(a) General requirements. Pursuant to Texas Utilities Code, §104.301, a gas utility may file with the Commission an application for an interim rate adjustment, subject to the requirements of this section. The director may reject any filing that, at the time of filing or within a reasonable time afterward, does not substantially comply with the requirements of this section.
  (1) The filing date of the gas utility's most recent rate case in which there is a final order setting rates for the area in which the interim rate adjustment will apply shall be no more than two years prior to the date the gas utility files its initial interim rate adjustment application under this section. The gas utility shall state in its application the gas utilities docket number of the gas utility's most recent rate case.
  (2) A gas utility shall file its application for interim rate adjustment with the Commission at least 60 days before the proposed implementation date of the interim rate adjustment.
  (3) A gas utility shall complete notice of its application for interim rate adjustment to all affected customers in accordance with subsection (b) of this section no later than the 45th day after the date the gas utility files its application for interim rate adjustment.
  (4) An application for interim rate adjustment is complete on the date the gas utility has filed at the Commission all information required by this section.
  (5) A gas utility shall not implement its requested interim rate adjustment until the later of:
    (A) the 60th day after the filing is complete;
    (B) the day after the utility completes notice to customers; or
    (C) the day after the last day of a suspension period imposed pursuant to paragraph (6) of this subsection.
  (6) During the 60-day period following a gas utility's filing of an application for interim rate adjustment, the director may suspend the implementation of the interim rate adjustment for a period of up to 45 days from the later of:
    (A) the 60th day after the gas utility's application is complete;
    (B) the proposed implementation date; or
    (C) the day after the utility completes notice to customers.
(b) Notice. The utility shall print the notice of its application for an interim rate adjustment in type large enough for easy reading. The notice shall be the only information contained on the piece of paper on which it is written. A gas utility may give the notice required by this section either by separate mailing or by mailing or otherwise delivering the notice with its billing statements. Notice by mail shall be presumed to be complete three days after the date of deposit of the paper upon which it is written, enclosed in a post-paid, properly addressed wrapper, in a post office or official depository under the care of the United States Postal Service. The notice to customers shall include the following information:
  (1) a description of the proposed revision of rates and schedules;
  (2) the effect the proposed interim rate adjustment is expected to have on the rates applicable to each affected customer class and on an average bill for each affected customer class;
  (3) the service area or areas in which the proposed interim rate adjustment would apply;
  (4) the date the proposed interim rate adjustment was or will be filed with each other regulatory authority;
  (5) the gas utility's address, telephone number, and web site where information concerning the proposed interim rate adjustment may be obtained; and
  (6) a statement that any affected person may file written comments or a protest concerning the proposed interim rate adjustment with Gas Services, Market Oversight Section, Railroad Commission of Texas, P.O. Box 12967, Austin, Texas 78711-2967.
(c) Contents of application. A gas utility shall submit a signed original and two copies of the following information with Gas Services as the utility's application for interim rate adjustment:
  (1) a copy of the notice to customers and an affidavit stating the method of giving notice and the date or dates on which the notice was or will be given;
  (2) a tariff or rate schedule or schedules;
  (3) an annual project report, as more specifically described in subsection (d) of this section;
  (4) an annual earnings monitoring report, as more specifically described in subsection (e) of this section; and
  (5) the gas utility's business address, telephone number, and, if applicable, facsimile transmission number and/or e-mail address.
(d) Annual project report. A gas utility seeking to implement an interim rate adjustment shall electronically file with the Commission an annual project report as part of the application.
  (1) The annual project report shall be made on a form approved by the Commission and found in the Gas Services section of the Commission's website.
  (2) The annual project report shall describe by jurisdictional area:
    (A) the gas utility investment projects completed and placed in service during the preceding calendar year;
    (B) the gas utility investment retired or abandoned during the preceding calendar year; and
    (C) the cost of, need for, and customers, by class and location, benefitted by the change(s) in gas utility investment projects.
  (3) Similar investment projects, such as service lines or small tools that the gas utility normally accounts for on a group basis, may be reported as a single investment project.
(e) Annual earnings monitoring report. A gas utility seeking to implement an interim rate adjustment shall electronically file with the Commission an annual earnings monitoring report as part of the application.
  (1) The annual earnings monitoring report shall be made on a form approved by the Commission and found in the Gas Services section of the Commission's website.
  (2) The annual earnings monitoring report shall demonstrate the utility's earnings during the preceding calendar year. A gas utility whose annual earnings monitoring report shows that the utility is earning a return on invested capital of more than 75 basis points above the return established by Commission final order setting rates in the utility's most recent rate case for the area in which the interim rate adjustment was implemented shall include with its annual earnings monitoring report a statement of the reasons the rates are not unreasonable or in violation of law.
(f) Methodology for interim rate adjustments. Approval of a gas utility's application for interim rate adjustment is subject to the requirements of this subsection.
  (1) The components of the revenue to be recovered through an interim rate adjustment shall be limited to those set forth in this subsection. The revenue to be recovered through an interim rate adjustment shall be incremental to that established in the gas utility's most recent rate case for the area in which the interim rate adjustment is to be implemented, as previously adjusted.
  (2) All incremental values for investment, accumulated depreciation, return on investment, depreciation expense, ad valorem taxes, revenue related taxes, and incremental federal income taxes shall be calculated and presented on a full calendar year basis, except as provided in paragraph (3) of this subsection.
  (3) The amount by which the gas utility may adjust its rates upward or downward using the interim rate adjustment for each calendar year is based on the difference between the value of the gas utility's invested capital for the preceding calendar year and the value of the invested capital for the calendar year preceding that calendar year; except for a gas utility's first interim rate adjustment application following a rate case and except for amounts that can be collected by the utility under Texas Utilities Code, §104.112. For the first interim rate adjustment following a rate case, the allowed adjustment shall be based on the difference between the gas utility's invested capital at the end of the rate case test year and the invested capital at the end of the calendar year following the end of such test year. The value of the gas utility's invested capital is equal to the original cost of the investment at the time the investment was first dedicated to public use minus the accumulated depreciation related to that investment.
  (4) Based on the difference between the values of the investment amounts as determined under paragraphs (2) and (3) of this subsection, a gas utility may adjust its revenue only by the following components:
    (A) return on investment;
    (B) depreciation expense;
    (C) ad valorem taxes;
    (D) revenue related taxes; and
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