| (a) General requirements. Pursuant to Texas Utilities
Code, §104.301, a gas utility may file with the Commission an
application for an interim rate adjustment, subject to the requirements
of this section. The director may reject any filing that, at the time
of filing or within a reasonable time afterward, does not substantially
comply with the requirements of this section.
(1) The filing date of the gas utility's most recent
rate case in which there is a final order setting rates for the area
in which the interim rate adjustment will apply shall be no more than
two years prior to the date the gas utility files its initial interim
rate adjustment application under this section. The gas utility shall
state in its application the gas utilities docket number of the gas
utility's most recent rate case.
(2) A gas utility shall file its application for interim
rate adjustment with the Commission at least 60 days before the proposed
implementation date of the interim rate adjustment.
(3) A gas utility shall complete notice of its application
for interim rate adjustment to all affected customers in accordance
with subsection (b) of this section no later than the 45th day after
the date the gas utility files its application for interim rate adjustment.
(4) An application for interim rate adjustment is complete
on the date the gas utility has filed at the Commission all information
required by this section.
(5) A gas utility shall not implement its requested
interim rate adjustment until the later of:
(A) the 60th day after the filing is complete;
(B) the day after the utility completes notice to customers;
or
(C) the day after the last day of a suspension period
imposed pursuant to paragraph (6) of this subsection.
(6) During the 60-day period following a gas utility's
filing of an application for interim rate adjustment, the director
may suspend the implementation of the interim rate adjustment for
a period of up to 45 days from the later of:
(A) the 60th day after the gas utility's application
is complete;
(B) the proposed implementation date; or
(C) the day after the utility completes notice to customers.
(b) Notice. The utility shall print the notice of its
application for an interim rate adjustment in type large enough for
easy reading. The notice shall be the only information contained on
the piece of paper on which it is written. A gas utility may give
the notice required by this section either by separate mailing or
by mailing or otherwise delivering the notice with its billing statements.
Notice by mail shall be presumed to be complete three days after the
date of deposit of the paper upon which it is written, enclosed in
a post-paid, properly addressed wrapper, in a post office or official
depository under the care of the United States Postal Service. The
notice to customers shall include the following information:
(1) a description of the proposed revision of rates
and schedules;
(2) the effect the proposed interim rate adjustment
is expected to have on the rates applicable to each affected customer
class and on an average bill for each affected customer class;
(3) the service area or areas in which the proposed
interim rate adjustment would apply;
(4) the date the proposed interim rate adjustment was
or will be filed with each other regulatory authority;
(5) the gas utility's address, telephone number, and
web site where information concerning the proposed interim rate adjustment
may be obtained; and
(6) a statement that any affected person may file written
comments or a protest concerning the proposed interim rate adjustment
with Gas Services, Market Oversight Section, Railroad Commission of
Texas, P.O. Box 12967, Austin, Texas 78711-2967.
(c) Contents of application. A gas utility shall submit
a signed original and two copies of the following information with
Gas Services as the utility's application for interim rate adjustment:
(1) a copy of the notice to customers and an affidavit
stating the method of giving notice and the date or dates on which
the notice was or will be given;
(2) a tariff or rate schedule or schedules;
(3) an annual project report, as more specifically
described in subsection (d) of this section;
(4) an annual earnings monitoring report, as more specifically
described in subsection (e) of this section; and
(5) the gas utility's business address, telephone number,
and, if applicable, facsimile transmission number and/or e-mail address.
(d) Annual project report. A gas utility seeking to
implement an interim rate adjustment shall electronically file with
the Commission an annual project report as part of the application.
(1) The annual project report shall be made on a form
approved by the Commission and found in the Gas Services section of
the Commission's website.
(2) The annual project report shall describe by jurisdictional
area:
(A) the gas utility investment projects completed and
placed in service during the preceding calendar year;
(B) the gas utility investment retired or abandoned
during the preceding calendar year; and
(C) the cost of, need for, and customers, by class
and location, benefitted by the change(s) in gas utility investment
projects.
(3) Similar investment projects, such as service lines
or small tools that the gas utility normally accounts for on a group
basis, may be reported as a single investment project.
(e) Annual earnings monitoring report. A gas utility
seeking to implement an interim rate adjustment shall electronically
file with the Commission an annual earnings monitoring report as part
of the application.
(1) The annual earnings monitoring report shall be
made on a form approved by the Commission and found in the Gas Services
section of the Commission's website.
(2) The annual earnings monitoring report shall demonstrate
the utility's earnings during the preceding calendar year. A gas utility
whose annual earnings monitoring report shows that the utility is
earning a return on invested capital of more than 75 basis points
above the return established by Commission final order setting rates
in the utility's most recent rate case for the area in which the interim
rate adjustment was implemented shall include with its annual earnings
monitoring report a statement of the reasons the rates are not unreasonable
or in violation of law.
(f) Methodology for interim rate adjustments. Approval
of a gas utility's application for interim rate adjustment is subject
to the requirements of this subsection.
(1) The components of the revenue to be recovered through
an interim rate adjustment shall be limited to those set forth in
this subsection. The revenue to be recovered through an interim rate
adjustment shall be incremental to that established in the gas utility's
most recent rate case for the area in which the interim rate adjustment
is to be implemented, as previously adjusted.
(2) All incremental values for investment, accumulated
depreciation, return on investment, depreciation expense, ad valorem
taxes, revenue related taxes, and incremental federal income taxes
shall be calculated and presented on a full calendar year basis, except
as provided in paragraph (3) of this subsection.
(3) The amount by which the gas utility may adjust
its rates upward or downward using the interim rate adjustment for
each calendar year is based on the difference between the value of
the gas utility's invested capital for the preceding calendar year
and the value of the invested capital for the calendar year preceding
that calendar year; except for a gas utility's first interim rate
adjustment application following a rate case and except for amounts
that can be collected by the utility under Texas Utilities Code, §104.112.
For the first interim rate adjustment following a rate case, the allowed
adjustment shall be based on the difference between the gas utility's
invested capital at the end of the rate case test year and the invested
capital at the end of the calendar year following the end of such
test year. The value of the gas utility's invested capital is equal
to the original cost of the investment at the time the investment
was first dedicated to public use minus the accumulated depreciation
related to that investment.
(4) Based on the difference between the values of the
investment amounts as determined under paragraphs (2) and (3) of this
subsection, a gas utility may adjust its revenue only by the following
components:
(A) return on investment;
(B) depreciation expense;
(C) ad valorem taxes;
(D) revenue related taxes; and
(E) federal income taxes.
(5) The factors used to calculate the return on investment,
depreciation expense, and incremental federal income tax used to compute
the revenues to be collected through the interim rate adjustment must
be the same as those established or used in the final order setting
rates in the gas utility's most recent rate case for the area in which
the interim rate adjustment is to be implemented.
(6) The gas utility shall allocate the revenue to be
collected through the interim rate adjustment among the gas utility's
customer classes in the same manner as the cost of service was allocated
among customer classes in the utility's most recent rate case for
the area in which the interim rate adjustment is to be implemented.
(7) The gas utility shall design the interim rate adjustment
as either a flat rate to be applied to the monthly customer charge
or a volumetric rate to be applied to the initial block usage rate.
The interim rate adjustment, whether it is applied to the monthly
customer charge or the initial block rate, shall be shown on the customers'
monthly billing statements as a surcharge.
(g) Procedure for review. The director shall ensure
that applications for interim rate adjustments are reviewed for compliance
with the requirements of Texas Utilities Code, §104.301; and
this section.
(1) The director may:
(A) suspend the implementation date of an interim rate
adjustment in accordance with subsection (a) of this section;
(B) request assistance in reviewing applications for
interim rate adjustments from other Commission divisions; and
(C) request additional staff to achieve timely review
of interim rate adjustment applications.
(2) Upon completion of the review; the director shall
prepare a written recommendation, which shall be provided to the applicant
gas utility. The director may recommend:
(A) approval of the application for interim rate adjustment;
(B) approval of some elements of the application to
allow only those elements of the interim rate adjustment to take effect
without further Commission action; or
(C) rejection of the application for interim rate adjustment.
(3) The director's recommendation shall be submitted
to the Commission for decision at a scheduled open meeting.
(4) If the Commission approves an application for interim
rate adjustment, the gas utility shall either file the tariff or rate
schedule implementing the approved interim rate adjustment or shall,
within 30 days of the Commission's action, notify Gas Services that
the tariff or rate schedule initially filed with the application correctly
implements the approved interim rate adjustment.
(h) Annual interim rate adjustments. A gas utility
shall recalculate its approved interim rate adjustment annually in
accordance with the requirements of this section and shall file an
application for an annual adjustment no later than 60 days prior to
the one-year anniversary of the proposed implementation date of the
previous interim rate adjustment application.
(i) Refunds. All amounts collected from customers under
an interim rate adjustment tariff or rate schedule are subject to
refund. The issues of refund amounts, if any, whether interest should
be applied to refunded amounts and, if so, the rate of interest, shall
be addressed in the rate case a gas utility files or the Commission
initiates after the implementation of an interim rate adjustment and
shall be the subject of specific findings of fact in the Commission's
final order setting rates.
(j) Review for reasonableness and prudence. In the
rate case a gas utility files or the Commission initiates after the
implementation of an interim rate adjustment under this section, any
change in investment and related expenses and revenues that have been
included in any interim rate adjustment shall be fully subject to
review for reasonableness and prudence. Upon issuance of a final order
setting rates in this rate case, any change in investment and related
expenses and revenues that have been included in any interim rate
adjustment shall no longer be subject to review for reasonableness
or prudence.
(k) Suspension of interim rate adjustment. A gas utility
may file a request to suspend the operation of an interim rate adjustment
tariff or rate schedule for any year subject to the following requirements
and conditions:
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