Current through Reg. 50, No. 13; March 28, 2025
(a)
Applicability. This section provides that a transmission and distribution
utility (TDU) may procure, own, operate, and recover costs of long lead-time
facilities. This section applies to a TDU that operates distribution facilities
in the Electric Reliability Council of Texas (ERCOT) region to serve
distribution customers.
(b)
Definitions. The following terms, when used in this section, have the following
meanings unless the context indicates otherwise.
(1) Long lead-time facilities--transmission
and distribution facilities that would aid in restoring power to the TDU's
distribution customers following a significant power outage and that the TDU
reasonably anticipates will require at least six months to obtain. These
facilities may not include energy storage equipment or facilities as described
under Public Utility Regulatory Act (PURA), Chapter 35, Subchapter E.
(2) Significant power outage--an event that:
(A) causes ERCOT to order a TDU to shed
load;
(B) the Texas Division of
Emergency Management, ERCOT, or the executive director of the commission
determines should be classified as a significant power outage; or
(C) results in a loss of electric power that:
(i) affects a significant number of a TDU's
distribution customers and has lasted, or is expected to last, for at least six
hours;
(ii) affects a TDU's
distribution customers in an area for which the governor has issued a disaster
or emergency declaration;
(iii)
affects a TDU's distribution customers served by a radial transmission or
distribution facility, creates a risk to public health or safety, and has
lasted, or is expected to last, for at least 12 hours; or
(iv) creates a risk to public health or
safety because it affects a critical infrastructure facility that serves the
public such as a hospital, health care facility, law enforcement facility, fire
station, or water or wastewater
facility.
(c) Contracts for long lead-time facilities.
A TDU may enter into contracts to procure, own, and operate long lead-time
facilities. Such contractual arrangements may include cooperative agreements
with another TDU or procurement subscriptions with a transmission and
distribution equipment supply service company or other third party as described
under this section.
(1) Cooperative
agreements. A TDU may enter into a cooperative agreement with another TDU to:
(A) jointly procure, own, and operate long
lead-time facilities;
(B) maintain
inventories of long lead-time transmission and distribution equipment;
or
(C) engage in transfers of such
facilities or equipment following a significant power
outage.
(2) Procurement
subscriptions. A TDU may subscribe with a transmission and distribution
equipment supply service to access and utilize an inventory of transmission and
distribution equipment for the construction, modification, or operation of long
lead-time facilities.
(d)
Emergency operations annex. A TDU that procures, owns, and operates long
lead-time facilities under this section must include these facilities in the
TDU's emergency operations plan filed with the commission, as required by
§
25.53 of this title (relating to
Electric Service Emergency Operations Plans), on an ongoing basis.
(e) Eligible costs.
(1) Costs to procure, own, and operate long
lead-time facilities. Reasonable and necessary costs of procuring, owning, and
operating long lead-time facilities, including costs incurred under a
cooperative agreement or procurement subscription, are eligible for recovery
under this section, to the extent these costs are not otherwise included in the
TDU's rates.
(2) Return. Reasonable
and necessary costs under this section include a return on investment using the
rate of return on investment established in the commission's final order in the
TDU's most recent comprehensive base-rate proceeding. The return may be applied
beginning on the date that a long lead-time facility is
procured.
(f) Deferred
recovery of certain eligible costs. A TDU may create a regulatory asset to
defer to a future ratemaking proceeding the recovery of incremental operations
and maintenance expenses and the return, not otherwise recovered in a rate
proceeding, associated with the procurement, ownership, maintenance, and
operation of long lead-time facilities. These costs may be recorded, in order
to be requested for recovery in a future proceeding, beginning on the date the
long lead-time facility is procured.
(g) Cost recovery. Eligible costs under this
section may be recovered as follows.
(1)
Ratemaking proceedings.
(A) A TDU may:
(i) request recovery of eligible costs,
including any deferred expenses, pertaining to distribution invested capital
and its associated costs through a proceeding under §
25.243 of this title (relating to
Distribution Cost Recovery Factor (DCRF)), or in another ratemaking proceeding
appropriate to recover distribution-invested capital and its associated costs;
and
(ii) A TDU may request recovery
of eligible costs under this section, including any deferred expenses,
pertaining to transmission-invested capital and its associated costs through a
proceeding under §
25.192(h) of
this title (relating to Interim Update of Transmission Rates) or in another
ratemaking proceeding appropriate to recover transmission-invested capital and
its associated costs.
(B)
A TDU seeking cost recovery under this section must include sufficient
documentation in its filing to support a determination that the facilities
procured meet the definition of long lead-time facilities under subsection
(b)(1) of this section.
(2) Notice. The notice for any ratemaking
proceeding in which eligible costs addressed in this section are sought must
specifically identify those eligible costs. Notice under this paragraph is
required for all costs that have not been reconciled on or before the effective
date of this rule.
(3) Affiliate
contracts. For any contract between the TDU and an affiliate, the TDU bears the
burden of proof that the terms to the TDU were reasonable, necessary, prudent,
and did not exceed the prices charged by the supplying affiliate to its other
affiliates or divisions or to unaffiliated persons within the same market area
or having the same market condition. In addition, all affiliate payments must
comply with the requirements of PURA §36.058.
(4) Temporary rates and reconciliation. If
any rates include eligible costs that have not been reviewed for prudence,
reasonableness, and necessity, the rates to recover those costs are temporary
rates that must be reconciled in the TDU's next base-rate proceeding.
(A) A TDU must provide comprehensive
testimony and workpapers supporting the reconciliation of all eligible costs
and associated rate revenues as part of any base-rate proceeding application.
Any amounts recovered through rates approved under this subsection that are
found to have been unreasonable, unnecessary, or imprudent, plus the
corresponding return, taxes, and carrying charges, must either be refunded or
applied as an offset to any outstanding regulatory asset associated with
eligible costs.
(B) In any
proceeding in which the commission determines that a TDU has included in rates
any amounts deemed unreasonable, unnecessary, or imprudent, or that the TDU has
otherwise over-recovered costs, the commission may order a compliance
proceeding to determine the amounts and manner of any necessary refunds to
ratepayers or the proper accounting of over-recovered amounts as an offset to
any outstanding regulatory assets associated with eligible costs. Carrying
costs will be determined as follows:
(i) For
the time period beginning with the date on which over-recovery is determined to
have begun to the effective date of the TDU's base rates set in the base-rate
proceeding in which the costs are reconciled, carrying costs will accrue
monthly and will be calculated using an effective monthly interest rate based
on the same rate of return that was applied to the TDU's rate base included in
base rates in effect when the over-recovery began.
(ii) For the time period beginning with the
effective date of the TDU's rates set in the base-rate proceeding in which the
costs are reconciled, carrying costs will accrue monthly and will be calculated
using an effective monthly interest rate based on the TDU's rate of return
authorized in that base-rate
proceeding.
