PUBLIC UTILITY COM'N v. Cities of Harlingen

• Citation: 311 S.W.3d 610
• Decision Date: 27 May 2010
• Docket Number: No. 03-08-00793-CV.,03-08-00793-CV.
• Parties: PUBLIC UTILITY COMMISSION OF TEXAS; and Electric Transmission Texas, LLC, Appellants, v. CITIES OF HARLINGEN, McAllen, Mission, Port Lavaca, Rockport, and Victoria; State of Texas; and Texas Industrial Energy Consumers, Appellees.
• Court: Texas Court of Appeals

311 S.W.3d 610

PUBLIC UTILITY COMMISSION OF TEXAS; and Electric Transmission Texas, LLC, Appellants, v. CITIES OF HARLINGEN, McAllen, Mission, Port Lavaca, Rockport, and Victoria; State of Texas; and Texas Industrial Energy Consumers, Appellees.

No. 03-08-00793-CV.

Court of Appeals of Texas, Austin.

March 26, 2010.

Rehearing Overruled May 27, 2010.

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David C. Duggins, Patrick J. Pearsall, Kerry McGrath, Clark, Thomas & Winters, P.C., Douglas Fraser, Assistant Attorney General, Environmental Protection & Administrative Law Division, Austin, TX, for Appellants.

Bryan L. Baker, Assistant Attorney General, Consumer Protection Division, Philip G. Oldham, Tammy A. Cooper, Lino Mendiola, Andres Kurth, L.L.P., Thomas L. Brocato, Lloyd, Gosselink, Rochelle & Townsend, P.C., Austin, TX, for Appellees.

Before Justices PATTERSON, PURYEAR and WALDROP.

OPINION

G. ALAN WALDROP, Justice.

This case involves an administrative appeal challenging an order of the Public Utility Commission of Texas approving the application of Electric Transmission Texas, LLC (ETT) for regulatory approval of (1) ETT's formation transactions, (2) the transfer to ETT of certain transmission equipment held under another utility's certificate of convenience and necessity (CCN), and (3) ETT's initial rates. Prior to the administrative proceeding, ETT did not possess a CCN under which it could provide service to the public as an electric utility pursuant to the Public Utility Regulatory Act (PURA).¹ Following the Commission's order, ETT was approved to become an electric utility that provided only transmission-related services.

The district court found that the Commission exceeded its statutory authority by granting a CCN to ETT, and reversed the Commission's order. The district court also found that the Commission erred by denying the municipalities that had intervened in the proceeding any of their expenses, and the court remanded the case to the Commission for a redetermination of the municipalities' reasonable expenses pursuant to PURA section 33.023.

The Commission and ETT appeal the district court's judgment. We hold that the Commission acted within its statutory authority in granting a CCN to ETT, and in approving the transfer to ETT of rights obtained under a CCN pursuant to PURA section 37.154 without requiring compliance with the provisions of section 37.056. We also hold that the Commission's approval of the underlying formation transactions is supported by substantial evidence. However, we conclude that the Commission erred in determining that it was prohibited from granting the intervening municipalities reimbursement of their reasonable expenses. Consequently, we affirm the judgment of the district court as to its remand of the case for the Commission's reconsideration of whether to reimburse the municipalities for their expenses, and we reverse the remainder of the judgment of the district court and render judgment that the Commission's final order is otherwise affirmed.

Factual and Procedural Background

ETT filed an application with the Public Utility Commission in January 2007, seeking regulatory approvals needed to commence operations. ETT sought to become an electric utility whose activities would be limited to acquiring, constructing, owning, and operating transmission facilities within the state overseen by the Electric Reliability Council of Texas (ERCOT). Transmission for purposes of this proceeding involves transporting electricity over power lines at higher voltage. ETT would be owned in equal 50% shares by subsidiaries of American Electric Power Company, Inc. and MidAmerican Energy Holdings Company. American Electric Power's investment was to include the transmission assets to be transferred, which had been constructed and were operated by its subsidiary AEP Texas Central Company (TCC) under an existing CCN, and MidAmerican was to contribute a comparable amount of cash to capitalize the venture. The facilities and related rights that would initially be transferred, subject to ETT's application, were not yet in TCC's rates.

ETT applied to the Commission for a CCN to provide service as an electric utility in Texas, see Tex. Util.Code Ann. § 37.051(a) (West 2007), for approval of the transactions to form, capitalize, and structure ETT, see id. § 14.101 (West 2007), and for approval of ETT's initial rates for transmission service, see id. § 36.001 (West 2007).² Appellees—the Cities of Harlingen, McAllen, Mission, Port Lavaca, Rockport, and Victoria (the "Cities"), Texas Industrial Energy Consumers (TIEC), and the State of Texas— separately intervened in the proceeding, contesting portions of ETT's application.

On December 21, 2007, the Commission on rehearing issued its final order on ETT's application. The Commission found that the PURA contemplates the certification of a utility providing only transmission services. The Commission also found that, although ETT had originally requested a CCN in its application pursuant to PURA section 37.056, which governs the grant of a CCN, see id. § 37.056 (West 2007), it was more appropriate to apply PURA section 37.154, which governs the transfer of a CCN, see id. § 37.154 (West 2007). The Commission then granted ETT's application for the transfer to ETT of TCC's right to operate the initial facilities under the existing CCN in accordance with section 37.154, and approved ETT's formation transactions as in the public interest taking into consideration the factors set out in PURA section 14.101. In addition, the Commission set ETT's initial rates, granted ETT's request for expense reimbursement, and denied the Cities' request for reimbursement of their expenses incurred in connection with the proceeding.³

Appellees the Cities, TIEC, and the State separately sought review of the Commission's order in district court, and the causes were consolidated by request of the parties. ETT intervened in the case in support of the Commission's final order. Appellees challenged the transfer of the CCN by asserting that a utility which provides only transmission services and, therefore, which has no certificated service area cannot obtain a CCN under the PURA, that a utility without a preexisting CCN cannot receive by transfer rights obtained under another utility's CCN unless the requirements of PURA section 37.056 are satisfied, and that approval of the transfer under section 37.154 despite the application's citing only sections 37.051 and 37.056 was a violation of appellees' right to due process and was outside of the Commission's subject-matter jurisdiction. Appellees also challenged the approval of ETT's formation transactions, asserting that the Commission's determination that the transactions satisfied PURA section 14.101 was not supported by substantial evidence. Lastly, the Cities challenged the Commission's denial of their request for reimbursement of expenses.

On October 8, 2008, the district court issued its judgment in favor of appellees, reversing the Commission's order. The judgment contains the following findings:

(1) the primary issues the Court considered in issuing this Order relate to questions of statutory construction and procedural due process and are therefore reviewed de novo;

(2) the Public Utility Commission ("PUC") exceeded its statutory authority by granting Electronic sic Transmission Texas, LLC ("ETT") a certificate of convenience and necessity ("CCN") pursuant to the Public Utility Regulatory Act, Tex. Utilities Code § 37.154 ("PURA") instead of analyzing the request for a CCN pursuant to PURA §§ 37.051 and 37.056, the relevant statutes;

(3) the PUC violated the Plaintiffs' due process rights when it granted ETT a CCN based on PURA § 37.154 when such basis was not pled or raised by the PUC or ETT until after the close of evidence below;

(4) the PUC exceeded its statutory authority and lacked subject matter jurisdiction by granting ETT a CCN based on PURA § 37.154 while accepting jurisdiction over the case based on different statutes, PURA §§ 37.051 and 37.056;

(5) the PUC exceeded its statutory authority in granting a CCN to ETT, a transmission-only utility without a service area; and further

(6) the PUC exceeded its statutory authority in denying the City Plaintiffs any of their reasonable rate case expenses pursuant to PURA § 33.023.

In accordance with these six findings, the district court remanded the case to the agency for action consistent with the court's opinion and "for a determination and award of the Cities' reasonable rate case expenses, if any, pursuant to PURA § 33.023." In addition, the district court expressly declined to rule on the issue of whether substantial evidence supported the Commission's findings under PURA section 14.101.

Appellants—the Commission and ETT— appeal the judgment of the district court, specifically challenging paragraphs (2) through (6). In the event that we affirm the district court's judgment as to paragraphs (2) through (5), ETT further requests that we clarify the scope of remand to the Commission. In the event that we reverse the district court's judgment as to paragraphs (2) through (5), appellees request that we remand the case for the district court to perform the substantial evidence review that the district court had deemed unnecessary based on its findings.

Transmission-Only Utilities Without a Service Area

The district court, in paragraph (5) of its judgment, found that the Commission "exceeded its statutory authority in granting a CCN to ETT, a transmission-only utility without a service area." Appellants argue that, for a utility to obtain a CCN, the PURA does not require that the utility provide any services in addition to transmission services, or that such a utility have a certificated service area.

Statutory construction presents a question of law that we review de novo. See State v. Shumake, 199 S.W.3d 279, 284 (Tex.2006). An agency may...