Texas Ass'n of Long Distance Telephone Companies (TEXALTEL) v. Public Utility Com'n of Texas

• Decision Date: 14 November 1990
• Docket Number: No. 3-89-225-CV,3-89-225-CV
• Citation: 798 S.W.2d 875
• Parties: TEXAS ASSOCIATION OF LONG DISTANCE TELEPHONE COMPANIES (TEXALTEL), Appellant, v. PUBLIC UTILITY COMMISSION OF TEXAS, Appellee.
• Court: Texas Court of Appeals

Page 875

798 S.W.2d 875

TEXAS ASSOCIATION OF LONG DISTANCE TELEPHONE COMPANIES (TEXALTEL), Appellant, v. PUBLIC UTILITY COMMISSION OF TEXAS, Appellee.

No. 3-89-225-CV.

Court of Appeals of Texas Austin.

Nov. 14, 1990.

Myra McDaniel, Katie Bond, Bickerstaff, Heath & Smiley, Austin, for appellant.

Jim Mattox, Atty. Gen., Steve Baron, W. Scott McCullough, Asst. Attys. Gen., R. Steven Davis, II, Baker & Botts, Austin, for appellee.

Before CARROLL, JONES and EARL W. SMITH, ^* JJ.

ON MOTION FOR REHEARING

JONES, Justice.

The opinion issued by this Court on September 19, 1990, is withdrawn, and the following is filed in lieu thereof.

The Texas Association of Long Distance Telephone Companies ("TEXALTEL") appeals from a judgment of the district court affirming an order of the appellee, Public Utility Commission ("PUC"). The PUC's order increased the rates for services provided by AT & T Communications of the Southwest ("AT & T"), including wide area telecommunications service ("WATS"). We will affirm the judgment of the district court.

Docket No. 6095 was initiated in January 1985 in response to AT & T's application to increase its rates, including WATS rates, by $123.4 million. The application was amended on April 4, 1985, to request a rate increase of $139 million. Pursuant to § 43(d) of the Public Utilities Regulatory Act (PURA), Tex.Rev.Civ.Stat.Ann. art. 1446c (Supp.1990), the PUC subsequently suspended AT & T's proposed rates. As a result of pending hearings, the suspension period was extended through October 23, 1985, and thereafter AT & T voluntarily extended the suspension period until March 2, 1986.

On February 7, 1986, the PUC ordered a rate increase totalling $55.1 million. As part of this rate increase, the PUC's order directed AT & T to increase overall WATS rates approximately 33 percent over then-existing rates. While recognizing that this rate increase would not be sufficient even to enable AT & T to recoup all of its costs associated with its WATS service, the PUC determined that, in order to avoid severe customer impact, no individual customer should receive a rate increase of more than 145 percent. The PUC ordered AT & T to file revised tariffs within twenty days, to be effective twenty days after filing or sooner upon approval by the PUC staff.

On February 10, 1986, AT & T filed proposed tariffs, including a WATS tariff. The proposed WATS tariff was rejected by the PUC's Hearings Division on March 1. On March 5, AT & T filed another proposed The PUC later issued yet another order on July 28 in which it found that the February 7 order contained a $16,477 overstatement, but that the error had no effect on the rate design or the approved tariffs. The February 7 order became appealable on November 7, 1986, when all motions for rehearing were overruled.

WATS tariff. On March 11, the PUC issued an order ruling on motions for rehearing and amending its February 7 order. Among other things, the March 11 order stated that AT & T could apply any WATS tariff approved by the staff on or after March 27 and prior to April 27 to service provided on or after April 1. On March 25, the staff of the Hearings Division rejected AT & T's second proposed WATS tariff, whereupon AT & T filed with the PUC an emergency petition seeking approval of the proposed WATS tariff that had been filed on March 5; the petition also requested the PUC to consider motions for rehearing filed in response to the March 11 order. On April 9, the PUC met to consider AT & T's petition. That same day, following the hearing, the PUC issued an order which, in addition to granting a rehearing on the accuracy of certain numbers on which the level of AT & T's new rates had been based in the February 7 order, also directed that AT & T's WATS tariff be approved effective April 1, 1986.

TEXALTEL and numerous other parties to the PUC proceedings, including AT & T and the State Purchasing and General Services Commission ("SPGSC"), filed separate suits in the district court of Travis County seeking judicial review of the PUC's action. The relevant petitions named only the PUC as defendant. All such suits were eventually consolidated into a single cause. Shortly before the scheduled trial, all parties except TEXALTEL settled with the PUC. TEXALTEL's claim then proceeded to trial, following which the trial court rendered a final judgment ordering that (1) pursuant to the parties' settlement agreement, all claims other than those of TEXALTEL be dismissed; and (2) TEXALTEL take nothing.

MOTION TO STRIKE BRIEFS

TEXALTEL has filed a motion in this Court to strike the briefs of AT & T and the SPGSC, which those entities purported to file as appellees. Following the dismissal of their claims in the trial court, neither AT & T nor the SPGSC retained any pleaded claim or interest contrary to TEXALTEL vis-a-vis TEXALTEL's action against the PUC. In order to have created and protected their status as parties adverse to TEXALTEL, AT & T and the SPGSC should have asserted their contrary claims or interest by way of a plea in intervention in TEXALTEL's suit before consolidation of the actions, or by repleading after consolidation. Having failed to do either, the trial court's dismissal of their claims against the PUC left them as strangers to the consolidated cause. Accordingly, in this appeal they were not entitled to file briefs as appellees. We therefore grant TEXALTEL's motion to strike. However, pursuant to Rule 20, Tex.R.App.P., we have received and fully considered both briefs as amicus curiae. Cf. Houston Chronicle Pub. Co. v. City of Houston, 531 S.W.2d 177, 182 (Tex.Civ.App.1975), writ ref'd n.r.e., 536 S.W.2d 559 (Tex.1976).

TEXALTEL brings three points of error. In its first point of error TEXALTEL contends that the trial court erred in affirming the final order of the PUC because the PUC exceeded its statutory authority in making the effective date of the new WATS tariffs (April 1, 1986) earlier than the date the order was final and appealable (November 7, 1986). Alternatively, in its second point of error, TEXALTEL contends that the PUC exceeded its statutory authority in making the effective date of the WATS tariffs earlier than the date the tariffs were approved (April 9, 1986). Finally, in its third point of error, TEXALTEL contends that one of the PUC's findings is not supported by the record.

JURISDICTION

We must first address the PUC's assertion that TEXALTEL did not properly preserve the first two issues for our review..

The Administrative Procedure & Texas Register Act ("APTRA") provides that, except in the case of emergency orders issued by an agency, "a motion for rehearing is a prerequisite to an appeal." Tex.Rev.Civ.Stat.Ann. art. 6252-13a, § 16(e) (Supp.1990). This prerequisite is jurisdictional and cannot be waived by actions of the parties. Lindsay v. Sterling, 690 S.W.2d 560, 563 (Tex.1985). APTRA has been construed to require that a motion for rehearing be "sufficiently definite to apprise the regulatory agency of the error claimed and to allow the agency opportunity to correct the error or to prepare to defend it." Suburban Util. Corp. v. PUC, 652 S.W.2d 358, 365 (Tex.1983); see also Burke v. Central Educ. Agency, 725 S.W.2d 393, 397 (Tex.App.1987, writ ref'd n.r.e.).

In its motion for rehearing, TEXALTEL asserted that the PUC's action "setting rates retroactively is unjust and unreasonable in violation of PURA § 38, is in excess of the PUC's authority, and constitutes an abuse of discretion and arbitrary and capricious action." We conclude that the motion for rehearing was sufficiently definite to apprise the PUC of TEXALTEL's claimed error: that the PUC had exceeded its statutory authority by setting rates retroactively. We do not consider the motion's reference to PURA § 38 instead of § 43 to be so misleading as to prevent the PUC from deciding to change--or from preparing to defend--its action. Therefore, the motion was sufficient to give the district court and this Court jurisdiction to consider TEXALTEL's first two points of error.

RETROACTIVE RATEMAKING

1. General standards.

TEXALTEL in its first two points of error argues that the PUC engaged in retroactive ratemaking. ¹ TEXALTEL's argument seems to imply that a regulatory agency may never set a retroactive effective date for a rate change. That simply is not the law. See Railroad Comm'n v. Lone Star Gas Co., 656 S.W.2d 421, 425-27 (Tex.1983); Southwestern Bell Tel. Co. v. PUC, 615 S.W.2d 947 (Tex.Civ.App.), writ ref'd n.r.e., 622 S.W.2d 82 (Tex.1981).

In general, when an administrative agency seeks to make a utility rate effective retroactively, two questions must be addressed: (1) whether the legislature intended for the statute conferring rate-making power to permit the agency to amend or establish rates with retroactive effect; and (2) whether such action is permitted constitutionally. Southwestern Bell, 615 S.W.2d at 953. The basic premise underlying the prohibition against retroactive ratemaking is that the setting of utility rates is a legislative function, even if carried out by an administrative agency; therefore, utility rates, like any other legislation, generally can have only prospective application and cannot be used to recoup losses or gains incurred under prior legal rates. Tex.Const.Ann. art. I, § 16 (1984); see Railroad Comm'n v. Houston Natural Gas Corp., 155 Tex. 502, 289 S.W.2d 559 (1956).

Although article I, section 16 of the Texas Constitution expressly forbids retroactive legislation, it has been held not to invalidate all retroactive laws; unless vested rights are impaired, a statute (or rate) is not constitutionally infirm even though it operates retrospectively. McCain v. Yost, 155 Tex. 174, 284 S.W.2d 898 (1955); see also Amarillo Gas Co. v. City of Amarillo, 208 S.W. 239 (Tex.Civ.App.1919, no writ) (prohibiting a retroactive change in utility rates affecting "the substantial rights and obligations of" the implied contract...