Texas Utilities Elec. Co. v. Public Utility Com'n

• Decision Date: 15 June 1994
• Docket Number: No. 3-92-548-CV,3-92-548-CV
• Citation: 881 S.W.2d 387
• Parties: TEXAS UTILITIES ELECTRIC COMPANY, Public Utility Commission, Office of Public Utility Counsel, and Cities of Arlington, et al., Appellants, v. PUBLIC UTILITY COMMISSION, Texas Utilities Electric Company, Office of Public Utility Counsel, and Cities of Arlington, et al., Appellees.
• Court: Texas Court of Appeals

Page 387

881 S.W.2d 387

TEXAS UTILITIES ELECTRIC COMPANY, Public Utility Commission,

Office of Public Utility Counsel, and Cities of

Arlington, et al., Appellants, v. PUBLIC UTILITY COMMISSION, Texas Utilities Electric Company,

Office of Public Utility Counsel, and Cities of

Arlington, et al., Appellees.

No. 3-92-548-CV.

Court of Appeals of Texas,

Austin.

June 15, 1994.

Rehearings Overruled

Aug. 31 and Oct. 12, 1994.

Roy Q. Minton, Minton Burton Foster & Collins, Austin, for Texas Utilities Elec. Co.

Dan Morales, Atty. Gen., Susan Bergen, Asst. Atty. Gen., Austin, for Public Utility Com'n.

Stephen Fogel, Austin, for Office of Public Utility Counsel.

Geoffrey M. Gay, Buter Porter Gay & Day, Austin, for Cities of Arlington, et al.

David C. Duggins, Clark Thomas & Winters, Austin, for Texas Utilities Elec. Co.

Dan Morales, Atty. Gen., Steven Baron, Asst. Atty. Gen., Austin, for Public Utility Com'n.

Yolanda L. Woods, Asst. Public Counsel, Austin, for Office of Public Utility Counsel.

Steven A. Porter, Butler Porter Gay & Day, Austin, for Cities of Arlington, et al.

David C. Duggins, Clark Thomas & Winters, Austin, for Texas Utilities Elec. Co.

Before CARROLL, C.J., and ABOUSSIE and B.A. SMITH, JJ.

BEA ANN SMITH, Justice.

Texas Utilities Electric Company, the Public Utility Commission, the Office of Public Utility Counsel, and the Cities of Arlington, et al. appeal from a district-court judgment rendered in a suit for judicial review of the Commission's final order in an electric utility rate case conducted under the Public Utility Regulatory Act (PURA), Tex.Rev.Civ.Stat.Ann. art. 1446c (West Supp.1994). ¹ The district-court judgment reverses and remands certain aspects of the Commission's final order, and affirms the remainder. We will reverse the district-court judgment and remand the cause to the district court with instructions that the cause be remanded to the Commission for further proceedings consistent with our opinion. See Administrative Procedure Act (APA), Tex. Gov't Code Ann. § 2001.174 (West 1994). ²

THE CONTROVERSY

Texas Utilities filed its application for a rate increase in January 1990 seeking to include in its rate base costs associated with Comanche Peak, a newly constructed nuclear power plant. The utility sought an agency adjudication regarding what portion of its costs it could include in its rate base as being a "prudent" investment, public interest findings on its reacquisition of a 12.2 percent ownership interest in the plant, final reconciliation of its fuel costs and revenues for the period April 1983 to June 1989, and a reduction of its fuel factor for the period May 1990 to April 1991. After the Commission issued its order, motions for rehearing were filed and the Commission issued a second order on rehearing. Subsequent motions for rehearing were overruled by operation of law, and five parties to the rate-making proceeding filed suit for judicial review in district court. See PURA § 69; APA § 2001.171. The district court affirmed the Commission order in part and reversed it in part, after which Texas Utilities, Public Utility Counsel, the Cities, and the Commission each appealed the district-court judgment. ³ For clarity, we will provide additional facts germane to the various points of error throughout the opinion.

CONFLICT OF INTEREST

In their first point of error, the Cities and Public Utility Counsel argue that the chairman of the Commission, Paul Meek, was biased because he had a pecuniary interest in the outcome of the proceedings, and because he was prejudiced in favor of the gas industry. The allegations of impermissible bias center around Meek's ties with American PURA provides that no commissioner may, during a period of service with the Commission, "have any pecuniary interest ... in any person or corporation or other business entity a significant portion of whose business consists of furnishing goods or services to public utilities or affiliated interests...." PURA § 6(b)(1). It is grounds for removal from the Commission if a member has interests in violation of section 6(b) at the time of his or her appointment. PURA § 6A. However, "the validity of an action of the commission is not affected by the fact that it was taken when a ground for removal of a member of the commission existed." PURA § 6A(b). Meek resigned from the Commission effective April 20, 1992, after the Attorney General requested that he either sever all ties with Fina or resign from the Commission. Although Meek was not removed from the Commission because of a conflict of interest pursuant to PURA section 6A, he did resign in the face of a perceived conflict. Meek's conflict, however, has no effect on the Commission's order in Docket 9300. PURA § 6A(b). This Court is left, therefore, with the power to reverse and remand the Commission's order only if Meek's participation resulted in an order that prejudices substantial rights of the appellants. See APA § 2001.174. ⁴ We understand appellants to contend that this Court should reverse the Commission's order because Meek's interests in Fina resulted in an order that is arbitrary and capricious and a violation of their constitutional right to a fair and impartial hearing.

Petrofina ("Fina"). During the rate-making proceedings, Meek served as chairman of Fina's board, received retirement benefits from Fina, and held shares of its publicly traded common stock. Fina's direct sales of natural gas to Texas Utilities from 1989 to 1991 totalled $60,782; indirect revenue from sales to other Texas Utilities suppliers approximated $104 million. Because of his connections with Fina, the Cities and Public Utility Counsel claim that Meek's participation in the hearings precluded the Commission from making impartial findings. The district court found the evidence insufficient to show that Meek's service on the Commission led to unfair proceedings or prejudiced substantial rights of the parties. We agree.

In order to prevail, appellants must overcome the presumption that agency members are persons of conscience and intellectual discipline, capable of judging a particular controversy fairly on the basis of its own circumstances. United States v. Morgan, 313 U.S. 409, 421, 61 S.Ct. 999, 1004, 85 L.Ed. 1429 (1941). Following the United States Supreme Court, we recognize a presumption of honesty and integrity in those serving as adjudicators. Withrow v. Larkin, 421 U.S. 35, 47, 95 S.Ct. 1456, 1464, 43 L.Ed.2d 712 (1975). One may overcome this presumption by demonstrating that the decisionmaker's mind is "irrevocably closed" on the matters at issue. Federal Trade Comm'n v. Cement Inst., 333 U.S. 683, 701, 68 S.Ct. 793, 803-04, 92 L.Ed. 1010 (1948). During confirmation hearings conducted in May 1990, the Texas Senate fully explored the issue of Meek's conflict. At that time, aware of Meek's connections with Fina, the Senate satisfied itself that Meek could execute his duties as commissioner impartially and without prejudice in favor of the gas industry. Additionally, Meek promised to recuse himself from voting on any contested issue regarding contracts between public utilities and Fina, a promise he upheld by not reviewing contracts between Texas Utilities and Fina. ⁵

It is well established that absent a showing of incapability to decide a particular controversy fairly, an administrative officer is not disqualified simply because he or she has previously taken a position, even in public, on a policy issue related to a particular dispute. Morgan, 313 U.S. at 421, 61 S.Ct. at 1004. In Morgan, the Supreme Court held that the Secretary of Agriculture's strong views on a particular issue did not make him unfit to exercise his duties in administrative proceedings relating to those matters. Id. Similarly, in Cement Institute the Court held that members of the Federal Trade Commission were not disqualified from participating in adjudicatory proceedings simply because they had previously expressed their opinions that a pricing system at issue in the proceeding was illegal. Cement Institute, 333 U.S. at 700-01, 68 S.Ct. at 803-04.

In this appeal, the Cities and Public Utility Counsel question Meek's impartiality because of a newspaper interview in which he expressed his disappointment with the Commission's decision to disallow $1.3 billion of Comanche Peak costs. The Supreme Court has decided, however, that public criticism "is a practice familiar in the long history of ... litigation," and that while an administrator may have an underlying philosophy in approaching a specific case, he or she may still be assumed to be a person of conscience and intellectual discipline, capable of judging a particular controversy fairly. Morgan, 313 U.S. at 421, 61 S.Ct. at 1004.

The Cities and Public Utility Counsel argue that this order should be invalidated, relying on American Cyanamid Co. v. Federal Trade Commission, 363 F.2d 757 (6th Cir.1966). In American Cyanamid, the court invalidated a commission order because one of the commissioners had previously served as counsel for a Senate subcommittee investigating many of the same facts and issues that later came before the commission. The court found that the commissioner's dual investigative and adjudicative experiences with the issues involved in the hearing created a risk that commission decisions might be based on evidence outside the record. It was the presentation of nonrecord evidence, not the commissioner's personal viewpoints, that led the court to invalidate the order. American Cyanamid, 363 F.2d at 767. In this case, however, appellants base their request for invalidation of the order on assertions that Meek's personal views about the gas industry made it impossible for him to decide the issues fairly. Under the circumstances of this proceeding, we cannot agree.

We do not express any opinion regarding whether Meek should have been removed from the Commission had he not resigned. This Court is limited to the judicial...