource Conservation and Recovery Act (“RCRA”) will now have to comply with the authorized state requirements instead of the equivalent federal requirements. Additionally, such facilities will have to comply with any applicable federal requirements issued by the EPA for which the state has not received authorization. The State of Texas will continue to have enforcement responsibilities under its state hazardous waste program for violations of its program, but the EPA retains its authority to:

• Conduct inspections and require monitoring, tests, analyses, or reports;
• enforce RCRA requirements and suspend or revoke permits; and
• take enforcement actions after notice to and consultation with the State.

EPA Updates Audit Policy FAQs In Order to Promote Voluntary Self-Disclosure. On February 5, 2021, EPA released an updated Frequently Asked Questions guidance document titled, Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations Self-Policing Audit Policy. This guidance document supersedes 1997 and 2015 guidance and FAQ documents concerning EPA’s audit policy.

This new guidance document does not substantively change EPA’s audit policy, but rather reaffirms EPA’s policy of encouraging voluntary environmental compliance audits and prompt disclosure and correction of federal violations. The incentives for self-disclosure, according to EPA, are significant penalty reductions, no recommendations for criminal prosecution, and no routine requests for audit reports that might trigger enforcement investigations.

The guidance document confirms that regulated entities may state that they “may have” a violation rather than affirmatively admitting to a violation. However, to qualify for 100% mitigation of “gravity-based” penalties, regulated entities must meet the Audit Policy’s conditions, including: (1) discovering the potential violations during a systemic, and voluntary, compliance audit; (2) disclosing the potential violations to EPA within 21 days of discovery; (3) correcting/remediating the potential violations within 60 days of discovery; and (4) committing to take steps to prevent recurrence of the potential violations.

The guidance document also states that between 1995 and 2020, for roughly 28,000 self-disclosing facilities, EPA denied Audit Policy penalty mitigation less than 12 times.

This guidance has no effect on TCEQ’s separate audit policy.

United States Department of Justice (“DOJ”)

DOJ withdraws Trump-era policy memos. On February 4, 2021, Deputy Assistant Attorney General Jean E. Williams issued a memorandum formally withdrawing nine environmental policy memos made under the Trump Administration. The memo cites Executive Order 13,990—which directs federal agencies to review regulations and actions that conflict with the Biden Administration’s climate change goals—as the reason for withdrawing the policies. The nine withdrawn policies include several enforcement discretion memos, as well as several memos outlining the previous administration’s policy of banning Supplemental Environmental Projects (“SEPs”) in civil settlements. Additionally, the DOJ rescinded a memo from July 2020 that announced a policy to “strongly disfavor” any Clean Water Act enforcement actions when a state has “already initiated or concluded its own civil or administrative proceeding.”

Texas Commission on Environmental Quality (“TCEQ”)

TCEQ’s New Penalty Policy Revisions Go into Effect. On January 28, 2021, TCEQ’s penalty policy revisions went into effect. The penalty policy was last revised on April 1, 2014. The new policy will apply to violations discovered during investigations conducted on or after January 28, 2021 and that occurred or began on or after September 1, 2011.

The revisions generally increase penalty amounts and the number of violation events for actual releases of pollutants. The new penalty policy is available on TCEQ’s website and can be accessed here.

TCEQ Proposes Alternative Language Rulemaking. On March 26, 2021, TCEQ published notice of a proposed rulemaking in the Texas Register, which seeks to add new section 30 Texas Administration Code (“TAC”) § 39.426 in order to impose additional alternative language requirements on many permit applications. Under the proposed rulemaking, the TCEQ Executive Director may also determine that alternative language notice is necessary on a case-by-case basis in order to provide notice and meaningful access to affected communities.

Specifically, the proposed rulemaking requires that applicants provide an alternative language version of the summary of the application that is required by 30 TAC § 39.405(k). In addition, the proposed rulemaking requires applicants to provide notice of public meeting in an alternative language and to provide for interpretive services in the same alternative language at the public meeting if certain conditions are met.

Furthermore, the proposed rulemaking requires the TCEQ Executive Director to provide a written response to comments in the alternative language and also requires that any written responses to requests for reconsideration or hearing requests submitted by the Executive Director, Office of Public Interest Counsel, or applicant be provided in the alternative language.

TCEQ is holding virtual public hearings on this proposed rulemaking on April 20 and April 22. The written comment period closes on April 26, 2021.

TCEQ Adopts Final Rule to Clarify Exemptions Under New Recycling Rules. On March 10, 2021, the TCEQ Commissioners approved a final rule 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 final rule is aimed at restructuring the rules to provide additional clarity to Chapter 328; specifically, clarifying the recycling rule exemptions by reordering the rules.

TCEQ Streamlined Pre-Injection Unit Permitting. TCEQ’s amended pre-injection unit (PIU) permitting rules went into effect on January 7, 2021 in order to streamline the permitting process for PIUs. More specifically, the rules under Title 30 of the Texas Administrative Code (TAC), Chapter 331, Underground Injection Control, have been amended and repealed to remove the permitting and registration requirements for PIUs associated with nonhazardous, noncommercial injection wells. PIUs associated with nonhazardous, noncommercial injection wells will continue to be regulated under 30 TAC § 331.5 (Prevention of Pollution, 30 TAC § 331.47 (Pond Lining), TCEQ’s industrial solid waste and municipal hazardous waste rules in 30 TAC Ch. 335, and TCEQ’s radioactive substance rules in 30 TAC Ch. 336.

Public Utility Commission of Texas (“PUC”)

PUC Chairman Walker Resigns, Followed by Remaining Two Commissioners, Botkin and D’Andrea. The PUC’s Chairman, DeAnn Walker, resigned on March 1, 2021. Chairman Walker faced criticism in the aftermath of the winter weather event, with several lawmakers calling for her resignation following her testimony in legislative hearings. Lt. Gov. Dan Patrick also called for Walker to resign. Walker’s resignation letter states that she believes it is in the best interest of the state and that she accepts her role in the situation. Walker also called on other groups, including gas companies, the Railroad Commission, electric generators, transmission and distribution utilities, electric cooperatives, municipally owned utilities, ERCOT, and the Legislature, who she said “all had responsibility to foresee what could have happened and failed to take the necessary steps for the past ten years to address issues that each of them could have addressed.”

One week later, on March 8, 2021, Commissioner Shelly Botkin resigned, leaving only Commissioner Arthur D’Andrea. D’Andrea was chosen by Governor Greg Abbott to replace Walker as Chairman. On March 17, less than two weeks after being promoted to Chairman, D’Andrea resigned. Governor Abbott issued a statement on D’Andrea’s resignation, saying, “Tonight, I asked for and accepted the resignation of PUC Commissioner Arthur D’Andrea. I will be naming a replacement in the coming days who will have the responsibility of charting a new and fresh course for the agency. Texans deserve to have trust and confidence in the Public Utility Commission, and this action is one of many steps that will be taken to achieve that goal.” D’Andrea’s resignation will be effective upon the appointment of his replacement.

Governor Abbott announced on April 1 the nomination of Will McAdams, president of the Associated Builders and Contractors (“ABC”), to one of the open PUC Commissioner positions. “Will McAdams will bring a fresh perspective and outstanding leadership to the Public Utility Commission of Texas,” Abbott said. “Will is committed to charting a new course for the commission and restoring trust with Texans. I am confident that he will lead the agency with integrity and transparency and I urge the Senate to confirm Will’s appointment.” The appointment must be confirmed by the state Senate.

Parties Reach Unanimous Settlement in TNMP’s Merger with Avangrid and NM Green Holdings; Requires Final PUC Approval. As we have previously reported, 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 PUC in Docket No. 51547, detailing TNMP’s proposed new ownership. The hearing on the merits was scheduled for March 24 – 26, 2021, but was cancelled when the parties reached a unanimous agreement. On March 30, 2021, the Joint Applicants filed a Unanimous Stipulation and Agreement on behalf of all parties including Staff of the PUC, the Office of the Public Utility Counsel, Cities Served by Texas-New Mexico Power Company, the Alliance for Retail Markets, the Texas Energy Association for Marketers, Texas Industrial Energy Consumers, and Walmart Inc. If approved by the Commission, Green Holdings, a subsidiary of Avangrid, will be merged into PNM Resources, Inc. (“PNMR”), TNMP’s indirect parent company. Avangrid will then contribute 100 percent of its interest in PNMR to Avangrid Networks, Inc. (“Avangrid Networks”). Avangrid’s subsidiary, TNP Enterprises, Inc. (TNPE), will then transfer its 100 percent ownership interest in TNMP to a newly created special purpose entity, TNMP Holdings, which will be owned by TNPE. If approved, TNMP will still be a subsidiary of PNMR, but will also be an indirect subsidiary of Avangrid Networks and Avangrid. The Joint Applicants agreed to a number of regulatory commitments, including payment of a $16.2 million rate credit to electric delivery rates payable over three years following closing of the transaction. The transaction now awaits final Commission order approving the unanimously agreed to terms.

TNMP’s Advanced Meter System Update Approved by PUC. As we have previously reported, on October 2, 2020, Texas-New Mexico Power Company (“TNMP”) filed a request at the PUC 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. On January 14, 2021, the PUC issued a final order, approving TNMP’s request to change its deployed advanced meter technology.

Companies Begin to File Annual Safety Reports Under 16 Texas Administrative Code § 25.97(f). Several electric utilities have started to file their annual safety reports under 16 Texas Administrative Code (“TAC”) § 25.97(f). This section of the PUC’s rules implements the reporting requirements in Public Utility Regulatory Act (“PURA”) § 38.102, which was enacted after the passage of House Bill 4150, also known as the “William Thomas Heath Power Line Safety Act,” in 2019. Legislation was driven by the death of three boy scouts in 2017 when a boat they were sailing on came into contact with a power line and electrocuted them. 16 TAC § 25.97(f) requires electric utilities, including municipally owned utilities and electric cooperatives that own or operate overhead transmission or distribution assets, to report to the PUC annually before May 1 regarding certain information related to those facilities.

For utilities that own or operate overhead transmission facilities greater than 60 kilovolts, the report must include:

• the number of identified occurrences of noncompliance with PURA § 38.004 regarding vertical clearance requirements of the National Electrical Safety Code (NESC) for overhead transmission facilities;
• whether the utility has actual knowledge that any portion of the utility’s transmission system is not in compliance with PURA § 38.004 regarding vertical clearance requirements of the NESC for overhead transmission facilities; and
• whether the utility has actual knowledge of any violations of easement agreements with the United States Army Corps of Engineers relating to PURA § 38.004 regarding the vertical clearance requirements of the NESC for overhead transmission facilities.

For utilities that own or operate overhead transmission facilities greater than 60 kilovolts or distribution facilities greater than 1 kilovolt, the report must include:

• the number of fatalities or injuries of individuals other than employees, contractors, or other persons qualified to work in proximity to overhead high voltage lines involving transmission or distribution assets related to noncompliance with the requirements of PURA § 38.004; and
• a description of corrective actions taken or planned to prevent the reoccurrence of fatalities or injuries.

Utilities are also required under other sections of the rule to submit annual employee training reports and five-year reports regarding compliance requirements. The PUC is required to make the reports publicly available by September 1 each year.

PUC Issues Executive Orders in Response to Massive Blackouts. The PUC issued a number of executive orders in the days following the winter weather event, including a ban on utility disconnections, an adjustment to wholesale power prices, and a green light to lift important financial rules in the wholesale energy market. The PUC’s emergency actions mark its all-hands-on-deck approach to the blackouts, now considered the state’s most severe energy crisis in at least a decade.

The PUC has issued four executive orders so far, and more may be on the way. A summary of those orders is provided below:

• On February 16, the PUC signed an order directed to the Electric Reliability Council of Texas (ERCOT). Filed in PUC Docket No. 51617, the order instructed ERCOT to account for “load shed” or forced outages in the determination of certain prices in the wholesale energy market. According to the PUC, system-wide prices in that segment were clearing as low as $1,200 per megawatt hour on February 16, although they should have closed closer to the $9,000 system-wide offer cap because of the grid emergency. “The Commission believes this outcome is inconsistent with the fundamental design of the ERCOT market,” the order stated.
• On February 17, the PUC issued an executive order to limit the duration of rotating outages for individual customers to no more than 12 hours. However, the order applied only to customers of investor-owned utilities under PUC jurisdiction—namely Oncor, AEP, CenterPoint, and TNMP. The February 17 order can be found in PUC Docket No. 51812.
• On February 21, the PUC placed a moratorium on the disconnection of retail electric customers for non-payment. As with the February 17 order, the moratorium applied only to customers within the PUC’s direct jurisdiction. The order also required retail electric providers to continue offering deferred payment plans to customers. The order can be found in PUC Docket No. 51812.
• Also on February 21, the PUC authorized ERCOT to deviate from its regular market rules “to protect the overall integrity of the financial electric market.” The order allowed ERCOT to take various actions at its own discretion, including:
• Deviating from deadlines relating to financial settlements and invoice payments;
• Using available funds—including undistributed congestion revenue right auction revenues—to cover short-paying invoice recipients;
• Relaxing credit requirements to provide short-term market-participant liquidity; and
• Suspending breach notifications to certain market participants for failure to make payouts or provide financial security.

The order required ERCOT to report to the PUC twice each day of any action it takes, beginning on February 22. This order also can be found in PUC Docket No. 51812.

PUC Opens Projects in Wake of Winter Storm. In response to the February winter weather event, the PUC has opened a number of projects to assess areas of improvement. Below is a list of the projects currently open.

• 50664 – Issues Related to the State of Disaster for Coronavirus Disease 2019
• 51617 – Orders Directing ERCOT to Take Action and Granting Exception (Filed on Feb. 16)
• 51812 – Issues Related to the State of Disaster for the February 2021 Winter Weather Event (Filed on Feb. 16)
• 51825 – Investigation Regarding the February 2021 Winter Weather Event (Filed on Feb. 22)
• 51830 – Review of Wholesale-Indexed Products for Compliance with Customer Protection Rules for Retail Electric Service (Filed on Feb. 23)
• 51838 – Petition for Emergency Relief of Freepoint Commodities LLC for Waiver of ERCOT Nodal Protocols (Filed on Feb. 25)
• 51839 – Electric-Gas Coordination (Filed on Feb. 26)
• 51840 – Rulemaking to Establish Weatherization Standards (Filed on Feb. 26)
• 51841 – Review of 16 TAC § 25.53 Relating to Electric Service Emergency Operations Plans (Filed on Feb. 26)
• 51871 – Review of the ERCOT Scarcity Pricing Mechanism (Filed on Mar. 5)
• 51888 – Review of Critical Load Standards and Processes (Filed on Mar. 10)
• 51889 – Review of Communication for the Electric Market (Filed on Mar. 10)

At the PUC’s March 12, 2021 Open Meeting, Deputy Executive Director Connie Corona explained the eight major categories that will form the “road map” for the Commission moving forward:

• Generation Weatherization and Emergency Operations. Led by the PUC’s Infrastructure Division, the review will include an examination of weatherization and emergency operations standards for power generation facilities as well as the content and processes for review and certification of emergency operations plans.
• Essential Generation Load. Also guided by the Infrastructure Division, this effort will seek to establish standards and processes to protect load that provides an essential service to electric generation and weigh the necessity of additional generation resiliency measures.
• Essential Customer Load and Load Shed. In this project, the agency’s Market Analysis Division will examine the standards and processes related to critical customer load and procedures related to emergency load shed.
• ERCOT Operations. The Market Analysis Division will also lead this review of ERCOT’s forecasting and planning processes with the goal of establishing standards for ERCOT designation of emergency conditions.
• Communications and Governance. The Executive Director’s office will lead a review of communications standards and expectations among utilities, ERCOT, the Commission, and the public with an eye to identifying improvements for Commission communications to the Legislature and the public. The effort is also intended to identify potential improvements to ERCOT governance structure, bylaws, and stakeholder process.
• Market Settlements. The Market Analysis Division will also examine ERCOT settlements and market uplift processes.
• Wholesale Market Design. The Market Analysis Division will review and identify potential improvements to the rules and protocols of the ERCOT wholesale electric market, with an emphasis on how energy and ancillary services are priced.
• Retail Market Design. The PUC’s Customer Protection Division will lead a review of the Commission’s customer protection rules, with emphasis on disclosures for certain electric product types and potential customer protections specific to emergency conditions.

The testimony and memoranda that will be filed to address these categories can be found in the projects listed above.

ERCOT Board Members Resign, Terminate CEO. On February 23, four Unaffiliated Directors resigned from the Electric Reliability Council of Texas, Inc. (“ERCOT”), including Sally Talberg, Board Chair; Peter Cramton, Board Vice Chair; Terry Bulger, Finance and Audit Committee Chair; and Raymond Hepper, Human Resources and Governance Committee Chair. In addition, Craig Ivey, who had applied for the sole prior Unaffiliated Director vacancy on the Board, withdrew as an Unaffiliated Director candidate. All five members resided out of state.

Governor Greg Abbott welcomed the resignations, issuing a statement the same day. The Governor said, “When Texans were in desperate need of electricity, ERCOT failed to do its job and Texans were left shivering in their homes without power. ERCOT leadership made assurances that Texas’ power infrastructure was prepared for the winter storm, but those assurances proved to be devastatingly false. The lack of preparedness and transparency at ERCOT is unacceptable, and I welcome these resignations. The State of Texas will continue to investigate ERCOT and uncover the full picture of what went wrong, and we will ensure that the disastrous events of last week are never repeated.”

Since then, four additional board members have resigned, including Vanessa Anesetti-Parra, IREP Market Segment Director, who also lives out of state; Randal Miller, IREP Segment Alternate; Clifton Karnei, Cooperative Market Segment Director; and Jackie Sargent, Municipal Market Segment Director and General Manager of Austin Energy.

In addition to the multiple Board resignations, the ERCOT Board voted on March 3, 2021 to terminate the employment of ERCOT CEO Bill Magness, effective May 3, 2021.

ERCOT filed a notice with the PUC on March 10, 2021 in Docket No. 51878, informing the Commission of the vacancies and describing the processes (pursuant to PURA, Commission rules, and ERCOT governing documents) by which the different types of Board members must be replaced, including Market Segment Directors, ex officio Directors, and Unaffiliated Directors. The notice also informed the Commission that due to the current Board composition, ERCOT is not able to fulfill certain statutory, regulatory and governing document requirements, some for an immediate time and some possibly for an indefinite time.

PUC Hires Director of ERCOT Accountability. On March 11, 2021, the PUC named Adrianne Brandt the agency’s new Director of ERCOT Accountability, and hired Brad Jones, former ERCOT COO, to assist her. Brandt was an Army intelligence analyst, and also held analyst roles at Dell, the PUC, Austin Energy and CPS Energy. The pair is charged with enhancing the PUC’s oversight of ERCOT, the grid operator and market manager.

Oncor Makes Compliance Filings. Pursuant to the PUC’s orders in Docket No. 47675, Oncor filed its 2020 Annual Compliance Report and its March 2021 Semi-Annual Interest-Rate Savings Report on March 9, 2021. In Docket No. 47675, the PUC approved a transaction in which Sempra Energy acquired an 80.03% interest in Oncor indirectly held by Energy Future Holdings Corp. The Revised Stipulation Agreement entered into by Oncor, Sempra Energy, Commission Staff, and all the intervening parties in the proceeding required Oncor to file annual reports regarding its compliance with certain regulatory commitments, and detailing any interest rate savings and determining a calculation of the credit. The two filings made by Oncor on March 9, 2021 fulfill the company’s requirements. The filings can be found in Docket Nos. 48119 and 51881.

TUSF Update. As we have previously reported, 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 for certain recipients. PUC Staff has been reviewing several eligible telecommunications providers (“ETPs”) as to whether their 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 Docket Nos. 51281 and 51283, PUC Staff initially recommended eliminating TUSF funding for the Falfurrias Wire Center and Lyford Wire Center, respectively, but the Administrative Law Judge requested briefing on whether the PUC only has jurisdiction to review these wire centers. After the PUC Staff briefed this issue, the ALJ ruled that (1) the review required by 16 TAC § 26.409(d) is a preliminary step that is necessary to determine whether an exchange is eligible for review under PURA §56.023(r); but that (2) under PURA § 56.023(r), the PUC only has authority to review and take action if the per-line TUSF support in an exchange is identified as eligible for review and there is an ETP within the exchange that is receiving support for the remaining lines. As such, the ALJ ruled that the PUC does not have authority to act on Staff’s application for review. Staff has recently withdrawn its applications in both of these dockets.

In the remaining dockets, the PUC has issued a proposed order in Docket No. 51282 discontinuing TUSF funding for Jackson 04T Wire Center. In Docket Nos. 51284 (McDade Wire Center), 51285 (Paige Wire Center), 51287 (Telephone Wire Center), and 51288 (Wallis Wire Center), the PUC has issued proposed orders continuing TUSF funding for those ETPs. In Docket No. 51286 (Santa Rosa Wire Center), the PUC received information from VTX Communications, LLC that, due to new information, the number of access lines in this wire center has not decreased at least 505% since 2016. The ALJ has asked for a supplemental recommendation from Staff or a withdrawal of the application by April 12. Docket No. 51289 has remained still since Staff made a recommendation in November 2020 to discontinue TUSF funding. Most, if not all, of these dockets will be finalized in April.

PUC Issues Proposed Order on Remand of CPS Energy against AT&T Texas and Time Warner Cable. In February, the PUC finally issued a Proposed Order on Remand of Docket No. 36633 (Petition of CPS Energy for Enforcement against AT&T Texas and Time Warner Cable Regarding Pole Attachments). This Order on Remand will supersede the PUC’s February 1, 2013 Order on Rehearing in Docket No. 36633 in accordance with the Final Judgment on Remand entered on March 13, 2020 by the District Court of Travis County, Texas, 250th Judicial District in Cause No. D-1-GN-13-001238.

The Proposed Order draws on the Order on Rehearing from 2013 and revises it to comport with the rulings of the Travis County District Court, the Third Court of Appeals, and the Supreme Court of Texas. The Final Judgment on Remand issued by the Travis County District Court found the following:

• The PUC’s conclusion that it has jurisdiction to review and modify each input of a municipally owned utility, including defaults and rebuttable presumptions, used to calculate the maximum pole attachment rate, is affirmed.
• The PUC’s findings and conclusions that the Federal Communication Commission’s (“FCC’s”) default rate of return was the appropriate input for test years 2005 through 2009 (billing years 2006 through 2010) is affirmed.
• The PUC’s decision adopting a rate of return other than the FCC’s default rate of return of 11.25% for test year 2004 (billing year 2005) is reversed.
• The PUC’s conclusion that Section 54.204(b) of PURA applies to this proceeding is affirmed.
• The PUC’s decision using an average of three attaching entities in its calculation of the pole attachment rate for test years 2004 through 2009 (billing years 2005 through 2010) rather than the FCC’s rebuttable presumption of five attaching entities is affirmed.
• The PUC’s conclusion that CPS Energy violated Section 54.204(b) of PURA because it offered different rates and terms to AT&T and TWC from September 7, 2005 through 2010 is affirmed.
• The PUC’s conclusion that CPS Energy violated Section 54.204(c) of PURA after December 31, 2006 is reversed.
• The PUC lacked jurisdiction to make determinations regarding the existence of, or PURA’s effect on, disputed private pole attachment agreements, or whether there was a breach of contract. The PUC also lacked jurisdiction to determine whether discrimination under PURA necessarily caused harm. The PUC’s findings of fact and conclusions of law regarding these issues are reversed. These findings and conclusions, including the narrative portions of the order upon which such findings and conclusions are based, are unnecessary to the PUC’s order. Their absence does not affect the order, and they shall be deleted.
• The PUC’s Order on Rehearing in Docket No. 36633 is otherwise affirmed.

The Proposed Order is lengthy in its discussions of the procedural history and the remaining issues for review. CPS Energy filed exceptions to the Proposed Order, stating that it finds the Proposed Order substantively correct but asking that the PUC add more language regarding the Travis County District Court’s 2020 Final Judgment. The PUC’s advising office issued a memorandum stating that it would not make any of CPS’s proposed changes. The PUC was supposed to take up the Proposed Order at the March 18 Open Meeting, but the meeting was cancelled.

Railroad Commission of Texas (“RRC”)

TGS and CenterPoint Gas Make GRIP Filings. On February 11, 2021, Texas Gas Service Company made an Interim Rate Adjustment or “GRIP” filing with the RRC for its customers within the Central-Gulf Coast Service Area. The Company is seeking recovery of $89,645,970 in invested capital. This translates into an annual rate increase of $10,714,728 on a system-wide basis. The current filing will increase rates to residential customers by $2.38 per month. This will increase the current residential customer charge from $16.00 to $18.38 per month. The increase is currently scheduled to go into effect for meter reads beginning on April 12, 2021.

On March 4, 2021, CenterPoint Gas made Interim Rate Adjustment or “GRIP” filings with the RRC for its customers within the Houston, Texas Coast, South Texas, and East Texas Divisions. Increases in all divisions are scheduled to go into effect on May 3, 2021.

• For cities in the Houston Division, the Company is seeking recovery of $153,689,801 in invested capital. The current filing will increase rates to residential customers by $.99 per month. This will increase the current residential customer charge from $17.39 to $18.38 per month.
• For cities in the Texas Coast Division, the Company is seeking recovery of $45,065,113 in invested capital. The current filing will increase rates to residential customers by $.88 per month. This will increase the current residential customer charge from $17.77 to $18.65 per month.
• For cities in the South Texas Division, the Company is seeking recovery of $44,723,636 in invested capital. The current filing will increase rates to residential customers by $2.33 per month. This will increase the current residential customer charge from $22.59 to $24.92 per month.
• For cities in the East Texas Division, the Company is seeking recovery of $44,335,398 in invested capital. The current filing will increase rates to residential customers by $2.39 per month. This will increase the current residential customer charge from $18.00 to $20.39 per month.

Winter Storm Spurs RRC Action. The RRC took action during the February winter storm by issuing an Emergency Order modifying its curtailment priority order. The RRC said its “Emergency Order is necessary to protect human needs customers” around the state and that the “existing regulations and Orders of the Commission do not sufficiently address the specific conditions of this emergency.” The Emergency Order modified the priority one category to include Local Distribution Companies (LDCs) which serve human needs customers, in addition to residences, hospitals, schools, churches and other human needs customers. The Emergency Order also changed the priority two category to include electric generation facilities which serve human needs customers. The modified curtailment priority list was in effect from February 12 to February 19.

The RRC also gave notice to Local Distribution Companies, authorizing them to record in a regulatory asset account any and all “extraordinary expenses” related to securing natural gas during the winter weather event, including the cost of gas and transportation of gas supply. Due to demand for natural gas, LDCs had to pay extraordinarily high prices in the market for natural gas and may be subjected to other high expenses as a result. The LDCs will be able to seek future recovery of those expenses in order to partially reduce the rate impact on customers.

Atmos Makes GRIP Filings. On February 26, Atmos Energy Corporation, Mid-Tex Division made an Interim Rate Adjustment or “GRIP” filing with the RRC for its customers within the Atmos Texas Municipalities Coalition (“ATM Cities”). The Company is seeking recovery of the difference between the values of invested capital for the Mid-Tex Division’s system as of December 31, 2020 and the value of the invested capital for the Mid-Tex Division’s system as of December 31, 2019. The current filing will increase rates to residential customers by $4.55 per month. This will increase the current residential customer charge from $26.45 to $31.00 per month. The increase is currently scheduled to go into effect for meter reads beginning on April 27.

On February 26, Atmos Energy Corporation, West Texas Division’s Environs made an Interim Rate Adjustment or “GRIP” filing with the RRC for its customers within the unincorporated areas served by Atmos’s West Texas Division. The Company is seeking recovery of additional capital investment incurred from January 1, 2020 through December 31, 2020. The current filing will increase rates to residential customers by $3.34 per month. This will increase the current residential customer charge from $21.46 to $24.80 per month. The increase is currently scheduled to go into effect for meter reads beginning on April 27.

On February 26, Atmos Energy Corporation, West Texas Division’s Triangle Distribution System made an Interim Rate Adjustment or “GRIP” filing with the RRC for its customers within the City of Hereford and the City of Lubbock. The Company is seeking recovery of additional capital investment incurred from April 1, 2019 through December 31, 2020. The current filing will increase rates by $0.02464 per month. This will increase the current City Gate / Transportation Service charge from $0.38152 per MMBtu to $0.40616 per MMBtu per month. The increase is currently scheduled to go into effect for meter reads beginning on April 27.

On February 12, Atmos Energy Corporation, Atmos Pipeline-Texas made an Interim Rate Adjustment or “GRIP” filing with RRC for its Rate CGS and Rate PT customers. The Company is seeking recovery of the difference between the value of the invested capital for the Atmos Pipeline’s system as of December 31, 2020 and the value of the invested capital for Atmos Pipeline’s system as of December 31, 2019. The current filing will increase rates to CGS – Mid-Tex customers and CGS – Other customers by $1.19325 per MMBtu of MDQ, and to Rate PT customers by $0.74745 per MMBtu of MDQ. The increase is currently scheduled to go into effect for meter reads beginning on April 13, 2021.

Atmos Makes Third Rider DARR Filing. On January 15, 2021, Atmos Energy Corporation, Mid-Tex Division submitted with the RRC its third filing under the current Rider DARR – Dallas Annual Rate Review Mechanism tariff. The DARR filing represents a requested increase in annual revenue of $17.0 million for the City of Dallas, which represents a monthly increase of 8.16%, or $5.09, for the average residential customer.

“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 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 Lauren at 512.322.5850 or lthomas@lglawfirm.com, Sam at 512.322.5825 or sballard@lglawfirm.com, or Taylor at 512.322.5874 or tdenison@lglawfirm.com.