The new rules cap residential and commercial charges for energy conservation programs at $0.20 per Mcf.


New regulations to implement House Bill 2263, state legislation that authorized gas utilities to create ratepayer-supported energy conservation programs, has received final approval.

HB 2263 specifies that local gas distribution companies such as Atmos in the Dallas-Fort Worth area and CenterPoint in Houston can offer energy conservation programs to their residential and commercial customers. The legislation also sets forth rules for cost recovery by utilities.

The Texas Railroad Commission adopted the final rules on March 20 after a public comment period and input from various stakeholders, including the Atmos Cities Steering Committee. As adopted, the rules establish a new section in state law, 16 Texas Administrative Code ยง7.480, that specifically addresses the implementation of Energy Conservation Programs by gas utilities.

The Details

  • The new rules create a cost cap for energy conservation programs, such that the maximum rate for them may not exceed a volumetric charge of $0.20 per Mcf for residential and commercial customers. The rate increase due to an ECP charge would be no more than approximately 1.2 percent of the 2023 average cost of residential gas service in Texas according to the U.S. Energy Information Administration. Various stakeholder groups supported this change.
  • The final adopted rules did not include a cost-effectiveness standard for the conservation programs, although commission staff indicated that they may revisit the issue after the program is up and running. ASCC and other stakeholder groups recommended the inclusion of such a standard.
  • The rules did not include a contested case prudence review of costs, as recommended by consumer and city groups, including the ACSC.
  • The rule included a 120-day deadline in which commission staff must complete its administrative review of an ECP application. This deadline was suggested by ACSC.
  • ACSC asked that the Commission allow program modifications more frequently than once every three years. The Commission pointed to its limited staff resources and said that once every year would not be manageable. However, it agreed with ACSC that once every three years is too infrequent, so the Commission included a provision in the final rule to allow new program applications every other year.
  • The final rule contemplates an annual review of the ECP rate to ensure rates match ECP costs, as suggested by ACSC. Staff will instruct the local distribution company to adjust its ECP rate for the next program year if the rate needs to be adjusted.

The Background

HB 2263 was signed into law by Gov. Greg Abbott on June 12, 2023. Beyond authorizing natural gas distribution companies to provide energy conservation programs to customers, HB 2263 further stipulates that the Railroad Commission possess exclusive original jurisdiction over such programs and that political subdivisions are prohibited from restricting eligible customers from participating in such programs based on energy types. The bill authorizes local distribution companies to recover any program costs approved by the Railroad Commission.

— R.A. Dyer