Entergy Texas, Inc.// Office of Public Utility Counsel and Public Utility Commission of Texas v. Public Utility Commission of Texas and Texas Industrial Energy Consumers// Office of Public Utility Counsel and Entergy Texas, Inc.
03-14-00735-CV
| Tex. App. | Apr 30, 2015Background
- Entergy Texas, Inc. (ETI) sought a rate increase before the Public Utility Commission of Texas (PUC), proposing to replace historical-test-year purchased-capacity and transmission-equalization expenses with projected "rate-year" amounts (June 1, 2012–May 31, 2013).
- ETI initially requested a purchased-capacity rider (pass-through); the PUC rejected the rider and ETI proceeded with a fallback request to substitute its projections for test-year amounts.
- The historical test year was July 1, 2010–June 30, 2011, during which ETI incurred $245,965,886 in purchased-capacity costs and $1,753,797 in transmission-equalization expense.
- The PUC and intervenors (including Texas Industrial Energy Consumers, TIEC) challenged ETI’s projections as not "known and measurable" under 16 Tex. Admin. Code § 25.231; the PUC found substantial uncertainty in ETI’s third-party contract, affiliate-contract (MSS-4), and MSS-1 (reserve-equalization) projections and rejected the post-test-year adjustments.
- The PUC also found ETI’s method violated the ratemaking matching principle by applying projected future costs to historical sales (billing determinants) and noted many projected transmission projects were not in service when the rates would take effect.
- The district court affirmed the PUC; ETI appealed to the Third Court of Appeals. TIEC’s brief (summarized here) urges affirmance, arguing substantial evidence supports the PUC.
Issues
| Issue | Plaintiff's Argument (ETI) | Defendant's Argument (PUC/TIEC) | Held |
|---|---|---|---|
| Whether the PUC must abandon historical-test-year ratemaking in favor of future projections | ETI: PUC should allow recovery based on projected "rate-year" costs or a purchased-capacity rider; historical test-year approach is obsolete | PUC/TIEC: PUC rules and precedents permit, but do not require, post-test-year adjustments; changing the rule is for agency/legislature | The PUC's historical-test-year approach remains valid; courts should not force a shift to future-test-year ratemaking |
| Whether ETI’s projected purchased-capacity costs were "known and measurable" | ETI: Projections (including new third-party and affiliate contracts) reasonably demonstrate higher future costs warranting adjustment | PUC/TIEC: Projections are speculative (contract payments vary with performance/availability, affiliate formulas dependent on future inputs) and fail the known-and-measurable and attendant-impacts tests | The PUC reasonably found projections were not known and measurable; substantial evidence supports denial of adjustment |
| Whether ETI properly matched costs and revenues (matching principle) | ETI: Should be allowed to use rate-year costs without matching rate-year billing determinants | PUC/TIEC: Must match costs and sales period; ETI ignored increased future revenues from load growth, producing a mismatch | The PUC correctly applied the matching principle and rejected ETI’s proposal to apply future costs to historical sales |
| Whether projected transmission-equalization expenses were known and measurable | ETI: Forecasted MSS-2 expenses reflect anticipated transmission investment and justify upward adjustment | PUC/TIEC: MSS-2 depends on many uncertain future variables across Entergy operating companies; many transmission projects were not in service, so costs are speculative | The PUC reasonably rejected the transmission-equalization upward adjustment; substantial evidence supports the decision |
Key Cases Cited
- City of El Paso v. Pub. Util. Comm’n of Texas, 883 S.W.2d 179 (Tex. 1994) (PUC may use historical test year; post-test-year adjustments discretionary)
- Suburban Util. Corp. v. Pub. Util. Comm’n of Texas, 652 S.W.2d 358 (Tex. 1983) (upholding historical-test-year ratemaking; post-test-year changes allowed only when known)
- Cent. Power & Light Co. v. Pub. Util. Comm’n of Texas, 36 S.W.3d 547 (Tex. App.—Austin 2001) (PUC’s authority to allow post-test-year adjustments is discretionary; attendant impacts must be identified and matched)