Agency Highlights

U.S. Environmental Protection Agency (“EPA”)

EPA’s Role in a Post-Sackett Water World. In the months following the Supreme Court’s decision in Sackett v. EPA, Army Corps of Engineers (“Corps”), EPA, and Department of the Army (collectively the “Agencies”) have issued procedures for their coordination on jurisdictional determinations (“JDs”). On September 27, 2023, the Agencies issued joint memorandums on their coordination plans to “ensure accurate and consistent implementation” of the Sackett precedent. Under Section 404 of the Clean Water Act (“CWA”), the Corps makes a determination on whether waters are “jurisdictional” and therefore subject to the requirements of a dredge-and-fill permit, which EPA may subsequently reconsider, hence the need for a coordinated approach. EPA has committed to addressing issues that may arise in the implementation of the pre-2015 waters of the United States (“WOTUS”) definition, as 27 states have blocked EPA’s 2023 rule. While Sackett significantly reduced the number of jurisdictional wetlands, CWA Section 402 pollutant discharge permits may still be required for point source discharges into non-jurisdictional waters. Therefore, even though there will be a reduction in the Agencies’ JDs, EPA may find other routes to wetlands protection.

EPA’s Final 401 Certification Rule. On September 14, 2023, EPA issued the final CWA Section 401 Water Quality Certification Improvement Rule. The rule will not apply retroactively to 401 decisions made under the 2020 rule and will go into effect 60 days after publication in the Federal Register. Under the CWA, a federal agency may not issue a permit or license that results in a discharge into WOTUS without first obtaining a 401 water quality certification or waiver. Under the new rule, EPA is allowing certifying authorities to play a role alongside the agency in determining the length to review the request for certification. This change allows the certifying authority the ability to collaborate with the permitting agency to establish “reasonable periods of time” before receiving the request. However, if the two authorities fail to reach an agreement, the time will default to six months, according to the EPA fact sheet. The final rule also establishes a 1-year statutory maximum timeframe for certification review. Another significant change from the prior rule is that the new rule no longer limits oversight to “discharges” associated with federal projects. Instead, the new rule permits states to consider, more broadly, the issues related to water quality impacts.

Proposed PFAS Rules. On September 28, 2023, EPA finalized a new reporting rule that will provide the agency and the public with the largest dataset of per- and polyfluoroalkyl substances (“PFAS”) manufactured and used in the United States. The rule falls under the Toxic Substances Control Act (“TSCA”) and will require all manufacturers and importers of PFAS and PFAS-containing articles since 2011 to report information related to chemical identity, uses, volumes, byproducts, and more to EPA. The data is due to EPA within 18 months of the effective date of the final rule. This rule builds on the progress of this Administration’s PFAS action plan and is an important step in EPA’s PFAS Strategic Roadmap. Additionally, EPA maintains that by January 2024, it will finalize the Safe Drinking Water Act (“SDWA”) limitations for six specific PFAS: perfluorooctanesulfonic acid (“PFOS”), perfluorooctanoic acid (“PFOA”), hexafluoropropylene oxide (“HFPO”), dimer acid (also referred to as a GenX substance), perfluorononanoate (“PFNA”), perfluorohexanesulfonic acid (“PFHxS”), and perfluorobutane sulfonic acid (“PFBS”). The proposed rule will set a maximum contaminant level for PFOA and PFAS, and the remaining four substances will be regulated through a “hazard index approach.”

PFAS CERCLA Designation and NPDES Permits. After receiving comments on its draft rule, EPA has slightly extended its deadline to February 2024 for its plans to finalize a Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) designation rule for PFOA and PFOS. EPA claims that by August 2025, it will release a proposed rule to regulate other additional PFAS under CERCLA. EPA has consistently held that it plans to avoid targeting passive receivers of PFAS in its enforcement. However, industry sector commenters argue that EPA lacks the authority to insulate them from third-party claims under CERCLA. Additionally, EPA’s long-term agenda includes its plans to add PFAS requirements in National Pollutant Discharge Elimination System (“NPDES”) permits, with a proposed rule set to be released in February 2025. While some states remain reluctant, EPA continues to urge states to include PFAS provisions in their state implemented NPDES permits for the time being. EPA’s push for PFAS provisions in NPDES permits can be best previewed in the new best management practices (“BMP”) fact sheet. The BMP fact sheet encourages permit writers and pretreatment coordinators to monitor for PFAS in facilities where they may be suspected.

Post-Sackett “Assumption Rule”. Environmental groups have recently targeted EPA’s proposal to regulate state and tribal authority over CWA Section 404 dredge-and-fill permits (“404 Permits”). Primarily, they contend that EPA has failed to address how the Supreme Court’s Sackett decision will affect the 404 Permit program as it curtailed the number of jurisdictional wetlands. The Supreme Court’s recent decision in Sackett dramatically scales back the number of wetlands covered under the CWA, which is a crucial part of the 404 Permit program. The rollback of jurisdictional wetlands has increased uncertainty among the states’ dredge and fill permitting. EPA is currently proposing to “streamline and clarify the requirements and steps necessary” for state 404 Permit programs. EPA’s nearly 200-page Assumption Rule fails to provide any context on Sackett except for two footnotes. Environmental groups urge EPA to provide greater clarity and substance such that the public may more meaningfully comment on the proposed Assumption Rule, upholding the tenets of the Administrative Procedure Act.

EPA On Toxics. On October 19, 2023, EPA announced its proposed new framework for how it evaluates the risks of existing chemicals under TSCA. The new framework proposes to codify policies already implemented by the Biden Administration, as well as reform the data-gathering process and review of vulnerable communities. EPA stated that the proposal “would ensure that EPA’s processes better align with the law, support robust evaluations that account for all risks associated with a chemical, and provide [] the foundation for protecting workers and communities from toxic chemicals.” EPA is already conducting evaluations for 20 “high priority” chemicals it identified in 2019. EPA now argues that TSCA requires the agency to make a single risk determination of a chemical substance in each risk evaluation rather than making separate risk determinations for each condition of use. EPA contends that direct evaluations should consider both the cumulative effects of multiple chemical exposures and aggregate exposures of one substance. Moreover, EPA plans to propose the scope of evaluation for chemicals in the “prioritization” step of the TSCA process. EPA remains steadfast in the notice and comment rulemaking procedure for listing a substance for high-priority designation to allow the agency to gather public and stakeholder inputs.

Tougher Maui Groundwater Permitting Requirements and Its Effect On NPDES. On October 30, 2023 the Office of Management and Budget (“OMB”) officially completed its review of the groundwater permitting guidance, implementing the Supreme Court’s ruling in County of Maui v. Hawaii Wildlife Fund (“Maui”). The OMB final guidance helped mold EPA and state water agencies’ considerations for groundwater discharges that flow to navigable waters, invoking the NPDES permits. On November 21, 2023, EPA released its draft guidance for applying Maui, which is subject to public comment for the following 30 days. The 2019 Supreme Court decision, authored by Justice Stephen Breyer, held that if a groundwater discharge is a “functional equivalent” of a discharge into protected surface waters, the discharging party must obtain a permit. Maui outlined a seven-factor “functional equivalent” test that considers: (1) the pollutant’s transit time, (2) the distance traveled, (3) the medium of travel, (4) the chemical dilution or change, (5) the discharge quantity, (6) the manner of entry to navigable waters, and (7) the degradability of the specific chemical. Although time and distance remain the most important, they are not always determinative. However, because the OMB guidance was issued shortly before the Supreme Court’s ruling in Sackett v. EPA, some commenters argue that it could have been an opportunity to broaden protections for wetlands.

SDWA Cyber Security Update. On October 12, 2023, EPA decided to rescind its previous interpretive memorandum issued on March 3, 2023, “Addressing Public Water System Cybersecurity in Sanitary Surveys of an Alternate Process,” due to ongoing litigation in State of Missouri, et al. v. U.S. EPA. Despite such rescission, EPA urges that even in the absence of a formal policy, states should continue to voluntarily review the cybersecurity programs of public water systems to minimize public health impacts. EPA plans to support states by providing cybersecurity risk assessments, as well as training and funding. For example, technical and funding programs are actively available to water utilities to combat cyber threats like EPA’s Water Sector Cybersecurity Evaluation Program, drinking water state-revolving fund, Cybersecurity Technical Assistance Program, and the Drinking Water System Infrastructure Resilience and Sustainability grant program. Moreover, EPA’s Office of Ground Water and Drinking Water offers a free self-assessment tool for water utilities, the Water Cybersecurity Assessment Tool. EPA’s greatest concern is the “basic lapse of cybersecurity practices” making utilities vulnerable to attacks. Currently, EPA has a greater capacity to conduct additional cybersecurity assessments for utilities through its cybersecurity evaluation program, and the agency touts that each assessment provides utilities with a “comprehensive report and risk mitigation plan,” which aims to resolve current gaps in cybersecurity.

Lead Service Lines (“LSL”) Funding. The White House Office of Management and Budget is reviewing EPA’s proposed lead and copper rule improvements (“LCRI”) that will set a 10-year timeline for water systems to replace 100% LSLs. The LCRI is expected to lower the lead action levels, prioritize environmental justice communities, and strengthen the Trump-era Lead and Copper Rule Revisions (“LCRR”). EPA announced its plans to assist underserved communities in identifying and planning for the removal of LSLs. EPA’s Get the Lead Out (“GLO”) initiative will identify 200 communities that will receive up to $15 billion in funding from the Bipartisan Infrastructure Law (“BIL”). In addition, EPA is requesting that states and drinking water systems update their responses to a 2021 survey that provided data to the agency for funding requirements to replace LSLs. This one-time opportunity to update the state and water systems’ original responses to EPA’s 7th Drinking Water Infrastructure Needs Survey and Assessment will inform the BIL, specifically the Drinking Water State Revolving Loan Fund for the LSL Replacement funding distribution, which is set to start in fiscal year 2024.

Bolstering EJ Considerations Regulatory Analysis. On November 15, 2023, EPA released a 130-page draft of its environmental justice (“EJ”) guidance, “Technical Guidance for Assessing Environmental Justice in Regulatory Analysis,” to the Federal Register. This guidance updates the first EJ technical guidance released in 2016 and is aimed at aligning the agency with the Biden Administration’s EJ goals. EPA notes that this guidance reflects “the state of the science” and provides the agency with “priorities and direction.” EPA now recognizes that it is necessary to understand variability across diverse populations while also considering preexisting factors driving the different responses. Accordingly, the draft guidance seeks to fill data and research gaps in the relationship between demographic characteristics and their responses to environmental stressors that have adverse health implications. Moreover, EPA plans to consider non-chemical stressors, life stages, preexisting conditions, and genetic factors that may increase susceptibility. The main takeaway is that EPA recommends that EJ be considered in every regulatory action. For example, on September 7, 2023, $19 million was allotted to the Drinking Water System Infrastructure Resilience and Sustainability grant program to improve the climate resilience of the nation’s water infrastructure largely for the benefit of disadvantaged communities. Going forward, it is clear that EPA plans to use the “best professional judgment to decide on the type of analysis that is feasible and appropriate,” while also tailoring its analysis to the appropriate context and incorporating new data as it becomes available. The guidance document is available for a 60-day public comment period through January 15, 2024.

“Once In Always In” Emissions Policy Proposed to be Reinstated. For years, facilities that were classified as major emission sources had to maintain the same standards for emissions controls even if they downgraded their operations to qualify as an “area” source under EPA’s “Once In Always In” policy of the National Emission Standards for Hazardous Pollutants program. While EPA reversed this policy under the previous administration, EPA has recently proposed a rule that would allow reclassification from major source to area source only when the following criteria are met: (i) permit limitations are federally enforceable; and (ii) any such permit limitations contain safeguards to prevent emission increases after reclassification. Reclassification will only become effective once a permit has been issued containing enforceable conditions reflecting the requirements proposed in this action and electronic notification has been submitted to EPA. If finalized, the rule would apply to all sources that have reclassified from 2018 onward. The comment period closed on November 13, 2023. EPA is currently reviewing comments with no anticipated date for finalizing the rule proposal.

EPA Adds Dozens of PFAS to TRI Reporting Requirements and Classifies all PFAS as Chemicals of Special Concern. On October 31, 2023, EPA promulgated a final rule that added dozens of PFAS chemicals to the Toxic Release Inventory (“TRI”) list and classified all PFAS under TRI as “chemicals of special concern.” Previously, PFAS were subject to a 100-pound threshold and a de minimis exception to TRI reporting was allowed, both of which have been removed under the final rule. Under the final rule, information on PFAS must be reported regardless of the amount of PFAS released into the air or water, disposed of, or recycled. As PFAS are now chemicals of special concern, the reports must be made on EPA’s “Form R,” which requires more detailed information and can’t be reported in ranges.

Public Utility Commission of Texas (“PUC”)

Oncor Electric Delivery Company (“Oncor”) Files a Second Distribution Cost Recovery Factor (“DCRF”) Application. On September 15, 2023, Oncor submitted a DCRF application – its second for 2023. Under that application, the utility sought to increase its distribution revenues by another $56,536,428. Under a settlement agreement with the Steering Committee of Cities Served by Oncor (“OCSC”) and others, the utility agreed to reduce its recovery by $3 million. PUC has not yet approved this settlement, which can be found under PUC Docket No. 55525. On November 30, 2023, PUC Commissioners agreed when discussing Oncor’s second DCRF that parties have no right to hearings in DCRF proceedings. Chair Kathleen Jackson concluded this in part because of the Legislature’s adoption in 2023 of SB 1015, which includes a 60-day deadline for consideration of DCRF cases. She also stated that the opportunity for a hearing will occur in the next base rate proceeding.

Oncor to Pay Penalty for Reliability Violations. Pursuant to a recently proposed settlement agreement by PUC, Oncor will pay $322,000 in penalties for repeated service and quality violations. In this agreement, Oncor agreed that it committed multiple violations of PUC’s service and quality standards during 2020 and 2021. Each of the violations pertained to the agency’s System Average Interruption Duration Index (“SAIDI”) and System Average Interruption Frequency Index (“SAIFI”). Whereas SAIDI measures the average amount of time a customer’s service is interrupted during the reporting period, SAIFI measures the number of times that a customer’s service is interrupted. Lower SAIDI and SAIFI scores represent better reliability. According to the proposed settlement agreement, Oncor exceeded average SAIDI and SAIFI scores by more than 300% on multiple occasions and on multiple feeders. PUC will consider the proposed settlement during an upcoming open meeting. More information can be found under PUC Docket No. 55804.

• PUC Rulemaking Update. PUC Staff’s current rulemaking calendar for 2023 can be found under Docket No. 54455. As of November 30, 2023, the following projects are being prioritized:
• Project No. 55153 – Review of § 22.52
• Project No. 54589 – Rule Review of Chapter 26
• Project No. 53924 – Water and Sewer Utility Rates after Acquisition
• Project No. 55323 – Review of Renewable Portfolio Standard
• Project No. 54585 – Emergency Pricing Program
• Project No. 55566 – Generation Interconnection Allowance
• Project No. 55826 – Texas Energy Fund In-ERCOT Generation Loan Program
• Project No. 55812 – Texas Energy Fund Completion Bonus Grant Program
• Project No. 55250 – Transmission and Distribution System Resiliency Plans
• TBD – Review of Voluntary Migration Plans

• Other rulemaking projects that are being prioritized but do not yet have a determined schedule include:
• Project No. 53404 – Power Restoration Facilities and Energy Storage Resources for Reliability
• Project No. 52059 – Review of PUC’s Filing Requirements
• Project No. 54233 – Technical Requirements and Interconnection Processes for Distribution Energy Resources (“DERs”)
• Project No. 54224 – Cost Recovery for Service to DERs
• Project No. 52301 – ERCOT Governance and Related Issues
• Project No. 55249 – Regional Transmission Reliability Plans
• Project No. 54584 – Reliability Standard for ERCOT Market
• Project No. 51888 – Critical Load Standards and Processes
• Project No. 53981 – Review of Wholesale Water and Sewer Rate Appeals
• TBD – Review of § 25.243. Distribution Cost Recovery Factor (“DCRF”)
• TBD – Water Financial Assurance

Summary of Expected Filing Dates of Electric Utilities’ Comprehensive Rate Proceedings. Below is a list of comprehensive rate cases currently expected to be filed by electric utilities during the 2024-2027 timeframe.

• March 2024 – CenterPoint Energy Houston
• April 2024 – AEP Texas
• Late 2024 – Bryan Texas Utilities; Brazos Electric Cooperative
• December 2024 – Texas-New Mexico Power; Wind Energy Transmission Texas
• 2024-2025 – El Paso Electric
• January 2025 – Cross Texas Transmission
• February 2025 – Electric Transmission Texas; Lone Star Transmission
• Summer 2025 – CPS San Antonio
• July 2025 – Sharyland Utilities
• 2025-2026 – Southwestern Electric Power; Southwestern Public Service
• Mid 2026 – Pedernales Electric Cooperative
• 2026-2027 – Austin Energy

Electric Reliability Council of Texas (“ERCOT”)

Will McAdams and Carrie Bivens Resign. PUC Commissioner Will McAdams and Director of Independent Marketing Monitor (“IMM”) team for ERCOT Carrie Bivens have both resigned. McAdams’s term was set to expire on September 1, 2025, but he chose to resign by the end of this year. He was first appointed as Commissioner after Winter Storm Uri by Governor Greg Abbott. McAdams is resigning to focus more on his family and health. His final open meeting as Commissioner occurred on December 14, 2023. McAdams’s departure leaves two vacancies on the five-person commission, which was expanded from three after Winter Storm Uri. Peter Lake resigned as Chair of PUC in June 2023. Kathleen Jackson is currently Chair.

Bivens was appointed Director of IMM in April 2020. According to 16 Tex. Admin. Code § 25.365(c), IMM is responsible for monitoring ERCOT wholesale electric market to detect and prevent market manipulation strategies and market power abuses and evaluating the operations of the wholesale market and the current market rules and proposed changes to the market rules. IMM also recommends measures to enhance market efficiency. Bivens often criticized Texas energy market reforms. Most recently, she said that ERCOT Contingency Reserve Service (“ECRS”) has squeezed the energy market and raised the cost of electricity by $8-10 billion. At an October meeting, ERCOT officials rejected Bivens’ allegations in her report on ECRS. Disagreements like this led some to believe that PUC was trying to limit the power and independence of IMM. Bivens’ contract was set to expire in December, but she chose to resign in November. IMM still lacks a director.

PUC to Implement Emergency Pricing Program (“EPP”). PUC approved the EPP at its open meeting on November 30, 2023. EPP was required by Senate Bill 3 of the 87th Texas Legislature and will limit energy costs during events such as Winter Storm Uri. EPP will set energy prices at a low threshold until the later of 72 hours after EPP activation or 24 hours after ERCOT exits emergency operations. ERCOT must issue a notice to market participants both when EPP is activated and when EPP ends. At the open meeting on November 30, 2023, David Smeltzer addressed PUC Staff’s Proposal for Adoption on EPP, and Commissioner Lori Cobos discussed her memo on the matter. Smeltzer recommended the inclusion of a definition for emergency conditions to apply whenever there is an Energy Emergency Alert (“EEA”). Staff also included additional language requiring attestation which will help with recovery related to fuel cost recovery. Smeltzer then mentioned that Staff modified the rule so that ERCOT can implement EPP immediately to ensure that EPP is available in the winter. In her memo, Cobos stated that ERCOT should not approve reimbursement for an entity’s fuel costs if attestation is not provided. Ultimately, a motion to adopt the Proposal for Adoption with language from Commissioner Cobos’s memo was passed.

ERCOT Increased “System Administration Fee” By 13.5%. ERCOT’s budget will grow 40% in 2024, which will lead to an increase of nearly $119 million to its current $287 million budget. Much of this increase stems from a 13.5% increase in the System Administration Fee on wholesale energy from 55 cents per megawatt hour to 63 cents. PUC approved the change at its November 2 open meeting by a 4-0 vote. ERCOT will begin collecting the higher fee in January, and it will remain in effect through at least 2025. Pablo Vegas stated that ERCOT will likely not seek another increase prior to 2028.

ERCOT Announces a Rulemaking Regarding the Performance Credit Mechanism (“PCM”). In a recently released memo, ERCOT requested guidance from PUC on whether load side resources, such as energy efficiency, demand response, and distributed energy resources (“DERs”), will be eligible for PCM. PCM was established in HB 1500 and is a market mechanism that rewards performance credits (“PCs”) to generators that are available during hours of highest reliability risk. During the November 2 Open Meeting, ERCOT said that it will publish a strawman in January 2024 specifying which PCM components will be developed through a PUC rulemaking or ERCOT stakeholder process. PUC will open a stand-alone project providing stakeholders the opportunity to comment on PCM policy.

Cities File Generation Interconnection Allowance Rulemaking Comments. On September 19, 2023, PUC asked for comments on a rulemaking regarding the Generation Interconnection Allowance. Under HB 1500, the Commission must develop a rulemaking that (1) establishes an allowance on generation interconnection costs and (2) imposes costs more than the allowance on the interconnecting entity. The Legislature issued HB 1500 because it was concerned about unnecessarily high interconnection costs that would be borne by ratepayers. On October 13, 2023, Steering Committee of Cities Served by Oncor (“OCSC”) and Texas Coalition for Affordable Power (“TCAP”) (collectively, “Cities”) filed comments highlighting that the rulemaking may frustrate the legislature’s intent and increase costs. Therefore, the Cities urged the Commission to adopt an allowance only applicable to extraordinarily expensive interconnections. Commission staff agreed and recommended that the rule only applies to interconnections at or above the 85th percentile of interconnection costs. PUC plans to adopt a rule in February 2024.

ERCOT Updates Emergency Alert System. ERCOT raised the energy reserve threshold for energy emergency alerts since it believes the grid operator now requires additional reserves to operate the grid. The Emergency Alert System is used when ERCOT’s operating reserves drop below certain levels. ERCOT stated that the need for more reserves stems from the increased presence of wind, solar, and battery storage resources during times of grid constraint. ERCOT will now initiate an Energy Emergency Alert (“EEA”) 1 if reserves reach 2,500 MW (previously 2,300 MW) and are not expected to recover within 30 minutes. EEA 2 will occur if reserves reach 2,000 MW (previously 1,750 MW) and are not expected to recover within 30 minutes or if frequency has dropped below 59.91 hertz (Hz) for 15 minutes (previously 30 minutes). EEA 3 will occur if reserves drop below 1,500 MW (previously 1,430 MW) and are not expected to recover within 30 minutes or, alternatively, if frequency drops below 59.8 Hz for any period. If ERCOT initiates an EEA 3, transmission and distribution service providers must implement controlled outages.

Industrial Consumers Express Concern about ERCOT Rule. ERCOT is considering new rules that some industrial companies say could damage the state’s ability to attract large manufacturing to the state. Anxiety over cryptocurrency mines in Texas has prompted the proposed changes. On June 9, 2023, Texas Governor Greg Abbott signed into law Senate Bill 1929, which grants explicit authority to ERCOT for registration of crypto loads. Under ERCOT proposals, any new facility with an average peak consumption of 75 MW or more would need to provide additional operational information to ERCOT and comply with other requirements. In addition, smaller consumers using 25 MW also would need to provide more information to ERCOT. ERCOT also wants to regulate when and how large-scale users ramp up and down their power consumption. This regulation will eventually head to ERCOT’s board before it is considered by PUC.

Notably, a major industrial trade group has taken steps to intervene in the process, according to a report in the Dallas Morning News. Representatives of Texas Industrial Electric Consumers trade group (“TIEC”) submitted comments opposing the rules and met with officials in both the governor’s office and PUC about the regulation. Katie Coleman, who is counsel for TIEC, said ERCOT would exert too much control over industrial users if the proposal goes into effect without changes.

ERCOT Unveils New “MORA” Report. On October 2, 2023, ERCOT launched a new Monthly Outlook for Resource Adequacy (“MORA”) report. MORA report replaced ERCOT’s Seasonal Assessment of Resource Adequacy (“SARA”) report. The first MORA report provided an overall assessment for the reporting month of December 2023 and showed low risk for emergency alerts under typical conditions. According to Kristi Hobbs, ERCOT’s Vice President, System Planning and Weatherization, “[o]ur goal is to manage a reliable grid under all situations. MORA report provides a more frequent advance look at resource adequacy with a focus on the likelihood of capacity shortage events for each month.” MORA report will be released two months before each reporting month and accessible from the Resource Adequacy page of www.ercot.com.

Texas Railroad Commission (“RRC”)

RRC Sets Emergency Disconnection Fines. On November 15, 2023, RRC adopted new rules pertaining to improper gas utility service disconnections during extreme weather emergencies. New rules, which correspond to provisions of Senate Bill 3 adopted in 2021 after Winter Storm Uri, include a classification system for fines that can be assessed for improper disconnections, as well as new prohibitions against demanding full payment of utility bills during weather emergencies. These rules modify 16 Tex. Admin. Code § 7.460.

RRC Conducts 7,200 Weatherization Inspections. This November, RRC reported that it conducted more than 7,200 weatherization inspections of critical natural gas infrastructure during the winter and summer seasons. The inspection process began again on December 1 when operators faced a deadline to submit attestations summarizing what weatherization methods they utilized at their facilities. RRC stated that inspections by its Infrastructure Division will resume right after that deadline.

Atmos Pipeline Rate Case. On May 19, 2023, Atmos Pipeline filed a rate case at RRC seeking to increase annual revenues by $119.4 million. Atmos Cities Steering Committee (“ACSC”) intervened in this proceeding and worked with Atmos and other intervening parties to reach a settlement. On December 14, 2023, RRC issued a Final Order approving the parties’ settlement agreement, which provided for a total revenue requirement of $841,924,105. Ultimately, Atmos Pipeline’s revenue requirement increased by $11,968,126 because of this proceeding. This increase meant that Atmos Pipeline accepted an overall revenue requirement that was $109 million less than its requested $951.1 million. More information can be found on RRC’s website under Case No. 00013758.

CoServ Gas, Ltd. (CoServ) Rate Case. On July 28, 2023, CoServ filed a rate case at RRC seeking to increase annual revenues by $10.3 million in incorporated areas. The proposed rates and tariffs would increase CoServ’s annual revenues by approximately $12,118,404, or 7.7% including gas costs and 27.5% excluding gas costs. On November 14, 2023, the Steering Committee of Cities Served by CoServ Gas, Ltd. (“Cities”) filed a two-day abatement of the November 14 deadline so that Cities and CoServ could continue to work towards settlement. RRC granted the abatement on November 16, 2023. Cities and CoServ are still working towards settlement. More information can be found on RRC’s website under Case No. 00014771.

Texas Gas Service Company (“TGS”) Rate Case. On June 30, 2023, TGS filed with the RRC a statement of intent to increase rates within the unincorporated areas served by TGS in the Rio Grande Valley Service Area. TGS sought to increase annual revenues within the unincorporated areas by $9.81 million, which is an increase of 16.10% including gas costs or 25.94% excluding gas costs. Cities served by TGS intervened in this proceeding and worked with TGS and RRC staff to reach a settlement. On November 6, 2023, TGS filed a unanimous settlement agreement, which, pending RRC approval, allows TGS to recover a systemwide revenue requirement increase in the amount of $5,875,000. More information can be found on RRC’s website under Case No. 00014399.

SiEnergy, LP (“SiEnergy”) Rate Case. On May 5, 2023, SiEnergy filed a rate case at RRC seeking to increase rates in the environs of North, Central, and South Texas. On June 20, 2023, SiEnergy filed its Petition for Review of the rate action taken by the City of Princeton (the “City”). SiEnergy stated that the City denied SiEnergy’s requested rate change. This proceeding was docketed under OS-23-00014351. On August 9, 2023, SiEnergy, RRC staff, Cities Served by SiEnergy, and the City reached a Unanimous Settlement Agreement, which resulted in an annual revenue increase for SiEnergy totaling $5,500,000 – a reduction from the $9,694,308 initially requested by SiEnergy. RRC signed a final order affirming this annual revenue increase. More information can be found on RRC’s website under Case No. 00013504.

CenterPoint Energy Resources Corp., d/b/a CenterPoint Energy Entex and CenterPoint Energy Texas Gas (“CenterPoint”) Rate Case. On October 30, 2023, CenterPoint filed a rate case at RRC seeking to increase non-gas revenues by $37.4 million, which is a total aggregate revenue increase of about 3.1% including gas costs or 5.8% excluding gas costs. On November 1, 2023, Cities served by CenterPoint Gas filed its Motion to Intervene in this proceeding. This motion was granted during a prehearing conference on November 14, 2023. More information can be found on RRC’s website under Case No. 00015513.

RRC Receives New Funding and Duties. Speaking recently in her hometown of Midland, RRC Chair Christi Craddick described new legislative funding for inspections, critical energy mapping, and other purposes. She also described new regulatory responsibilities for the agency. Her comments were reported in October by the Midland Reporter-Telegram.

Highlights of Ms. Craddick’s comments include the following:

• In addition to its existing budget, RRC was awarded additional funding by the Texas Legislature this year to hire 50 additional inspectors and purchase more equipment. Ms. Craddick said the agency requires the extra personnel and equipment because it only has until next May to inspect about 100,000 miles of gathering lines, which is a new responsibility. She also said RRC received funding to hire five more people for environmental permits and to operate a public engagement office.
• Ms. Craddick said the Texas Legislature has tasked RRC with mapping critical infrastructure due to the aftermath of Winter Storm Uri. Some have partially blamed the massive power losses during the storm on gas infrastructure failures. Ms. Craddick said RRC received $3 million in funding to automate critical infrastructure maps.
• RRC increasingly has begun regulating new energy sources like hydrogen, a departure from its more traditional role overseeing the oil and gas industries.
• Ms. Craddick said the commission is sifting through 60 applications it received for the Texas Hydrogen Production Policy Council. Ms. Craddick said the agency awaits feedback from proposed changes to its Statewide Rule 8 that protects groundwater sources. Those changes include streamlining existing environmental protection regulations and updating requirements on the design, construction, operation, monitoring, and closure of waste management units. RRC released draft rules on October 9, 2023. However, according to recent media reports, some industry representatives began giving input into the rules more than two years ago.
• RRC is seeking primary designation from EPA for overseeing carbon capture and sequestration operations. Ms. Craddick said she hopes to receive an EPA response “sooner rather than later.” She said two other states – North Dakota and Wyoming – already possess such authority.

Atmos Energy Reports Quarterly Earnings. On November 8, 2023, Atmos Energy reported consolidated net income of $885.9 million for the year ending September 30 and $118.5 million for the fourth fiscal quarter. It also reported capital expenditures of $2.8 billion for the year ending September 30 and expects capital expenditures to total approximately $2.9 billion for fiscal year 2024. For the fiscal year that ended September 30, 2023, Atmos Energy generated an operating cash flow of $3.5 billion, compared to $977.6 million in the prior year. The year-over-year increase primarily reflects the receipt of $2.02 billion from Texas Natural Gas Securitization Finance Corporation in March 2023 relating to gas costs incurred during Winter Storm Uri.

With respect to the three months that ended September 30, 2023, consolidated operating income increased $48.7 million to $154.1 million, compared to $105.4 million in the prior-year quarter. Moreover, distribution operating income increased $17.2 million to $53.9 million, compared to $36.7 million in the prior-year quarter.

“Agency Highlights” is prepared by Chloe Daniels in the Firm’s Water and Districts Practice Groups; Mattie Neira in the Firm’s Air and Waste Practice Group; and Jack Klug in the Firm’s Energy and Utility Practice Group. If you would like additional information or have questions related to these agencies or other matters, please contact Chloe at 512.322.5814 or chloe.daniels@lglawfirm.com, or Mattie at 512.322.5804 or mneira@lglawfirm.com, or Jack at 512.322.5837 or jklug@lglawfirm.com.