Gulf States Utilities Co. v. Coalition of Cities for Affordable Utility Rates

• Decision Date: 31 August 1994
• Docket Number: No. 3-92-046-CV,3-92-046-CV
• Citation: 883 S.W.2d 739
• Parties: GULF STATES UTILITIES COMPANY, Office of Public Utility Counsel, and Public Utility Commission, Appellants, v. COALITION OF CITIES FOR AFFORDABLE UTILITY RATES, et al., Appellees.
• Court: Texas Court of Appeals

Page 739

883 S.W.2d 739

GULF STATES UTILITIES COMPANY, Office of Public Utility Counsel, and Public Utility Commission, Appellants, v. COALITION OF CITIES FOR AFFORDABLE UTILITY RATES, et al., Appellees.

No. 3-92-046-CV.

Court of Appeals of Texas Austin.

Aug. 31, 1994.

Rehearing Overruled Oct. 12, 1994.

John Williams, Barry Bishop, Clark, Thomas, Winters & Newton, Austin, for Gulf States Utilities Co.

Stephen Fogel, Office of Public Utility Counsel, Dan Morales, Atty. Gen., Susan Bergen Schultz, Asst. Atty. Gen., Austin, for Public Utility Com'n.

Geoffrey M. Gay, Butler, Porter, Gay & Day, Austin, for Cities of Beaumont, Bevil Oaks, Bridge City, China Groves, Nederland, Nome, Orange, Port Arthur, Port Neches, Rose City, Silsbee, Sour Lake and Vidor.

Jim Boyle, Boyle & Bender, Austin, for Coalition of Cities for Affordable Utility Rates.

Charles L. Lacallade, Brown & Lacallade, P.C., Austin, for North Star Steel Tex., Inc.

Jonathan Day, Major, Day, Caldwell & Keeton, L.L.P., Houston, for Tex. Indus. Energy Consumers.

Before POWERS, ABOUSSIE and B.A. SMITH, JJ.

ON SECOND MOTION FOR REHEARING

BEA ANN SMITH, Justice.

We withdraw the opinion and judgment of this Court dated May 25, 1994, and substitute the following in its place.

The Public Utility Commission of Texas, the Office of Public Utility Counsel, and Gulf States Utilities Company appeal from a district-court judgment rendered in a suit for judicial review of the Commission's final order in an electric-utility rate case conducted under the Public Utility Regulatory Act (PURA), Tex.Rev.Civ.Stat.Ann. art. 1446c (West Supp.1994). ¹ The district-court judgment reverses the Commission's final order and remands the case to the Commission with instructions. We will affirm the district-court judgment in part, reverse it in part, and render judgment affirming the Commission's order. See Administrative Procedure Act ("APA"), Tex.Gov't Code Ann. §§ 2001.174, .901(a) (West 1994); Tex.R.App.P. 80(b). ²

THE CONTROVERSY

Gulf States erected a new power-generating facility, the River Bend Nuclear Generating Station, and initiated in the Commission a contested case seeking the agency's adjudication regarding what portion of its total construction costs the utility might include in its rate base as being a "prudent" investment. ³ The Commission consolidated that proceeding with a rate case Gulf States had filed in the agency. The consolidated case is now before us following the Commission's final order and the district court's judgment on judicial review of that order.

The Commission determined in its final order that Gulf States was entitled to include in its rate base $2.273 billion of its construction costs on the River Bend project, that being the portion of total costs meeting the criterion of a prudent investment. The Commission also found the Gulf States failed to meet its burden of proving that capital costs "above a reasonable Definitive Cost Estimate of $2.273 billion were reasonably and prudently incurred." Conclusion of Law 18A. The Commission's final order declared that the agency would not presently include an additional $1.453 billion in rate base as a prudent investment. However, the Commission declared it would "reexamine on rehearing or in a subsequent proceeding the prudence and reasonableness of those River Bend construction costs regarding which the evidence is inadequate to support a finding of either prudence or imprudence."

Various parties filed their motions for rehearing in the Commission. See APA § 2001.145. These were overruled by operation of law. Several parties then sued in district court, as authorized by PURA section 69, seeking direct judicial review of the Commission's final order. Concurrently, Gulf States filed in the Commission a new contested case to address the $1.453 billion not included in rate base in the previous order.

COLLATERAL ATTACK

Almost before direct judicial review began, the Office of Public Utility Counsel and twelve municipalities sued the Commission in district court in a cause independent of the various suits for judicial review brought under PURA section 69. These plaintiffs prayed for declaratory judgment that the Commission lacked the power to reconsider, in a separate contested case, the prudence of the $1.453 billion expenditure which had already been considered in this proceeding. An action taken by an administrative agency in excess of its statutory powers is the well-recognized exception to the general rule that an agency's final order, like the final judgment in a court of justice, is immune from collateral attack. ⁴ Westheimer Indep. Sch Dist. v. Brockette, 567 S.W.2d 780, 785-87 (Tex.1978). Ancillary to their suit for declaratory relief, these plaintiffs requested a permanent injunction restraining the Commission from conducting any further proceedings addressing the prudence of the $1.453 billion expenditure. The district court granted the permanent injunction after trial. ⁵

The plaintiffs ultimately prevailed in their collateral attack upon that part of the Commission's order which purported to defer until a subsequent proceeding an adjudication regarding the $1.453 billion. Coalition of Cities for Affordable Util. Rates v. Public Util. Comm'n, 798 S.W.2d 560 (Tex.1990), cert. denied, 499 U.S. 983, 111 S.Ct. 1641, 113 L.Ed.2d 736 (1991). The parties' competing arguments in the present appeal rest largely upon their conflicting interpretations of the supreme court's opinion in Coalition of Cities. We should therefore address that opinion before proceeding further.

In Coalition of Cities, the supreme court gave the following rationale in sustaining the plaintiffs' collateral attack:

1. The Commission's order in the rate case consolidating docket numbers 7195 and 6755 constituted a final adjudication of the amount of River Bend capital costs prudently and reasonably incurred; that amount excluded $1.453 billion because Gulf States had failed to bear its burden of proof as to the prudence of those expenditures. ⁶

2. The Commission lacked the statutory power to revisit its determination concerning the prudence of the $1.453 billion expenditure. ⁷

3. Therefore, the Commission exceeded its statutory power in concluding that it could reexamine in a future agency proceeding the prudence of the costs on which Gulf States had failed to bear its burden of proof--the $1.453 billion expenditure. ⁸

4. All parties had a legal right to a straightforward adjudication, in the original rate case, regarding the prudence of the $1.453 billion expenditure. ⁹

5. By its decision in the collateral attack, the supreme court did not intend to bar Gulf States' legal right to a fair adjudication of the prudence issue or to restrict the scope of judicial review of that adjudication. ¹⁰

Upon this reasoning, the supreme court reversed the judgment of this Court and affirmed the district court's order that permanently restrained the Commission from proceeding with a new contested case initiated by Gulf States. To underscore the importance of the Coalition of Cities opinion to the outcome of this appeal, we note that the dissent arrives at its result based on its contradictory reading of that decision. The dissent insists that the prudence of the $1.453 billion of construction costs has never been finally adjudicated. Gulf States Utils. Co. v. Coalition of Cities for Affordable Util. Rates, 883 S.W.2d 739, 757 (Tex.App.--Austin 1994, no writ h.) (Powers, J., dissenting). This view was the basis for our earlier decision in Coalition of Cities; we reversed the trial court's injunction, holding that the principles of res judicata were inapplicable because the Commission, by deferring its consideration, had never finally adjudicated the prudence of the $1.453 billion. Public Util. Comm'n v. Coalition of Cities for Affordable Util. Rates, 777 S.W.2d 814, 817 (Tex.App.--Austin 1989), rev'd, Coalition of Cities for Affordable Util. Rates v. Public Utility Commission of Texas, 798 S.W.2d 560 (Tex.1990). The supreme court reversed, basing its decision on the principles of res judicata. As both courts recognized, res judicata principles would not apply unless there had been a final adjudication concerning the $1.453 billion. Coalition of Cities, 798 S.W.2d at 564. There can be no dispute: the supreme court held that the matter has been finally adjudicated by the Commission. "More importantly, the PUC order must be considered final unless the PUC has statutory power to defer and reconsider." Id. The supreme court then ruled that the Commission exceeded its statutory authority in attempting to postpone its decision, and concluded, "Once the order in the initial docket became final, it was not subject to any further PUC review." Id. at 565. The dissent dismisses this language as mere dicta, ignoring that the finality of the Commission's adjudication was the very basis for the trial court's injunction and the supreme court's final ruling in Coalition of Cities, notwithstanding our intermediate decision holding otherwise. To insist now that this Court was right and the supreme court was wrong is to disregard the authority of the high court to whose decisions we are obliged to defer.

THE DISTRICT-COURT JUDGMENT

Being thus advised by the supreme court's judgment in Coalition of Cities, the district court, in reviewing the agency's action in the original rate case, (1) reversed the Commission's final order on an unstated ground, and (2) remanded the rate case to the Commission with an instruction directing the agency to "exclude from rate base the relevant statutory-law expenses" and another instruction forbidding the agency to "reduce rate base by $1.50 for each $1.00 of interim rate revenues collected." We have not yet discussed these two instructions. They pertain to issues raised in the appeals taken by the Commission and the Office of Public Utility Counsel. For the present, we need only note that the instructions...