(a) All lost and unaccounted for gas shall be presumed to be lost gas unless the portion represented by unaccounted for gas, including but not limited to losses to company used gas, liquids extraction, and meter errors due to inaccurate calibration or temperature and pressure fluctuations, is proven by a preponderance of the evidence in a given ratemaking proceeding.
(b) All expenses for lost gas in excess of the maximum allowable shall be disallowed for ratemaking purposes.
  (1) The maximum allowable for a distribution system is 5.0% of the amount metered in, and the maximum allowable for a transmission system is 3.0% of the amount metered in, except as provided in subsection (c) of this section.
  (2) The calculation of the percentage of lost and unaccounted for gas shall be based on an annual period. Notwithstanding the choice of test year for other aspects of ratemaking, and unless a more appropriate period can be demonstrated by a preponderance of the evidence in a given ratemaking proceeding, the annual period ends June 30, and is the most recent such period for which data are available.
(c) The Commission may allow a greater percentage of lost gas than that specified in subsection (b) of this section based on special facts and circumstances including, where appropriate, the cost of effecting a reduction of the actual amount of lost gas, as may be demonstrated in a given ratemaking proceeding.
(d) Nothing in this section shall be construed to limit the Commission's authority to evaluate the reasonableness of gas expense figures, including those for unaccounted for gas, and incorporating that evaluation into its rate setting orders.

Source Note: The provisions of this §7.5525 adopted to be effective July 29, 2002, 27 TexReg 6687