In re Txu Elec. Co.
| Decision Date | 31 December 2001 |
| Docket Number | No. 01-0547.,01-0547. |
| Parties | In re TXU ELECTRIC COMPANY, Relator. |
| Court | Texas Supreme Court |
David C. Duggins, Clark Thomas & Winters, Austin, Robert A. Wooldridge, Jo Ann Biggs, Howard V. Fisher, Worsham Forsythe Wooldridge, Dallas, for Relator.
Philip F. Ricketts, Bracewell & Patterson, Austin, Kenneth C. Raney, Jr., Dallas, John Cornyn, Atty. Gen., Steven Baron, Karen Watson Kornell, Office of Atty. Gen., Howard G. Baldwin, First Atty. Gen., Jeffrey S. Boyd, Paul D. Carmona, Office of Atty. Gen., Marion Taylor-Drew (Atty. for Public Utility Counsel), Bryan L. Baker, Office of Atty. Gen., Austin, for Respondent.
In this original proceeding, relator is TXU Electric Co. and respondents are the Public Utility Commission and its three members. TXU seeks relief from portions of the Commission's orders requiring TXU to reverse efforts it has undertaken to mitigate its estimated stranded costs as part of the transition to a deregulated, competitive retail market for the sale of electricity in Texas.
Six Members of the Court vote to deny relief for different reasons. Chief Justice Phillips, joined by Justice Enoch and Justice Godbey, would not exercise mandamus jurisdiction because TXU has an adequate remedy at law. Justice Baker, joined by Justice Rodriguez, would hold that the relief TXU seeks is against the Commission, over which the Court has no original mandamus jurisdiction. Justice Brister would hold that the portions of the Commission's orders of which TXU complains do not constitute a clear abuse of discretion. Justice Hecht, joined by Justice Owen and Justice Jefferson, would grant relief.
The petition for writ of mandamus is denied.
Mandamus is an extraordinary remedy available "only in situations involving manifest and urgent necessity and not for grievances that may be addressed by other remedies." Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992). To obtain mandamus relief, the relator must demonstrate a clear abuse of discretion for which there is no adequate remedy at law. Id. at 839-40. A party establishes that no adequate remedy at law exists by showing that the party is in real danger of permanently losing its substantial rights. Canadian Helicopters, Ltd. v. Wittig, 876 S.W.2d 304, 306 (Tex. 1994). Thus, mandamus will not issue absent "compelling circumstances." Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex. 1996). On the record before us, TXU has not shown compelling circumstances for our intervention because it has not established that no adequate remedy is available in the district court. Therefore, I would deny the petition for writ of mandamus.
In 1999, the Legislature amended the Public Utilities Regulatory Act (PURA) to establish competition in the retail market for electricity beginning January 1, 2002, and to "protect the public interest during the transition" to competition. Tex. Util. Code § 39.001(a); City of Corpus Christi v. Pub. Util. Com'n, 51 S.W.3d 231, 237 (Tex.2001). Under deregulation, the incumbent utilities were required to separate their bundled business into three separate enterprises—a generating company, a transmission and distribution company, and a retail electric provider. Tex. Util. Code § 39.051(b). After January 1, 2002, the generating company will own and operate the generating plants, the transmission and delivery company will deliver the electricity over transmission and distribution lines, and the retail electric provider will sell electricity to end-use customers and provide customer service. Because the generating companies and retail electric providers must use the existing power lines to move electricity from the plant to the retail customer's home or business, the transmission and delivery companies will remain regulated monopolies. The generating companies and the retail electric providers will operate in what are intended to be competitive, unregulated markets.
Underpinning the Legislature's decision to restructure the electric power industry was its finding that regulation was no longer warranted, except for regulating transmission of electricity and overseeing the recovery of stranded costs. Although "stranded costs" have a precise, technical definition under chapter 39 of PURA, Tex. Util.Code § 39.251(7), we have generally described them "as the portion of the book value of a utility's generation assets that is projected to be unrecovered through rates that are based on market prices." Corpus Christi, 51 S.W.3d at 238-39. The largest part of stranded costs are attributable to investments in nuclear power plants. Id. at 238. The Legislature, agreeing that incumbent utilities should not have to bear these stranded costs, devised a three-phase program for such utilities to recover these costs in the new, unregulated market.
Under the first phase, ending on December 31, 2001, the Commission froze retail electric rates. Utilities identified as having stranded costs have been allowed to mitigate them through (1) shifting depreciation from the transmission and delivery assets to the generating assets, Tex. Util. Code § 39.256, and (2) keeping earnings in excess of the allowed rate of return to reduce book value. Tex. Util.Code §§ 39.254. Under the second phase, from January 1, 2002, to December 31, 2003, the Commission is to consider remaining stranded costs in setting the "competition transition charge" or "CTC." Tex. Util. Code § 39.201(b)(3). The CTC is intended to cover the utilities' stranded costs through collection from every customer taking power over the utility's transmission and delivery system, thus making up the difference between a generating plant's book value and its market value. Under the final phase, actual stranded costs are to be calculated in a "true-up" proceeding beginning January 2004. This "true-up" is based on market valuations of the utilities' generation assets. Tex. Util. Code §§ 39.201(l), 39.262. If stranded costs remain, the Commission can extend the CTC collection period or increase the charge. Tex. Util.Code § 39.201(l). Conversely, if mitigation efforts and the CTC have overcompensated the utility, the Commission is authorized to make other adjustments. Tex. Util.Code § 39.201(l)(1)-(4).
Consistent with the statutory scheme, on March 31, 2000, the Commission instituted separate contested case proceedings to consider applications filed by each of the nine incumbent electric utilities in Texas. Because the nine dockets shared many of the same legal and policy issues, the Commission concluded that a supplemental generic proceeding would be the most efficient method for resolving these common issues. Common issues resolved in the generic docket were then applied in each individual docket.
To fulfill the statute's mandates, the Commission segmented each individual docket into four phases. In Phase I, the Commission conducted a hearing on the business separation plan through which the utility proposed to divide itself into a power generation company, a transmission and delivery company, and an affiliated retail electric provider. In Phase II, the Commission conducted a hearing to project the amount of the utility's stranded costs when retail competition begins on January 1, 2002. Tex. Util.Code § 39.201(g). In Phases III and IV, the Commission conducted hearings to determine the actual rates the transmission and delivery company could charge retailers.
The Legislature provided that those utilities the Commission identified as having potentially stranded costs in an April 1998 Report to the Texas Senate Interim Committee on Electric Utility Restructuring (1998 ECOM Report) should use mitigation tools to reduce these potential costs. Tex. Util.Code § 39.254. In this report, the Commission estimated that TXU had potentially two billion dollars in stranded costs, created primarily by TXU's investment in the Comanche Peak nuclear plant. Based on this estimate, TXU began mitigation efforts by shifting depreciation from transmission and delivery assets to generating assets and by applying excess earnings to reduce book value. See Tex. Util. Code §§ 39.254, 39.256.
Before setting rates the transmission and delivery company could charge in 2002, the Commission updated the 1998 ECOM Report in 2001 and concluded that market forces, particularly the surge in natural gas prices, had dramatically impacted TXU's projected stranded costs. Under the new update, the Commission estimated that TXU now had negative stranded costs in excess of two billion dollars. In other words, TXU's investment in the Comanche Peak nuclear plant, once a liability, had now become profitable because the cost of generating electricity from natural gas plants exceeded that of generating electricity from nuclear plants.
Consumers and retail electric providers, who had intervened in the proceeding to determine the cost of service rates for the unbundled transmission and delivery companies, argued that because TXU's and certain other utilities' updated stranded cost estimates were negative, the Commission should make adjustments for excess mitigation costs when setting transmission and delivery charges. TXU argued that the Commission had no authority to revise its stranded cost estimates because the statute did not authorize the Commission to update the 1998 ECOM Report except for CTC setting purposes or to revisit the mitigation issue until the true-up proceeding in 2004. The Commission disagreed; and...
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