Lone Star Gas Co., A Div. of Enserch Corp. v. Railroad Com'n of Texas, 13513

• Citation: 644 S.W.2d 166
• Decision Date: 15 December 1982
• Docket Number: No. 13513,13513
• Parties: LONE STAR GAS COMPANY, A DIVISION OF ENSERCH CORPORATION, Appellant, v. RAILROAD COMMISSION OF TEXAS, Appellee.
• Court: Court of Appeals of Texas

Page 166

644 S.W.2d 166

LONE STAR GAS COMPANY, A DIVISION OF ENSERCH CORPORATION, Appellant, v. RAILROAD COMMISSION OF TEXAS, Appellee.

No. 13513.

Court of Appeals of Texas Austin.

Dec. 15, 1982.

Rehearing Denied Jan. 5, 1983.

David C. Duggins, Clark, Thomas, Winters & Shapiro, Austin, for appellant.

Mark White, Atty. Gen., J. Scott Wilson, Asst. Atty. Gen., Austin, for appellee.

Before PHILLIPS, C.J., and SHANNON and POWERS, JJ.

ON MOTION FOR REHEARING

SHANNON, Justice.

The opinion of this Court handed down on July 7, 1982, is withdrawn and the following opinion is substituted therefor.

Lone Star Gas Company has appealed from the judgment of the district court of Travis County sustaining an order of the Railroad Commission in Gas Utilities Dockets 1718 and 1758 which related to rates for natural gas service supplied by Lone Star within the City of Kaufman and its environs. Appellee is the Commission. This Court will reverse the judgment of the district court.

The underlying economic issue in this appeal concerns the gas company's effort to minimize its claimed economic losses resulting from "regulatory lag" in the decisional process of the Commission. Regulatory lag arises from the loss in revenue experienced by a utility whose rates are in need of upward adjustment during the period between filing an application for a rate increase and the date when rate relief is granted. The longer the time required to process and pass on the application, the greater the revenue loss arising from regulatory lag. Accordingly, the time consumed in processing and deciding a rate case assumes real economic significance. Garfield and Lovejoy, Public Utility Economics, at 266 (1964).

On September 1, 1978, the gas company filed with the City its Statement of Intent to raise its rates. The City thereafter rejected the proposed rates on September 18, 1978. The gas company filed its appeal with the Commission on October 6, 1978. On November 17, 1978, the City and the gas company waived their respective rights to a formal hearing before the Commission. The Commission handed down its final order on February 11, 1980, providing that the rate increase granted the gas company would be effective as of March 8, 1979.

The gas company asserts two points of error claiming the Commission abused its discretion or acted arbitrarily and capriciously in selecting March 8, 1979, as the effective date for the rate increase granted the company by the Commission. Under its points, the gas company, in an effort to compensate for regulatory lag, argues the Commission granted it the minimum rate allowed by law and each day the Commission delayed the effective date of the new rate resulted in confiscation of its property because it was required to operate under the old, allegedly inadequate rate. Since the rate increase was supposedly the absolute minimum, the company then insists that the Commission was required to make the rate increase effective at the earliest possible date. The company invites the Court to investigate the labyrinth of figures and factors necessary in reviewing the validity vel non of a rate order. Such investigation, the company suggests, is necessary to demonstrate that the rate increase granted the company was indeed the absolute minimum allowed by law. We do not regard such an investigation as necessary for the resolution of the appeal.

In our view the sole question for decision is whether the Commission abused its discretion in selecting an effective date for the new rate order. In the final analysis, the Commission defends its order by taking the position that it has discretion to select whatever date it wishes to make the new rate effective. This Court does not agree. The discretion conferred by law upon an administrative agency to set the effective date of a rate order should not be, and is not, an unbridled discretion. In other words, an agency's power to select a time to make effective its order is not absolute.

We are reminded that long ago this Court held in an appeal of this character that the Commission is empowered to make its rate order effective as of the date of the city ordinance denying the request for a rate increase. United Gas Public Service Co. v. State, 89 S.W.2d 1094, 1103 (Tex.Civ.App.1936, writ ref'd). ¹ On the other hand, the parties have not shown us, nor have we discovered, any cases defining the authority of the Commission to make its rate order effective prospectively.

All parties to a rate proceeding, and the public in general, are benefitted by a prompt determination of the rate proceeding. This manifest fact was recognized by the legislature in the enactment of § 16(d) of the Administrative Procedure and Texas Register Act, Tex.Rev.Civ.Stat.Ann. art 6252-13a (Supp.1981). Section 16(d) of the Act provides an agency's "final decision or order must be rendered within 60 days after the hearing is finally closed...." Although § 16(d) has been held to be only directory, Railroad Commission v. City of Fort Worth, 576 S.W.2d 899 (Tex.Civ.App.1979, writ ref'd n.r.e.), the fact remains that the legislature intended § 16(d) to promote the proper, orderly, and prompt conduct of business by the agency. As the agency is directed by § 16(d) to hand down its order sixty days after the hearing is completed, it would seem that the same policy should require that the effective date of the order be no later than the date when the order itself was supposed to be rendered in the absence of a finding by the agency of extraordinary circumstances which justify a later date based upon evidence adduced after notice and an opportunity of the parties to address legal argument to the issue of an effective date.

In this appeal, the Commission's order granted the gas company a rate increase effective March 8, 1979, which was one hundred-ten days after the date on which the parties waived their right to a formal hearing. A formal hearing was not held because the parties agreed to submit the case on prepared testimony and exhibits.

In our view, based upon policy considerations of § 16(d), the last day the Commission may permissibly make the new rate effective in the ordinary case is: (1) sixty days after the date of formal hearing is closed or (2) in stipulated cases, such as this one, sixty days after the date the formal hearing is waived by the parties. The earliest date on which the Commission may authorize increased rates is the date of the city ordinance denying the request for a rate increase. United Gas Public Service Co. v. State, supra, or in those cases where the application for an increased rate is filed originally with the Commission, the earliest date is the date of such filing.

The...