Through this revision to the Operating Fund rule (24 CFR 990), HUD proposes to codify the changes Section 209(b) of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (Economic Growth Act) made to section 9(e)(2) of the U.S. Housing Act of 1937, as well as make other changes related to energy incentives within the public housing program. These changes allow small, rural Public Housing Agencies (PHAs), as defined in section 209(a) of the Economic Growth Act to elect to be paid for utility and/or waste management costs based on a frozen rolling base methodology (FRB) for a period not to exceed 20 years. In addition, the Housing Opportunity Through Modernization Act of 2016 (HOTMA) amended the U.S. Housing Act of 1937 to allow non-small PHAs to use up to 20 percent of their Operating Funds for Capital Fund purposes. HUD’s changes to the Operating Fund rule will incorporate the FRB and HOTMA provisions and clarify how these provisions will interact with other aspects of the Operating Fund formula. Further, the rule will add flexibilities and efficiencies to PHAs and HUD by making changes to the rate reduction incentive, energy performance contracting administration, and permit PHAs to incorporate the costs of air conditioning in public housing utilities allowances. This rule will also streamline the Operating Fund rule by removing provisions that have been made obsolete with the passage of time.