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October 4, 2005

via EDGAR Transmission

Mr. Anthony Watson

Staff Accountant

Securities and Exchange Commission

450 Fifth Street, N.W

Washington, D.C. 20549-0405

Re:                             Cap Rock Energy
Corporation

Form 8-K filed August 30, 2005

File No. 0-32667

Dear Mr. Watson:

On behalf of the Company, we have set forth below the Company’s
responses to the comments of the Staff of the Securities and Exchange
Commission, dated September 1, 2005, regarding the Company’s Form 8-K
filed August 30, 2005.  For your
convenience, each response follows the sequentially numbered Staff comment
copied in bold from your letter.  We have
filed amendments to the Company’s Form 10-K for the year ended December 31,
2004, its Form 10-Q for the quarter ended March 31, 2005, and a Form 10-Q
for the quarter ended June 30, 2005, which discuss the questions raised by
the Staff in comments 1 and 2.  In our
responses to the Staff’s questions, we have included language from the filings
which address the questions.

1.                                      Please
tell us if your certifying officers have considered the effect of the error on
the adequacy of your disclosure controls and procedures as of the end of the
period covered by your Forms 10-K and 10-Q for the periods ended December 31,
2004 and March 31, 2005.

The Company’s certifying officers have considered the effect of the
error on the adequacy of the Company’s disclosure controls and procedures.  Item 9(a) of Part II of Amendment No. 2
to the Company’s Annual Report on Form 10-K/A for the year ended December 31,
2004, Item 4 of Part I of Amendment No. 1 to the quarterly Report on Form 10-Q
for the period ended March 31, 2005, and the Quarterly Report on Form 10-Q
for the period ended June 30, 2005, disclose the circumstances, the
identification of the issue, resolution of the matter and subsequent changes in
internal control.

The aforementioned items in each of the documents are nearly identical:

Disclosure
Controls and Procedures.  We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in reports under the Securities Exchange
Act of 1934, as amended, are recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms, and that
such information is accumulated and communicated to management, including our
chief executive officer and chief financial officer, as appropriate, to allow
timely decisions regarding required disclosures.  Our internal control system is designed to
provide reasonable assurance regarding the preparation and fair presentation of
published financial statements.  All
internal control systems are designed based in part upon certain assumptions
about the likelihood of future events, and, no matter how well designed, have
inherent limitations.  Therefore, even
those systems determined to be effective can provide only reasonable assurance
with respect to financial statement presentation and may not prevent or detect
all misstatements.

During the period covered by this report, the Company’s
chief executive officer and chief financial officer, after evaluating the
effectiveness of the Company’s “disclosure controls and procedures” (as defined
in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e))
as of December 31, 2004, (the “Evaluation Date”), had concluded that as of
the Evaluation Date, the Company’s disclosure controls and procedures (as
required by paragraph (b) of the Securities Exchange Act of 1934 Rules 13a-15
or 15d-15) were effective.

Restatement
of Previously Issued Consolidated Financial Statements.  Subsequent to the Evaluation Date,
it was determined that certain tax
positions maintained by the Company through its conversion from an electric
cooperative to an investor owned utility, might not be correct.   In connection with that change
in corporate status, the Company had independent professional consultants
evaluate the corporate structure of the Company and its subsidiaries.  Based on that review, the Company believed
the subsidiary would continue to qualify as a tax exempt cooperative.  Therefore, the Company treated the subsidiary
as tax exempt for both financial and tax reporting purposes.  Recently, in connection with an unrelated
project, the tax structure of the subsidiary was reviewed and issues arose
concerning its exempt status.  Because of
the complex nature of the issue, the Company is seeking guidance from the
Internal Revenue Service regarding the taxable nature of the subsidiary.  As a result of the Company’s identification
of the issue, on August 24, 2005, Management and the Audit Committee
concluded, after consultation with its independent accountants, that the
Company would amend and restate its Annual Report on Form 10-K for the
year ended December 31, 2004, to treat the subsidiary as a taxable entity
for financial reporting purposes.  The
Company had generated net operating losses in earlier periods that would be
used to offset the taxable nature of the subsidiary.

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The use of the net operating losses, earlier
than expected, may result in taxes payable that are greater than originally
disclosed.

After reviewing the circumstances leading to
the issue discussed above, it has been determined that there was a material weakness in
the Company’s internal controls over financial reporting.  The weakness concerned reliance on the
opinions of the Company’s outside professionals, and controls surrounding
procedures associated with issues and positions proposed by outside
professional consultants that are adopted by the Company.   The Company’s chief executive officer and
chief financial officer have concluded that the Company’s disclosure controls
and procedures over financial reporting were not effective at December 31,
2004, to enable the Company to record, process, summarize and report
information required to be included in the Company’s SEC filings within the
required time period, and to ensure that such information is accumulated and
communicated to management, including our chief executive officer and chief
financial officer, to allow timely decisions regarding required disclosure.

Changes in
Internal Control over Financial Reporting.  There were no changes in the Company’s
internal control over financial reporting in connection with the evaluation
required by paragraph (d) of the Securities Exchange Act of 1934 Rules 13a-15
or 15d-15, that occurred during the quarter ended December 31, 2004, that
materially affected, or that were reasonably likely to materially affect, the
Company’s internal control over financial reporting.

Subsequent to the identification of the tax matter
discussed above, Management determined that it would implement additional
procedures for evaluating issues and positions proposed by independent
professional consultants that are adopted by the Company.  These procedures include formalizing the
process for adoption of any outside professional opinion; if a question arises
as to the position taken, notification to executive management and the Audit
Committee; and seeking further professional opinions and/or guidance.  The Company’s management has implemented
these additional controls surrounding procedures associated with issues and
positions proposed by outside professional consultants that are adopted by the
Company, and believe that the controls now in place are adequate to assure that
similar errors will not recur.

2.                                      Please
tell us how you concluded that your subsidiary no longer qualified for
exemption from income taxes.  A
discussion of facts surrounding the circumstances of how you originally concluded
that the subsidiary should not be taxed might be helpful in this regard.

Item 9(a) of Part II of Amendment No. 2 to the Company’s
Annual Report on Form 10-K/A for the year ended December 31, 2004,
Item 4 of Part I of Amendment No. 1 to the quarterly Report on Form 10-Q
for the period ended March 31, 2005, and the Quarterly Report on Form 10-Q
for the period ended June 30, 2005, disclose the circumstances and

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identification of the issue.  The
language of each of those sections is nearly identical and is provided in
response to Question 1.

We acknowledge that we are responsible for the adequacy and accuracy of
the disclosure in our filings with the Commission, that Staff comments or
changes to disclosure in response to Staff comments in the filings reviewed by
Staff do not foreclose the Commission from taking any action with respect to
such filings, and that the Company may not assert Staff comments as a defense
in any proceeding initiated by the Commission or any person under the federal
securities laws of the United States.

If you have any questions concerning the foregoing, please do not
hesitate to contact me at 432-684-0307.

  Sincerely,

  Celia B. Page

  Vice President, Chief Accounting Officer,

  Assistant Secretary/Treasurer and
  Controller

  cc:

  David W. Pruitt, Cap Rock Energy
  Corporation

  Richard Terrill, Esq.

  Darin Kempke, KPMG LLP

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