Texas Coast Utilities Coalition v. Railroad Commission
423 S.W.3d 355
| Tex. | 2014Background
- CenterPoint Energy (gas utility) sought rate increases in 2008 across the Texas Coast Division; 38 municipalities approved, 9 (the Texas Coast Utilities Coalition) denied; appeals were consolidated before the Railroad Commission of Texas (Commission).
- The Commission approved a modified rate increase (less than CenterPoint requested) that included a cost of service adjustment (COSA) clause permitting automatic annual adjustments based on prior-year costs, subject to a 5% cap and procedures for notice, filings by May 1, newspaper notice, and municipal/Commission review within 90 days.
- The COSA required CenterPoint to reimburse regulatory review expenses up to an aggregate $100,000 and was initially effective for three years; municipalities retained rights to object, initiate full rate proceedings, and appeal denials to the Commission.
- The Coalition and intervening state agencies sought judicial review, arguing the Commission lacked statutory authority under the Gas Utility Regulatory Act (GURA) to include COSA clauses and that COSA circumvented GURA’s procedural protections and municipal jurisdiction.
- The district court held the Commission lacked authority; the Austin Court of Appeals reversed. The Texas Supreme Court granted review to resolve whether GURA authorizes inclusion of COSA clauses in approved rate schedules.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether GURA authorizes the Commission to adopt a COSA clause as part of a rate | COSA is an unauthorized mechanism that lets utilities change rates without complying with GURA’s notice/hearing requirements and usurps municipal original jurisdiction | GURA authorizes the Commission to "establish and regulate rates" and defines "rate" to include practices or rules that affect charges; a COSA is such a practice approved in a full rate case | Held: GURA authorizes the Commission to include COSA clauses as part of an approved rate (subsection (B) definition of “rate”) |
| Whether annual COSA adjustments must be reapproved via new rate proceedings each year | Each application of a COSA that changes charges is a new rate increase triggering GURA’s procedural safeguards | Once a rate (including the COSA practice) is approved in a full rate case, subsequent applications of that approved practice need not repeat full rate proceedings | Held: Approval of the COSA in a full rate case suffices; annual applications under the approved COSA do not require new full rate proceedings |
| Whether COSA infringes municipal original jurisdiction over rates within city limits | COSA deprives municipalities of statutory powers (e.g., test-year policing, postponement, stay, full review) by enabling rate changes without municipal ratemaking action | Municipalities retain statutory rights: they may object to adjustments, initiate full rate cases anytime, and appeal to the Commission; COSA does not remove these powers | Held: COSA does not usurp municipal jurisdiction because it is part of a rate originally set after full proceedings and municipalities retain review and rate-case rights |
| Whether Commission rules or precedent (GRIP, PGA practice) bar COSA usage | GRIP and regulatory practices show Legislature would have expressly authorized COSA if intended; Commission rules restrict COSA application in environs | GRIP authorizes a different, utility-initiated interim adjustment mechanism and does not negate the Commission’s general authority to establish rates; Commission rules require review and do not bar COSA in environs | Held: GRIP and Commission rules do not prohibit COSA; rules require Commission review in environs but do not bar inclusion of COSA in rates |
Key Cases Cited
- Pub. Util. Comm’n of Tex. v. City Pub. Serv. Bd. of San Antonio, 53 S.W.3d 310 (Tex. 2001) (agencies have only express and implied statutory powers; implied powers limited)
- State v. Pub. Util. Comm’n, 344 S.W.3d 349 (Tex. 2011) (limits on relying on statutory definitions as independent sources of agency authority)
- CenterPoint Energy Entex v. R.R. Comm’n of Tex., 208 S.W.3d 608 (Tex. App.—Austin 2006) (holding a PGA fits within the statutory definition of a rate)
- San Antonio Indep. Sch. Dist. v. City of San Antonio, 550 S.W.2d 262 (Tex. 1976) (PGA tariffs characterized as components of rates and lawful exercise of rate regulation)
- R.R. Comm’n of Tex. v. High Plains Natural Gas Co., 628 S.W.2d 753 (Tex. 1981) (statutory mandate to structure rates to permit recovery of operating expenses)
- R.R. Comm’n of Tex. v. Lone Star Gas Co., 656 S.W.2d 421 (Tex. 1983) (recognizing regulatory lag and deferring to agency discretion within statutory bounds)