TITLE 16. ECONOMIC REGULATION

PART 2. PUBLIC UTILITY COMMISSION OF TEXAS

CHAPTER 24. SUBSTANTIVE RULES APPLICABLE TO WATER AND SEWER SERVICE PROVIDERS

The Public Utility Commission of Texas (commission) proposes amendments to 16 Texas Administrative Code (TAC) §24.3 relating to Definitions, §24.25, relating to Form and Filing of Tariffs, §24.27, Notice of Intent and Application to Change Rates, §24.41, relating to Cost of Service, and §24.43, relating to Rate Design. The commission also proposes new 16 TAC §24.26, relating to Test Year and §24.28, relating to Review of Test Year.

The proposed new rules will implement Texas Water Code §§13.1831, 13.184(d), and 13.185(l) and (m) as enacted by House Bill (HB) 2712 during the Texas 89th Regular Legislative Session (89R). The proposed amended rules will implement Texas Water Code §§13.185(j), 13.183(a)(1), 13.184(a), 13.185(b), (d)(1), and (j) as amended by HB 2712 (89R), and Texas Water Code §13.185(k) as enacted by HB 2712 (89R). The proposed amended and new rules will enable water and sewer utilities to enter a combined test year or a future test year in a comprehensive base rate proceeding. The proposed rules will also make conforming changes associated with the implementation of a combined test year and future test year. The commission also proposes conforming changes to the Class A Utility Annual Report Form for a utility that elects to use a combined test year or a future test year. The commission also proposes revisions to the Class A, B, C, and D Water and Sewer Annual Report General Instructions (Annual Report General Instructions) to conform with recent electronic filing changes. The proposed rules will also implement Texas Water Code §13.002 of the Texas Water Code, as enacted by Senate Bill (SB) 740, Section 2 (89R) by adding the definition of "public utility agency."

Growth Impact Statement

The agency provides the following governmental growth impact statement for the proposed rule, as required by Texas Government Code §2001.0221. The agency has determined that for each year of the first five years that the proposed rules are in effect, the following statements will apply:

(1) the proposed rules will create a government program and will eliminate a government program;

(2) implementation of the proposed rules will not require the creation of new employee positions and will not require the elimination of existing employee positions;

(3) implementation of the proposed rules will not require an increase and will not require a decrease in future legislative appropriations to the agency;

(4) the proposed rules will not require an increase and will not require a decrease in fees paid to the agency;

(5) the proposed rules will create a new regulation in accordance with the requirements of HB 2712 (89R);

(6) the proposed rules will expand, limit, or repeal an existing regulation;

(7) the proposed rules will not change the number of individuals subject to the rule's applicability; and

(8) the proposed rules will affect this state's economy.

Fiscal Impact on Small and Micro-Businesses and Rural Communities

There is no adverse economic effect anticipated for small businesses, micro-businesses, or rural communities as a result of implementing the proposed rule. Accordingly, no economic impact statement or regulatory flexibility analysis is required under Texas Government Code §2006.002(c).

Takings Impact Analysis

The commission has determined that the proposed rule will not be a taking of private property as defined in chapter 2007 of the Texas Government Code.

Fiscal Impact on State and Local Government

Micah Noon, Rate Analyst, Tariff and Rate Analysis Division has determined that for the first five-year period the proposed rule is in effect, there will be no fiscal implications for the state or for units of local government under Texas Government Code §2001.024(a)(4) as a result of enforcing or administering the sections.

Public Benefits

Mr. Noon has determined that for each year of the first five years the proposed section is in effect the public benefit anticipated as a result of enforcing the section will be the availability of a future test year or combined test year for water and sewer utilities to set rates in accordance with HB 2712 (89R). There will not be any probable economic costs to persons required to comply with the rule under Texas Government Code §2001.024(a)(5).

Local Employment Impact Statement

For each year of the first five years the proposed sections are in effect, there should be no effect on a local economy; therefore, no local employment impact statement is required under Texas Government Code §2001.022.

Costs to Regulated Persons

Texas Government Code §2001.0045(b) does not apply to this rulemaking because the commission is expressly excluded under subsection §2001.0045(c)(7).

Public Hearing

The commission will conduct a public hearing on this rulemaking if requested in accordance with Texas Government Code §2001.029. The request for a public hearing must be received by May 14, 2026. If a request for public hearing is received, commission staff will file in this project a notice of hearing.

Public Comments

Interested persons may file comments electronically through the interchange on the commission's website. Comments must be filed by May 14, 2026. Comments should be organized in a manner consistent with the organization of the proposed rules. The commission invites specific comments regarding the effects of the proposed rule, including the costs associated with, and benefits that will be gained by, implementation of the proposed rule. The commission also requests any data, research, or analysis from any person required to comply with the proposed rule or any other interested person. The commission will consider the information submitted by commenters and the costs and benefits of implementation in deciding whether to modify the proposed rules on adoption. All comments should refer to Project Number 59086.

Each set of comments should include a standalone executive summary as the last page of the filing. This executive summary must be clearly labeled with the submitting entity's name and should include a bulleted list covering each substantive recommendation made in the comments.

In addition to comments on the proposed rule text, the commission requests comments on the following questions concerning the proposed rules and the implementation of HB 2712. Questions for comment should be interpreted broadly and understood to potentially entail future revision to any underlying rule language. Any provision or concept explored in a question for comment indicates that provision or concept is specifically noticed for consideration and review in the rulemaking. Responses to questions for comment, including draft language provided by commenters, are within the scope of such consideration and review. The inclusion of additional analysis, research, or other relevant information is encouraged when responding to questions for comment.

In addition to the proposed revisions to the Class A Annual Report Form and the Annual Report General Instructions in this rulemaking, the commission is contemplating a later rulemaking to update other commission-prescribed forms to accommodate utilities that select a combined test year and a future test year.

The commission has identified the following commission-prescribed forms as potentially requiring changes. While the commission offers no edits to these forms and does not intend to change the forms in this rulemaking project, the commission requests comment from stakeholders to identify any necessary changes. Specifically, the commission requests redline edits or comments recommending changes to the following forms:

Class B Water Sewer Annual Report;

Class C Water Sewer Annual Report;

Class D Water Sewer Annual Report;

Application to Obtain or Amend a Water or Sewer Certificate of Convenience and Necessity (CCN);

Application for Expedited Sale, Transfer, or Merger of a Retail Public Utility;

Application for Sale, Transfer, or Merger of a Retail Public Utility;

Class A Utility Notice of Proposed Rate Change;

Class B and C Utility Notice of Proposed Rate Change;

Class B Rate/Tariff Change Application (Schedule);

Class C Rate/Tariff Change Application (Schedule); and

Class D Rate/Tariff Change Application/Instructions/Notice (Schedule).

If there are other forms that require amendment that are not listed above, identify the additional form and any necessary changes in the same manner as requested in Question 1a.

Texas Water Code §13.185(l) and (m) require a "post test-year report" for a utility that elects to use a "fully projected future test year." In the proposed draft of §24.28, the commission has extended the requirement to perform a test year report to a utility that has elected to use a "combined test year." This is due to the requirement in §13.184(d), which applies to "a utility that uses a future or combined historic and future test year." Specifically, §13.184(d) requires the commission to determine in the next rate proceeding for that utility, whether the test year information resulted in rates yielding a fair return and, if so, "require the utility to refund to customers money collected in excess of a rate that would have yielded a fair return during the period in which the excessive rate was collected."

Should the commission extend the post-test year report requirement to a utility that enters a combined test year? Please include the rationale for a response to this question.

Are there alternative methods to ensure forecasted costs and revenues for a combined test year are properly accounted for to facilitate reconciliation in a later base rate proceeding?

SUBCHAPTER A. GENERAL PROVISIONS

Statutory Authority

The amendment is proposed under Texas Water Code §13.002(16-a), which defines the term "public utility agency" for use in Chapter 13; §13.041(a), which provides the commission the general power to regulate and supervise the business of each public utility within its jurisdiction and to do anything specifically designated or implied by the Texas Water Code that is necessary and convenient to the exercise of that power and jurisdiction; Texas Water Code §13.041(b), which provides the commission with the authority to adopt and enforce rules reasonably required in the exercise of its powers and jurisdiction; §13.1831 which requires a regulatory authority to fix rates for water and sewer services for a Class, A, B, C, or D utility based on a test year that,, among other things, includes historic, future, or combined historic and future data; §13.183(a) which requires the regulatory authority to fix a utility's rates for water and sewer services at a level that will permit the utility a reasonably opportunity to earn a reasonable return on its invested capital used and useful in rendering service to the public, based on test year information, over and above its reasonable and necessary operating expenses; §13.184(a) which prohibits the utility commission from prescribing any rate that will yield more than a fair return on the invested capital used and useful in rendering service to the public based on test year information; §13.184(d), which requires the regulatory authority to require a utility that uses a future or combined historic and future test year, to refund to customers money collected in excess of a rate that would have yielded a fair return during the period in which the excessive rate was collected if the regulatory authority determines in the next rate proceeding for that utility that the test year information used for the utility resulted in the utility's rates yielding more than a fair return on the utility's invested capital used and useful in rendering service to the public; §13.185(b), which requires utility rates to be based on the original cost of property used by and useful to the utility during the test year in providing service, including, if necessary to the financial integrity of the utility, construction work in progress at cost as recorded on the books of the utility; §13.185(d)(1) which requires the regulatory authority to base a utility's expenses on test year information, as determined by commission rules; §13.185(j) which establishes that depreciation expense included in the cost of service includes depreciation on all depreciable utility property owned by the utility except for property provided by explicit customer agreements or funded by customer contributions in aid of construction and requires depreciation on all developer or governmental entity contributed property to be allowed in the cost of service.

Section 13.185(k) which requires the regulatory authority to allow inclusion in the rate base of facilities projected to be in service through the end of the test year; and §13.185(l) which requires a utility that selects a fully projected future test year to, not later than the 30th day after the last day of the last quarter of the test year, to file with the regulatory authority a statement that describes the utility's actual results experienced in the test year; and provides appropriate data to demonstrate the accuracy of the estimates used for the test year and serve a copy of such a statement on all parties of record in the rate proceeding in which the final rate determination using the test year was entered; and §13.185(m) which requires a utility that does not have the results or data required under §13.183(l) to file a notice with the regulatory authority stating the date on which the results or data will be available, serve a copy of that notice on all parties of record in the rate proceeding in which the final rate determination using the test year was entered, and perform the actions described under §13.185(l) as soon as possible after the results or data are available.

Cross Reference to Statute Texas Water Code §§13.002(16-a), 13.041(a) and (b), 13.1831, 13.183(a)(1), §13.184(a) and (d), §13.185(b), (d), (j), (k), (l), and (m).

§24.3. Definitions of Terms.

In this chapter, the following definitions apply unless the context indicates otherwise.

(1) - (9) (No change.)

(11) [(10)] Corporation--Any corporation, joint-stock company, or association, domestic or foreign, and its lessees, assignees, trustees, receivers, or other successors in interest, having any of the powers or privileges of corporations not possessed by individuals or partnerships, but does not include municipal corporations unless expressly provided in TWC chapter 13.

(12) [(11)] Customer--Any entity that purchases services from a retail public utility.

(13) [(12)] Customer class--A group of customers with similar cost-of-service characteristics that take utility service under a single set of rates.

(14) [(13)] Customer service line--The pipe connecting the water meter to the customer's point of use or the pipe that conveys sewage from the customer's premises to the service provider's service line.

(15) [(14)] District--District has the meaning assigned to it by TWC §49.001(a).

(16) [(15)] Facilities--All the plant and equipment of a retail public utility, including all tangible and intangible real and personal property without limitation, and any and all means and instrumentalities in any manner owned, operated, leased, licensed, used, controlled, furnished, or supplied for, by, or in connection with the business of any retail public utility.

(19) [(16)] Inactive connection--A water or wastewater connection is considered to be inactive when the ability to provide water or wastewater service is either physically removed or permanently closed.

(20) [(17)] Incident of tenancy--Water or sewer service provided to tenants of rental property for which no separate or additional service fee is charged other than the rental payment.

(21) [(18)]) Landowner--An owner or owners of a tract of land.

(22) [(19)] Member--A person who holds a membership in a water supply or sewer service corporation and who is a record owner of a fee simple title to property in an area served by a water supply or sewer service corporation, or a person who is granted a membership and who either currently receives or will be eligible to receive water or sewer utility service from the corporation. In determining member control of a water supply or sewer service corporation, a person is entitled to only one vote regardless of the number of memberships the person owns.

(23) [(20)] Minimum Monthly Charge--The fixed amount billed to a customer each month even if the customer uses no water or wastewater.

(24) [(21)] Municipality--Cities organized under the general, home rule, or special laws of this state.

(25) [(22)] Municipally owned utility--Any retail public utility owned, operated, and controlled by a municipality or by a nonprofit corporation whose directors are appointed by one or more municipalities.

(26) [(23)] Nonfunctioning system or utility--A system that is operating as a retail public utility and:

(A) is required to have a CCN and is operating without a CCN; or

(B) is under supervision in accordance with §24.353 of this title (relating to Supervision of Certain Utilities); or

(C) is under the supervision of a receiver, temporary manager, or has been referred for the appointment of a temporary manager or receiver, in accordance with §24.355 of this title (relating to Operation of Utility that Discontinues Operation or Is Referred for Appointment of a Receiver) and §24.357 of this title (relating to Operation of a Utility by a Temporary Manager).

(27) [(24)] Person--Natural persons, partnerships of two or more persons having a joint or common interest, mutual or cooperative associations, water supply or sewer service corporations, and corporations.

(28) [(25)] Point of use--The primary service connection point where water is used or sewage is generated.

(29) [(26)] Potable water--Water that is suitable for drinking.

(30) [(27)] Potential connections--Total number of active plus inactive connections.

(31) [(28)] Premises--A tract of land or real estate including buildings and other appurtenances thereon.

(33) [(29)] Rate--Every compensation, tariff, charge, fare, toll, rental, and classification or any of those items demanded, observed, charged, or collected, whether directly or indirectly, by any retail public utility, for any service, product, or commodity described in TWC §13.002(23), and any rules, regulations, practices, or contracts affecting that compensation, tariff, charge, fare, toll, rental, or classification.

(34) [(30)] Requested area--The area that a petitioner or applicant seeks to obtain, add to, or remove from a retail public utility's certificated service area.

(35) [(31)] Retail public utility--Any person, corporation, public utility, water supply or sewer service corporation, municipality, public utility agency, political subdivision or agency operating, maintaining, or controlling in this state facilities for providing potable water service or sewer service, or both, for compensation.

(36) [(32)] Retail water or sewer utility service--Potable water service or sewer service, or both, provided by a retail public utility to the ultimate consumer for compensation.

(37) [(33)] Service--Any act performed, anything furnished or supplied, and any facilities or lines committed or used by a retail public utility in the performance of its duties under TWC chapter 13 to its patrons, employees, other retail public utilities, and the public, as well as the interchange of facilities between two or more retail public utilities.

(38) [(34)] Service area--Area to which a retail public utility is obligated to provide retail water or sewer utility service.

(39) [(35)] Stand-by fee--A charge, other than a tax, imposed on undeveloped property:

(A) with no water or wastewater connections; and

(B) for which water, sanitary sewer, or drainage facilities and services are available; water supply, wastewater treatment plant capacity, or drainage capacity sufficient to serve the property is available; or major water supply lines, wastewater collection lines, or drainage facilities with capacity sufficient to serve the property are available.

(41) [(37)] Tract of land--An area of land that has common ownership and is not severed by other land under different ownership, whether owned by government entities or private parties; such other land includes roads and railroads. A tract of land may be acquired through multiple deeds or shown in separate surveys.

(42) [(38)] Water and sewer utility, utility, or public utility--Any person, corporation, cooperative corporation, affected county, or any combination of those persons or entities, other than a municipal corporation, public utility agency, water supply or sewer service corporation, or a political subdivision of the state, except an affected county, or their lessees, trustees, and receivers, owning or operating for compensation in this state equipment or facilities for the transmission, storage, distribution, sale, or provision of potable water to the public or for the resale of potable water to the public for any use or for the collection, transportation, treatment, or disposal of sewage or other operation of a sewage disposal service for the public, other than equipment or facilities owned and operated for either purpose by a municipality or other political subdivision of this state or a water supply or sewer service corporation, but does not include any person or corporation not otherwise a public utility that furnishes the services or commodity only to itself or its employees or tenants as an incident of that employee service or tenancy when that service or commodity is not resold to or used by others.

(43) [(39)] Water supply or sewer service corporation--Any nonprofit corporation organized and operating under TWC chapter 67, that provides potable water or sewer service for compensation and that has adopted and is operating in accordance with bylaws or articles of incorporation which ensure that it is member-owned and member-controlled. The term does not include a corporation that provides retail water or sewer utility service to a person who is not a member, except that the corporation may provide retail water or sewer utility service to a person who is not a member if the person only builds on or develops property to sell to another and the service is provided on an interim basis before the property is sold.

(44) [(40)] Water use restrictions--Restrictions implemented to reduce the amount of water that may be consumed by customers of the utility due to emergency conditions or drought.

(45) [(41)] Wholesale water or sewer service--Potable water service or sewer service, or both, provided to a person, political subdivision, or municipality who is not the ultimate consumer of the service.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on March 26, 2026.

TRD-202601381

Katelyn Lewis

Projects Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: May 10, 2026

For further information, please call: (512) 936-7044

SUBCHAPTER B. RATES AND TARIFFS

Statutory Authority

The amendments and new rules are proposed under Texas Water Code §13.002(16-a), which defines the term "public utility agency" for use in Chapter 13; §13.041(a), which provides the commission the general power to regulate and supervise the business of each public utility within its jurisdiction and to do anything specifically designated or implied by the Texas Water Code that is necessary and convenient to the exercise of that power and jurisdiction; Texas Water Code §13.041(b), which provides the commission with the authority to adopt and enforce rules reasonably required in the exercise of its powers and jurisdiction; §13.1831 which requires a regulatory authority to fix rates for water and sewer services for a Class, A, B, C, or D utility based on a test year that,, among other things, includes historic, future, or combined historic and future data; §13.183(a) which requires the regulatory authority to fix a utility's rates for water and sewer services at a level that will permit the utility a reasonably opportunity to earn a reasonable return on its invested capital used and useful in rendering service to the public, based on test year information, over and above its reasonable and necessary operating expenses; §13.184(a) which prohibits the utility commission from prescribing any rate that will yield more than a fair return on the invested capital used and useful in rendering service to the public based on test year information; §13.184(d), which requires the regulatory authority to require a utility that uses a future or combined historic and future test year, to refund to customers money collected in excess of a rate that would have yielded a fair return during the period in which the excessive rate was collected if the regulatory authority determines in the next rate proceeding for that utility that the test year information used for the utility resulted in the utility's rates yielding more than a fair return on the utility's invested capital used and useful in rendering service to the public; §13.185(b), which requires utility rates to be based on the original cost of property used by and useful to the utility during the test year in providing service, including, if necessary to the financial integrity of the utility, construction work in progress at cost as recorded on the books of the utility; §13.185(d)(1) which requires the regulatory authority to base a utility's expenses on test year information, as determined by commission rules; §13.185(j) which establishes that depreciation expense included in the cost of service includes depreciation on all depreciable utility property owned by the utility except for property provided by explicit customer agreements or funded by customer contributions in aid of construction and requires depreciation on all developer or governmental entity contributed property to be allowed in the cost of service.

Section 13.185(k) which requires the regulatory authority to allow inclusion in the rate base of facilities projected to be in service through the end of the test year; and §13.185(l) which requires a utility that selects a fully projected future test year to, not later than the 30th day after the last day of the last quarter of the test year, to file with the regulatory authority a statement that describes the utility's actual results experienced in the test year; and provides appropriate data to demonstrate the accuracy of the estimates used for the test year and serve a copy of such a statement on all parties of record in the rate proceeding in which the final rate determination using the test year was entered; and §13.185(m) which requires a utility that does not have the results or data required under §13.183(l) to file a notice with the regulatory authority stating the date on which the results or data will be available, serve a copy of that notice on all parties of record in the rate proceeding in which the final rate determination using the test year was entered, and perform the actions described under §13.185(l) as soon as possible after the results or data are available.

Cross Reference to Statute Texas Water Code §§13.002(16-a), 13.041(a) and (b), 13.1831, 13.183(a)(1), §13.184(a) and (d), §13.185(b), (d), (j), (k), (l), and (m).

§24.25. Form and Filing of Tariffs.

(a) (No change.)

(b) Requirements as to size, form, identification, minor changes, and filing of tariffs.

(1) Tariffs filed with applications for CCNs.

(A) - (B) (No change.)

(D) (No change.)

(2) Minor tariff changes. Except for an affected county or a utility under the original rate jurisdiction of a municipality, a utility's approved tariff may not be changed or amended without commission approval. Changes to any fees charged by affiliates, the addition of a new extension policy to a tariff, or modification of an existing extension policy are not minor tariff changes. An affected county may change rates for retail water or sewer service without commission approval, but must file a copy of the revised tariff with the commission within 30 days after the effective date of the rate change.

(A) The commission, or regulatory authority, as appropriate, may approve the following minor changes to utility tariffs:

(i) - (v) (No change.)

(viii) some surcharges as provided in subparagraph (G) of this paragraph; and

(ix) (No change.)

(B) - (G) (No change.)

(3) - (5) (No change.)

(c) - (l) (No change.)

§24.27. Notice of Intent and Application to Change Rates.

(a) (No change.)

(b) Contents of the application. An application to change rates is initiated by the filing of the applicable rate filing package, a statement of intent to change rates, and the proposed form and method of notice to customers and other affected entities under subsection (c) of this section.

(1) The application must:

(A) include the commission's rate filing package form; [and]

(B) include all required schedules;

(C) [(2) The application must] be based on a test year; and [as defined in §24.3(36) of this title (relating to Definitions of Terms).]

(2) [(3)] For an application filed by a Class A utility, the rate filing package, including each schedule, must be supported by pre-filed direct testimony. The pre-filed direct testimony must be filed at the same time as the application to change rates.

(3) [(4)] For an application filed by a Class B utility, Class C utility, or Class D utility filing under TWC §13.1872(c)(2), the applicable rate filing package, including each schedule, must be supported by affidavit. The affidavit must be filed at the same time as the application to change rates. The utility may file pre-filed direct testimony at the same time as the application to change rates. If the application is set for a hearing, the presiding officer may require the filing of pre-filed direct testimony at a later date.

(4) [(5)] Proof of notice. Proof of notice in the form of an affidavit stating that proper notice was mailed, e-mailed, or delivered to customers and affected municipalities and stating the dates of such delivery must be filed with the commission by the applicant utility as part of the rate change application.

(c) - (g) (No change.)

§24.41. Cost of Service.

(a) (No change.)

(b) Allowable expenses. Only those expenses that are reasonable and necessary to provide service to the ratepayers may be included in allowable expenses. In computing a utility's allowable expenses, only the utility's test year expenses [as adjusted for known and measurable changes] will be considered. A change in rates must be based on a test year as defined in §24.3[(37)] of this title[,] (relating to Definitions of Terms) and, as applicable, comply with the requirements of §24.26 (relating to Test Year). Payments to affiliated interests for costs of service, or any property, right, or thing, or for interest expense are not allowed as an expense for cost of service except as provided in Texas Water Code (TWC) §13.185(e).

(1) Components of allowable expenses. Allowable expenses, to the extent they are reasonable and necessary, may include, but are not limited to, the following general categories:

(A) (No change.)

(B) Depreciation expense based on original cost and computed on a straight-line basis over the useful life of the asset as approved by the commission.

(i) Depreciation expense is allowed on all [currently used and useful] depreciable utility property owned by the utility, including CWIP reasonably projected to be in service during a combined test year or future test year, and depreciable utility plant, property and equipment retired by the utility, subject to the requirements of subparagraph (c)(2)(C) of this section. Depreciation expense is not allowed for property provided under explicit customer agreements or funded by customer contributions in aid of construction. Depreciation expense is allowed for all [currently used and useful] developer or governmental entity contributed property. A utility must calculate depreciation on a straight-line basis over the expected or remaining life of the asset, but is not required to use the remaining life method if salvage value is zero. A utility that does not use group depreciation and proposes to change the useful life of an asset with an accumulated depreciation balance must not change the accumulated depreciation balance and must adjust depreciation expense going forward based on the changed useful life.

(ii) (No change.)

(C) - (G) (No change.)

(2) (No change.)

(c) Return on rate base. The return on rate base is the rate of return times rate base.

(1) Rate of return. The commission will allow each utility a reasonable opportunity to earn a reasonable rate of return, which is expressed as a percentage of invested capital, and will fix the rate of return in accordance with the following principles.

(A) The return should be reasonably sufficient to assure confidence in the financial soundness of the utility and should be adequate, under efficient and economical management, to maintain and support its credit and enable it to raise the money necessary for the proper discharge of its public duties.

(B) The commission will consider the utility's cost of capital, which is the composite of the cost of the various classes of capital used by the utility.

(i) Debt capital. The cost of debt capital is the actual cost of debt, plus adjustments for premiums, discounts, and refunding and issuance costs.

(ii) Equity capital. For companies with ownership expressed in terms of shares of stock, equity capital commonly consists of the following classes of stock.

(I) Common stock capital. The cost of common stock capital must be based upon a fair return on its value.

(II) Preferred stock capital. The cost of preferred stock capital is its annual dividend requirement, if any, plus an adjustment for premiums, discounts, and cost of issuance.

(C) The commission will consider the efforts and achievements of the utility in the conservation of resources, the quality of the utility's services, the efficiency of the utility's operations, and the quality of the utility's management, along with other relevant conditions and practices.

(D) The commission may consider inflation, deflation, the growth rate of the service area, and the need for the utility to attract new capital.

(2) Rate base. The rate of return is applied to the rate base. Assets retired before June 19, 2009, must be removed from rate base before the rate of return is applied to the rate base. Components to be included in determining the rate base are as follows:

(A) (No change.)

(B) Original cost, less accumulated depreciation, of utility plant, property, and equipment used by and useful to the utility during the test year in providing service.

(C) - (D) (No change.)

(3) (No change.)

(4) Construction work in progress (CWIP).

(A) This subparagraph applies to a utility that elects to use a historic test year. The inclusion of CWIP is an exceptional form of relief. Under ordinary circumstances, the rate base consists only of those items that are used and useful in providing service to the public. Under exceptional circumstances, the commission may include CWIP in rate base to the extent that the utility has proven that:

(i) [(A)] the inclusion is necessary to the financial integrity of the utility; and

(ii) [(B)] major projects under construction have been efficiently and prudently planned and managed.

(5) Requirements for post-test year adjustments.

(A) A post-test year adjustment to test year data for known and measurable rate base additions may be considered only if:

(i) the addition represents a plant which would appropriately be recorded for investor-owned utilities in National Association of Regulatory Utility Commissioners (NARUC) account 101 or 102;

(ii) the addition comprises at least 10% of the utility's requested rate base, exclusive of post-test year adjustments and CWIP;

(iii) the addition is in service before the rate year begins; [and]

(iv) the attendant impacts on all aspects of a utility's operations, including but not limited to, revenue, expenses and invested capital, can with reasonable certainty be identified, quantified and matched. Attendant impacts are those that reasonably result as a consequence of the post-test year adjustment being proposed; and [.]

(B) - (C) (No change.)

(d) - (g) (No change.)

§24.43. Rate Design.

(a) General. In fixing the rates of a utility, the commission shall fix its overall revenues at a level which will permit such utility a reasonable opportunity to earn a reasonable return on its invested capital used and useful in rendering service to the public, based on test year information, over and above its reasonable and necessary operating expenses (unless an alternative rate method is used as set forth in §24.75 of this title (relating to Alternative Rate Methods), and preserve the financial integrity of the utility.

(b) - (c) (No change.)

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on March 26, 2026.

TRD-202601382

Katelyn Lewis

Projects Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: May 10, 2026

For further information, please call: (512) 936-7044

SUBCHAPTER H. CERTIFICATES OF CONVENIENCE AND NECESSITY

The Public Utility Commission of Texas (commission) proposes amendments to 16 Texas Administrative Code (TAC) §24.245, relating to Revocation of a Certificate of Convenience and Necessity or Amendment of a Certificate of Convenience and Necessity by Decertification, Expedited Release or Streamlined Expedited Release, and §24.259, relating to Single Certification in Incorporated or Annexed Areas. The proposed rule will implement Texas Water Code (TWC) §§13.254, 13.2541, and 13.255 as revised by House Bill (HB) 837 (87th Leg. R.S), HB 2442 (88th Leg. R.S), and HB 1318 (89th Leg. R.S). Amendments to §24.245 establish requirements for an expedited release and a streamlined expedited release petitioner to submit a report to the commission, which verifies that compensation was paid by them to the former certificate of convenience and necessity (CCN) holder. Amendments to §24.259 implement the following process and procedural modifications: establishes requirements for a municipality or franchised utility to submit a report to the commission, verifying compensation paid by it to the former retail public utility; replaces the requirement for the commission to determine compensation for former retail public utility property rendered useless or valueless by single certification with a requirement to determine just and adequate compensation for adverse effects on property remaining in former utility's ownership; and requires that appeals against a final order of the commission granting single certification to a municipality must be filed with the commission before seeking further review. Additionally, clarifying and consistency edits were made to the rule language, including non-substantive revisions to a definition to improve clarity.

Growth Impact Statement

The agency provides the following governmental growth impact statement for the proposed rule, as required by Texas Government Code §2001.0221. The agency has determined that for each year of the first five years that the proposed rule is in effect, the following statements will apply:

(1) the proposed rule will not create a government program and will not eliminate a government program;

(2) implementation of the proposed rule will not require the creation of new employee positions and will not require the elimination of existing employee positions;

(3) implementation of the proposed rule will not require an increase and will not require a decrease in future legislative appropriations to the agency;

(4) the proposed rule will not require an increase and will not require a decrease in fees paid to the agency;

(5) the proposed rule will not create a new regulation;

(6) the proposed rule will not expand, limit, or repeal an existing regulation;

(7) the proposed rule will not change the number of individuals subject to the rule's applicability; and

(8) the proposed rule will not affect this state's economy.

Fiscal Impact on Small and Micro-Businesses and Rural Communities

There is no adverse economic effect anticipated for small businesses, micro-businesses, or rural communities as a result of implementing the proposed rule. Accordingly, no economic impact statement or regulatory flexibility analysis is required under Texas Government Code §2006.002(c).

Takings Impact Analysis

The commission has determined that the proposed rule will not be a taking of private property as defined in chapter 2007 of the Texas Government Code.

Fiscal Impact on State and Local Government

Celia Eaves, Utility Outreach Administrator, Division of Utility Outreach, has determined that for the first five-year period the proposed rule is in effect, there will be no fiscal implications for the state or for units of local government under Texas Government Code §2001.024(a)(4) as a result of enforcing or administering the sections.

Public Benefits

Ms. Eaves has determined that for each year of the first five years the proposed section is in effect the public benefit anticipated as a result of enforcing the section will strengthen compensation reporting requirements for CCN decertification and provide more opportunity to appeal certain commission decisions. There will be no probable economic cost to persons required to comply with the rule under Texas Government Code §2001.024(a)(5).

Local Employment Impact Statement

For each year of the first five years the proposed section is in effect, there should be no effect on a local economy; therefore, no local employment impact statement is required under Texas Government Code §2001.022.

Costs to Regulated Persons

Texas Government Code §2001.0045(b) does not apply to this rulemaking because the commission is expressly excluded under subsection §2001.0045(c)(7).

Public Hearing

The commission staff will conduct a public hearing on this rulemaking if requested in accordance with Texas Government Code §2001.029. The request for a public hearing must be received by April 23, 2026. If a request for public hearing is received, commission staff will file in this project a notice of hearing.

Public Comments

Interested persons may file comments electronically through the interchange on the commission's website. Comments must be filed by April 23, 2026. Comments should be organized in a manner consistent with the organization of the proposed rules. The commission invites specific comments regarding the costs associated with, and benefits that will be gained by, implementation of the proposed rule. The commission also requests any data, research, or analysis from any person required to comply with the proposed rule or any other interested person. The commission will consider the costs and benefits in deciding whether to modify the proposed rules on adoption. All comments should refer to Project Number 59332.

Each set of comments should include a standalone executive summary as the first page of the filing. This executive summary must be clearly labeled with the submitting entity's name and should include a bulleted list covering each substantive recommendation made in the comments.

Statutory Authority

The amendments are proposed under TWC §13.041(a), which provides the commission the general power to regulate and supervise the business of each public utility within its jurisdiction and to do anything specifically designated or implied by the TWC that is necessary and convenient to the exercise of that power and jurisdiction; TWC §13.041(b), which provides the commission with the authority to adopt and enforce rules reasonably required in the exercise of its powers and jurisdiction; TWC §13.254(a-3), which provides the commission the authority to require the reporting of compensation paid by the petitioner to the decertified retail public utility; TWC §13.2541(f), which provides the commission the authority to require the reporting of compensation paid by the petitioner to the CCN holder; TWC §13.255(c-1), which provides the commission the authority to require the reporting of adequate and just compensation paid by the municipality or franchised utility to the former retail public utility; TWC §13.255(c-3), which authorizes a retail public utility to appeal a final order of the commission granting single certification to a municipality.

Cross Reference to Statute: Texas Water Code §13.041(a); §13.041(b); §13.254(a-3); §13.2541(f); §13.255(c-1); and §13.255(c-3).

§24.245. Revocation of a Certificate of Convenience and Necessity or Amendment of a Certificate of Convenience and Necessity by Decertification, Expedited Release, or Streamlined Expedited Release.

(a) - (e) (No change.)

(f) Expedited release.

(1) - (14) (No change.)

(g) (No change.)

(h) Streamlined expedited release.

(1) - (8) (No change.)

(i) - (l) (No change.)

§24.259. Single Certification in Incorporated or Annexed Areas.

(a) (No change.)

(b) Definitions. In this section, the following words and terms have the definitions provided by this subsection.

(1) Impaired property--Property remaining in the ownership of the current CCN holder after single certification that would sustain damages from or be adversely affected by the transfer of property to the municipality.

(2) Franchised utility--A retail public utility that has been granted a franchise by a municipality to provide service inside the municipal boundaries.

(3) Current CCN holder--The retail public utility that holds a CCN to provide service to the municipality's requested area.

(4) Requested [Transferred] property--Property that the municipality has requested in its application be transferred to it or to a franchised utility from the current CCN holder, which request is solely for application purposes and does not, by itself, effectuate an actual transfer.

(c) Notice of intent to provide service in incorporated or annexed area. A municipality that intends to provide service itself or through a franchised utility to all or part of an annexed or incorporated area must [shall] notify the current CCN holder in writing of the municipality's intent. The written notice to the current CCN holder must [shall] specify the following information:

(1) the municipality's requested area;

(2) any requested [ transferred ] property;

(3) the municipal ordinance or other action that annexed or incorporated the municipality's requested area;

(4) what kind of service will be provided;

(5) whether a municipally owned utility or franchised utility will provide the service; and

(6) the municipally owned utility's or the franchised utility's identity and contact information.

(d) Written agreement regarding service to area. The municipality and the current CCN holder may agree in writing that all or part of the area incorporated or annexed by the municipality may receive service from a municipally owned utility, a franchised utility, or the current CCN holder, or any combination of those entities.

(1) If a franchised utility is to provide service to any part of the area, the franchised utility must [ shall ] also be a party to the agreement.

(2) The executed agreement may provide for single or dual certification of all or part of the area incorporated or annexed by the municipality, for the purchase of facilities or property, and may contain any other terms agreed to by the parties.

(3) The executed agreement must [ shall ] be filed with the commission. The commission must [ shall ] incorporate the agreement's terms into the respective CCNs of the municipality, current CCN holder, and franchised utility, as appropriate.

(e) Application for single certification. If an agreement is not executed within 180 calendar days after the municipality provides written notice under subsection (c) of this section and the municipality intends to provide service to the municipality's requested area, the municipality must [ shall ] submit an application to the commission to grant single certification to a municipally owned utility or a franchised utility.

(1) If a franchised utility will provide service to any part of the municipality's requested area, the franchised utility must [ shall ] join the application.

(2) The application must [ shall ] include all of the information listed in this paragraph.

(A) The application must [ shall ] identify the municipal ordinance or other action that annexed or incorporated the municipality's requested area.

(B) The application must [ shall ] identify the type of service that will be provided to the municipality's requested area.

(C) The application must [ shall ] identify the municipally owned utility or franchised utility that will provide service to the municipality's requested area and, if each will serve part of the area, the area that each will serve.

(D) The application must [ shall ] identify contact information for the current CCN holder.

(E) The application must [ shall ] demonstrate compliance with the TCEQ's minimum requirements for public drinking water systems if the municipality owns a public drinking water system.

(F) The application must [ shall ] demonstrate that at least 180 calendar days have passed since the date that the municipality provided written notice under subsection (c) of this section.

(G) The application must [ shall ] identify with specificity any property that the municipality requests be transferred from the current CCN holder.

(H) The application must [ shall ] identify the boundaries of the municipality's incorporated area or extraterritorial jurisdiction by providing digital-mapping data in a shapefile (SHP) format georeferenced in either NAD 83 Texas State Plane Coordinate System (US feet) or in NAD 83 Texas Statewide Mapping System (meters). The digital mapping data must [ shall ] include a single, continuous polygon record.

(I) The application must [ shall ] identify the municipality's requested area by providing mapping information to clearly identify the area the municipality is seeking in accordance with §24.257 of this title relating to Mapping Requirements for Certificate of Convenience and Necessity Application. Commission staff may request additional mapping information after the application is submitted.

(3) Within 30 calendar days of the filing of the application, commission staff must [ shall ] file a recommendation regarding whether the application meets the requirements of this subsection.

(f) Notices for single-certification application. The applicant must [ shall ] send a copy of the application to the current CCN holder by certified mail or hand-delivery on the same day that the applicant submits the application to the commission.

(g) Response to single-certification application. The current CCN holder must [ shall ] file a response to the application for single certification in conformance with this subsection.

(1) The response must [ shall ] be filed within 40 calendar days of the filing of the application.

(2) The response must [ shall ] state the following information:

(A) whether the single certification is agreed to; and

(B) if there is no agreement for single certification, any conditions that, if met, would cause the current CCN holder to agree to single certification.

(3) In its response, the current CCN holder must [ shall ] identify any [ useless or valueless property, or ] impaired property[ , ] that would result from certification of the municipality's requested area to the municipality.

(4) There is a rebuttable presumption that there is no [ useless or valueless property or ] impaired property if the current CCN holder fails to timely respond as required under paragraph (1) of this subsection. Upon motion and proof of service consistent with the requirements of subsection (f) of this section, the presiding officer may issue an order determining that there is no [ useless or valueless property or ] impaired property.

(h) Referral to SOAH.

(1) Within 50 calendar days of the filing of the application, a presiding officer must [ shall ] determine whether an application for single certification meets the requirements of subsection (e) of this section.

(2) If the presiding officer determines that the application meets the requirements of subsection (e) of this section, the application must [ shall ] be referred to the State Office of Administrative Hearings (SOAH) for a hearing. SOAH must [ shall ] fix a time and place for a hearing on the application and must [ shall ] notify the current CCN holder, municipality, and franchised utility, if any, of the hearing.

(3) Except as provided under paragraph (4) of this subsection, if the presiding officer determines that the application does not meet the requirements of subsection (e) of this section, the applicant must [ shall ] supplement its application to correct the identified deficiencies within a timeframe, and under a process, established by the presiding officer.

(4) The application must [ shall ] be denied if the municipality fails to demonstrate compliance with the TCEQ's minimum requirements for public drinking water systems. This paragraph does not apply to a municipality that does not own a public drinking water system.

(i) Hearing at SOAH.

(1) The hearing at SOAH must [ shall ] be limited to determining what property, if any, is [ useless or valueless property, ] impaired property[ , ] or requested [ transferred ] property.

(2) The current CCN holder bears the burden of proof to demonstrate [ to prove ] what property is [ useless or valueless property or ] impaired property.

(3) The requested [ transferred ] property must [ shall ] be limited to the specific property identified in the application.

(4) The SOAH administrative law judge must [ shall ] issue a proposal for decision for the commission's consideration.

(j) Interim order. The commission must [ shall ] issue an interim order identifying what property, if any, is [ useless or valueless property, ] impaired property[ , ] or requested [ transferred ] property.

(k) Administrative Completeness. Section 24.8 of this title relating to Administrative Completeness does not apply to the determination of administrative completeness under this section. After the commission has issued its interim order under subsection (j) of this section, a presiding officer must [ shall ] determine that the application for single certification is administratively complete and must [ shall ] establish a procedural schedule that will allow total compensation for any property identified in the interim order to be determined not later than 90 calendar days after the application is determined to be administratively complete.

(l) Valuation of real property. The value of real property that the commission identified in the interim order issued under subsection (j) of this section must [ shall ] be determined according to the standards set forth in Texas Property Code, chapter 21, governing actions in eminent domain.

(m) Valuation of personal property. The value of personal property that the commission identified in the interim order issued under subsection (j) of this section must [ shall ] be determined according to this subsection.

(1) This subsection is intended to ensure that the compensation to a current CCN holder is just and adequate as provided by these rules.

(2) The following factors must [ shall ] be used to value personal property that the commission identified in the interim order issued under subsection (j) of this section:

(A) the impact on the current CCN holder's existing indebtedness and the current CCN holder's ability to repay that debt;

(B) the value of the current CCN holder's service facilities located within the municipality's requested area;

(C) the amount of any expenditures for planning, design, or construction of service facilities outside the incorporated or annexed area that are allocable to service to the municipality's requested area;

(D) the amount of the current CCN holder's contractual obligations allocable to the municipality's requested area;

(E) any demonstrated impairment of service or increase of cost to the current CCN holder's customers that remain after the single certification;

(F) the impact on future revenues lost from existing customers;

(G) necessary and reasonable legal expenses and professional fees;

(H) factors relevant to maintaining the current financial integrity of the current CCN holder; and

(I) other relevant factors as determined by the commission.

(n) Valuation Process.

(1) For an area incorporated by a municipality, the valuation of property that the commission identified in the interim order issued under subsection (j) of this section must [ shall ] be determined by a qualified individual or firm serving as an independent appraiser. The independent appraiser must [ shall ] be limited to appraising the property that the commission identified in the interim order issued under subsection (j) of this section. The current CCN holder must [ shall ] select the independent appraiser by the 21st calendar day after the date of the order determining that the application is administratively complete. The municipality must [ shall ] pay the independent appraiser's costs. The independent appraiser must [ shall ] file its appraisal with the commission by the 70th calendar day after the date of the order determining that the application is administratively complete. The valuation of property under this paragraph is binding on the commission.

(2) For an area annexed by a municipality, the valuation of property that the commission identified in the interim order issued under subsection (j) of this section must [ shall ] be determined by one or more independent appraisers under the process set forth in this paragraph. All independent appraisers must [ shall ] be limited to appraising the property that the commission identified in the interim order issued under subsection (j) of this section. All independent appraisers must [ shall ] be qualified individuals or firms.

(A) If the current CCN holder and the municipality can agree on an independent appraiser within ten calendar days after the application is found administratively complete, the agreed-upon independent appraiser must [ shall ] make a valuation of the property that the commission identified in the interim order issued under subsection (j) of this section.

(i) The agreed-upon independent appraiser must [ shall ] file its appraisal with the commission by the 70th calendar day after the date of the order determining that the application is administratively complete.

(ii) A valuation of property under this subparagraph is binding on the commission.

(B) If the current CCN holder and the municipality cannot agree on an independent appraiser within ten calendar days after the application is found administratively complete, the municipality must [ shall ] notify the serving CCN holder in writing of the failure to agree.

(i) If the parties still cannot agree within 11 calendar days of the written notification, on the 11th day, the current CCN holder and the municipality must [ shall ] each file with the commission a letter appointing a qualified individual or firm to serve as an independent appraiser.

(I) Within 10 business days of their appointment, the independent appraisers must [ shall ] meet to reach an agreed valuation of property that the commission identified in the interim order issued under subsection (j) of this section.

(II) If the independent appraisers reach an agreed valuation of property, the agreed valuation under this subclause is binding on the commission.

(ii) If the appraisers cannot agree on a valuation before the 16th business day after the date of their first meeting under this subsection, then both parties must [ shall ] file separate appraisals by that date, and either the current CCN holder or the municipality must [ shall ] petition the commission to appoint a third appraiser to reconcile the two appraisals.

(I) The commission may delegate authority to appoint the third appraiser.

(II) The third appraiser must [ shall ] file an appraisal that reconciles the two other appraisals by the 80th calendar day after the application is found administratively complete.

(III) The third appraiser's valuation may not be less than the lower or more than the higher of the two original appraisals filed under subparagraph (B)(ii) of this paragraph.

(IV) A valuation of property under this clause is binding on the commission.

(C) The current CCN holder and the municipality must [ shall ] each pay one-half of the costs of all of the appraisers appointed under this paragraph. Payment must [ shall ] be made directly to the appraisers, and proofs of payment must [ shall ] be separately filed by the current CCN holder and the prospective retail public utility within 30 calendar days of the date of the invoice.

(o) Action after receipt of appraisals.

(1) An order incorporating the valuation determined under subsection (n) of this section must [ shall ] be issued by the 90th calendar day after the application is found administratively complete.

(2) The commission must [ shall ] deny the application if the municipality fails to demonstrate compliance with the TCEQ's minimum requirements for public drinking water systems. This paragraph does not apply to a municipality that does not own a public drinking water system.

(3) If the commission does not deny the application, the commission must [ shall ] do the following:

(A) determine what property, if any, is [ useless or valueless property, ] impaired property[ , ] or requested [ transferred ] property;

(B) determine the monetary amount that is adequate and just to compensate the current CCN holder for any such [ useless or valueless property, ] impaired property[ , ] and requested [ transferred ] property; [ and ]

(D) [ (C) ] grant single certification to the municipality or franchised utility.

(4) The granting of single certification must [ shall ] be effective on the date that

(A) the municipality or franchised utility pays adequate and just compensation under a court order;

(B) the municipality or franchised utility pays an amount into the registry of the court or to the current CCN holder under TWC §13.255(f); or

(C) the Travis County district court's judgment becomes final, if the court's judgment provides that the current CCN holder is not entitled to any compensation.

(5) The commission's order does not transfer any property, except as provided under subsection (u) of this section. Any other transfer of property under this section must [ shall ] be obtained only by a court judgment rendered under TWC §13.255(d) or (e).

(6) A presiding officer may issue an order under this section. Any such order must [ shall ] be the final act of the commission subject to motions for rehearing under the commission's rules.

(p) Appeal to the commission, district court, district court judgment, and transfer of property.

(2) [ (1) ] Under TWC §13.255(e), any party that is aggrieved by a final order of the commission under this section may file an appeal with the district court of Travis County within 30 days after the order becomes final.

(3) [ (2) ]Under TWC §13.255(d), if the commission's final order is not appealed within 30 days, the municipality may request the Travis County district court to enter a judgment consistent with the commission's order.

(q) (No change.)

(r) Additional requirements regarding certain current CCN holders. The following subsection applies to proceedings under this section in which the current CCN holder meets the criteria of subsection (a)(3)(B) of this section.

(1) The commission or a court, as appropriate, must determine that the service provided by the current CCN holder is substandard or its rates are unreasonable in view of the current CCN holder's reasonable expenses.

(2) If the municipality abandons its application, the commission is authorized to award to the current CCN holder its reasonable expenses incurred to participate in the proceeding addressing the municipality's application, including attorney's fees.

(3) Unless the current CCN holder otherwise agrees, the municipality must [ shall ] take all of the current CCN holder's personal and real property that is used and useful to provide service or is eligible to be deemed so in a future rate case.

(s) Notice of single certification. Within 60 days of a transfer of property under a court judgment, the municipality or franchised utility must [ shall ] provide written notice to each customer within the service area that is now singly certificated. The written notice must [ shall ] provide the following information: the identity of the municipality or franchised utility, the reason for the transfer, the rates to be charged by the municipality or franchised utility, and the effective date of those rates.

(t) Provision of service.

(1) A municipally owned utility or a franchised utility may provide service to all or a portion of an incorporated or annexed area on one of the following dates:

(A) the date that the commission incorporates the terms of an executed agreement filed with the commission under subsection (d)(3) of this section into the CCNs of the municipality, current CCN holder, and franchised utility, if applicable; or

(B) the date that the municipality or franchised utility

(i) pays adequate and just compensation under court order, or

(ii) pays an amount into the registry of the court or to the current CCN holder under TWC §13.255(f).

(2) If the court judgment provides that the current CCN holder is not entitled to any compensation, the grant of single certification must [ shall ] go into effect when the court judgment becomes final.

(u) Additional conditions.

(1) If the current CCN holder did not agree in writing to a revocation or amendment sought under this section, then an affected retail public utility may request that the revocation or amendment be conditioned on the following:

(A) ordering the municipality or franchised utility, as applicable, to provide service to the entire service area of the current CCN holder; and

(B) transferring the entire CCN of the current CCN holder to the municipality or franchised utility, as applicable.

(2) The commission must [ shall ] order the municipality or franchised utility, as applicable, to provide service to the entire service area of the current CCN holder if the commission finds that the current CCN holder will be unable to provide continuous and adequate service at an affordable cost to the current CCN holder's remaining customers.

(A) The commission must [ shall ] order the municipality or franchised utility, as applicable, to provide continuous and adequate service to the remaining customers at a cost comparable to the cost of that service to the municipality's or franchised utility's other customers and must [ shall ] establish the terms under which service must be provided.

(B) The commission may order the following terms:

(i) transfer of debt and other contract obligations;

(ii) transfer of real and personal property;

(iii) establishment of interim service rates for affected customers during specified times; and

(iv) other provisions necessary for the just and reasonable allocation of assets and liabilities.

(3) The municipality or franchised utility, as applicable, must [ shall ] not charge the affected customers any transfer fee or other fee to obtain service, except

(A) the municipality's or franchised utility's usual and customary rates for monthly service, or

(B) interim rates set by the commission, if applicable.

(4) If the commission orders the municipality or franchised utility, as applicable, to provide service to the entire service area of the current CCN holder, the proceeding must [ shall ] not be referred to SOAH for a hearing to determine the [ useless or valueless property, ] impaired property[ , ] or requested [ transferred ] property, and the commission must [ shall ] not order compensation to the current CCN holder.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on March 26, 2026.

TRD-202601384

Katelyn Lewis

Projects Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: May 10, 2026

For further information, please call: (512) 936-7044

PART 3. TEXAS ALCOHOLIC BEVERAGE COMMISSION

CHAPTER 35. ENFORCEMENT

The Texas Alcoholic Beverage Commission (TABC) proposes new rule 16 TAC §35.7, relating to Consumption of Consumable Hemp Products. The proposed rule prohibits a permittee or licensee from authorizing or allowing any person to consume a consumable hemp product (CHP) on any permitted or licensed premises where the consumption of alcoholic beverages is generally prohibited.

TABC is generally tasked with regulating every phase of the business of manufacturing, importing, exporting, transporting, storing, selling, advertising, labeling, and distributing alcoholic beverages. Tex. Alco. Bev. Code §5.31. But the agency is also directed to "supervise and regulate licensees and permittees and their places of business in matters affecting the public." Id. §5.33. And that "authority is not limited to matters specifically mentioned in" the Alcoholic Beverage Code. Id. TABC must also ensure that the place and manner in which a permittee or licensee conducts its business is consistent with the general welfare, health, peace, morals, and safety of the people and the public sense of decency. Id. §§11.61(b)(7), 61.71(a)(16). The proposed rule implements those provisions.

With limited exceptions, the consumption of alcoholic beverages is prohibited on the premises of the following types of permits and licenses: Wine and Malt Beverage Retailer's Off-Premise Permit, Retail Dealer's Off-Premise License, Package Store Permit, and Wine-Only Package Store Permit. This prohibition has long served an important public safety purpose. See, e.g., Bill Analysis, H.B. 877, 68th Leg., R.S. (1983) (discussing problems involving the consumption of alcoholic beverages at off-premise locations). With the recent rise in the use of CHPs, many of which are intoxicating, TABC believes it is necessary to restrict the use of such products at these types of premises for the same public safety reasons that alcohol consumption is prohibited. The proposed rule provides for sanctions to be imposed on a permittee or licensee that authorizes or allows consumption of CHPs in violation of the proposed rule, consistent with Chapter 34 of TABC's rules (16 TAC §§34.1-34.22).

TABC presented the proposed rule at a stakeholder meeting on February 26, 2026, and considered comments received from stakeholders in drafting this proposal.

FISCAL NOTE AND LOCAL EMPLOYMENT IMPACT STATEMENT. Andrea Maceyra, Chief of Regulatory Affairs, has determined that during each year of the first five years the proposed rule is in effect, there will be no fiscal impact on state or local governments because of enforcing or administering the rule. Mrs. Maceyra made this determination because the proposed rule does not add to or decrease state revenues or expenditures, and because local governments are not involved in enforcing or complying with the proposed rule. Mrs. Maceyra also does not anticipate any measurable effect on local employment or the local economy because of this proposal.

PUBLIC BENEFIT AND COST NOTE. For each year of the first five years the proposed rule is in effect, Mrs. Maceyra expects that enforcing or administering the amended rule will have the public benefit of preventing consumption of CHPs at licensed premises not intended and designed for the consumption of intoxicating products. Mrs. Maceyra does not expect the proposed rule will impose economic costs on persons required to comply with the rule.

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS. TABC has determined that the proposed rule will not have an adverse economic effect on small or micro businesses, or on rural communities. As a result, and in accordance with Government Code §2006.002(c), TABC is not required to prepare a regulatory flexibility analysis.

GOVERNMENT GROWTH IMPACT STATEMENT. TABC has determined that for each year of the first five years that the proposed rule is in effect, it:

- will not create or eliminate a government program;

- will not require the creation of new employee positions or the elimination of existing employee positions;

- will not require an increase or decrease in future legislative appropriations to the agency;

- will not require an increase or decrease in fees paid to the agency;

- will create a new regulation;

- will not expand, limit, or repeal an existing regulation;

- will not increase or decrease the number of individuals subject to the rule's applicability; and

- will not positively or adversely affect the Texas economy.

TAKINGS IMPACT ASSESSMENT. TABC has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action. As a result, this proposal does not constitute a taking or require a takings impact assessment under Government Code §2007.043.

REQUEST FOR PUBLIC COMMENT. TABC requests comments on the proposed amendment from any person interested in the amendment. Additionally, TABC requests information related to the cost, benefit, or effect of the proposed amendment, including any applicable data, research, or analysis, from any person required to comply with the proposed amendment or any other interested person. TABC will consider any written comments on the proposal that are received by TABC no later than 5:00 p.m., central time, May 11, 2026. Send your comments to rules@tabc.texas.gov or to the Office of the General Counsel, Texas Alcoholic Beverage Commission, P.O. Box 13127, Austin, Texas 78711-3127. TABC staff will hold a public hearing to receive oral comments on the proposed rule at 10:00 a.m. on April 23, 2026. Interested persons should visit TABC's public website at www.tabc.texas.gov or contact TABC Legal Assistant Amada Clopton at (512) 206-3367, prior to the meeting date to receive further instructions.

STATUTORY AUTHORITY. TABC proposes the new rule under Alcoholic Beverage Code §§5.31 and 5.33. Section 5.31 provides that "the commission may exercise all powers, duties, and functions conferred by this code, and all powers incidental, necessary, or convenient to the administration of this code," and further states that "it may prescribe and publish rules necessary to carry out the provisions of this code." Section 5.33 provides that "the commission shall supervise and regulate licensees and permittees and their places of business in matters affecting the public." And that "this authority is not limited to matters specifically mentioned in [the] code."

CROSS-REFERENCE TO STATUTE. The proposed rule implements Alcoholic Beverage Code §§11.61(b)(7) and 61.71(a)(16).

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on March 24, 2026.

TRD-202601359

Matthew Cherry

Senior Counsel

Texas Alcoholic Beverage Commission

Earliest possible date of adoption: May 10, 2026

For further information, please call: (512) 206-3491

CHAPTER 41. AUDITING

SUBCHAPTER B. RECORDKEEPING & REPORTS

The Texas Alcoholic Beverage Commission (TABC) proposes an amendment to 16 TAC §41.12, relating to Compliance Reporting by License and Permit Holders. Current §41.12(d) provides that TABC may issue a written warning to a permittee or licensee who fails to file a compliance report in a timely manner. The proposed amendment adds new subsection (e), which would permit TABC to issue such a warning without providing the permittee or licensee an opportunity for an administrative hearing.

Section 41.12 generally requires TABC-licensed businesses with a premises in Texas to prepare and file a compliance self-assessment, known as a compliance report, each year. Despite repeated attempts to notify permittees and licensees of their filing obligation, and recent amendments to the rule extending the timeframe to submit compliance reports (49 TexReg 9745 (2024)), a significant number of permittees and licensees still fail to submit their reports to the agency. TABC relies on these reports to fulfill its enforcement obligations under the Alcoholic Beverage Code, and the continued noncompliance has hampered the agency's ability to fulfill those obligations. The agency believes the issuance of written warning letters is warranted in these instances.

TABC rule 16 TAC §34.1(d)(3) currently gives the recipient of any written warning the opportunity to request an administrative hearing challenging the warning at the State Office of Administrative Hearings (SOAH). It often takes SOAH many months to hold a hearing and issue a proposal, and TABC must devote significant time and scarce resources to each hearing. TABC believes these resources can be better spent elsewhere in these types of cases. Furthermore, a hearing to determine whether a permittee or licensee filed a compliance report would seem to be pointless; the report is either filed or not. As such, TABC does not believe an administrative hearing is warranted when issuing a written warning for failure to file compliance reports. Lastly, this specific compliance report warning will not impact a license or permit holder's existing bonds and does not qualify as a violation for purposes of bond forfeiture.

TABC presented the proposed amendment at a stakeholder meeting on February 5, 2026, and considered comments received from stakeholders in drafting this proposal.

FISCAL NOTE AND LOCAL EMPLOYMENT IMPACT STATEMENT. Andrea Maceyra, Chief of Regulatory Affairs, has determined that during each year of the first five years the proposed amendment is in effect, there will be no fiscal impact on state or local governments because of enforcing or administering the amended rule. Mrs. Maceyra made this determination because the proposed amendment does not add to or decrease state revenues or expenditures, and because local governments are not involved in enforcing or complying with the amended rule. Mrs. Maceyra also does not anticipate any measurable effect on local employment or the local economy because of this proposal.

PUBLIC BENEFIT AND COST NOTE. For each year of the first five years the proposed amendment is in effect, Mrs. Maceyra expects that enforcing or administering the amended rule will have the public benefit of increasing permittees' and licensees' rate of compliance with regulatory reporting requirements and conserving TABC resources. Mrs. Maceyra does not expect the proposed amendment will impose economic costs on persons required to comply with the amended rule.

ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS. TABC has determined that the proposed amendment will not have an adverse economic effect on small or micro businesses, or on rural communities. As a result, and in accordance with Government Code §2006.002(c), TABC is not required to prepare a regulatory flexibility analysis.

GOVERNMENT GROWTH IMPACT STATEMENT. TABC has determined that for each year of the first five years that the proposed amendment is in effect, it:

- will not create or eliminate a government program;

- will not require the creation of new employee positions or the elimination of existing employee positions;

- will not require an increase or decrease in future legislative appropriations to the agency;

- will not require an increase or decrease in fees paid to the agency;

- will not create a new regulation;

- will expand, limit, or repeal an existing regulation;

- will not increase or decrease the number of individuals subject to the rule's applicability; and

- will not positively or adversely affect the Texas economy.

TAKINGS IMPACT ASSESSMENT. TABC has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action. As a result, this proposal does not constitute a taking or require a takings impact assessment under Government Code §2007.043.

REQUEST FOR PUBLIC COMMENT. TABC requests comments on the proposed amendment from any person interested in the amendment. Additionally, TABC requests information related to the cost, benefit, or effect of the proposed amendment, including any applicable data, research, or analysis, from any person required to comply with the proposed amendment or any other interested person. TABC will consider any written comments on the proposal that are received by TABC no later than 5:00 p.m., central time, May 11, 2026. Send your comments to rules@tabc.texas.gov or to the Office of the General Counsel, Texas Alcoholic Beverage Commission, P.O. Box 13127, Austin, Texas 78711-3127. TABC staff will hold a public hearing to receive oral comments on the proposed rule at 10:00 a.m. on April 23, 2026. Interested persons should visit TABC's public website at www.tabc.texas.gov or contact TABC Legal Assistant Amada Clopton at (512) 206-3367, prior to the meeting date to receive further instructions.

STATUTORY AUTHORITY. TABC proposes the amendments pursuant to TABC's rulemaking authority under Texas Alcoholic Beverage Code §5.31. Section 5.31 authorizes TABC to prescribe and publish rules necessary to carry out the provisions of the Alcoholic Beverage Code.

CROSS-REFERENCE TO STATUTE. The proposed amendment implements Alcoholic Beverage Code §§ 5.32 and 5.361.

§41.12. Compliance Reporting By License and Permit Holders.

(a) - (d) (No change.)

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on March 24, 2026.

TRD-202601358

Matthew Cherry

Senior Counsel

Texas Alcoholic Beverage Commission

Earliest possible date of adoption: May 10, 2026

For further information, please call: (512) 206-3491

PART 4. TEXAS DEPARTMENT OF LICENSING AND REGULATION

CHAPTER 73. ELECTRICIANS

The Texas Department of Licensing and Regulation (Department) proposes amendments to existing rules at 16 Texas Administrative Code (TAC), Chapter 73, §§73.10, 73.21, 73.26, 73.80, 73.110, and 73.111, and a new rule at §73.112, regarding the Electricians program. These proposed changes are referred to as the "proposed rules."

EXPLANATION OF AND JUSTIFICATION FOR THE RULES

The rules under 16 TAC, Chapter 73, implement Texas Occupations Code, Chapter 1305, Electricians.

The proposed rules are necessary to address a shortage of journeyman electricians and do so by creating an accelerated pathway for graduates of an approved accelerated journeyman electrician education program ("JEEP program").

Under Texas Occupations Code §1305.155, to become a journeyman electrician, an applicant must have 8,000 hours of on-the-job training under the supervision of a master electrician and must pass an examination. The current rule at 16 TAC §73.10 defines "on-the-job training" narrowly to include only "electrical work," which is also defined restrictively by the rule. Historically, the first-time pass rate for the journeyman electrical examination has been less than 30 percent. The combined effect of the arduous on-the-job training requirements and examination policies have contributed to the current shortage of journeymen electricians. Current Department policy allows applicants to sit for the examination after completing 7,000 hours of the statutorily-required 8,000 hours of supervised on-the-job training.

Under Texas Occupations Code §51.4041(a), the Department has the authority to adopt alternative means of determining a person's eligibility for a license, including evaluating the person's education, training, or experience. Texas State Technical College has proposed to offer an intensive hands-on education program to provide students with in-depth knowledge of the current National Electrical Code and to prepare them to take the journeyman electrician examination. Under the proposal, most of the instruction will occur in a laboratory setting under the direct supervision of qualified electricians. Because this type of instruction will be the functional equivalent of on-the-job training, the proposed rules redefine "on-the-job training" to include participation in this type of program. The precise number of hours each student spends to complete the program, including time practicing skills in a laboratory, will vary based on the time it takes the student to master the relevant skills.

Due to the intensive and focused nature of the instruction offered in the program, under the proposed rules, program graduates will ordinarily receive 3,000 hours of on-the-job training credit for JEEP program completion and may receive additional credit for electrical work performed for third parties in an optional cooperative education element.

Also, under the proposed rules, program graduates will be eligible to immediately sit for the journeyman electrical examination and the current policy of authorizing examination after 7,000 hours for other candidates is formalized in rule. Thus, by allowing early examination and providing on-the-job training credit for instruction received, the proposed rules provide an accelerated track to journeyman licensure under the Department's alternative qualification authority. Under the proposed rules, the Executive Director is empowered to extend the period of validity of examination results of JEEP program graduates if good cause is shown, so that the student will retain the benefit of early examination.

The proposed rules establish criteria for approval of a JEEP program and related curriculum, mechanisms for audit and inspection of programs, and set a fee for evaluation of a program for approval. Lastly, the proposed rules correct a statutory reference in a rule and make non-substantive clarifying and stylistic changes to existing rules.

Advisory Board Recommendations

The topics of the proposed JEEP program and the application of the Department's alternative qualification power was discussed at the Electrical Safety and Licensing Advisory Board meetings held on January 29, 2026 and February 25, 2026. The proposed rules were developed with assistance of education and examination and rules workgroups assigned by the presiding officer of the advisory board. Due to time constraints, the proposed rules have not been presented to the full advisory board for recommendation prior to publication in the Texas Register for public comment.

SECTION-BY-SECTION SUMMARY

The proposed rules amend §73.10, Definitions. The statutory reference in paragraph (3), pertaining to the definition of "career and technology education program" is corrected to Texas Occupations Code §1305.1575(a)(1). A definition of the term "Accelerated Journeyman Electrician Education Program" is provided in new paragraph (12). Existing paragraphs (12) through (30) are renumbered as (13) through (31), respectively. The definition of "on-the-job training," currently found in paragraph (23) is moved to paragraph (24) and a sentence is added to include hours earned in the JEEP program in the definition. Additionally, throughout the section, the word "licensee" is replaced with the term "license holder" and male pronouns are replaced with gender-neutral pronouns for stylistic consistency. Lastly, the word "while," in relation to the performance of electrical sign work, is inserted in the definition of Electrical Sign Apprentice currently found in paragraph (22) and moved to paragraph (23), for clarity.

The proposed rules amend §73.21, Licensing Requirements--Examinations. Two new subsections, (b) and (c) are inserted, and existing subsection (b) is re-lettered as (d). New subsection (b) allows applicants to sit for the journeyman electrician examination after either completing 7,000 hours of on-the-job training or completing the JEEP program. New subsection (c) allows the Executive Director, for JEEP program graduates, to extend the period that the test results are valid, if good cause is shown.

The proposed rules amend §73.26, Documentation of Required On-The-Job Training. New subsection (e) is inserted to establish when and how an applicant will receive on-the-job training credit for completion of the JEEP program, including how electrical work performed under an optional cooperative program is treated. Language is added to existing subsection (a) to recognize the exception in new subsection (e). Stylistic changes are made to the language in subsections (b) and (c) for clarity and consistency.

The proposed rules amend §73.80, Fees. Subsection (f) is amended to reflect that a $90 fee will be charged for the evaluation of a prospective JEEP program for approval. Subsection (g) is amended to reflect that the waiver of renewal fees, currently extended to instructors in career and technology education programs for residential wiremen, will now be also extended to instructors of JEEP programs.

The proposed rules amend §73.110, Career and Technology Education Program Requirements. The phrase "residential wiremen" is added to the title of the section for clarity. New subsection (a) is inserted, with language distinguishing the program from the new JEEP program and clarifying that certain restrictions under that section do not apply to the JEEP program. Existing subsections are re-lettered.

The proposed rules amend §73.111, Compliance with Career and Technology Education Program Requirements. The phrase "residential wiremen" is added to the section title for clarity. New subsection (a) is inserted, with language clarifying that the rule does not apply to the JEEP program. Existing subsections are re-lettered.

The proposed rules add new §73.112, Accelerated Journeyman Electrician Education Program. Subsection (a) states the authority for and applicability of the section, and cites to both program statutes and the Department's alternative qualification statute as sources of authority. Subsection (b) states general requirements for the program, including that both the curriculum and program must be approved by the Department. Subsection (c) provides information related to curriculum approval. Subsection (d) states required elements of a curriculum. Subsection (e) establishes minimum instructional hours and hands-on instruction requirements. Subsection (f) establishes requirements for a program to apply for approval. Subsection (g) requires an approved program to notify the Department of changes related to the program. Subsection (h) provides for audits and inspections. Subsection (i) provides for rescission of approval. Subsection (j) clarifies that denial or recission of approval does not constitute a contested case under the Administrative Procedure Act (Texas Government Code, Chapter 2001). Subsection (k) clarifies how approval will impact current students in a program. Subsection (l) establishes how credit will be awarded and gives the Executive Director authority to award greater credit than generally provided in the subsection.

FISCAL IMPACT ON STATE AND LOCAL GOVERNMENT

Tony Couvillon, Senior Policy Research and Budget Analyst, has determined that for each year of the first five years the proposed rules are in effect, there are no estimated additional costs or reductions in costs to state or local government as a result of enforcing or administering the proposed rules.

Mr. Couvillon has also determined that for each year of the first five years the proposed rules are in effect, there is no estimated increase or loss in revenue to the state or local government as a result of enforcing or administering the proposed rules.

Mr. Couvillon has determined that for each year of the first five years the proposed rules are in effect, there will be some decrease in revenue to the state government stemming from the waiver of license renewal fees for JEEP program instructors and an increase in revenue to the state government related to the fees for JEEP program approval. Because it is not known at this time how many license holders will become instructors and avail themselves of this provision or how many programs will apply and pay the fee, the net impact on revenue cannot be estimated, however, it is not expected to be significant. No other increase or loss in revenue to state government is expected.

Mr. Couvillon has determined that for each year of the first five years the proposed rules are in effect, there will be costs to community college districts that choose to establish and seek approval of a JEEP program. These costs will vary by district and cannot be estimated at this time. No other implications relating to costs or revenues of local governments are anticipated.

LOCAL EMPLOYMENT IMPACT STATEMENT

Because Mr. Couvillon has determined that the proposed rules will not affect a local economy, the agency is not required to prepare a local employment impact statement under Texas Government Code §2001.022.

PUBLIC BENEFITS

Mr. Couvillon also has determined that for each year of the first five-year period the proposed rules are in effect, the public benefit will be addressing a shortage of qualified electricians to facilitate the construction and maintenance of homes and buildings and providing an accelerated pathway for individuals to qualify for work as journeyman electricians.

PROBABLE ECONOMIC COSTS TO PERSONS REQUIRED TO COMPLY WITH PROPOSAL

Mr. Couvillon has determined that for each year of the first five-year period the proposed rules are in effect, there will be additional costs to persons who are required to comply with the proposed rules. Prospective JEEP programs will incur start-up costs in establishing a program that complies with the proposed rules and will be required to pay the $90 fee for approval. Approved programs will also have costs associated with complying with audits or inspections. Because these costs will vary from program to program, they cannot be estimated for a particular individual.

FISCAL IMPACT ON SMALL BUSINESSES, MICRO-BUSINESSES, AND RURAL COMMUNITIES

There will be no adverse economic effect on small businesses, micro-businesses, or rural communities as a result of the proposed rules. Because the agency has determined that the proposed rule will have no adverse economic effect on small businesses, micro-businesses, or rural communities, preparation of an Economic Impact Statement and a Regulatory Flexibility Analysis, as detailed under Texas Government Code §2006.002, is not required.

ONE-FOR-ONE REQUIREMENT FOR RULES WITH A FISCAL IMPACT

The proposed rules have a fiscal note that imposes a cost on regulated persons, including another state agency, a special district, or a local government; however, the proposed rules fall under the exception for rules that are necessary to protect the health, safety, and welfare of the residents of this state under §2001.0045(c)(6). Therefore, the agency is not required to take any further action under Texas Government Code §2001.0045.

GOVERNMENT GROWTH IMPACT STATEMENT

Pursuant to Texas Government Code §2001.0221, the agency provides the following Government Growth Impact Statement for the proposed rules. For each year of the first five years the proposed rules will be in effect, the agency has determined the following:

1. The proposed rules do not create or eliminate a government program.

2. Implementation of the proposed rules does not require the creation of new employee positions or the elimination of existing employee positions.

3. Implementation of the proposed rules does not require an increase or decrease in future legislative appropriations to the agency.

4. The proposed rules do require an increase or decrease in fees paid to the agency. The proposed rules require prospective programs to pay a $90 fee for evaluation for approval and authorize the waiver of license renewal fees for instructors.

5. The proposed rules create a new regulation. The rules authorize instructional programs to apply for approval as a JEEP program.

6. The proposed rules expand, limit, or repeal an existing regulation. The proposed rules expand an existing regulation by adding completion of a JEEP program as a pathway to a journeyman electrician license.

7. The proposed rules increase or decrease the number of individuals subject to the rules' applicability. The proposed rules increase the number of individuals eligible for waiver of license renewal fees and create an alternative pathway to licensure.

8. The proposed rules do not positively or adversely affect this state's economy.

TAKINGS IMPACT ASSESSMENT

The Department has determined that no private real property interests are affected by the proposed rules and the proposed rules do not restrict, limit, or impose a burden on an owner's rights to his or her private real property that would otherwise exist in the absence of government action. As a result, the proposed rules do not constitute a taking or require a takings impact assessment under Texas Government Code §2007.043.

PUBLIC COMMENTS AND INFORMATION RELATED TO THE COST, BENEFIT, OR EFFECT OF THE PROPOSED RULES

The Department is requesting public comments on the proposed rules and information related to the cost, benefit, or effect of the proposed rules, including any applicable data, research, or analysis. Any information that is submitted in response to this request must include an explanation of how and why the submitted information is specific to the proposed rules. Please do not submit copyrighted, confidential, or proprietary information.

Comments on the proposed rules and responses to the request for information may be submitted electronically on the Department's website at https://ga.tdlr.texas.gov:1443/form/ELE_Rule_Making; by facsimile to (512) 475-3032; or by mail to Shamica Mason, Legal Assistant, Texas Department of Licensing and Regulation, P.O. Box 12157, Austin, Texas 78711. The deadline for comments is 30 days after publication in the Texas Register.

STATUTORY AUTHORITY

The proposed rules are proposed under Texas Occupations Code, Chapters 51 and 1305, which authorize the Texas Commission of Licensing and Regulation, the Department's governing body, to adopt rules as necessary to implement these chapters and any other law establishing a program regulated by the Department.

The statutory provisions affected by the proposed rules are those set forth in Texas Occupations Code, Chapters 51 and 1305. No other statutes, articles, or codes are affected by the proposed rules.

§73.10. Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise.

(1) Assumed name--A name used by a business as defined in the Business and Commerce Code.

(2) Business affiliation--The business organization to which a master license holder's [ licensee may assign his or her ] license may be assigned .

(3) Career and technology education program--An educational program, defined in Texas Occupations Code §1305.1575(a)(1) [ §1302.5037(a)(1) of the Act ], focused on electrical training and either:

(A) offered by a public high school under Subchapter F, Chapter 29, Education Code; or

(B) offered by a private high school or institution of higher education and determined by the department to be similar to a program described by subparagraph (A) of this paragraph.

(4) Employee--An individual who performs tasks assigned by the individual's [ to him by his ] employer. The employee is subject to the deduction of social security and federal income taxes from the employee's [ his ] pay. An employee may be full time, part time, or seasonal.

(5) Employer--One who employs the services of employees, pays their wages, deducts the required social security and federal income taxes from the employee's pay, and directs and controls the employee's performance.

(6) Filed--A document is deemed to have been filed with the department on the date that the document has been received by the department or, if the document has been mailed to the department, the date a postmark is applied to the document by the U.S. Postal Service.

(7) General Supervision--Exercise of oversight by a master electrician on behalf of an electrical contractor, or electrical sign contractor, or by a master sign electrician on behalf of an electrical sign contractor of performance by all classes of electrical license holders [ licensees ] of electrical work bearing responsibility for the work's compliance with applicable codes under Texas Occupations Code, Chapter 1305.

(8) On-Site Supervision--Exercise of supervision of electrical work or electrical sign work by a licensed individual other than an electrical apprentice. Continuous supervision of an electrical apprentice is not required, though the on-site supervising license holder [ licensee ] is responsible for review and inspection of the electrical apprentice's work to ensure compliance with any applicable codes or standards.

(9) Electrical Contractor--A person , or entity, licensed as an electrical contractor, that is in the business of performing "Electrical Contracting" as defined by Texas Occupations Code, §1305.002(5).

(10) Master Electrician--An individual, licensed as a master electrician, who on behalf of an electrical contractor, electrical sign contractor, or employing governmental entity, performs "Electrical Work" as defined by Texas Occupations Code, §1305.002(11).

(11) Journeyman Electrician--An individual, licensed as a journeyman electrician, who works under the general supervision of a master electrician, on behalf of an electrical contractor, or employing governmental entity, while performing "Electrical Work" as defined by Texas Occupations Code, §1305.002(11).

(13) [ (12) ] Electrical Apprentice--An individual, licensed as an apprentice who works under the on-site supervision of a master electrician, journeyman electrician, or residential wireman, on behalf of an electrical contractor or employing governmental entity performing "Electrical Work" as defined by Texas Occupations Code, §1305.002(11).

(14) [ (13) ] Electrical Sign Contractor--A person, or entity, licensed as an electrical sign contractor, that is in the business of performing "Electrical Sign Contracting" as defined by Texas Occupations Code, §1305.002(9).

(15) [ (14) ] Institution of higher education--An "institution of higher education" or a "private or independent institution of higher education," as those terms are defined by §61.003, Education Code.

(16) [ (15) ] Master Sign Electrician--An individual, licensed as a master sign electrician, who, on behalf of an electrical sign contractor, performs "Electrical Sign Work" as defined in paragraph 21 [ (20) ].

(17) [ (16) ] Journeyman Sign Electrician--An individual, licensed as a journeyman sign electrician, who works under the general supervision of a master electrician or a master sign electrician, on behalf of an electrical sign contractor, while performing "Electrical Sign Work" as defined in paragraph 21 [ (20) ].

(18) [ (17) ] Residential Wireman--An individual, licensed as a residential wireman, who works under the general supervision of a master electrician, on behalf of an electrical contractor, or employing governmental entity, while performing electrical work that is limited to electrical installations in single family and multifamily dwellings not exceeding four stories, as defined by Texas Occupations Code, §1305.002(13).

(19) [ (18) ] Maintenance Electrician--An individual, licensed as a maintenance electrician, who works under the general supervision of a master electrician, on behalf of an electrical contractor, or employing governmental entity while performing "Electrical Maintenance Work" as defined in paragraph 20 [ (19) ].

(20) [ (19) ] Electrical Maintenance Work--The replacement, or repair of existing electrical appurtenances, apparatus, equipment, machinery, or controls used in connection with the use of electrical energy in, on, outside, or attached to a building, residence, structure, property, or premises. All replacements or repairs must be of the same rating and type as the existing installation. No improvements may be made that are necessary to comply with applicable codes under Texas Occupations Code, Chapter 1305. Electrical maintenance work does not include the installation of any new electrical appurtenances, apparatus, equipment, machinery, or controls beyond the scope of any existing electrical installation.

(21) [ (20) ] Electrical Sign Work--Any labor or material used in manufacturing, installing, maintaining, extending, connecting or reconnecting an electrical wiring system and its appurtenances, apparatus or equipment used in connection with signs, outline lighting, awnings, signals, light emitting diodes, and the repair of existing outdoor electric discharge lighting, including parking lot pole lighting. This also includes the installation of an electrical service integral to an isolated sign and/or outline lighting installation.

(22) [ (21) ] Work Involved in the Manufacture of Electrical Equipment--Work involved in the manufacture of electrical equipment includes on and off-site manufacture, commissioning, testing, calibration, coordination, troubleshooting, evaluation, repair or retrofits with components of the same ampacity, maintenance and servicing of electrical equipment within their enclosures performed by authorized employees, or authorized representatives of electrical equipment manufacturers and limited to the type of products they manufacture.

(23) [ (22) ] Electrical Sign Apprentice--An individual, licensed as an electrical sign apprentice who works under the on-site supervision of a master electrician, a master sign electrician, or a journeyman sign electrician, on behalf of an electrical sign contractor while performing "Electrical Sign Work" as defined by this chapter.

(24) [ (23) ] On-the-job Training--Training or experience gained under the supervision of an appropriate license holder [ licensee ], as prescribed by Texas Occupations Code Chapter 1305, while performing electrical work as defined by Texas Occupations Code, §1305.002(11). The term includes hours earned toward on-the-job training requirements through an accelerated journeyman electrician education program, where permitted by rule.

(25) [ (24) ] Residential Appliance Installer--An individual, licensed as a residential appliance installer, who on behalf of a residential appliance installation contractor, performs electrical work that is limited to residential appliance installation including residential pool-related electrical installation and maintenance as defined by Texas Occupations Code, §1305.002(12-b).

(26) [ (25) ] Residential Appliance Installation Contractor--A person or entity licensed as a residential appliance installation contractor, that is in the business of residential appliance installation including pool-related electrical installation and maintenance as defined by Texas Occupations Code §1305.002(12-d).

(27) [ (26) ] Residential Appliance--Electrical equipment that performs a specific function, and is installed as a unit in a dwelling by direct connection to an existing electrical circuit, such as water heaters, kitchen appliances, or pool-related electrical device. The term does not include general use equipment such as service equipment, other electrical power production sources, or branch circuit overcurrent protection devices not installed in the listed appliance or listed pool-related electrical device.

(28) [ (27) ] Offer to perform--To make a written or oral proposal, to contract in writing or orally to perform electrical work or electrical sign work, to advertise in any form through any medium that a person or business entity is an electrical contractor, electrical sign contractor, or residential appliance installation contractor or that implies in any way that a person or business entity is available to contract for or perform electrical work, electrical sign work, or residential appliance installation work.

(29) [ (28) ] Electro Mechanical Integrity--The condition of an electrical product, electrical system, or electrical equipment installed in accordance with its intended purpose and according to standards at least as strict as the standards provided by the National Electrical Code, the manufacturer's specifications, any listing or labeling on the product, and all other applicable codes or ordinances.

(30) [ (29) ] Journeyman Lineman--An individual who engages in electrical work involving the maintenance and operation of equipment associated with the transmission and distribution of electricity from the electricity's original source to a substation for further distribution.

(31) [ (30) ] Journeyman Industrial Electrician--An individual who engages in electrical work exclusively at a business that operates a chemical plant, petrochemical plant, refinery, natural gas plant, natural gas treating plant, pipeline, or oil and gas exploration and production operation.

§73.21. Licensing Requirements--Examinations.

(a) To obtain a license by examination issued under this chapter:

(1) An individual applicant must submit a completed application, all necessary documentation, and appropriate fees to the Texas Department of Licensing and Regulation for review and determination of examination eligibility.

(2) An individual applicant must achieve a passing score on an examination approved by the executive director of the Texas Department of Licensing and Regulation.

(d) [(b)] To obtain a license without examination, an applicant must have been licensed for the preceding year by a municipality or regional licensing authority that has terminated its licensing program and have applied for a state issued license within ninety days of the date the program stopped issuing or renewing licenses.

§73.26. Documentation of Required On-The-Job Training.

(a) Except as otherwise provided in this chapter, an [An] applicant for a license which requires on-the-job training under Occupations Code Chapter 1305 must [may] verify that the applicant [he or she] has completed on-the-job training by submitting the department's experience verification form with the license application.

(b) When an applicant or the department requests verification of on-the-job training of an applicant from a license holder [licensee] who is authorized by Occupations Code Chapter 1305 to verify on-the-job training, the license holder [licensee] must provide the verification within 30 calendar days of the request. The licensee must verify only on-the-job training within the licensee's knowledge. The licensee must verify the dates of on-the-job training, describe the work performed by the applicant, specify the name of the business under which the applicant's work was performed, and provide any other information required on the department's form.

(c) An applicant for a journeyman lineman license must verify that the applicant [he or she] has completed the apprenticeship required by Occupations Code Chapter 1305 by submitting verification in a form acceptable to the department.

(d) An applicant for a residential wireman license who has completed a career and technology education program must verify completion by submitting verification in a form acceptable to the department.

§73.80. Fees.

(a) Application fees:

(1) Master Electrician--$45

(2) Master Sign Electrician--$45

(3) Journeyman Electrician--$30

(4) Journeyman Sign Electrician--$30

(5) Journeyman Lineman Electrician--$30

(6) Residential Wireman--$20

(7) Maintenance Electrician--$20

(8) Electrical Contractor--$110

(9) Electrical Sign Contractor--$110

(10) Electrical Apprentice--$20

(11) Electrical Sign Apprentice--$20

(12) Residential Appliance Installer--$30

(13) Residential Appliance Installation Contractor--$110

(14) Apprentice Training Program Registration--$95

(15) Journeyman Industrial Electrician--$30

(b) Renewal fees:

(1) Master Electrician--$50 for licenses expiring before February 1, 2014; $45 for licenses expiring on or after February 1, 2014

(2) Master Sign Electrician--$50 for licenses expiring before February 1, 2014; $45 for licenses expiring on or after February 1, 2014

(3) Journeyman Electrician--$35 for licenses expiring before February 1, 2014; $30 for licenses expiring on or after February 1, 2014

(4) Journeyman Sign Electrician--$35 for licenses expiring before February 1, 2014; $30 for licenses expiring on or after February 1, 2014

(5) Journeyman Lineman Electrician--$30

(6) Residential Wireman--$25 for licenses expiring before February 1, 2014; $20 for licenses expiring on or after February 1, 2014

(7) Maintenance Electrician--$25 for licenses expiring before February 1, 2014; $20 for licenses expiring on or after February 1, 2014

(8) Electrical Contractor--$115 for licenses expiring before February 1, 2014; $110 for licenses expiring on or after February 1, 2014

(9) Electrical Sign Contractor--$115 for licenses expiring before February 1, 2014; $110 for licenses expiring on or after February 1, 2014

(10) Electrical Apprentice--$20

(11) Electrical Sign Apprentice--$20

(12) Residential Appliance Installer--$40 for licenses expiring before February 1, 2014; $30 for licenses expiring on or after February 1, 2014

(13) Residential Appliance Installation Contractor--$115 for licenses expiring before February 1, 2014; $110 for licenses expiring on or after February 1, 2014.

(14) Journeyman Industrial Electrician--$30

(c) Late Renewal Fees. Late renewal fees for licenses issued under this chapter are provided under §60.83 of this title (relating to Late Renewal Fees).

(d) Revised/Duplicate License/Certificate/Permit/Registration fees:

(1) All licenses except as set out below--$25

(2) Electrical Apprentice--$20

(3) Electrical Sign Apprentice--$20

(4) Residential Wireman--$20

(5) Maintenance Electrician--$20

(e) All fees are non-refundable.

(f) The fee for a determination under §73.111 or §73.112 is $90.

(g) The department will waive the license renewal fee for a master electrician, journeyman electrician, or residential wireman who provides proof, in a manner prescribed by the department, of having served as an instructor of a course within a career and technology education program or accelerated journeyman electrician education program for at least one academic semester during that renewal period.

§73.110. Career and Technology Education Program Requirements--Residential Wiremen.

(b) [(a)] Texas Occupations Code Section §1305.157 provides a pathway to the residential wireman license for persons who complete a career and technology education program. Under [Pursuant to] §1305.1575, the department is required to:

(1) establish standards for the essential knowledge and skills of career and technology education programs offered in Texas public high schools; and

(2) determine on a case-by-case basis whether educational programs offered by private high schools and institutions of higher education are similar to career and technology education programs offered in Texas public high schools.

(c) [(b)] A career and technology education program must be designed to ensure that students obtain the essential knowledge and skills set out in the following cross-referenced rules of the Texas Education Agency. The minimum number of academic semesters required for each course is also noted. Students enrolled in courses identified in paragraphs (2) and (3) below must be provided hands-on practical instruction, including interactive lab work, for at least 80 percent of total classroom time. A career and technology education program may not allow students to obtain credit by examination.

(1) Principles of Construction; Texas Administrative Code Title 19, Part 2, Chapter 130, Subchapter B, §130.43; one credit.

(2) Electrical Technology I; Texas Administrative Code Title 19, Part 2, Chapter 130, Subchapter B, §130.57; one credit.

(3) Electrical Technology II; Texas Administrative Code Title 19, Part 2, Chapter 130, Subchapter B, §130.58; two credits.

(4) Practicum in Construction Technology and Extended Practicum in Construction Technology; Texas Administrative Code Title 19, Part 2, Chapter 130, Subchapter B, §§130.64 and 130.69; three total credits.

(A) At least 80 percent of a student's time in a practicum must be spent outside of the classroom and working under the supervision of a department-licensed master electrician, on behalf of a department-licensed electrical contractor.

(B) A high school or institution of higher education offering a career and technology education program under this section must implement procedures allowing a student to earn course credit for work performed outside of the classroom under the supervision of a department-licensed master electrician and on behalf of a department-licensed electrical contractor.

(d) [(c)] A career and technology education program will not be recognized by the department unless it is instructed by a department-licensed master electrician, journeyman electrician, or residential wireman.

(e) [(d)] A career and technology education program offered by an institution of higher education may not be more stringent than a program offered by a public high school.

(f) [(e)] The department will recognize an educational program offered by a private high school or institution of higher education as a "career and technology education program" if the department determines that the educational program substantially complies with the requirements of this section.

(g) [(f)] Hours spent completing a program described by this section may not be credited toward any on-the-job training required to apply for another type of license under this chapter.

§73.111. Compliance with Career and Technology Education Program Requirements--Residential Wiremen.

(b) [(a)] A private high school or institution of higher education that implements an educational program under §73.110 must request a determination whether the program substantially complies with that section's requirements by:

(1) submitting the request in a manner prescribed by the department;

(2) providing copies of course materials requested by the department;

(3) providing the names and license numbers of all master electricians, journeyman electricians, or residential wiremen who will be supervising or instructing students; and

(4) paying the applicable fee.

(c) [(b)] After receiving a positive determination under subsection (a), a private high school or institution of higher education must inform the department, in a manner prescribed by the department, of any substantial change to the program.

(d) [(c)] Upon a finding that an educational program does not substantially comply with §73.110, the department may rescind its determination.

(e) [(d)] A determination or decision under this section is not a contested case under Texas Government Code, Chapter 2001, and may not be appealed.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on March 30, 2026.

TRD-202601402

Deanne Rienstra

Interim General Counsel

Texas Department of Licensing and Regulation

Earliest possible date of adoption: May 10, 2026

For further information, please call: (512) 463-7750