Tex. Indus. Energy Consumers, Cities Advocating Reasonable Deregulation, & Office of Pub. Util. Counsel v. Pub. Util. Comm'n of Tex.

• Decision Date: 11 August 2021
• Docket Number: 03-17-00490-CV
• Court: Texas Court of Appeals
• Parties: Texas Industrial Energy Consumers, Cities Advocating Reasonable Deregulation, and Office of Public Utility Counsel, Appellants v. Public Utility Commission of Texas and Southwestern Electric Power Company, Appellees

Texas Industrial Energy Consumers, Cities Advocating Reasonable Deregulation, and Office of Public Utility Counsel, Appellants v. Public Utility Commission of Texas and Southwestern Electric Power Company, Appellees

No. 03-17-00490-CV

Court of Appeals of Texas, Third District, Austin

August 11, 2021

FROM THE 200TH DISTRICT COURT OF TRAVIS COUNTY NO D-1-GV-14-000536, THE HONORABLE DARLENE BYRNE, JUDGE PRESIDING

Before Justices Triana, Kelly, and Jones ^[*]

MEMORANDUM OPINION

J Woodfin Jones, Judge

This case involves an agency's interpretation of its prior administrative order. In 2014 the Public Utility Commission of Texas issued an order that, among other things, construed an earlier order the Commission had issued in 2008. Texas Industrial Energy Consumers (TIEC), Cities Advocating Reasonable Deregulation (CARD), and the Office of Public Utility Counsel filed suit in Travis County District Court for judicial review of the 2014 Order. Defendants were the Commission and Southwestern Electric Power Company (SWEPCO). The district court affirmed the Commission's Order. This Court reversed and remanded on the basis of a separate issue and did not address the Commission's interpretation of its 2008 Order. The Texas Supreme Court reversed this Court's judgment, affirmed the trial court's judgment as to the issue we had addressed, and remanded the case to this Court to decide the issue we had not addressed. We will reverse the trial court's judgment and remand the case to the Commission for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

This case had its genesis in 2007, when SWEPCO applied to the Commission for an amendment to its certificate of convenience and necessity (CCN) to allow it to construct a new coal-fired power plant called the Turk Plant.^[1] That proceeding was given PUC Docket No. 33891. In 2008, after a lengthy hearing before the State Office of Administrative Hearings (SOAH), the Commission granted SWEPCO's application but imposed significant conditions and limitations.

The Commission's 2008 Order in Docket No. 33891 conditionally granted SWEPCO's application but placed a cap on the amount of "capital costs" that SWEPCO would later be able to include in its rate base:

[T]he Commission conditionally grants the CCN for SWEPCO's ownership in the 600 MW Turk Plant on obtaining all of the necessary environmental permits, limits the costs that may be included in ratebase to Texas's jurisdictional allocation of SWEPCO's ownership share of total plant cost of $1.522 billion, ^[2]and places other limitations and requirements on SWEPCO.

The cap on the capital costs that Texas retail consumers may be responsible for is the Texas jurisdictional allocation of $1.522 billion.

Following completion of the Turk Plant in 2012, SWEPCO applied to the Commission for permission to change its rates to earn a return on its capital investment in the plant. SWEPCO's application was challenged before the Commission by TIEC CARD, and others, primarily on the ground that during construction SWEPCO had not properly monitored the economic prudence of completing the project. The final Order in that proceeding, to which the Commission assigned Docket No. 40443, is the subject of this appeal.

After another lengthy hearing before SOAH, the Commission found in Docket No. 40443 that SWEPCO had met its burden of proving that completing the Turk Plant was prudent. In addition, although the issue had not been briefed by the parties, the Commission determined initially that the amount of SWEPCO's construction financing costs, referred to as "allowance for funds used during construction" (AFUDC), was meant to be included in the capital-costs cap imposed by the 2008 Order in Docket No. 33891. On rehearing, however, the Commission reopened the record and admitted additional evidence regarding the capital-costs-cap issue. A majority of the commissioners found that the 2008 Order was

ambiguous and not conclusive regarding whether the Commission at that time intended to include AFUDC in the $1.522 billion cap on capital costs. Therefore, the Commission looks beyond the order in Docket No. 33891 to the underlying record evidence in that docket.

Subsequently, two of the commissioners reversed their earlier decision and found that AFUDC was not included in the cap:^[3]

In [looking to the underlying record evidence], the Commission finds that the cap was based on estimates of construction costs excluding AFUDC as testified to by parties to that docket. Based on that evidence, the Commission now concludes that the AFUDC was a separately calculated component of capital costs that was not intended to be included in the cap. Accordingly, the Commission determines that the order in Docket No. 33891 did not include AFUDC in the cap on capital costs, and that SWEPCO may recover the Texas jurisdictional share of those costs from ratepayers.

On this basis, the Commission allowed SWEPCO to include AFUDC separately in its rate base, which amounted to approximately $250 million more than would have been allowed if the cap on capital costs had been construed to include AFUDC.

TIEC, CARD, and others filed a suit for judicial review to challenge this Order on both the prudence issue and the capital-costs-cap issue. The trial court affirmed. On further appeal, this Court reversed the Commission's Order based on our holding that SWEPCO had not met the standard the Commission purported to apply, thereby rendering the Commission's decision arbitrary and capricious. See Texas Indus. Energy Consumers v. Public Util. Comm'n, 608 S.W.3d 817, 829 (Tex. App.-Austin 2018), rev'd, 620 S.W.3d 418 (Tex. 2021). Because that decision resulted in a complete reversal of the Commission's Order, this Court did not address the costs-cap issue. Id. at 829 n.14. On further appeal, the Texas Supreme Court reversed this Court's judgment, holding that the Commission's prudence decision was supported by substantial evidence. See Public Util. Comm'n v. Texas Indus. Energy Consumers, 620 S.W.3d 418, 432 (Tex. 2021). The supreme court remanded the case to this Court for consideration of the costs-cap issue. Id.

DISCUSSION

The single narrow issue remaining for decision here is whether the cap on "capital costs" in the Commission's 2008 Order in Docket No. 33891 was intended to include AFUDC.

This required the Commission, in the 2014 proceeding, to interpret its 2008 Order. The Commission's 2014 Order in Docket No 40443 concluded on rehearing that the cap in the 2008 Order did not include AFUDC. TIEC and CARD complain that the 2014 Order was erroneous because the 2008 cap unambiguously included AFUDC.^[4] SWEPCO and the Commission argue that the Commission's 2014 Order was correct, both in concluding that the 2008 Order was ambiguous and in concluding that the capital-costs cap in that Order did not include AFUDC.

Rules of Interpretation

Courts and agencies are required to interpret earlier agency orders using the same rules that are used to construe statutes. See, e.g., L &G Oil Co. v. R.R Comm'n, 368 S.W.2d 187, 193 (Tex. 1963) ("Rules and orders of the Railroad Commission made under authority of a statute are considered under the same principles as if they were the acts of the Legislature ...."); Office of Pub. Util. Couns. v. Texas-New Mexico Power Co., 344 S.W.3d 446, 450-51 (Tex. App.-Austin 2011, pet. denied) ("In construing orders of an administrative agency, we apply the same rules as when we interpret statutes."); Boswell v. Brazos Elec. Power Co-op., Inc., 910 S.W.2d 593, 599 (Tex. App.-Fort Worth 1995, writ denied) ("Rules of statutory construction apply equally to the construction of an administrative order."); Airport Coach Serv., Inc. v. City of Fort Worth, 518 S.W.2d 566, 574 (Tex. Civ. App.-Tyler 1974, writ ref'd n.r.e.) ("The same rules apply to the construction of [an] order of an administrative agency as those applied to the construction of statutes.").

The construction of a statute is a question of law that courts review de novo. Texas Lottery Comm'n v. First State Bank of DeQueen, 325 S.W.3d 628, 635 (Tex. 2010); see also Davis v. Morath, 624 S.W.3d 215, 221 (Tex. 2021) ("[T]he jurisdictional question presented here turns on the meaning of a statute and thus presents a question of law reviewed de novo."). Accordingly, the construction of a prior agency order is likewise a question of law that is reviewed de novo. See Boswell, 910 S.W.2d at 599; Airport Coach Serv., 518 S.W.2d at 574.

The Texas Supreme Court has set forth the rules of statutory interpretation on numerous occasions. The legislature's intent must, if possible, be discovered within the language the legislature enacted. Texas Health Presbyterian Hosp. of Denton v. D.A., 569 S.W.3d 126, 135-36 (Tex. 2018). When text is clear and unambiguous, it is determinative of intent. TIC Energy &Chem., Inc. v. Martin, 498 S.W.3d 68, 74-75 (Tex. 2016). If the statute's words are unambiguous, that ends the inquiry. Agar Corp., Inc. v. Electro Cirs. Int'l, LLC, 580 S.W.3d 136, 147 (Tex. 2019). Courts must construe a statute as a whole. Youngkin v. Hines, 546 S.W.3d 675, 680 (Tex. 2018) ("[L]egislative intent derives from an act as a whole rather than from isolated portions of it.").

Courts may not rely on extrinsic aids to construe statutory language unless the language is ambiguous. Texas Health Presbyterian Hosp., 569 S.W.3d at 135. Nor may extrinsic aids to interpretation be used to create an ambiguity. Id. at 133 n.8.

Moreover "we look to and rely on the plain meaning of a statute's words as expressing legislative intent unless a different meaning is supplied, is apparent from the context, or the plain meaning of the words leads to absurd or nonsensical results." El Paso Educ. Initiative, Inc. v. Amex...