344 S.W.3d 609
Tex. App.2011Background
- EPE and the City challenged a Public Utility Commission fuel-reconciliation order in district court; the 1995 Stipulation/Agreed Order froze base rates and restricted base-rate shifting to fuel costs.
- The Former Fuel Rule barred recovery of demand or capacity costs as eligible fuel expenses; reconciliation sought embedded capacity costs within energy purchases.
- EPE claimed approximately $277 million in eligible fuel expenses during January 1999–December 2001, including purchased-power costs.
- The Commission found embedded capacity costs in the SPS 2000 contract via long-term, planning-era purchases and proxied capacity with a $7.32/kW-month cap (WSPP proxy), totaling about $6.2 million.
- Off-system IID sales were used to credit fuel costs via margins; IID was treated as a wholesale customer and allocated in the jurisdictional framework.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether substantial evidence supports imputing capacity costs to SPS 2000 | EPE: SPS 2000 lacked explicit capacity charges; no capacity purchase. | City/PUC: contract language and long-term planning indicate capacity costs embedded. | Yes; embedded capacity costs found consistent with contract language and policy. |
| Whether the imputation complies with the 1995 Stipulation/Agreed Order | EPE: rule pre-dates Entergy; exclusion of embedded costs not contemplated. | PUC: Former Fuel Rule prohibits capacity costs; 1995 order does not limit this. | Yes; imputation consistent with the stipulation and rule. |
| Whether the imputation is preempted by the filed-rate doctrine | EPE: imputing costs beyond FERC-filed tariff alters rate terms. | Rates were filed with FERC; manner of recovery permitted to be addressed by state agency. | No; state can determine recovery method while respecting FERC-filed rates. |
| Whether the special-circumstances denial was arbitrary and capricious | EPE: special circumstances justified recovering embedded costs. | No special circumstances; would cause double recovery and trap costs. | No; denial was not arbitrary or capricious. |
| Whether off-system IID margins were properly calculated and allocated | City: use incremental costs and exclude IID from wholesale allocation. | IID margins based on average system cost per contract terms and total-system allocation. | Yes; margins calculated on average system-wide costs and included in jurisdictional allocation. |
Key Cases Cited
- City of El Paso v. El Paso Elec. Co., 851 S.W.2d 896 (Tex.App.-Austin 1993) (capacity costs historically associated with base rates and fixed costs)
- Gulf States Utils. v. Public Util. Comm'n of Tex., 841 S.W.2d 459 (Tex.App.-Austin 1992) (capacity costs generally fixed costs of generation facilities)
- Entergy Gulf States, Inc. v. Public Util. Comm'n of Tex., 173 S.W.3d 199 (Tex.App.-Austin 2005) (capacity cost embedded in energy purchases as in Entergy analysis)
- Entergy Gulf States, Inc., 173 S.W.3d 211 (Tex.App.-Austin 2005) (Entergy contracts: embedded capacity considered for disallowance)
- Entergy La., Inc. v. Louisiana Pub. Serv. Comm'n, 539 U.S. 39 (1999) (federal preemption and filed-rate doctrine context for wholesale rates)