TITLE 16. ECONOMIC REGULATION

PART 1. RAILROAD COMMISSION OF TEXAS

CHAPTER 7. GAS SERVICES

SUBCHAPTER H. INTERIM RATE ADJUSTMENTS

The Railroad Commission of Texas (Commission) proposes new §7.7102, relating to Regulatory Asset for Certain Costs Associated with Gross Plant. The Commission proposes the new rule pursuant to House Bill 4384, 89th Legislative Session (2025) which creates a new §104.302 in Subchapter G, Interim Cost Recovery and Rate Adjustment, of the Texas Utilities Code.

House Bill (HB) 4384 authorizes a gas utility to recover certain costs from customers related to new capital investment, or gross plant, placed in service. These costs, defined in HB 4384 and further clarified in proposed §7.7102(a), are recoverable by a gas utility when booked in a regulatory asset account and approved by the Commission in an interim rate adjustment (IRA) order pursuant to §7.7101 of this title (relating to Interim Rate Adjustments). Specifically, new §104.302 allows a gas utility to defer for future recovery from customers in a regulatory asset account (1) post-in service carrying costs; (2) depreciation associated with the unrecovered gross plant; and (3) ad valorem taxes associated with the unrecovered gross plant. Authorized costs associated with unrecovered gross plant included in a regulatory asset account as authorized by HB 4384 and proposed §7.7102 must be included in a Localized Distribution Company's annual IRA filing as required §104.302(c). Proposed §7.7102 implements HB 4384 creates a process that gas utilities must follow if they elect to recover the allowable costs from customers.

Proposed new subsection (a) defines gross plant, post in-service carrying costs, recovery, unrecovered gross plant, and unrecovered gross plant regulatory asset. These terms are also defined in the legislation with the exception of the definitions of unrecovered gross plant regulatory asset and recovery. The Commission proposes to define unrecovered gross plant regulatory asset as a regulatory asset authorized by §104.302, Utilities Code, so that it is clear that §7.7102 is referring only to a regulatory asset authorized by HB 4384.

Proposed new subsection (b) outlines the parameters associated with the allowable costs related to unrecovered gross plant that may be deferred into a regulatory asset account. A gas utility must include an unrecovered gross plant regulatory asset in its IRA filing, and shall include in such IRA filing a workpaper, formulas intact, using a form approved by the Commission and found in the Gas Services section of its website.

Proposed new subsection (c) clarifies that any costs allowed by the proposed rule in the unrecovered gross plant regulatory asset are fully subject to review for reasonableness and prudence by the Commission in the subsequent rate case filed by the gas utility or initiated by the Commission. Proposed new subsection (c) also clarifies that if the Commission by order disallows costs included in an unrecovered plant regulatory asset, the disallowed costs are subject to refund to the customers with interest. Interest shall be calculated at the gas utility's pre-tax weighed average cost of capital.

Proposed subsection (d) clarifies that after including an unrecovered gross plant regulatory asset in an IRA, the gas utility shall make appropriate accounting adjustments to its books and records to reflect the recovery in rates.

Mark Evarts, Director, Gas Services Department, has determined that during the first five years the proposed new rule would be in effect, there will be no costs to the Commission for implementation. There will be no other additional cost to state government as a result of administering the new rule. There is no fiscal effect on local government.

Mr. Evarts has determined that for each year of the first five years that the proposed new rule would be in effect, the primary public benefit will be implementing required legislation.

Mr. Evarts has determined that for each year of the first five years the proposed new rule is in effect, there will be no increase in economic cost for the gas utility industry.

In accordance with Texas Government Code, §2006.002, the Commission has determined there will be no adverse economic effect on rural communities, small businesses or micro-businesses resulting from the new rule. The proposed new rule applies to gas utilities, which do not meet the definition of a rural community, small business, or micro-business in §2006.001. Therefore, the Commission has not prepared the economic impact statement or regulatory flexibility analysis required under §2006.002(c).

The Commission has also determined that the proposed new rule will not affect a local economy. Therefore, the Commission has not prepared a local employment impact statement pursuant to Texas Government Code §2001.022.

The Commission has determined that the proposed new rule does not meet the statutory definition of a major environmental rule as set forth in Texas Government Code §2001.0225(a); therefore, a regulatory analysis conducted pursuant to that section is not required.

During the first five years that the new rule would be in effect, the proposed new rule would not: create or eliminate a government program; create new employee positions or eliminate any existing employee positions; increase or decrease future legislative appropriations to the agency; require an increase or decrease in fees paid to the agency; increase or decrease the number of individuals subject to the rule's applicability; or affect the state's economy. The proposed new rule would create a new regulation in that it complies with HB 4834's requirement to adopt a new rule allowing gas utilities to recover certain costs associated with unrecovered gross plant.

The Commission reviewed the proposed new rule and found that it is not identified in Coastal Coordination Act Implementation Rules, 31 TAC §29.11(b)(4), and it would not affect any action or authorization identified in Coastal Coordination Act Implementation Rules, 31 TAC §29.11(a)(3). Therefore, the proposed new rule is not subject to the Texas Coastal Management Program.

Comments on the proposal may be submitted to Rules Coordinator, Office of General Counsel, Railroad Commission of Texas, P.O. Box 12967, Austin, Texas 78711-2967; online at https://rrc.texas.gov/general-counsel/rules/comment-form-for-proposed-rulemakings/; or by electronic mail to The Commission will accept comments until 5:00 p.m. on Monday, November 17, 2025. The Commission finds that this comment period is reasonable because the proposal and an online comment form will be available on the Commission's website prior to Texas Register publication of the proposal, giving interested persons additional time to review, analyze, draft, and submit comments. The Commission cannot guarantee that comments submitted after the deadline will be considered. For further information, call Mark Evarts, Director, Gas Services Department, at (512) 463-9663. The status of Commission rulemakings in progress is available at counsel/rules/proposed-rules.

The Commission proposes the new rule pursuant to Texas Utilities Code §104.302, which gives gas utilities the ability to book certain costs related to unrecovered gross plant in a regulatory asset account. Section 104.302 also mandates that the Commission adopt a rule no later than 270 days after the effective date of HB 4834.

Statutory authority: Texas Utilities Code §104.302.

Cross-reference to statute: Texas Utilities Code, Chapters 101-104.

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 September 30, 2025.

TRD-202503498

Olivia Alland

Attorney, Office of General Counsel

Railroad Commission of Texas

Earliest possible date of adoption: November 16, 2025

For further information, please call: (512) 475-1295