Agency Highlights

United States Environmental Protection Agency (“EPA”)

EPA Awards Over $17 Million to Benefit Small and Rural Water Systems. On May 12, 2021, EPA announced over $17 million in grant funding to small drinking water and wastewater systems that serve small communities and rural America for training and technical assistance purposes. Technical assistance may include circuit-rider and multi-state regional technical assistance programs, training and site visits, as well as training or technical assistance to diagnose and troubleshoot operational and compliance-related problems and identify solutions. EPA anticipates that grants will be awarded to (1) the Rural Community Assistance Partnership; (2) the National Rural Water Association; and (3) the University of New Mexico to provide training and technical assistance and improve water quality.

EPA Further Delays Revisions to Lead and Copper Rule (“LCRR”). On June 16, 2021 EPA announced that the effective date and compliance dates for its Lead and Copper Rule Revisions (“LCRR”) will be delayed according to President Biden’s Executive Order 13990 directing federal agencies to review certain environmental-related regulations. Implementation of the LCRR will be further delayed until December 16, 2021. The compliance date has also been pushed back from January 16, 2024 to October 16, 2024. During this time, EPA plans to review the LCRR and consider concerns raised by stakeholders such as disadvantaged communities that have been disproportionately impacted, states that administer national primary drinking water regulations, consumer and environmental organizations, and water systems. Stakeholders concerns include, but are not limited to, incentives to replace all lead service lines, replacement of privately owned lead lines, and costs to public water systems.

EPA Adds New Contaminants to its Drinking Water Treatability Database. EPA updated its Drinking Water Treatability Database to add new per- and polyfluoroalkyl substances (“PFAS”). The Database provides information on different contaminants, scientific references, and possible treatment processes to remove contaminants from drinking water. The update adds treatment information for 11 PFAS compounds, bringing the total number of treatment information in the database to 37 including perfluorooctanoic acid (“PFOA”) and perfluorooctane sulfonic acid (“PFOS”). The new PFAS entries are: perfluoropentanesulfonic acid (“PFPeS”); perfluorohexanesulfonamide (“PFHxSA”); perfluorobutylsulfonamide (“PFBSA”); perfluoro-4-methoxybutanoic acid (“PFMOBA”); perfluoro-3-methoxypropanoic acid (“PFMOPrA”); perfluoro-3,5,7,9-butaoxadecanoic acid (“PFO4DA”); fluorotelomer sulfonate 4:2 (“FtS 4:2”); ammonium 4,8-dioxa-3H-perfluorononanoate (“ADONA”); perfluoro-4-(perfluoroethyl)cyclohexylsulfonate (“PFECHS”); F-53B: a combination of 9-chlorohexadecafluoro-3-oxanone-1-sulfonic acid and 11-Chloroeicosafluoro-3-oxaundecane-1-sulfonic acid; perfluoro-2-{[perfluoro-3-(perfluoroethoxy)-2-propanyl]oxy}ethanesulfonic acid (“Nafion BP2”).

EPA to Revise 2020 Clean Water Act (“CWA”) Section 401 Certification Rule. On May, 27, 2021, EPA announced its intent to revise the 2020 CWA Section 401 Certification Rule after determining that it erodes state and tribal authority. Section 401 of CWA prohibits a federal agency from issuing a permit or license to conduct an activity that may result in any discharge into waters of the United States unless the affected state or Tribe certifies that the discharge is in compliance with CWA and state law, or waives certification. The 2020 CWA Section 401 Certification Rule places limits on the certification process, notably: (1) binding authorities to a strict timeline, subject to a boundary of one year and without any tolling provisions; (2) requiring decisions to be based on specific discharges from a proposed activity, not the water quality effects of the activity as a whole; and (3) limiting state and tribal conditions to those related to point source discharges into waters of the United States such that they are based on the requirements of CWA and do not consider issues like waters protected by state law, air emissions, transportation effects, or climate change.

EPA and Department of the Army Intend to Redefine “Waters of the United States.” On June 9, 2021, EPA and the Department of the Army (the “Agencies”) announced their intent to revise the definition of the “waters of the United States” (“WOTUS”). WOTUS is a term that establishes the geographic scope of federal jurisdiction under CWA. The current definition was established in 2020 through the Navigable Waters Protection Rule which rescinded the Obama Administration’s 2015 Clean Water Rule defining WOTUS. The Agencies determined that the 2020 Rule significantly reduced clean water protections, particularly in arid states where many streams were found to be non-jurisdictional. The Agencies will base their rulemaking efforts on the following considerations:

• Protecting water resources and communities consistent with CWA;
• The latest science and the effects of climate change on our waters;
• Emphasizing a rule with a practical implementation approach for state and Tribal partners; and
• Reflecting the experience of and input received from landowners, the agricultural community, states, Tribes, local governments, community organizations, environmental groups and disadvantaged communities with environmental justice concerns.
• In conjunction with this rulemaking, the Department of Justice also filed a motion to request remand of the 2020 Rule.

EPA Releases Environmental Justice Memo. On April 30, 2021, EPA’s Office of Enforcement and Compliance Assurance released a new internal memo outlining actions intended to strengthen enforcement and advance the protection of “overburdened communities” with Environmental Justice concerns. The memo defines “overburdened communities” to include minority, low-income, tribal, or indigenous populations of geographic locations in the countries that potentially experience disproportionate environmental harms and risks. The memo is expected to be the first in a series of memoranda released by EPA in response to the Biden Administration’s emphasis on Environmental Justice.

• The memo outlines a general plan to advance the agency’s Environmental Justice goals, including:
• Increasing the number of facility inspections;
• Strengthening enforcement and compliance;
• Increasing public engagement in overburdened communities; and
• Prioritizing community health when deciding appropriate action when state partner agencies are involved.

EPA Establishes PFAS Council Following Introduction of PFAS Action Act of 2021. On April 27, 2021, EPA established a specific PFAS Council with the stated goals to collaborate on cross-cutting strategies, advance new science, develop coordinated policies, regulations and communications, and engage with affected states, tribes, communities and stakeholders. The PFAS Council will develop a multi-year strategy to deliver critical public health protections to the American public (to be titled “PFAS 2021-2025 – Safeguarding America’s Waters, Air and Land”).

The Firm’s Air and Waste Practice Group has reported on PFAS in previous editions of The Lone Star Current (April 2019, July 2019, and April 2020), since EPA first introduced the PFAS Action Plan in 2019. Following the announcement of EPA’s PFAS Action Plan, Congress introduced the PFAS Action Act of 2019, which passed in the U.S. House of Representatives, but died in the U.S. Senate. On March 24, 2021, the PFAS Action Act of 2021 was introduced in the U.S. House of Representatives and is nearly identical to the 2019 bill. As it relates to the solid waste industry, the PFAS Action Act of 2021 would require EPA to declare PFOS and PFOA (the two main categories of PFAS) as hazardous substances within one year and to determine a list of additional PFAS to consider hazardous substances within five years. Listing these compounds as hazardous substances could require cleanup of sites with known contamination, and could result in PFAS being added to the list of constituents that landfill groundwater monitoring networks test for and potentially remediate.

EPA Rescinds Clean Air Act (“CAA”) Cost-Benefits Rule. On May 13, 2021, EPA rescinded a procedural rule aimed at improving the rulemaking process under the CAA cost-benefits rule by establishing requirements for evaluating the benefits and costs of regulatory decisions. The “Increasing Consistency and Transparency in Considering Benefits and Costs in the Clean Air Act Rulemaking Process Rule” (the “Cost-Benefits Rule”), finalized in December 2020, required: (1) EPA to prepare a benefit-cost analysis (“BCA”) for all significant proposed and final regulations under the CAA; (2) EPA to develop BCAs in accordance with best practices from the economic, engineering, physical, and biological sciences; and, (3) EPA to increase transparency in how it presents the costs and benefits resulting from significant CAA regulations. EPA decided to rescind the Cost-Benefits Rule after finding that it imposed procedural restrictions and requirements that would have limited EPA’s ability to use the best available science in developing CAA regulations, and would be inconsistent with economic best practices.

EPA Rescinds Guidance Document Rule. On May 18, 2021, EPA rescinded the “EPA Guidance; Administrative Procedures for Issuance and Public Petitions Rule” (the “Guidance Document Rule”), after the agency finalized the rule in October 2020 pursuant to an executive order titled Promoting the Rule of Law Through Improved Agency Guidance Documents. The Guidance Document Rule revised EPA’s practice of organizing, evaluating, and issuing guidance documents in order to increase the transparency of its guidance practices and improve the process used to manage its guidance documents. The stated purpose of the rule was to ensure EPA guidance documents:

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

EPA rescinded the Guidance Document Rule after it “concluded that the internal rule on guidance deprives EPA of necessary flexibility in determining when and how best to issue public guidance based on particular facts and circumstances, and unduly restricts EPA’s ability to provide timely guidance on which the public can confidently rely.” In rescinding the rule, EPA stated that it will continue to make agency guidance available to the public online and will continue to solicit stakeholder input on guidance of significant stakeholder and public interest.

The American Jobs Plan. On March 31, 2021, President Biden released the American Jobs Plan which seeks to replace 100% of the nation’s lead pipes and service lines. To fund the plan, Biden asked Congress to invest $45 billion in EPA’s Drinking Water State Revolving Fund and in Water Infrastructure Improvements for the Nation Act (“WIIN”) grants. In addition to reducing lead exposure in homes, the Plan aims to reduce exposure in 400,000 schools and childcare facilities. The Plan would also provide $56 billion in grants and low-cost flexible loans to states, Tribes, territories, and disadvantaged communities to modernize their systems, and $10 billion to monitor and remediate PFAS in drinking water and to invest in rural small water systems and household well and wastewater systems, including drainage fields.

United States Fish and Wildlife Service (“FWS”)

FWS to Leave “Habitat” Undefined under Endangered Species Act (“ESA”). The Biden Administration announced that it wants the term “habitat” to be undefined under ESA. While ESA does not define “habitat,” the Trump Administration created a regulatory definition after a 2018 Supreme Court case holding that only a “habitat” of an endangered species can be designated as “critical habitat” under ESA. FWS stated that “habitat” does not need a definition to comply with the Court’s ruling and that a definition would preclude an agency’s ability to determine what constitutes a “critical habitat.” While the Trump Administration’s definition will remain in effect until the FWS completes the rulemaking process, the Biden Administration is also working to rescind the definition. The FWS rulemaking, conducted jointly with the National Marine Fisheries Service, seeks to rescind or update the Trump Administration’s ESA regulations that address what areas can be excluded from a critical habitat; how ESA protects plants and animals; and how federal agencies work together on these issues.

Texas Water Development Board (“TWDB”)

Brooke Paup Takes Over as Chairwoman of the Texas Water Development Board. On April 22, 2021, Governor Abbot named Brooke T. Paup as Chairwoman of TWDB. Paup has served as a member of the TWDB since February 2018. She previously served as the Director of Legislative Affairs for the Texas Comptroller of Public Accounts. Paup was also the Deputy Division Chief of Intergovernmental Relations and Special Assistant for Policy and Research for the Office of the Attorney General and worked on legislative issues, special litigation, and public finance, including the creation of the State Water Implementation Fund for Texas and the State Water Implementation Revenue Fund for Texas.

Texas Commission on Environmental Quality (“TCEQ”)

TCEQ Announces New Water Quality Deputy Director, Wastewater Permitting Section Manager, and Pretreatment Team Leader. The TCEQ’s Water Quality Division recently announced changes in its leadership. Colleen Cook will serve as the new Pretreatment Team Leader. Cook worked for the Alabama Department of Environmental Management’s Water Division for over five years before joining the Pretreatment Team in January 2020. Additionally, Matthew Udenenwu will serve as the new Wastewater Permitting Section Manager. Udenenwu has worked for the TCEQ for over 20 years. Lastly, Robert Sadlier will serve as the new Water Quality Division Deputy Director. Sadlier has worked for the TCEQ for over 9 years serving as an environmental investigator, supervisor, and manager.

TCEQ Releases Guidance Document on Prohibited Waste Removal Plans. On April 7, 2021, the TCEQ MSW Permits Section released a new guidance document (RG-546) for Preparing Work Plans for Removing Prohibited Waste from Municipal Solid Waste Landfills. According to the guidance document, a Prohibited Waste Removal Plan is required for removal of prohibited wastes that have been disposed of in a MSW landfill. The permittee or operator must notify the TCEQ of such occurrences and prepare and submit a Prohibited Waste Removal Plan to the MSW Permits Section for review and approval before removing the prohibited wastes. However, a Prohibited Waste Removal Plan is not required for removal of prohibited wastes that are discovered and immediately removed in accordance with the landfill permit and Site Operating Plan.

TCEQ Proposes Rulemaking for Industrial and Hazardous Waste (IHW) Generator and Management Fees Increase. On June 4, 2021, TCEQ published a proposed rulemaking regarding industrial solid waste and municipal hazardous waste generator and management fee increases. The proposed rulemaking would increase the fees for generation and management of Industrial and Hazardous Waste (IHW). Additionally, it would give TCEQ the ability to adjust the fees on an annual basis at or below the new proposed fee schedules. TCEQ is proposing the fee increases because the revenue in Waste Management Account Fund 0549 is facing a declining fund balance and the fee rates have not been adjusted since 1994.

The proposed rulemaking aims to increase the IHW management fee schedule by 45%. More specifically, the proposed rulemaking seeks to (1) increase the IHW generation fee schedule from $0.50 to a maximum of $2.00 per ton for non-hazardous waste generation; (2) increase the fee schedule from $2.00 to a maximum of $6.00 per ton for hazardous waste generation; and (3) allow the Executive Director the ability to adjust the actual IHW generator fee at or below the new fee schedule amounts. TCEQ anticipates that the fee increases will primarily impact small businesses and the public may experience increased fees for waste generation or passed through price increases. TCEQ anticipates there may also be a small environmental benefit from waste generation reductions.

The deadline to submit written comments is July 6, 2021. TCEQ anticipates adopting a final rule on November 3, 2021.

TCEQ Proposes Amendment to Air Quality Standard Permit for Concrete Batch Plants. On May 28, 2021, TCEQ announced plans to amend the air quality standard permit for concrete batch plants. TCEQ originally issued the concrete batch plant standard permit in 2000, and amended it in 2003 and in 2012. This proposed amendment will update the standard permit to add an exemption from emissions and distance limitations that was inadvertently removed during the 2012 amendment. The standard permit will be effective for standard permits issued after September 22, 2021.

TCEQ is accepting comments on the proposed amendment until June 29, 2021.

TCEQ to Propose Rules to Amend Industrial Solid Waste and Municipal Hazardous Waste Rules to Maintain Equivalency with RCRA Revisions. On July 14, 2021, the TCEQ Commissioners will propose a rulemaking to amend, repeal, and replace a number of sections of 30 Texas Administrative Code Chapter 335, Industrial Solid Waste and Municipal Hazardous Waste, in order to maintain equivalency with Resource Conservation and Recovery Act (“RCRA”) revisions promulgated by EPA, and to formalize the foundry sands exclusion. The future rulemaking would update Chapter 335 to include federal rule changes set forth in parts of RCRA Clusters XXIV – XXVII, including the following:

• RCRA Cluster XXIV – Checklist 233
  • Rule changes in Checklist 233 implement vacaturs of parts of the federal definition of solid waste (“DSW”) ordered by the United States Court of Appeals for the District of Columbia Circuit by revising several recycling-related provisions associated with the DSW. The purpose of these revisions is to ensure that the hazardous secondary materials recycling regulations encourage reclamation in a way that does not result in increased risk to human health and the environment.

• RCRA Cluster XXV – Checklist 237
  • Rule changes in Checklist 237 revise the existing hazardous waste generator regulatory program by reorganizing the regulations to improve their usability by the regulated community; providing a better understanding of how the RCRA hazardous waste generator regulatory program works; addressing gaps in the existing regulations to strengthen environmental protection; providing greater flexibility for hazardous waste generators to manage their hazardous waste in a cost-effective and protective manner; and making technical corrections and conforming changes to address inadvertent errors and remove obsolete references to programs that no longer exist.

• RCRA Cluster XXVI – Checklists 238 and 239
  • Rule changes in Checklist 238 revise existing regulations regarding the export and import of hazardous wastes from and into the United States. Specifically, this rule applies a confidentiality determination such that no person can assert confidential business information claims for documents related to the export, import, and transit of hazardous waste and export of excluded cathode ray tubes. EPA is making these changes to apply a consistent approach in addressing confidentiality claims for export and import documentation.
  • Rule changes in Checklist 239 would adopt the methodology EPA established to determine and revise the user fees applicable to the electronic and paper manifests to be submitted to the national electronic manifest (e-Manifest) system that EPA developed under the Hazardous Waste Electronic Manifest Establishment Act. Certain users of the hazardous waste manifest are required to pay a prescribed fee to EPA for each electronic and paper manifest they use and submit to the national system.

• RCRA Cluster XXVII – Checklist 241
  • Rule changes in Checklist 241 establish cost-savings and streamlined standards for handling hazardous waste pharmaceuticals to better fit the operations of the healthcare sector while maintaining protection of human health and the environment. The rule would prohibit disposal of pharmaceuticals into the sewage system, exempt nicotine wastes from classification as a listed hazardous waste, and codify the exemption for unused pharmaceuticals that are expected to be legitimately reclaimed from being classified as a solid waste.

• RCRA Cluster XXVIII – Checklist 242
  • Rule changes in Checklist 242 add hazardous waste aerosol cans to the universal waste program. This change would benefit the wide variety of establishments generating and managing hazardous waste aerosol cans, including the retail sector, by providing a clear, protective system for managing discarded aerosol cans, easing regulatory burdens, and promoting the collection and recycling of these cans.

TCEQ anticipates publishing the proposed rulemaking on July 30, 2021 with the public comment period to end on August 30, 2021. TCEQ anticipates adopting a final rule in January 2022.

TCEQ to Propose Rules to Clarify Composting Notice Process and Obsolete Terms. On July 14, 2021, the TCEQ Commissioners will propose a rulemaking to clarify and update existing notice language and requirements found in 30 Texas Administrative (“TAC”) Code Section 332.22(b), add existing language that applies to composting from 30 TAC Chapter 330, Subchapter P, concerning Fees and Reporting, to Chapter 332, and make substantive and nonsubstantive revisions to bring the chapter more up to date with agency and program standards. More specifically, the future rulemaking would provide clarity on the definition of adjacent landowner for compost Notification of Intent (“NOI”) and remove other vague mailing requirements. Currently, Section 332.22(b) uses the phrase “affected landowners” regarding who the Chief Clerk mails notice of the planned facility to, which creates ambiguity on which landowners should be listed by the applicant. This rulemaking would incorporate applicability, fees, and reporting requirements from 30 TAC Chapter 330, Subchapter P into sections for registered and permitted facilities. Revisions and clarifications would be done to various citations and other conflicting rules between multiple chapters. Broken and obsolete links, typos, misspellings, and grammar mistakes would be fixed throughout the rule to ensure clarity and readability, and provide overall effectiveness of the rules.

TCEQ anticipates publishing the proposed rulemaking on July 30, 2021 with the public comment period to end on August 30, 2021. TCEQ anticipates adopting a final rule on December 15, 2021.

Public Utility Commission of Texas (“PUC”)

Governor Abbott Appoints New Chairman and Commissioners to PUC. Last month, we reported that all three Commissioners of PUC resigned in the wake of Winter Storm Uri. Since that time, Governor Greg Abbott has appointed a new Chairman and two new Commissioners to PUC.

On April 1, 2021, Governor Abbott announced the appointment of Will McAdams, President of the Associated Builders and Contractors of Texas, to one of the vacant PUC Commissioner positions for a term set to expire on September 1, 2025. On April 12, Governor Abbott appointed Peter Lake, Chairman of the Texas Water Development Board, as Chairman of PUC for a term set to expire on September 1, 2023. On June 17, Governor Abbott appointed Lori Cobos, Chief Executive and Public Counsel for the Office of Public Utility Counsel, to the other vacant PUC Commissioner position for a term set to expire September 1, 2021.

PUC Ends Disconnect Moratorium, Extends Required Deferred Payment Plans. On February 21, 2021, PUC issued an order establishing a good cause exception to specific electric, water, and sewer rules that enacted a moratorium on disconnections, preventing utilities from disconnecting customers due to nonpayment. PUC based its decision “on the existence of a public emergency and imperative public necessity following Winter Storm Uri.” On June 1, 2021, Commissioner McAdams issued a memo, recommending that PUC should end the disconnect moratorium at the June 11, 2021 Open Meeting.

At the June 11, 2021 Open Meeting, the Commissioners ended the disconnect moratorium, effective on June 18, 2021. The Commissioners discussed the “delicate balance between financial impact on consumers in households and the economic health of electric providers in our competitive marketplace,” and the need to remove the “regulatory limbo” before the heat of the summer months. They urged small commercial and residential consumers to work with their providers to get on deferred payment plans, and also expressed their expectation that all Retail Electric Providers (“REPs”) re-notice their customers who are behind on payments.

Lastly, the Commissioners renewed the directive from the March 26, 2020 Order in Project No. 50664 directing all REPs to offer deferred payment plans to customers upon request regardless of qualification. An order issued on July 16, 2020 renewed this directive, and at the June 11, 2021 Open Meeting, the Commissioners again renewed the directive until November 12, 2021.

PUC Amends Substantive Rule Section 25.505 Related to ERCOT Scarcity Pricing Mechanism. At the March 5, 2021 Open Meeting, PUC directed Commission Staff to open a project to evaluate whether the Commission should amend its rules to adjust the low system-wide offer cap (“LCAP”) prior to this summer. The Commission further requested comments from interested parties addressing this question. As a result of the initial and reply comments filed by multiple stakeholders, PUC filed on May 6, 2021 its Proposal for Publication of Amendments to 16 Texas Administrative Code (“TAC”) § 25.505 as approved at the May 6, 2021 Open Meeting, and requested additional comments on the proposed language from interested parties.

PUC received comments on the proposed amendments from NRG Energy. Inc., Texas Electric Cooperatives, Inc., the Lower Colorado River Authority, Texas Industrial Energy Consumers, South Texas Electric Cooperative, Inc., the Steering Committee of Cities Served by Oncor and the Texas Coalition for Affordable Power, ERCOT, Exelon Generation Company, LLC, Texas Energy Association for Marketers, Texas Competitive Power Advocates, and Texas Retail Energy, LLC.

PUC’s final amendments, with changes to the proposed text as published in the May 21, 2021 issue of the Texas Register (46 Tex. Reg. 3227 (May 21, 2021)), modify the value of the LCAP by eliminating the provision that ties the value of the LCAP to the natural gas price index and sets the LCAP at $2,000 per megawatt hour, with no alternate calculation. It also includes a make-whole provision that would require that “[w]hen the system-wide offer cap is set to the LCAP, ERCOT must reimburse resource entities for any actual marginal costs in excess of the larger of the LCAP or the real-time energy price for the resource.”

PUC Waives ERCOT Protocol Related to Confidential Outage Information. On June 23, 2021, Chairman Lake filed a memo stating that “we need more transparency and information about forced outages and that information should quickly be made available to the public.” Under the Electric Reliability Council of Texas’ (“ERCOT”) protocols, information regarding forced outages is considered protected and confidential for a 60-day period. However, after a call for conservation in early June due in part to a higher than expected number of forced generation outages, Chairman Lake stated that the public deserved to know “what generation units are unavailable, the amount of unavailable capacity, the cause of the outage, and when the units are expected to return to service.” Therefore, he recommended that PUC waive the portion of ERCOT Nodal Protocol § 1.3.1.1(1)(c) that protects outage information for sixty days for forced outages, effective for the time period of June 1, 2021 through September 30, 2021. He also recommended that ERCOT make access to this information clearly visible on the front page of its website.

At the June 24, 2021 Open Meeting, after hearing from Michele Richmond, Texas Competitive Power Advocates, and Woody Rickerson, Vice President of Grid Planning and Operations at ERCOT, the Commissioners voted to waive ERCOT Nodal Protocol § 1.3.1.1(1)(c) consistent with Chairman Lake’s memo.

PUC Holds Weekly Open Meetings, Transitions to Back to In-Person Format. The newly appointed Commissioners of PUC have announced they will be holding Open Meetings once per week this summer to address an influx of critical issues coming out of the 87th Texas Legislature and following February’s Winter Storm Uri. Some of these Open Meetings will be for the purpose of conducting normal business, but others will be held in a “workshop” format, for the Commission to work with stakeholders and Staff. No formal action will take place at these workshop-type Open Meetings, but the focus is instead on brainstorming with the public and stakeholders on key issues. Further, at the June 24, 2021 Open Meeting, PUC Executive Director Thomas Gleeson said Open Meetings will be held in person beginning with the July 15 Open Meeting, but asked parties to limit in-person representation to two people each.

PUC Opens Rulemaking Projects to Implement Legislation Adopted by the Texas Legislature. The 87th Texas Legislative Session ended on May 31, 2021. There were 326 bills filed that directly affected PUC’s operations or regulated entities. Pending the end of the Governor’s veto period on June 20, 2021, 25 bills have passed that will require PUC action, including Senate Bill 3, which includes 41 sections covering a wide range of provisions in response to Winter Storm Uri.

PUC Staff has begun providing information about the rulemaking and implementation process it will undertake to address the recently enacted legislation. PUC has published the following list of upcoming or pending rulemakings:

• Project No. 51825 – Investigation Regarding the February 2021 Winter Weather Event
  • Commission Staff is scoping the parameters of the project along with other winter weather projects.

• Project No. 51830 – Review of Wholesale-Indexed Products for Compliance with Customer Protection Rules for Retail Electric Service
  • This rulemaking implements provisions of House Bill 16, including limitations on wholesale-indexed products for compliance with customer protection rules and requirements surrounding expiration notices and default renewal products.
  • Commission Staff is scoping the project and drafting a proposed rule scheduled for consideration at the July 15 Open Meeting. Staff intends to restyle the rulemaking and expand it to include additional customer protection related rule changes.

• Project No. 51839 – Electric Gas Coordination
  • This rulemaking examines and improves coordination between the electric and gas industries.
  • Commission Staff is scoping the project parameters, which overlaps with the Critical Load project (Project No. 51888).

• Project No. 51840 – Rulemaking to Establish Weatherization Standards
  • This rulemaking implements provisions of Senate Bill 3 and will examine weatherization standards for power generation facilities.
  • Commission Staff is refining policy proposals and drafting a strawman for consideration by approximately July 1, 2021 and will have a proposed rule for consideration in late August.

• Project No. 51871 – Review of the ERCOT Scarcity Pricing Mechanism
  • This rulemaking reviews and identifies potential improvements to the rules and protocols of the ERCOT wholesale electric market, with emphasis on pricing of energy and ancillary services.
  • The proposal for adoption was published following the June 24, 2021 Open Meeting.

• Project No. 51888 – Review of Critical Load Standards and Processes
  • This rulemaking implements provisions of Senate Bill 3 and House Bill 3648, which establish standards and processes to protect load that provides an essential service to electric generation.
  • Commission Staff is scoping the project parameters and refining policy proposals.

• Project No. 51889 – Review of Communication for the Electric Market
  • This rulemaking reviews communications standards and expectations among ERCOT, governmental entities, market participants, and the public.
  • Commission Staff is scoping the project parameters and refining policy proposals.

• Other topics for future rulemakings identified by Commission Staff include:
• Review of 16 TAC § 25.53 Relating to Electric Service Emergency Operations Plans
• Power Outage Alert

New Application for Critical Load Created. On May 7, 2021, PUC filed a new “Application for Critical Load Serving Electric Generation and Cogeneration” in Project No. 51839, Electric-Gas Coordination. One of the contributing factors to the outages during the February winter storm was confusion and lack of coordination regarding the designation of critical load, as ERCOT shut off power to many facilities later identified as critical load facilities. As a result, the ERCOT Gas Electric Working Group (“GEWG”) coordinated with PUC Staff, the electric and gas industries, and Railroad Commission (“RRC”) Staff to create a new and improved form for these facilities to use.

The revised form broadens the scope of critical load to include premises that provide electricity to natural gas production, saltwater disposal wells, processing, storage, or transportation such as a natural gas compressor station, gas control center, or other pipeline transportation infrastructure. The revisions were made “in an effort to increase the reliability of uninterrupted supply of natural gas to natural gas-fired generation and cogeneration.” To facilitate the accessibility of the form, ERCOT has posted it on the ERCOT GEWG home page. PUC filing included a reminder that neither PUC nor ERCOT designate loads as critical, but instead, an application for designation of a premise as critical load should be submitted to the particular utility that provides electric service to the premise.

TNMP, AEP, and Oncor File DCRF Applications with PUC. In April 2021, Texas-New Mexico Power Company (“TNMP”), AEP Texas, and Oncor Electric Delivery Company LLC (“Oncor”) filed applications with PUC to adjust their Distribution Cost Recovery Factor (“DCRF”) to recover new investment in distribution equipment.

TNMP filed its DCRF Application on April 5, 2021 (Application of Texas-New Mexico Power Company to Amend its Distribution Cost Recovery Factor, Docket No. 51959 (pending)), requesting an increase in its distribution revenues of $13,959,505. The parties have unanimously reached a tentative agreement in principle on all issues and are currently working on finalizing the settlement agreement and documents.

AEP Texas filed its DCRF Application on April 6, 2021 (Application of AEP Texas Inc. to Amend its Distribution Cost Recovery Factor, Docket No. 51984 (pending)), requesting an increase in its distribution revenues of approximately $54.56 million. The parties have unanimously reached an agreement in principle on all issues and are currently working on finalizing the settlement agreement and documents.

Oncor filed its DCRF Application on April 8, 2021 (Application of Oncor Electric Delivery Company LLC to Amend its Distribution Cost Recovery Factor, Docket No. 51996 (pending)), requesting an increase in its total distribution revenue requirement by $97,826,277. The parties have unanimously reached an agreement in principle on all issues and are currently working on finalizing the settlement agreement and documents.

TNMP, Oncor, and CenterPoint File EECRF Applications with PUC. In May and June 2021, TNMP, Oncor, and CenterPoint Energy Houston Electric, LLC (“CenterPoint”) filed applications with PUC to adjust their Energy Efficiency Cost Recovery Factor (“EECRF”) to reflect changes in program costs and bonuses, and to minimize any over- or under-collection of energy efficiency costs resulting from the use of the EECRF.

On May 27, 2021, TNMP filed its 2022 EECRF application with PUC (Application of Texas-New Mexico Power Company for Approval to Adjust the Energy Efficiency Cost Recovery Factor and Related Relief, Docket No. 52153 (pending)). TNMP is seeking to adjust its EECRF to collect $7,225,543 in 2022.

On May 28, Oncor filed its 2022 EECRF application with PUC (Application of Oncor Electric Delivery Company LLC to Adjust its Energy Efficiency Cost Recovery Factor, Docket No. 52178 (pending)). Oncor is seeking to adjust its EECRF to collect $83,760,515 in 2022.

On June 1, 2021, CenterPoint filed its 2022 EECRF application with PUC (Application of Centerpoint Energy Houston Electric, LLC to Adjust its Energy Efficiency Cost Recovery Factor, Docket No. 52194 (pending)). CenterPoint is seeking to adjust its EECRF to collect $63,367,922 in 2022.

Railroad Commission of Texas (“RRC”)

Texas Legislature Passes Gas Securitization Bill, RRC Begins Implementation. Winter Storm Uri resulted in a historic demand for energy, causing gas utilities to incur extraordinary costs in procuring the necessary supply of gas to maintain service to their customers. House Bill 1520 allows for the high cost of gas from the storm to be securitized, which will ensure end-use customers do not receive high, unexpected bills from their natural gas utility provider in the wake of Winter Storm Uri. The bill passed out of the Texas Legislature and was signed by Governor Greg Abbott on June 16, 2021. House Bill 1520 directs RRC and the Texas Public Finance Authority to work together to issue customer rate-relief bonds, the proceeds of which gas utilities would use to pay for the extraordinary cost of natural gas. The bonds would provide rate relief to customers by allowing gas utilities to recover the cost of gas through customer bills over a long time period. The bill provides financial relief to gas utilities that choose to apply for the bonds by providing for a low-cost source of financing to fulfill outstanding obligations to natural gas suppliers.

As reported last month, RRC 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 Winter Storm Uri, including the cost of gas and transportation of gas supply. RRC also sent gas utilities a “Notice to Operators,” providing further information related to the bill, including specifics on how gas utilities can file an Application for Regulatory Asset Determination. A gas utility that chooses to participate in the process would submit information and documentation to RRC regarding its extraordinary costs to procure natural gas during Winter Storm Uri. The agency would review the application and, if the agency determines that issuing bonds is cost-effective, direct the Texas Public Finance Authority to issue bonds.

Atmos Requests Penalty Waiver from RRC. On April 8, 2021 Atmos filed a “Request for Penalty Waiver” letter at RRC. Atmos provides non-firm (i.e., interruptible) service to numerous industrial and transportation customers. Some of these customers are large city-owned accounts, but most are private industrial customers. These customers pay a discounted rate in return for being available to curtail their service in the event of a supply shortage. If they fail to curtail service when called upon, they are assessed penalties equal to 200% of the price of gas during the time they failed to curtail. The penalties are designed to incentivize customers to comply with natural gas service priorities and allow for continuous service to firm customers. During Winter Storm Uri, Atmos sent a notice on February 12, 2021 requesting that these customers curtail service by noon on February 13, 2021. Although Atmos claimed that “99% of the customers were good actors” and reduced their consumption, Atmos has calculated that “hundreds of millions of dollars” in penalties should have been assessed. Any penalties collected would be an offset to the cost of gas paid by all customers.
Notwithstanding the language in its tariffs, Atmos requested permission from RRC to waive issuing critical weather event imbalance fees, customer imbalance fees, curtailment overpull fees, and pooling agreement fees incurred by customers for service provided between February 13, 2021 and February 21, 2021. Atmos proposed to waive the penalties due to the severity and unanticipated nature of the storm. According to Atmos, “[a]bsent the requested waiver, the penalties incurred by affected customers, which include hospitals, schools, municipalities, and other businesses that continued to operate at minimum levels for plant protection, will be significant and unnecessarily punitive due to historically high natural gas prices” during the winter storm. Significantly, Atmos has reported that it did not have to curtail service during the storm to firm customers. On April 19, 2021 RRC issued a letter finding it “permissible” for Atmos to waive the fees.

“Agency Highlights” is prepared by Danielle Lam in the Firm’s Water and Districts Practice Groups; 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 Danielle at 512.322.5810 or dlam@lglawfirm.com, Sam at 512.322.5825 or sballard@lglawfirm.com, or Taylor at 512.322.5874 or tdenison@lglawfirm.com.