1. (a) Definitions.

   1. (1) Gross plant--The original cost of a gas utility's investment in plant, facilities, or equipment that has been placed in service and is used and useful.
   2. (2) Post in-service carrying costs--The product of unrecovered gross plant multiplied by a monthly interest rate equal to one-twelfth of a gas utility's pretax weighted average cost of capital established in the Commission's final order in the gas utility's most recent rate case until recovery in rates.
   3. (3) Unrecovered gross plant--Gross plant whose cost is not yet being recovered in a gas utility's rates and not already being deferred to a regulatory asset.
   4. (4) Unrecovered gross plant regulatory asset--A regulatory asset as authorized by §104.302, Utilities Code and this section.

2. (b) Deferral of certain costs associated with gross plant.

   1. (1) A gas utility shall only defer for future recovery in rates the following costs in an unrecovered gross plant regulatory asset:

      1. (A) post in-service carrying costs;
      2. (B) depreciation associated with the unrecovered gross plant (if depreciation expense associated with the unrecovered gross plant is included in the unrecovered gross plant regulatory asset, the unrecovered gross plant used for purposes of calculating post in-service carrying costs shall be reduced by the associated accumulated depreciation that is deferred); and
      3. (C) ad valorem taxes associated with the unrecovered gross plant.
   2. (2) An unrecovered gross plant regulatory asset shall be included in the Commission's interim rate adjustment cost recovery mechanism under §7.7101 of this title (relating to Interim Rate Adjustments) or in a rate case filed by the gas utility or initiated by the regulatory authority and calculated for the period from the in-service date of the unrecovered gross plant.
   3. (3) A gas utility that defers for recovery an unrecovered gross plant regulatory asset shall include in its interim rate adjustment filing made pursuant to §7.7101 of this title or in a rate case filed by the gas utility or initiated by the regulatory authority a workpaper, with formulas intact, on a form approved by the Commission and found in the Gas Services' section of the Commission's website. The workpaper shall include the gas utility's calculation of the unrecovered gross plant regulatory asset balance to be recovered in rates calculated through the end of the interim rate adjustment calendar year or test year in a rate case. The calculation shall include depreciation expense, associated accumulated depreciation, ad valorem tax, and post in-service carrying costs.

3. (c) Review by the Commission in a general rate proceeding.

   1. (1) Any costs included in a regulatory asset authorized under this section shall be fully subject to review for reasonableness and prudence by the Commission.
   2. (2) If the Commission by order disallows unrecovered gross plant regulatory asset costs that were previously recovered through rates established in the Commission's interim rate adjustment cost recovery mechanism under §7.7101 of this title, the disallowed costs are subject to refund with interest. Interest shall be calculated at the gas utility's pre-tax weighted average cost of capital.
4. (d) Accounting adjustments. Upon inclusion of an unrecovered gross plant regulatory asset in the Commission's interim rate adjustment cost recovery mechanism under §7.7101 of this title or in a rate case filed by the gas utility or initiated by the regulatory authority, the gas utility shall make appropriate accounting adjustments to its books and records, in accordance with §7.310 (relating to System of Accounts), to reflect the recovery in rates.

Source Note:The provisions of this §7.7102 adopted to be effective March 16, 2026, 51 TexReg 1628.