TITLE 16. ECONOMIC REGULATION

PART 2. PUBLIC UTILITY COMMISSION OF TEXAS

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

SUBCHAPTER C. ALTERNATIVE RATE METHODS

The Public Utility Commission of Texas (commission) proposes the repeal and replace of 16 Texas Administrative Code (TAC) §24.76 relating to System Improvement Charge. Proposed new §24.76 will implement Texas Water Code §13.183 as revised by Senate Bill (SB) 740, Section 4 during the Texas 89th Regular Legislative Session. Specifically, the proposed rule will overhaul the system improvement charge (SIC) application process by revising the form, manner, and content of information and documentation that a utility must file with the commission. The proposed rules also align §24.76 with the procedural timelines established by SB 740 for SIC applications and specific requirements related to the Office of Public Utility Counsel (OPUC). The proposal also includes several commission-prescribed forms, including the SIC application form required by SB 740, a template notice for utilities to issue to ratepayers when establishing a SIC, two separate Excel filing schedules for SIC applications for water service and sewer service, and an instruction form for the SIC filing schedules.

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 create a new regulation to implement new requirements established by SB 740 (89R);

(6) the proposed rule will 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 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

Emily Sears, Senior Financial Analyst, Financial Review, 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. Sears 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 more efficient and accurate rate recovery for water and sewer utilities. 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 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 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 December 12, 2025. 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. Initial comments must be filed by December 19, 2025. Reply comments must be filed by January 23, 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 58391.

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 rule and the new procedures established by SB 740, Section 4 (89R):

1. Proposed §24.76(d)(1)(J)(ii) requires a SIC application to include, for each capital project included in the application, either (1) a transaction ledger describing all associated supporting documentation or (2) all supporting documentation. If an applicant elects to provide a transaction ledger, a "sample for audit" must be provided under proposed §24.76(d)(2). Specifically, proposed §24.76(d)(2) describes a process by which, the sample for audit will be determined by the presiding officer based on the recommendation of commission staff that will be determined prior to a sufficiency determination.

a. Should the proposed rule specify one or more alternative methodologies by which a sample or audit may be derived that would either (1) allow an applicant to provide relevant information at the outset of its application or (2) be used by commission staff when determining its sample for audit?

b. If alternative methodologies should be specified by the rule (1) what should those methodologies be based on (i.e., number of assets, dollar amount for assets, number of projects, dollar amount for projects, or a combination thereof) and (2) what should the percentage thresholds be to provide sufficient assurance that the sample for audit adequately supports the eligible plant placed into service detailed in the SIC application?

c. If such an alternative methodology is determined, should it replace the currently proposed sample for audit process or be an additional available option for the sample for audit?

2. SB 740 (89R) Section 4 revised Texas Water code §13.183(c) to require the commission to "enter a final order on a request for a system improvement charge…not later than the 60th day after the date the utility commission determines that a complete application for a system improvement charge has been filed." The commission uses a sufficiency review and recommendation by staff and a subsequent order by the presiding officer as the functional equivalent of a commission determination on "completeness." SB 740 Section 4 does not specify a timeline by which the commission must deem an application "complete" (i.e., sufficient). Similarly, proposed §24.76 does not impose a time limitation for between application filing and the sufficiency determination.

a. Considering all other aspects of the application (i.e. a potential sample for audit, review of supporting documentation, requests for information), should a procedural timeline be added to the proposed rule that governs the time period between an applicant filing a SIC application and the commission's determination of application sufficiency?

b. Should there be a specific timeline associated with the proposed sample for audit under proposed §24.76(d)(2)? If yes, please provide details. Answers to this question may incorporate any alternative proposals provided in response to Question 1.

3. Proposed §24.76(c)(3)(B) prohibits any assets from being included in a SIC application that have replaced existing plant to provide the same service or level of service. The provision also defines "existing plant" as including plant that is included in the utility's current rates established in the utility's most recent base-rate proceeding and excluding eligible plant that is included in the utility's current SIC for a proceeding in which the utility seeks to amend its SIC. In a previous SIC contested case, the commission requested that parties brief the following threshold policy question "Should the utility be required to offset costs that are no longer needed because of the improvements included in the system improvement charge?" In the commission's preliminary order, the commission stated: "Neither the Texas Water Code nor Commission rules provide for offsetting of costs in the context of a system improvement charge. Whether or not the costs are still needed because of the improvements included in the system improvement charge is irrelevant. Because there is no legal basis for this type of offset, the utility should not be required to offset costs in a proceeding for a system improvement charge. To the extent that a utility is recovering costs in base rates that are rendered unnecessary by improvements included in a system improvement charge, the appropriate inquiry is whether the utility is overearning and therefore whether the Commission should initiate a proceeding under TWC § 13.186(a)." (Docket No. 53109, Preliminary Order at 3 (Aug. 25,2022))

a. Does the Texas Water Code prevent the Commission from establishing the prohibition in proposed §24.76(c)(3)(B)?

b. If the Texas Water Code does not prevent the Commission from establishing the prohibition under proposed §24.76(c)(3)(B), should the Commission, in lieu of establishing the prohibition, consider revising the methodology for calculating the SIC such that it accounts for retirements (i.e., "offsets"), thus requiring a utility to offset the costs that are no longer needed because of the improvements included in the system improvement charge but that are still being reflected in the utility's base rates? If so, include an explanation and proposal, if any, as to what extent the methodology should be revised.

c. Provide any other context or information that may be relevant to Questions 3a and 3b, including, if necessary, a discussion of the methodologies implemented for similarly expedited electric rate proceedings such as §25.243 (relating to Distribution Cost Recovery Factor (DCRF)) and §25.192(h) (relating to Interim Update of Transmission rates).

4. House Bill 2712 (89R) allows a utility to use a historic, future, or combined future and historic test year. Proposed §24.76(c)(1)(D) limits the cost recovery of a SIC to cost recovery of eligible plant placed into service subsequent to the end of the future test year or combined historic and future test year if the applicant used a test year in a base rate proceeding after September 1, 2026 that includes either only future data or combined historic and future data. The intention of this provision is to prevent overlap between any potential future test year period selected by the utility and the period covered by the SIC.

a. Should proposed §24.76(c)(1)(D) be maintained in the rule?

b. Are there any other considerations that should be addressed in proposed §24.76 to prevent the potential overlap of a future test year period and the period covered by the SIC.

16 TAC §24.76

Statutory Authority

The proposed repeal is proposed under Texas Water Code §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; Texas Water Code §13.183 which authorizes the commission to establish alternative ratemaking methodologies for water and sewer service rates such as a SIC and specific content and procedural requirements for a SIC application, including the requirement for the commission to develop a commission-prescribed form;

Cross Reference to Statute: Texas Water Code §13.041(a) and (b), 13.183.

§24.76. System Improvement Charge.

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 November 14, 2025.

TRD-202504165

Andrea Gonzalez

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: December 28, 2025

For further information, please call: (512) 936-7244

16 TAC §24.76

Statutory Authority

The proposed new rule and new forms are proposed under Texas Water Code §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; Texas Water Code §13.183 which authorizes the commission to establish alternative ratemaking methodologies for water and sewer service rates such as a SIC and specific content and procedural requirements for a SIC application, including the requirement for the commission to develop a commission-prescribed form;

Cross Reference to Statute: Texas Water Code §13.041(a) and (b), 13.183.

§24.76. System Improvement Charge.

(a) Applicability. This section establishes the requirements for a utility to establish or amend a system improvement charge to ensure timely recovery of infrastructure investment.

(b) Definitions. In this section, the following words and terms have the following meanings unless the context indicates otherwise.

(1) Eligible plant -- Plant properly recorded in the National Association of Regulatory Utility Commissioners (NARUC) System of Accounts, accounts 304 through 339 for water utility service or accounts 354 through 389 for sewer utility service.

(2) System improvement charge- An additional charge to recover certain costs of service associated with the portion of the cost of a utility's eligible plant that is not already included in the utility's base rates.

(c) System improvement charge (SIC). A utility may apply to establish or amend one or more SICs in accordance with the requirements of this section.

(1) General requirements.

(A) A SIC must be nondiscriminatory and be applied uniformly to each meter size provided in the utility's tariff.

(B) A SIC applies to each meter size provided in the utility's tariff based on the calculation and multiplier under subsection (e) of this section.

(C) A SIC application must include any relevant data, attachments, or supplementary materials filed in their native format and, if applicable, any formula intact.

(D) If the applicant used a test year in a base rate proceeding after September 1, 2026, that includes either only future data or combined historic and future data, a SIC is limited to cost recovery of eligible plant placed into service subsequent to the end of the future test year or combined historic and future test year.

(E) A utility is prohibited from establishing or amending a SIC while it has a comprehensive rate proceeding under TWC §§13.187, 13.1871, 13.18715, or 13.1872 pending before the commission. If a utility with a pending application to establish or amend a system improvement charge files an application to change rates under TWC §§13.187, 13.1871, 13.18715, or 13.1872, or the commission initiates a rate change review under TWC §13.186, the utility will be deemed to have withdrawn its application to establish or amend a system improvement charge and the presiding officer must dismiss the application.

(2) Eligibility for and timing of SIC application.

(A) A utility may have a SIC in effect for water service, sewer service, or both.

(B) A utility that is applying to establish or amend multiple SICs in a calendar year must do so in a single application.

(i) having more than one SIC in effect at any given time for each type of service (i.e., water service or sewer service) unless a utility has multiple rate schedules for systems that have not yet been consolidated under a single rate; and

(ii) adjusting its rates under this section more than once each calendar year.

(D) The filing of SIC applications as allowed by this section is limited to a specific quarter of the calendar year, and is based on the last two digits of a utility's certificate of convenience and necessity (CCN) number as outlined below, unless good cause is shown for filing in a different quarter. For a utility holding multiple CCNs, the utility may file an application in any quarter for which any of its CCN numbers is eligible.

(i) Quarter 1 (January-March): CCNs ending in 00 through 27;

(ii) Quarter 2 (April-June): CCNs ending in 28 through 54;

(iii) Quarter 3 (July-September): CCNs ending in 55 through 81; and

(iv) Quarter 4 (October-December): CCNs ending in 82 through 99.

(3) Eligible costs.

(A) A SIC is limited to the cost recovery of eligible plant that is not already included in the utility's rates and eligible plant that has been placed into service after the later of the ending date of the 2019 reporting period reflected in the utility's annual report filed with the commission as required by §24.19 of this chapter or the end of the test year used in the utility's most recent base-rate proceeding.

(B) A utility is prohibited from including any assets in a SIC application that have replaced existing plant to provide the same service or level of service. For purposes of this subparagraph, "existing plant" includes plant that is included in the utility's current rates established in the utility's most recent base-rate proceeding. The term "existing plant" does not include eligible plant that is included in the utility's current SIC for a proceeding in which the utility seeks to amend its SIC.

(d) SIC Application.

(1) An application to establish or amend a SIC must be filed using the form prescribed by the commission. A SIC application must include the following:

(A) the following contact information:

(i) the applicant's primary contact name and title, street and mailing address, business telephone number, business e-mail address, and, if available, web address;

(ii) the authorized representative's name, title, street and mailing address, telephone number, e-mail address, and, if available, web address;

(B) the following disclosures:

(i) the applicant's legal business name, including any assumed names;

(ii) the applicant's Texas Secretary of State registration number;

(iii) the number of active water and sewer connections as of the date the SIC application is filed, itemized by type of service (i.e., water or sewer service) and the total number of connections (i.e., water connections plus sewer connections); and

(iv) the applicant's classification based on the applicant's total number of connections (i.e., Class A, B, C, or D utility);

(i) whether the application is for a new SIC or is an amendment to an existing SIC;

(ii) if the application is for an amendment to an existing SIC, the docket control number associated with the previous SIC application;

(iii) whether the applicant is seeking a SIC for water service, sewer service, or both;

(iv) identification of each water and sewer tariff or rate schedule currently in effect, as applicable, for which the applicant is seeking a SIC; and

(v) a copy of each water and sewer tariff or rate schedule identified under clause (iv) of this subparagraph, including each docket control number where each tariff or rate schedule was most recently approved;

(D) the following general information concerning the applicant's last comprehensive base rate proceeding:

(i) the year the applicant's last comprehensive base rate proceeding was initiated;

(ii) the docket control number of the applicant's last comprehensive base rate proceeding;

(iii) if applicable, copies of any final orders issued by the Texas Commission on Environmental Quality (TCEQ) or any other predecessor agency that are relevant to the application (i.e., orders relating to rate proceedings held at the TCEQ or any other predecessor agency);

(E) the following general information concerning each CCN possessed by the applicant:

(i) all of the CCN numbers currently issued to the applicant including a separate identification of which CCN numbers apply to the provision of water service or sewer service, as applicable;

(ii) each CCN that would be affected by the SIC sought by the applicant; and

(iii) whether the applicant has, at the time the application is filed, a pending sale, transfer, or merger (STM) application under §24.239 of this title (relating to Sale, Transfer, Merger, Consolidation, Acquisition, Lease, or Rental) or §24.243 of this title (relating to Purchase of Voting Stock or Acquisition of a Controlling Interest in a Utility), including the docket control number associated with the STM application;

(F) the following general information concerning currently effective SIC for water or sewer service, or both, as applicable:

(i) whether the applicant has a SIC in effect as of the date the application is filed;

(ii) each docket control number associated with the applicant's currently effective SIC for water service or sewer service;

(iii) each CCN for which the currently effective SIC is applicable;

(G) the date the SIC application is being filed and a confirmation that the application is being filed in the appropriate filing quarter as specified by subsection (c)(2)(D) of this section;

(H) a description of the eligible plant for which cost recovery is sought through the SIC, including:

(i) each project included in the request;

(ii) the following information, itemized by the applicable NARUC account number:

(I) the cost associated with each project and project component;

(II) a detailed explanation of the benefits of each project and project component, including how each project has improved or will improve service, and any reliability impacts; and

(III) transaction details supporting eligible costs substantiated by the documents specified in subparagraph (J) of this paragraph;

(I) a calculation of the SIC in accordance with subsection (e) of this section and all supporting calculations and assumptions for each component of the SIC;

(J) information to substantiate each claimed eligible cost of the applicant's eligible plant that is not already included in the applicant's rates.

(i) Eligible costs must be substantiated by:

(I) a description of each capital project or addition that correlates with all capital expenditures associated with that project or addition.

(II) evidence to support eligible plant placed into service as needed to support the eligible costs in the manner specified by clause (ii) of this subparagraph; and

(III) external or internal documentation of direct and indirect costs, as applicable. External documentation must be word-searchable and organized by each NARUC Account.

(ii) A SIC application must include, at a minimum, either:

(I) a transaction ledger in list format that includes a description of all associated supporting documentation described by clauses (iii) and (iv) of this subparagraph for each capital project included in the application for use in a sample for audit under paragraph (2) of this subsection; or

(II) all associated supporting documentation described by clauses (iii) and (iv) of this subparagraph for each capital project included in the application.

(iii) External documentation (i.e., cost information from unaffiliated third-parties such as contractors or vendors) includes:

(I) receipts;

(II) invoices;

(III) contracts; or

(IV) other documentation of eligible costs, which may include any other information that may be required by commission staff or the presiding officer.

(iv) Internal documentation (i.e. work orders, affiliate costs, capitalized overhead, timesheet for labor, and interest expenses, etc. (allocated overhead) must be substantiated by:

(I) if available and as applicable, the information listed under clause (iii) of this subparagraph;

(II) a categorized list of allocated overhead expenses with supporting documentation for each category. Such supporting documentation may include:

(-a-) narrative explanations describing the billing methods;

(-b-) expert testimony;

(-c-) policies and procedures developed by the applicant for the recording, billing, or management of allocated overhead;

(-d-) calculations, methodologies, or formulas for determining allocation factors used to apply allocated overhead associated with eligible costs; and

(-e-) affiliate service agreements;

(III) work orders categorized by projects. Each work order must:

(-a-) clearly specify the nature and scope of the work performed;

(-b-) provide a detailed breakdown of the total project cost; and

(-c-) identify the sources of those costs, including specific materials used, labor hours incurred, and equipment installed;

(IV) timesheets for labor categorized by projects. Each timesheet must:

(-a-) accurately reflect the time employees dedicate to capital projects and must exclude time associated with routine operations and maintenance activities;

(-b-) distinctly categorize direct labor and indirect labor, and all recorded hours shall be attributed to individual employees; and

(-c-) apply a consistent methodology for capitalizing labor costs over time; and

(V) any other information that may be required by commission staff or the presiding officer;

(K) information that sufficiently addresses the exclusion of costs for plant provided by explicit customer agreements or funded by customer contributions in aid of construction;

(L) information that sufficiently demonstrates compliance with subsection (c)(3)(B) of this section, including a list of the "existing plant" included and approved in the applicant's most recent base-rate proceeding that have been retired or removed from service, as well as the assets that have replaced such existing plant.

(M) If the applicant used group depreciation in its last comprehensive base rate proceeding, the applicant must provide, for each asset within the group to which the group rate applies:

(i) the name or number of the asset;

(ii) a description of the asset;

(iii) the in-service date of the asset; and

(iv) all cost information that corresponds to that asset;

(N) a copy of the applicant's most recent annual report filed with the commission as required by §24.19 of this chapter (relating to Water and Sewer Utilities Annual Report), which must be the annual report most recently due for filing;

(O) an affidavit confirming that the application meets the requirements of this section;

(P) notice and proof of notice, provided in the form and manner specified by subsection (f) of this section; and

(Q) as applicable, any other information required by the presiding officer in accordance with paragraph (2) of this subsection.

(2) Sample for audit of eligible plant. This paragraph only applies if the applicant has made the election under paragraph (1)(J)(ii)(I) of this subsection.

(A) Prior to filing its recommendation on sufficiency of the application under paragraph (5)(A) of this subsection, commission staff will file a recommendation on an appropriate sample for audit of eligible plant derived from the information included in the transaction ledger within a time period prescribed by the presiding officer.

(B) After staff submits its recommendation under subparagraph (A) of this paragraph, the presiding officer will determine an appropriate sample for audit, taking into consideration commission staff's recommendation and any other factor that is in the public interest. Staff will request a sample for audit based on the determination of the presiding officer.

(C) Within five working days of commission staff's request for an appropriate sample for audit under subparagraph (B) of this paragraph, intervenors may file comments in response to commission staff's request. The presiding officer is not required to consider the comments of the Office of Public Utility Counsel (OPUC) or other intervenors when determining an appropriate sample for audit.

(D) An applicant must file the supporting documentation described by the transaction ledger that is associated with the sample for audit of eligible plant designated by the presiding officer within a reasonable timeframe.

(E) Commission staff must review the supporting documentation provided by the applicant and must include in its sufficiency recommendation as to whether the supporting documentation sufficiently accounts for all transaction details described by the transaction ledger.

(3) Additional information.

(A) The presiding officer or commission staff may require additional documentation from the applicant to:

(i) supplement the information or disclosures required under paragraph (1) of this subsection;

(ii) if the applicant has made the election under paragraph (1)(J)(ii)(I) of this subsection, provide additional supporting documentation responsive to a sample for audit of eligible plant under paragraph (2) of this subsection and approved by the presiding officer under paragraph (2) of this subsection; or

(iii) address additional issues specific to the application or are in the public interest to do so.

(B) Each party, other than commission staff, may serve no more than 20 requests for information and requests for admission of fact prior to the presiding officer determining an application to be sufficient.

(4) Requests for information. Except as otherwise provided by this section or as determined by the presiding officer, requests for information will be conducted in accordance with §22.144 of this title (relating to Requests for Information and Requests for Admission of Facts).

(A) Except for a request by commission staff, a request must not include subparts or multiple questions.

(B) Requests must be sequentially numbered, regardless of whether the requests are served at the same time or on different parties.

(C) Unless otherwise specified by the presiding officer or other applicable law, a response to a request must be served no later than ten working days after receipt of the discovery request.

(D) An objection to a request must be filed no later than five working days from receipt of the request. A request for which an objection is sustained or is withdrawn in response to an objection does not count towards a party's request limit.

(5) Commission processing of application.

(A) Sufficiency determination.

(i) To be deemed sufficient, an application must include:

(I) all information required by paragraph (1) of this subsection;

(II) if the applicant has made the election under paragraph (1)(J)(ii)(I) of this subsection, supporting documentation responsive to a sample for audit determined by the presiding officer under paragraph (2) of this subsection; and

(III) any additional information requested by the presiding officer or commission staff under paragraph (3) of this subsection.

(ii) The presiding officer will establish a procedural schedule for commission staff to file a recommendation on the sufficiency of an application filed under this section.

(iii) OPUC may file comments on the SIC application 30 days from the date the SIC application is filed.

(I) The commission will electronically provide to OPUC any additional data or information related to the application at no cost.

(II) Any confidential material provided to OPUC by the applicant or the commission that has been designated as confidential by the applicant under commission rules, a commission protective order, under Chapter 552 of the Texas Government Code, or other applicable law must remain confidential and is not subject to disclosure by OPUC without the express written consent of the applicant.

(iv) If commission staff recommends the application be found deficient:

(I) Commission staff must identify each application deficiency in its recommendation.

(II) An applicant will have five working days to file a response, which may include an amendment to the application to cure the deficiency.

(v) If the presiding officer determines the application is deficient, the presiding officer will file a notice of deficiency. The notice of deficiency will:

(I) cite the particular requirements with which the application does not comply; and

(II) include a timeline within which the applicant will have an opportunity to amend its application to cure the deficiencies.

(vi) In the event an application is amended, commission staff must file a recommendation on sufficiency of an amended application within a time period prescribed by the presiding officer.

(vii) An application will not be deemed sufficient by the presiding officer until at least 30 days from the date the initial application is filed.

(B) Commission evaluation and final determination. Unless otherwise extended in the manner provided in this subsection, upon finding an application sufficient under subparagraph (A) of this subsection, the presiding officer will set a procedural schedule that will enable the commission to issue a final order in the proceeding within 60 days from the date the application is determined to be sufficient. The commission may extend the deadline for not more than 15 days for good cause.

(i) The procedural schedule must include a deadline for commission staff to file its final recommendation on the application.

(ii) Each party, other than commission staff, may serve no more than 10 requests for information and requests for admission of fact prior to the presiding officer issuing a final proposed order on the application.

(iii) Requests for information under this subparagraph must be issued no later than ten working days from the date the application is determined to be sufficient by the presiding officer.

(iv) Commission staff must include in its recommendation whether the supporting documentation provided as part of the application under paragraph (1)(J)(ii)(I) of this subsection or the supporting documentation provided in response to a sample for audit under paragraph (2) of this subsection, as applicable, adequately substantiates each claimed eligible cost of the applicant utility's eligible plant for each project included in the audit or sample.

(e) Calculation of the SIC. The revenue requirement for the SIC must be calculated using the following formula: SIC RR = (Reconcilable Cost * ROR) + Federal Income Taxes + Depreciation + ad valorem taxes + other revenue related taxes. Where:

(1) SIC = the system improvement charge.

(2) SIC RR = system improvement charge revenue requirement.

(3) Reconcilable Cost = the original costs of eligible plant placed into service after the later of the ending date of the 2019 reporting period reflected in the utility's annual report filed with the commission as required by §24.19 of this chapter or the end of the test year used in the utility's most recent base-rate proceeding, less:

(A) accumulated depreciation; and

(B) any costs for plant provided by explicit customer agreements or funded by customer contributions in aid of construction.

(4) Accumulated depreciation = depreciation accumulated for eligible plant after the date the eligible plant was placed in service.

(5) ROR = after-tax overall rate of return as defined in paragraph (10) of this subsection.

(6) Federal Income Taxes = current annual federal income tax, as related to eligible costs.

(7) Depreciation = current annual depreciation expense for the eligible plant.

(8) Ad Valorem Taxes = current annual amount of taxes based on the assessed value of the eligible cost.

(9) Other Revenue Related Taxes = current annual amount of any additional taxes resulting from the utility's increased revenues related to the SIC.

(10) The after-tax overall rate of return is one of the following:

(A) if the final order approving the utility's overall rate of return (i.e., the company's weighted-average cost of capital) was filed less than three years before the date that the utility files an application for a SIC, the after-tax rate overall of return is the one approved by the commission in the utility's last base-rate case; or

(B) if the final order approving the utility's overall rate of return (i.e., the company's weighted-average cost of capital) was filed three years or more before the date that the utility files an application for a SIC, the after-tax overall rate of return is the average of the commission's approved rates of return for water and sewer utilities in settled and fully litigated cases over the three years immediately preceding the filing of the SIC.

(11) The SIC must be calculated based on annualized meter equivalents, derived using the most recent month's total customer meter equivalents multiplied by 12. The base SIC must be calculated as the SIC RR divided by annual meter equivalents. The SIC for each meter size must be calculated as the base SIC multiplied by the multiplier for that meter size.

Figure: 16 TAC §24.76(e)(11) (.pdf)

(f) Notice.

(1) General notice requirements.

(A) Upon filing a SIC application with the commission, the applicant must also electronically provide a copy of its application to the OPUC.

(B) On or before the first working day after it files its application, the applicant must issue notice of its SIC application to all affected ratepayers by first class mail or, if the customer has agreed to receive communications electronically, by e-mail. If the applicant has a website, the applicant must also post a copy of the notice on its website accessible to the general public.

(2) Contents of notice. The notice must include, at a minimum, the following:

(A) the docket control number for the utility's SIC proceeding;

(B) information regarding the proposed SIC itemized for each type of service (i.e., water or sewer service, or both), as applicable, including:

(i) a brief description of the investments and costs the utility is seeking recovery for through the proposed SIC;

(ii) the time period for which the utility is seeking the proposed SIC to recover costs;

(iii) the proposed total SIC revenues sought by the utility;

(iv) a description of the proposed SIC as a monthly minimum bill charge for each meter size;

(v) for each customer meter size, an estimated total monthly bill at 5,000 gallons and 10,000 gallons;

(vi) a statement that substantially conforms to the following: "The effective date of the proposed rate change will be the date the commission issues a final order adopting the proposed SIC.";

(D) a brief explanation of how an affected ratepayer can intervene in the SIC proceeding or submit comments as a protestor; and

(E) an explanation of how intervention differs from protesting a rate increase.

(3) Completion of notice and intervention deadline.

(A) Notice is complete on the date that notice is physically or electronically mailed to all customers by the utility. If notice is mailed over multiple days, notice is complete on the last day of mailing.

(B) The intervention deadline is 25 days from the date service of notice is complete.

(4) Proof of notice. Within 15 days from the date notice was complete, the utility must file a proof of notice affidavit with the commission. The affidavit must:

(A) be sworn;

(B) be completed and signed by an officer or managerial employee of the utility that is qualified and authorized to verify and file notice on behalf of the utility;

(D) attest and verify that each notice was posted to the utility's website in a manner accessible to the general public and include a hyperlink to the webpages where each notice is posted; and

(E) contain a copy of each notice issued by the utility

(h) Scope of proceeding. The issue of whether eligible costs included in an application for a SIC or an amendment to a SIC are prudent, reasonable, or necessary, will not be addressed in a proceeding under this section.

(i) SIC reconciliation. Costs recovered through a SIC are subject to reconciliation in the utility's next comprehensive rate case.

(1) Any amounts recovered through the SIC that are found to have been unreasonable, unnecessary, or imprudent, plus the corresponding return and taxes, must be refunded with carrying costs.

(2) The utility must pay to its customers carrying costs on these amounts calculated using the same rate of return that was applied to the recovered costs in establishing the SIC until the date the rates approved in the utility's next comprehensive rate case are effective. Thereafter, carrying costs must be calculated using the utility's rate of return authorized in the comprehensive rate case.

(3) A utility that uses group depreciation must perform a new depreciation study in its next comprehensive base rate proceeding.

(j) SIC application expenses. Recovery of expenses associated with a SIC application may be requested and must be reviewed in the utility's next comprehensive base rate case and in accordance with §24.44 of this chapter (relating to Rate-case Expenses Pursuant to Texas Water Code §13.187 and §13.1871).

(k) Requirement to file a rate case. A utility must file a comprehensive rate case under TWC §13.187, 13.1871, 13.18715, or 13.1872 within the following times from the date the commission files an order approving the SIC.

(1) Four years for a utility that was a Class A utility at the time of filing the SIC application.

(2) Six years for a utility that was a Class B utility at the time of filing the SIC application.

(3) Eight years for a utility that was a Class C or Class D utility at the time of filing the SIC application.

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 November 14, 2025.

TRD-202504166

Andrea Gonzalez

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: December 28, 2025

For further information, please call: (512) 936-7244

CHAPTER 25. SUBSTANTIVE RULES APPLICABLE TO ELECTRIC SERVICE PROVIDERS

SUBCHAPTER O. UNBUNDLING AND MARKET POWER

DIVISION 2. INDEPENDENT ORGANIZATIONS

16 TAC §25.368

The Public Utility Commission of Texas (commission) proposes new 16 Texas Administrative Code (TAC) §25.368 relating to Commission Directives to ERCOT. This proposed rule will implement Public Utility Regulatory Act (PURA) §39.1514 as enacted by House Bill (HB) 1500 during the Texas 88th Regular Legislative Session. The new rule will set forth the framework for a commissioner to introduce and the commission to adopt a directive that requires ERCOT to take an official action.

Growth Impact Statement

(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

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

Jessie Horn, Sr. Counsel, Rules and Projects 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

Ms. Horn 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 greater transparency in how the commission issues a directive to ERCOT and when the commission requires ERCOT to take an official action. 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

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

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 December 19, 2025. 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 or by submitting a paper copy to Central Records, Public Utility Commission of Texas, 1701 North Congress Avenue, P.O. Box 13326, Austin, Texas 78711-3326. Comments must be filed by December 19, 2025. 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 rule on adoption. All comments should refer to Project Number 57883.

Statutory Authority

The new rule is proposed under Public Utility Regulatory Act (PURA) §14.002, which authorizes the commission to adopt and enforce rules reasonably required in the exercise of its powers and jurisdiction; §39.151, which grants the commission complete oversight of ERCOT; §39.1514, which requires the commission to adopt a rule specifying the types of directives the commission may issue through a contested case, rulemaking, memorandum, or written order, and the process for the commission to issue directives to ERCOT in an urgent or emergency situation.

Cross Reference to Statute: Public Utility Regulatory Act §14.002; §39.151; and §39.1514.

§25.368. Commission Directives to ERCOT.

(a) Applicability. This section applies to a directive, introduced by a commissioner and adopted by the commission, that requires ERCOT to take an official action, including an action that will create a new cost or fee, increase an existing cost or fee, or impose significant operational obligations on an entity. This section does not apply to a directive that the commission is statutorily required to issue, or an order that the commission issues through a commission proceeding, including a review process, that is initiated by ERCOT staff or commission staff.

(b) Scope. This section defines a directive, defines an official action, and establishes what process must be followed for a commissioner to introduce and the commission to adopt a directive that requires ERCOT to take an official action.

(1) Directive -- an instruction, introduced by a commissioner and adopted by a majority vote of the commission, that requires ERCOT to take an official action.

(2) Official action -- an action that requires approval by the ERCOT Board of Directors and impacts either the wholesale market or the operation of the grid in the ERCOT region. An official action does not include conducting a study, contracting with a third-party to conduct a study, a verbal update to the commission, a report, or a notification.

(d) Specific types of directives.

(1) Official action that creates a new cost or fee. A directive, introduced by a commissioner, that requires ERCOT to take an official action that will create a new cost or fee must be issued through a written order adopted by a majority vote of the commission in a contested case or rulemaking proceeding. An official action that creates a new cost or fee is one that results in:

(A) the creation of a new ancillary service; or

(B) the creation of a new program that imposes a new cost on ERCOT wholesale market participants.

(2) Official action that increases an existing cost or fee. A directive, introduced by a commissioner, that requires ERCOT to take an official action that will increase an existing cost or fee must be issued through a written order adopted by a majority vote of the commission in a contested case or rulemaking proceeding. An official action that increases an existing cost or fee is one that results in:

(A) a change in the amount of an existing ancillary service procured by ERCOT that is anticipated to result in a 25% or greater increase to the total annual cost of that ancillary service;

(B) a change to an operating reserve demand curve or ancillary service demand curve that increases the offer floor or the offer cap of the demand curve by 25% or more; or

(3) Official action that imposes significant operational obligations. A directive, introduced by a commissioner, that requires ERCOT to take an official action that will impose significant operational obligations must be issued through a written order adopted by a majority vote of the commission in a contested case or rulemaking proceeding. An official action that imposes significant operational obligations on an entity is one that is anticipated to result in increased commitments through the Reliability Unit Commitment process.

(4) Official action that involves an ERCOT protocol. A directive, introduced by a commissioner, that requires ERCOT to take an official action that involves an ERCOT protocol must be issued through a written order or memorandum that is adopted by a majority vote of the commission in an open meeting. An official action that involves an ERCOT protocol is one that requires ERCOT to:

(A) develop a new ERCOT protocol;

(B) revise an existing ERCOT protocol; or

(e) Commission consideration of a directive introduced by a commissioner. At least two days before an open meeting that the commission will consider a directive introduced by a commissioner, the commissioner introducing the directive will file a memorandum introducing the directive and materials relevant to the discussion of the directive, as applicable.

(1) Before the commission considers a directive, members of the public will be provided an opportunity to comment on the directive at an open meeting.

(2) At the commission's discretion, the commission may request written comment from the public on a directive introduced by a commissioner. Written comments from the public related to the directive may be limited to the appropriate process for the commission to issue the directive.

(3) Upon determination of the appropriate process to issue a directive, the commission may direct commission staff to initiate the appropriate process, as applicable.

(f) Urgent or emergency situation. Notwithstanding another provision of this section, the commission may issue a directive verbally to require ERCOT to take an official action in an urgent or emergency situation that poses an imminent threat to public health, public safety, or the reliability of the power grid. A verbal directive may be issued in an emergency meeting under Chapter 551 of the Texas Government Code.

(1) An urgent or emergency situation that poses an imminent threat to public health, public safety, or the reliability of the grid is deemed to have occurred if one of the following circumstances is imminent or likely to occur within 24 hours:

(A) the Texas Department of Public Safety activates a power outage alert for the ERCOT region in accordance with Section 411.301 of the Texas Government Code;

(B) ERCOT declares an energy emergency alert level 3;

(D) the frequency on the power grid falls below 59.8 Hz.

(2) Not later than 72 hours after the urgent or emergency situation ends, the commission will serve a written copy of the directive on ERCOT's general counsel and publicly file a written copy of the directive on its website. The written copy of the directive must include the following information:

(A) the circumstances giving rise to the directive issued by the commission;

(B) the directive issued by the commission to ERCOT; and

(3) Upon receipt of the written copy of the directive, ERCOT must publicly publish the directive on its website and notify market participants of the directive.

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 November 14, 2025.

TRD-202504160

Andrea Gonzalez

Rules Coordinator

Public Utility Commission of Texas

Earliest possible date of adoption: December 28, 2025

For further information, please call: (512) 936-7244

PART 8. TEXAS RACING COMMISSION

CHAPTER 301. DEFINITIONS

16 TAC §301.1

The Texas Racing Commission (TXRC) proposes rule amendments in Texas Administrative Code, Title 16, Part 8, Chapter 301, §301.1. Definitions, concerning definitions in the Texas Rules of Racing. The purpose of this rule amendment is to define the terms "practicing veterinarian" and "unlicensed race event." TXRC is responsible for regulating all aspects of horse racing in Texas regardless of whether that racing involves pari-mutuel wagering as authorized by Texas Occupations Code §2023.001.

Comments on the proposal may be submitted to the Texas Racing Commission Executive Director, Amy F. Cook, via webpage comment form at https://www.txrc.texas.gov/texas-rules-of-racing or through the agency customer service desk at customer.service@txrc.texas.gov, or by calling the customer service phone number at (512) 833-6699. Comments will be accepted for 30 days following publication of the proposal in the Texas Register.

Agency Analysis

Government Growth Impact Statement Required by Texas Government Code §2001.022.

Amy F. Cook, Executive Director, has determined that the proposed rule change will not affect the local economy, so the Commission is not required to prepare a local employment impact statement under Government Code §2001.022.

Economic Impact Statement Required by Texas Government Code §2006.002.

Amy F. Cook, Executive Director, has determined that the proposed rule amendments will have no adverse economic effect on small businesses, micro-businesses, or rural communities, therefore preparation of an Economic Impact Statement as detailed under Texas Government Code §2006.002, is not required.

Regulatory Flexibility Analysis Required by Texas Government Code §2006.002.

Amy F. Cook, Executive Director, has determined that the proposed rule amendments will have no adverse economic effect on small businesses, micro-businesses, or rural communities, therefore preparation of a Regulatory Flexibility Analysis as detailed under Texas Government Code §2006.002, is not required.

Takings Impact Assessment Required by Texas Government Code §2007.043.

Amy F. Cook, Executive Director, has determined that no private real property interests are affected by the proposed rule amendments, and the proposed rule amendments 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 rule amendments do not constitute a taking or require a takings impact assessment under Texas Government Code §2007.043.

Local Employment Impact Statement Required by Texas Government Code §2001.024(A)(6).

Amy F. Cook, Executive Director, has determined that the proposed rule amendments are not expected to have any fiscal implications for state or local government as outlined in Texas Government Code §2001.024(A)(6).

Cost-Benefit Analysis Required by Texas Government Code §2001.024(A)(5).

Amy F. Cook, Executive Director has determined that the proposed rule amendments are expected to improve the positive economic impact, health, and safety of licensed horse racing in Texas by reducing the impact of unlicensed racing.

Fiscal Note Analysis Required by Texas Government Code §2001.024(A)(4).

Amy F. Cook, Executive Director has determined that no significant fiscal impact is associated with the proposed rule change.

Legal Review Required by Texas Government Code §2001.024(A)(3).

Amy F. Cook, Executive Director certifies that a legal review has been completed and the proposal is within agency's legal authority to adopt under §2023.001 of the Texas Occupations Code.

Statutory Authority. The amendments are proposed under Texas Occupations Code §2023.001.

Cross Reference to Statute. Texas Occupations Code §2023.001.

§301.1. Definitions.

(a) Words and terms defined in the Act shall have the same meaning when used in this part unless otherwise defined below.

(b) The following words and terms, when used in this part, shall have the following meanings, unless the context clearly indicates otherwise:

(1) Act--The Texas Racing Act, Subtitle A-1, Title 13, Texas Occupations Code.

(2) Active license--a racetrack license designated by the commission as active.

(3) Age of a greyhound--determined as beginning on the day the greyhound is whelped.

(4) Age of a horse--determined as beginning on the first day of January in the year in which the horse is foaled.

(5) Application documents--documents submitted by an applicant for a license in support of the application.

(6) Application period--a period designated by the Commission for the submission of application documents for a racetrack license.

(7) Association grounds--all real property approved by the Commission for use by an association in the conduct of a race meeting.

(8) Association veterinarian--A veterinarian employed by the association.

(9) Authorized agent--a person appointed in writing by the owner or trainer of a horse or greyhound to represent the owner or trainer at a racetrack.

(10) Backstretch--the straightaway on the side of a track that is opposite to the finish line.

(11) Booking--a contract between an association and a kennel owner for the kennel owner to provide greyhounds to the association for a race meeting and for the association to provide kennel buildings to house the greyhounds.

(12) Branding--the act of a totalisator system imprinting a mutuel ticket with information that identifies the ticket as canceled or cashed and automatically making the appropriate notation in the system's memories.

(13) Canceled ticket--a mutuel ticket that represents a wager that has been canceled and withdrawn from the pari-mutuel pool.

(14) Cashed ticket--a mutuel ticket that is paid for a winning wager.

(15) Chief veterinarian--the chief veterinarian employed by the Commission.

(16) Common pool--a pool in which the wagers received at a receiving location are combined with the wagers received at a sending racetrack.

(17) Condition of a race--a characteristic element of the race, such as the distance, qualifications of animal to enter, purse or stakes, or other special features.

(18) Coupled entry--two or more horses entered in a race that, because of common ties of ownership, are joined to be a single betting interest in that race.

(19) Cushion--the top level of a dirt racetrack.

(20) Dead heat--a race in which two or more race animals finish at the same time.

(21) Double entry--an entry of two or more greyhounds in the same race that have either common ownership or the same trainer and are separate wagering interests.

(22) Encrypted--scrambled or otherwise manipulated audio-visual signals to mask the original video content of the signal to cause the signals to be indecipherable and unrecognizable to any person receiving the signal.

(23) Entry--a horse, or horses in the case of a coupled entry, made eligible to run in a race.

(24) Established weight--the racing weight for a greyhound established in accordance with the Rules.

(25) Exempt institutional investor--an investor who is:

(A) an insurance company as defined by the Securities Act of 1933, §2(13), a bank as defined by that Act, §3(a)(2), a savings and loan association or other institution referenced in that Act, §3(a)(5)(A), or a foreign bank or savings and loan association or equivalent institution;

(B) an investment company as defined by the Investment Company Act of 1940, §3(a), an issuer that would have been deemed an investment company under that Act except for the exclusion in that Act, §3(c)(1), or a business development company as defined by that Act, §2(c)(48);

(C) a small business investment company licensed by the United States Small Business Administration under the Small Business Investment Act of 1958, §301(c);

(D) a plan established and maintained by a state, its political subdivisions, or an agency or instrumentality of a state or its political subdivisions for the benefit of its employees;

(E) an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974;

(F) a trust fund whose trustee is a bank or trust company and whose participants are exclusively plans of the types identified in subparagraph (D) or (E) of this definition, except trust funds that include as participants individual retirement accounts or H.R. 10 plans;

(G) a business development company as defined by the Investment Advisers Act of 1940, §202(a)(22), or an investment adviser registered under that Act;

(H) an organization described in the Internal Revenue Code, §501(c)(3);

(I) a dealer registered under the Securities Exchange Act of 1934, §15;

(J) a legal entity with a market value of at least $50 million whose securities are traded on a nationally recognized or foreign securities exchange or interdealer quotation system, such as NASDAQ; and

(K) a legal entity, acting for its own account or the account of other exempt institutional investors, that in the aggregate owns and invests on a discretionary basis at least $25 million in securities of issuers that are not affiliated with the entity, with the aggregate value of the securities being the cost of the securities, except if the entity reports its securities holdings in its financial statements based on their market value and no current information regarding the cost of the securities has been published, in which case the securities may be valued at market.

(26) Exotic pool--a mutuel pool that involves wagers on more than one entered horse or greyhound or on entries in more than one race.

(27) False start--failure of the starting gate or box doors to open simultaneously.

(28) Foul--an action by a horse or jockey that hinders or interferes with another horse or jockey during the running of a race.

(29) Greyhound race--a contest among greyhounds for purse, stakes, premium, or wager for money, run in the presence of the racetrack officials, including the following:

(A) Hurdle race--a race over a course in which jumps or hurdles are used.

(B) Match race--a race between two or more greyhounds, each the property of different owners, on terms agreed on by the owners and approved by the Commission.

(C) Overnight race--a race for which entries close 96 hours or less before the time set for the first race of the day on which the race is to be run.

(D) Purse race--a race for money or other prize to which the owners of the greyhounds engaged in the race do not contribute an entry.

(E) Race on the flat--a race over a course in which no jumps or other obstacles are placed.

(F) Stakes race--a race in which all money is to be deposited by the owners of the greyhounds engaged in the race, including a race of the day on which the stakes race is to be run.

(30) Groom--an individual employed by an owner or trainer of a racehorse to tend to the physical appearance of the horse and to perform chores in and around the stable.

(31) Growing medium--the substance immediately below the grass on a turf track.

(32) Handle--the total amount of money wagered at a racetrack during a particular period.

(33) Horse--an equine of any breed, including a stallion, gelding, mare, colt, filly, or ridgling.

(34) Horse Race--a running contest between horses for entry fees, purse, prize, or other reward, including the following:

(A) Claiming race--a race in which a horse may be claimed in accordance with the Rules.

(B) Derby race--a race in which the first condition of eligibility is to be three years old.

(D) Guaranteed race--a race for which the association guarantees by its conditions a specified purse, which is the limit of its liability.

(E) Handicap race--a race in which the weights to be carried by the entered horses are adjusted by the racing secretary for the purpose of equalizing their respective chances of winning.

(F) Match race--a race between only two horses that are owned by different owners.

(G) Maturity race--a race in which the first condition of eligibility is to be four years of age or older.

(H) Optional claiming race--a claiming race in which there is an option to have horses entered to be claimed for a stated price or not eligible to be claimed.

(I) Progeny race--a race restricted to the offspring of a specific stallion or stallions.

(J) Purse or overnight race--a race for which owners of horses entered are not required by its conditions to contribute money toward its purse.

(K) Stakes race--a race to which nominators of the entries contribute to a purse.

(L) Starter race--an overnight race under allowance or handicap conditions, restricted to horses which have previously started for a designated claiming price or less, as stated in the conditions of the race.

(M) Walkover race--a stakes race in which only one horse starts or all the starters are owned by the same interest.

(N) Weight for age race--a race in which weights are assigned in keeping with the scale of weights in these rules.

(35) In today horse--a horse that is in the body of a race program which is entered into a race on the next consecutive race day.

(36) Inactive license--a racetrack license designated by the commission as inactive.

(37) Kennel area--an area for the boarding or training of greyhounds.

(38) Lead out--an individual who handles a greyhound from the lockout kennel to the starting box.

(39) Locked in the gate--a horse or greyhound that is prevented from leaving the starting gate or box due to the failure of the front door of the gate or box to open simultaneously with the other doors.

(40) Lure--a mechanical apparatus at a greyhound racetrack consisting of a stationary rail installed around the track, a motorized mechanism that travels on the rail, and a pole that is attached to the mechanism and extends over the track, and to which a decoy is attached.

(41) Maiden--a horse or greyhound that has never won a race at a recognized race meeting authorized by the Commission or by another racing jurisdiction.

(42) Minus pool--a pool in which there are insufficient net proceeds to pay the minimum price to holders of the winning tickets.

(43) Mutuel field--a group of horses joined as a single betting interest in a race due to the limited numbering capacity of the totalisator.

(44) No race--a race that is canceled after being run due to a malfunction of the starting gate or box or any other applicable reason as determined by the Rules.

(45) Nominator--the person in whose name a horse or greyhound is entered for a race.

(46) Occupational licensee--an individual to whom the Commission has issued a license to participate in racing with pari-mutuel wagering.

(47) Odds--a number indicating the amount of profit per dollar wagered to be paid to holders of winning pari-mutuel tickets.

(48) Off time--the moment when, on signal from the starter, the horses or greyhounds break from the starting gate or box and run the race.

(49) Paddock--the area in which horses or greyhounds gather immediately before a race.

(50) Paper/Program Trainer--a licensed trainer who solely for the purposes of the official race program is identified as the trainer of a horse that is actually under the control of and trained by another person who may or may not hold a current trainer's license in any jurisdiction.

(51) Patron--an individual present on association grounds during a race meeting who is eligible to wager on the racing.

(52) Pecuniary interest--includes a beneficial ownership interest in an association, but does not include bona fide indebtedness or a debt instrument of an association.

(53) Performance--the schedule of horse or greyhound races run consecutively as one program. A greyhound performance consists of fifteen or fewer races unless approved by the executive secretary.

(54) Photofinish--the system of recording pictures or images of the finish of a race to assist in determining the order of finish.

(55) Place--to finish second in a race.

(56) Post position--the position assigned to a horse or greyhound in the starting gate or box.

(57) Post time--the time set for the arrival at the starting gate or boxes by the horses or greyhounds in a race.

(58) Practicing Veterinarian- a Veterinarian in good standing with the Texas Board of Veterinary Medical Examiners (TBME) not under the employ of an Association or the TXRC and practicing in the restricted area of a racetrack.

(59) [~~(58)~~] Purse--the cash portion of the prize for a race.

(60) [~~(59)~~] Race date--a date on which an association is authorized by the Commission to conduct races.

(61) [~~(60)~~] Race day--a day in which a numerical majority of scheduled races is conducted and is a part of the association's allocated race days.

(62) [~~(61)~~] Race meeting--the specified period and dates each year during which an association is authorized to conduct racing and/or pari-mutuel wagering by approval of the Commission.

(63) [~~(62)~~] Racetrack facility--the buildings, structures and fixtures located on association grounds used by an association to conduct horse or greyhound racing.

(64) [~~(63)~~] Racetrack official--an individual appointed by the commission to officiate at a race meeting.

(65) [~~(64)~~] Racing judge--the executive racing official at a greyhound track.

(66) [~~(65)~~] Reasonable belief--a belief that would be held by an ordinary and prudent person in the same circumstances as the actor.

(67) [~~(66)~~] Recognized race meeting--a race meeting held under the sanction of a turf authority.

(68) [~~(67)~~] Refunded ticket--a pari-mutuel ticket that has been refunded for the value of a wager that is no longer valid.

(69) [~~(68)~~] Rule off--to bar an individual from the enclosure of an association and to deny all racing privileges to the individual.

(70) [~~(69)~~] Rules--the rules adopted by the Texas Racing Commission found in Title 16, Part VIII of the Texas Administrative Code.

(71) [~~(70)~~] Schooling race--a practice race conducted under actual racing conditions but for which wagering is not permitted.

(72) [~~(71)~~] Scratch--to withdraw an entered horse or greyhound from a race after the closing of entries.

(73) [~~(72)~~] Scratch time--the closing time set by an association for written requests to withdraw from a race.

(74) [~~(73)~~] Show--to finish third in a race.

(75) [~~(74)~~] Specimen--a bodily substance, such as hair, blood, urine, saliva, or other bodily tissues taken for analysis from a horse, greyhound, or individual in a manner prescribed by the Commission.

(76) [~~(75)~~] Stakes payments--the fees paid by subscribers in the form of nomination, entry, or starting fees to be eligible to participate.

(77) [~~(76)~~] Stallion owner--a person who is owner of record, at the time of conception, of the stallion that sired the accredited Texas-bred horse.

(78) [~~(77)~~] Starter--a horse or greyhound entered in a race when the doors of the starting gate or box open in front of the horse or greyhound at the time the official starter dispatches the horses or greyhounds.

(79) [~~(78)~~] Straight pool--a mutuel pool that involves wagers on a horse or greyhound to win, place, or show.

(80) [~~(79)~~] Subscription--money paid to nominate, enter, or start a horse or greyhound in a stakes race.

(81) [~~(80)~~] Tack room--a room in the stable area of a horse racetrack in which equipment for training and racing the horses is stored.

(82) [~~(81)~~] Totalisator--a machine or system for registering and computing the wagering and payoffs in pari-mutuel wagering.

(83) [~~(82)~~] Tote board--a facility at a racetrack that is easily visible to the public on which odds, payoffs, advertising, or other pertinent information is posted.

(84) [~~(83)~~] Tote room--the room in which the totalisator equipment is maintained.

(85) [~~(84)~~] Tout--an individual licensed to furnish selections on a race in return for a set fee.

(86) [~~(85)~~] Trial--a race designed primarily to determine qualifiers for finals of a stakes race.

(87) Unlicensed Race Event--a match race, multiple horse race, or timed activity involving two or more horses racing simultaneously, may or may not involve pari-mutuel wagering, and involves any of the following:

(A) owners, trainers, or jockeys receiving purses, compensation, or prizes as part of the performance;

(B) conducted as a spectator event in which spectators are charged for entry onto the event grounds;

(D) advertisement or open marketing as a racing event, including social media, website posts, or printed handouts during the event detailing the race information;

(E) is required to have a mass gathering permit under Texas Health and Safety Code 751.0021.

(88) [~~(86)~~] Uplink--an earth station broadcasting facility, whether mobile or fixed, which is used to transmit audio-visual signals and/or data emanating from a sending racetrack, and includes the electronic transfer of received signals from the receiving antenna to TV monitors within the receiving location.

(89) [~~(87)~~] Weigh in--the process by which a jockey is weighed after a race or by which a greyhound is weighed before being placed in the lockout kennel.

(90) [~~(88)~~] Weighing in weight--the weight of a greyhound on weighing in to the lockout kennel.

(91) [~~(89)~~] Weigh out--the process by which a jockey or greyhound is weighed before a race.

(92) [~~(90)~~] Weighing out weight--the weight of a greyhound on weighing out of the lockout kennel immediately before post time for the race in which the greyhound is entered.

(93) [~~(91)~~] Win--to finish first in a race.

(94) [~~(92)~~] Winner--

(A) for horse racing, the horse whose nose reaches the finish line first, while carrying the weight of the jockey or is placed first through disqualification by the stewards; and

(B) for greyhound racing, the greyhound whose muzzle, or if the muzzle is lost or hanging, whose nose reaches the finish line first or is placed first through disqualification by the judges.

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 November 12, 2025.

TRD-202504130

Amy F. Cook

Executive Director

Texas Racing Commission

Earliest possible date of adoption: December 28, 2025

For further information, please call: (512) 833-6699

CHAPTER 307. PROCEEDINGS BEFORE THE COMMISSION

SUBCHAPTER C. PROCEEDINGS BY STEWARDS AND RACING JUDGES

16 TAC §307.62

The Texas Racing Commission (TXRC) proposes an amendment to §307.62. Disciplinary Hearings.

Purpose and Background: This proposal authorizes hearings to be conducted either by a panel of three stewards or an individual steward and outlines the assignment of cases between the two panels. The proposal also removes references to greyhound racing in the subtitle heading and the text of the rule.

Comments on the proposal may be submitted to the Texas Racing Commission Executive Director, Amy F. Cook, via webpage comment form at https://www.txrc.texas.gov/texas -rules-of-racing or through the agency customer service desk at customer.service@txrc.texas.gov, or by calling the customer service phone number at (512) 833-6699. Comments will be accepted for 30 days following publication of the proposal in the Texas Register.

Fiscal Note.

Amy Cook, Executive Director, has determined that for the first five years the proposed rule is in effect: (1) there are no foreseeable implications relating to costs or revenues of state or local governments as a result of enforcing or administering the rule; and (2) there are no estimated reductions in costs to, or increases in revenues of, state or local governments.

Public Benefit and Cost Note.

Amy Cook has determined that for each year of the first five years the proposed rule is in effect, the public benefit will be clearer rules regarding disciplinary hearings by stewards. There is no probable economic cost to persons required to comply with the rule because the change is procedural and removes unused or unnecessary text.

Local Employment Impact Statement.

The Commission has determined that the proposed rule will not affect local economies and therefore no local employment impact statement is required.

Small Business, Micro-Business, and Rural Community Impact Analysis.

The proposed rule does not have an adverse economic effect on small businesses, micro- businesses, or rural communities because it imposes no additional costs and only removes a subsection and renumbers another.

Government Growth Impact Statement.

For the first five years the rule is in effect: (1) the rule does not create or eliminate a government program; (2) implementation does not require the creation or elimination of employee positions; (3) implementation does not require an increase or decrease in future appropriations; (4) the rule does not require an increase or decrease in fees; (5) the rule does not create a new regulation; (6) the rule does not expand, limit, or repeal an existing regulation other than removing an unnecessary subsection and renumbering; and (7) the rule does not positively or adversely affect the state economy.

Takings Impact Assessment.

The Commission has determined that no private real property interests are affected by this proposal and a takings impact assessment is not required.

Regulatory Analysis.

The proposal is not a "major environmental rule" as defined by Texas Government Code,

§2001.0225, and does not require a regulatory analysis.

Statutory Authority.

The amendment is proposed under Texas Occupations Code, §2023.001(a) and

§2023.004, which authorize the agency to regulate all aspects of horse racing and require the Commission to adopt rules for conducting racing and to administer the Texas Racing Act, and §2023.106(b), which requires the Commission to adopt rules specifying the powers and duties of race meeting officials.

Cross-Reference to Statute.

Texas Occupations Code, §2023.001(a), §2023.004, and §2023.106.

§307.62. Disciplinary Hearings.

(a) Authority to Conduct. On their own motion or on receipt of a complaint regarding the actions of an occupational licensee, the stewards [~~and racing judges~~] may conduct a disciplinary hearing regarding the licensee's actions.

(1) A disciplinary hearing may be conducted by a steward or a panel of three stewards. In either case, a steward or a panel of three stewards shall have all the authority and powers granted by this section and the rules.

(2) Matters assigned to a panel of three stewards. The following shall be heard by a panel of three stewards:

(A) alleged violations occurring during the running of a race, including matters affecting the order of finish, interference, riding/crop use, or other on-track conduct;

(B) alleged violations involving the handling, care, custody, safety, or welfare of a horse while on association grounds;

(D) any matter the presiding steward designates for panel hearing because of its complexity, potential to affect the integrity of racing, anticipated sanction severity, or substantial public interest.

(3) Matters eligible for a single-steward hearing. Unless assigned to a panel under paragraph (2) of this subsection or transferred under paragraph (4) of this subsection, the following may be heard by a single steward:

(A) device, medication and testing-related rule violations, including laboratory positives and associated chain-of-custody or documentation issues;

(B) licensing, credentials, and access-control violations not involving a summary suspension;

(C) entry, scratch, weight, equipment, identification, and similar compliance matters that do not arise from the running of a race; and

(D) other compliance violations of a routine or administrative nature.

(4) Transfer and consolidation. On a steward's own motion or on a party's motion, any single-steward matter may be transferred to a panel of three stewards when warranted by the seriousness, complexity, number of parties, overlapping issues with panel matters, or the interests of uniformity. Related cases may be consolidated before the same forum to promote consistency and efficiency.

(5) Notice of forum. The notice of hearing shall state whether the matter is assigned to a single steward or to a panel of three stewards. A party's motion to transfer should be filed promptly after notice; the presiding steward shall issue a brief written ruling on any transfer motion.

(6) No limitation on authority. Assignment to a single steward or to a panel does not limit the forum's authority to impose any sanction authorized by statute or rule.

(7) If a disciplinary hearing is conducted by a steward, the steward shall:

(A) have exclusive jurisdiction of all the issues at the disciplinary hearing;

(B) comply with §307.63(b) and (d) of this title (relating to Ruling); and

(8) A disciplinary hearing conducted by a panel of three stewards is governed by §307.63 of this title.

(b) Notice of Hearing. Except as otherwise provided by the Rules, the stewards [~~and racing judges~~] shall provide written notice to a person who is the subject of a disciplinary hearing at least 10 calendar days before the hearing. Notice given under this subsection must state the nature of the charges against the person and the possible penalties that may be imposed. The stewards [~~and racing judges~~] or their designee may hand deliver the written notice of the disciplinary hearing to the licensee who is the subject of the hearing. Alternatively, the stewards [~~and racing judges~~] may provide the notice by sending it by both certified mail, return receipt requested, and regular mail to the licensee's last known address as found in the Racing Commission's licensing records. The stewards [~~and racing judges~~] may also send the notice by electronic mail provided that the Commission verifies receipt by the licensee. The person may waive his or her right to 10 days notice. Nonappearance of a licensee to whom notice has been provided under this subsection shall be deemed a waiver of the right to a hearing before the stewards.

(c) Rights of the Licensee. At a disciplinary hearing conducted by the stewards [~~or racing judges~~], the person who is the subject of the disciplinary hearing has the following rights, all of which the person may waive:

(1) the right to counsel;

(2) the right to present a defense;

(3) the right to make an opening and closing statement;

(4) the right to call witnesses; and

(5) the right to cross-examine witnesses testifying against the person.

(d) Evidence.

(1) Each witness at a disciplinary hearing conducted by the stewards [~~or racing judges~~] must be sworn by the presiding steward [~~or racing judge~~].

(2) To facilitate participation by licensees, the stewards [~~and racing judges~~] may permit witnesses to testify at a disciplinary hearing via telephone if the stewards [~~or racing judges~~] make reasonable assurances that the person testifying is who he or she purports to be.

(3) The stewards [~~and racing judges~~] shall make a record of a disciplinary hearing.

(4) The stewards [~~and racing judges~~] shall allow a full presentation of evidence and are not bound by the technical rules of evidence. However, the stewards [~~and racing judges~~] may disallow evidence that is irrelevant or unduly repetitive of other evidence. The stewards shall have the authority to determine, in their sole discretion, the weight and credibility of any evidence and/or testimony. The stewards [~~and racing judges~~] may admit hearsay evidence if the stewards [~~and racing judges~~] determine the evidence is of a type that is commonly relied on by reasonably prudent people. The rules of privilege recognized by state law apply in hearings before the stewards [~~and racing judges~~]. Hearsay evidence that is not otherwise admissible under the exceptions of the Texas Rules of Evidence is an insufficient basis alone for a ruling.

(e) Burden of Proof. The burden of proof is on the person bringing the complaint to show, by a preponderance of the evidence, that the licensee has violated or is responsible for a violation of the Act or a Commission rule.

(f) Continuances.

(1) Upon receipt of a notice, a person may request a continuance of the hearing.

(2) For good cause shown, the stewards ~~or racing judges~~ may grant a continuance of any hearing for a reasonable period of time.

(3) The stewards [~~or racing judges~~] may at any time order a continuance on their own motion.

(g) Agreed Settlement. The person who is the subject of the disciplinary hearing may waive the right to a hearing and subsequent appeal and enter into an agreed settlement with the stewards [~~or racing judges~~].

(h) Failure to Appear. The stewards [~~or racing judges~~] may suspend the license of a person who fails to appear at a disciplinary hearing after receiving written notice of the hearing until the matter is adjudicated.

(i) Summary Suspension. If the stewards [~~or racing judges~~] determine that a licensee's actions constitute an immediate danger to the public health, safety, or welfare, the stewards [~~or racing judges~~] may enter a ruling summarily suspending the license, without a prior hearing. A summary suspension takes effect immediately on issuance of the ruling. If the stewards [~~or racing judges~~] suspend a license under this subsection, the licensee is entitled to a hearing on the summary suspension within seven days after the ruling.

(j) Discovery.

(1) Prior to a disciplinary hearing, upon written request served on the opposing party, a party shall be entitled, subject to the limitations in §2022.103, §2.15 of the Act, to:

(A) the name and address of any witness who may be reasonably expected to testify on behalf of the opposing party, together with a brief summary of the subject matter of each witness's anticipated testimony; and

(B) copies of all documents or other materials in the possession or control of the opposing party that the opposing party reasonably expects to introduce into evidence in either its case-in-chief or in rebuttal. Rebuttal documents, to the extent that they are not immediately identifiable, shall be tendered to the opposing party forthwith upon identification.

(2) A party may obtain discovery only by making a written request for the production of witness lists, documents, and other materials, as provided in paragraph (1) of this subsection.

(3) The stewards [~~and racing judges~~] may exclude from a disciplinary hearing any witnesses, documents, and other materials that were not properly disclosed in accordance with this subsection unless good cause is shown for the failure to disclose them.

(4) Discovery requests under this section shall not be cause for postponement or delay of a disciplinary hearing or of the disposition of the proceedings.

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 November 12, 2025.

TRD-202504133

Amy F. Cook

Executive Director

Texas Racing Commission

Earliest possible date of adoption: December 28, 2025

For further information, please call: (512) 833-6699

CHAPTER 309. RACETRACK LICENSES AND OPERATIONS

SUBCHAPTER C. HORSE RACETRACKS

DIVISION 3. FACILITIES FOR LICENSEES

16 TAC §309.282

The Texas Racing Commission (TXRC) proposes rule amendments in Texas Administrative Code, Title 16, Part 8, Chapter 309, §309.282. Living Quarters for Licensees. The purpose of this rule amendment is to address feedback from the State Fire Marshal's Office (SFMO) regarding appropriate fire inspection standards. This rule change enables the standards to be updated over time without additional rule changes and aligns our rules with the expectations of the SFMO including National Fire Protection Act 150 which specifically addresses the horse industry.

Agency Analysis

Government Growth Impact Statement Required by Texas Government Code §2001.022.

Economic Impact Statement Required by Texas Government Code §2006.002.

Amy F. Cook, Executive Director, anticipates that some licensed racetracks may incur compliance costs to update facilities and procedures to align with the current editions of applicable NFPA standards. The magnitude and timing of any costs will vary materially by facility based on factors such as facility size and layout, existing fire protection systems, construction type and age, the specific NFPA editions currently applicable onsite, and whether compliance is triggered by new construction or substantial renovation. Because these variables are facility-specific, depend upon the processes of other state agencies, and the Commission presently lacks comprehensive data necessary to produce a reasonable statewide estimate, the Commission cannot quantify a probable cost range at proposal.

Request for Cost Information. The Commission requests that affected persons submit facility-level cost information (e.g., vendor quotes, recent invoices, inspection/testing costs, and any expected operational impacts) to inform the adoption preamble and the agency record.