*1
February
1986,
proceed-
February
respec-
court
further
cause
the trial
FDIC,
bank,
ings.
tively. The
as receiver for the
acquired
April
these
1986. The
notes
notes went into default
November
subsequently assigned by
and were
(“Cadle”)
Company
FDIC
The Cadle
February
brought
1990. After
suit
Cadle
COMPANY, Petitioner,
The CADLE
against
January
Weaver on the notes in
summary judg-
the defendant1 moved for
v.
year
ment based on the Texas four
statute
WEAVER,
ESTATE of Forrest
&
limitations. See Tex.Civ.Prac.
Rem.Code
Respondent.
§
granted
16.004. The trial court
defen-
No. D-3866.
summary judgment,
motion for
dant’s
Supreme Court of Texas.
affirmed,
rejecting
the court
Ca-
argument
dle’s
that it was entitled to
six
March
1994.
year
period applicable
limitations
1821(d)(14).
FDIC. See
U.S.C.
today
held
an assignee
in Jackson that
of a
note from
promissory
the FDIC does
receive
benefit
the extended limita-
provision applicable
tions
to the FDIC. Ac-
cordingly,
hearing
argument,
without
oral
majority
Court reverses
of the court of
and remands the
cause
that court for
re-
consideration of
spondent’s remaining arguments
previ-
ously reached.2
PASO,
Texas,
CITY OF EL
Utility Counsel,
and Office of Public
Petitioners,
Brewster,
Jones,
P. Anne
Michael L.
Dallas,
Lindley,
Randall K.
for petitioner.
PUBLIC UTILITY COMMISSION OF
Fischer, Dallas,
Robert W.
respondent.
TEXAS and
Paso Electric
Company, Respondents.
PER CURIAM.
No. D-3053.
presents
question
This case
resolved
Supreme Court of Texas.
Thweatt,
today
Jackson
Forrest Weaver executed two Irving *2 first, Paso, Gordon, appeal questions presented El G. Norman J. James Austin, Williams, Boyle, Nanette C. within dis- G. David whether the Commission acted Paso, Wilmot, Caylor, Luis A. Anto- part, San its final cretion nio, Fogel, Stephen Magness, L. William W. stipulation agreement, and the nonunanimous *3 Morales, McCollough, Scott Dan K. second, Joe has au- whether Commission Muscat, Austin, Crews and Richard A. thority Utility Regulatory under the Public petitioners. (PURA)2 utility to public Act to allow a in include rate base certain costs Holman, Austin, Checldey, James W. Alan during “regulatory lag” period.3 incurred Jr., Leatherbury, Meyer, Thomas S. Ferd C. yes, issues and consequently We answer both Jr., Dallas, Raney, Kenneth C. R. Eden Mar- judgment affirm the of the court of tin, IL, Chicago, Barry Bishop, F. John part part. in in reverse Williams, Austin, Reasoner, Harry Hous- M. ton, Demond, Austin, Hall, Walter Alton J. April 1987, application EPEC an filed Jr., Houston, Scogin, Norma K. Dan Mor- rate for a increase with the Commission Pratt, Grant, ales, Joe N. and Davison W. seeking to recover costs associated with its Austin, respondents. Project. investment in the Palo Verde sought EPEC rate treatment related to its opinion Justice ENOCH delivered in investment the two units which had start- Court, in which Chief Justice operation, ed commercial Verde Units PHILLIPS, HIGHTOWER, Justices during and 2.4 On October HECHT, join. and CORNYN hearing application, on EPEC’s course This is an appeal administrative certain industrial intervenors the Com- (Com- the Public mission General Counsel announced and filed mission) setting charged by rates to be El stipulation agreement intended resolve (EPEC).1 Company Electric Paso The order ad- the case.5 The Examiners scheduled an was consistent stipula- with non-unanimous phase hearing ditional consider tion between EPEC in- parties, and several stipulation, eventually recommended cluding the Commission General Counsel. the Commission that re- be order, In its final the Commission authorized jected. The Commissioners modified capitalize EPEC to and include in rate base and, modified, proposed stipulation post-in-ser- deferrals associated with certain adopted its its order. terms final carrying operating vice costs and costs relat- increase, part its request ed to investment in the Palo Verde Nucle- As its for a rate (Palo Verde). ar Generating requested in- Station EPEC its base Comm'n, Application companies 1. Tex. Public utility agreed Utils. other EPEC four Company Authority Change Paso Electric building partially fund and otherwise assist in Rates, 14 Tex.P.U.C.Bull. generating one more nuclear steam electric (June 1988) (Docket No. 7460). units, with attendant common facilities. Con- art. 1446c 2. Tex.Rev.Civ.Stat.Ann. plant’s costs in the rate below standard and the time when an ion, the new rates that result from et latory process (the the time creases or- rate decrease or rate effect delay date a new (2d 1994). Generally, regulatory lag ed. "regulatory "in-service” is due to the inherent al., Principles commission order or otherwise. This when increases. plant begins lag" date) allow utility’s profits is the For increase publicUtility and the effective date of base. for immediate rate commercial purposes is the inability period including See may Ra (Vernon delay are above or. James C. between of this operation offsetting tes put between the new Supp. opin- regu- Bonbright into de- interest rate intervenors project. Although EPEC units. stipulation. Verde Units 1 and EPEC modified its amounts Unit and made mon struction is EPEC, the duration of EPEC’s involvement in the two of the Originally, EPEC each of the other company electricity arrangements complete five retains which 2). units has sold ownership from EPEC all four on the common facilities units as a tenant in com- After construction its originally planned purchased significant staff, owned an undivided to lease the unit back undivided interest project its interest interest Unit participants. four signed began, corpo- (Palo carrying respects, creased amount of costs and vice costs. all other af operating and maintenance costs it incurred during “regulatory firmed. lag” period. The util-
ity types had deferred these of costs for aggregating type
Units 1 and
each
cost
I.
separate capital
unit
for each
into a
account.
Stipulation
The Non-Unanimous
prior per-
EPEC obtained the Commission’s
argu-
and OPUC make several
mission to defer Unit
costs.6 The Commis-
position
supporting
ments
their
right, however, to
sion reserved the
refuse
erred
subsequently to include
the deferred costs
*4
part,
stipulation. They
aon
non-unanimous
they
the
base
the
were
rate
extent
unrea-
judgment
the
ask this Court to reverse the
of
sonable,
useful,
plant
used
related to
not
and
holding
its
appeals, contending
court of
spent
imprudently.
or were
or incurred
Al-
an
affirms
action of the Commission that
prior
though
permis-
EPEC
not
did
obtain
evidence,
by
post-in-service
its
for
sion
defer
costs
Unit
law, arbitrary
ca-
consistent with Texas
and
2, it nevertheless deferred them. After the
pricious
of
and characterized
abuse
hearing,
granted
EPEC’s
City’s or
accept
discretion. We do not
the
request
the
to include
deferred costs
both
arguments.
OPUC’s
units in the
base.
A.
(City),
of El Paso
the State of
(on
agencies
behalf of various state
Reliance on the Non-Unanimous
Texas) (State),
located in
western
the
Stipulation
(OPUC)
Office of Public
Counsel
and OPUC contend that where
sought judicial review of the Commission’s
decision,
support
no
existed to
its
order, contending that the Commission erred
erroneously
the Commissioners
relied on
part,
on
in
the non-
as
stipulation itself
a substitute
the evi-
State,
City,
stipulation. The
unanimous
City argues
relying on
dence. The
argued
OPUC also
evidence,
stipulation
opposed
to the
authority
permit
lacked
EPEC to
de-
statutory re-
the Commissioners violated the
costs,
subsequently to
fer
quirement
every finding
be based exclu-
utility’s
in
include the deferrals
rate base.
sively on
evidence.
Ann.
Code
Tex.Gov’t
(Vernon Pamphlet
2001.141
upheld
trial
Commission’s
City analogizes
present case
a civil
appeals
order. The court of
affirmed the
agreed
cause which the court renders an
judgment
portion
the trial court’s
which
parties.
consent of all the
without
allowing
affirmed the Commission’s order
adopting
It
that in
contends
capitalized post-in-service operat
inclusion of
ease,
as a resolution
ing
rate base. 839
costs
imposed
settle-
improperly
the terms
(1991).
895,
The court of
non-signing parties.
ment
portion
judg
trial
reversed the
court’s
which affirmed the
ment
Commission’s
City’s analogy.
In Mobil
post-in-service carry
allowing
the deferral
Corp.
Oil
v. Federal Power
ing
parties
applications
(1974),
Id.7 All
filed
costs.
94 S.Ct.
L.Ed.2d
U.S.
of error
to this court. For the
writ
Supreme
upheld
Court
the Federal Pow-
below,
judg
establishing
we reverse the
reasons stated
er
final order
based,
part,
of the court of
to the extent
ment
rate structure
stipulation.
em-
post-in-ser
non-unanimous
The Court
that it
the deferral of
disallows
appeals separated the
into
6. The Commission authorized deferred account-
The court
(1)
categories:
for Unit 1 in Tex. Public Utils.
operating
treatment
and maintenance
two
Comm'n, Application
Compa-
Paso Electric
costs,
(2)
holding
costs. Our
makes
Rates,
ny
Authority
Change
Docket No.
between these costs.
no distinction
(1986).
Tex.P.U.C.Bull.
1239-41
importance
considering
represented by parties
phasized
of those customers
stipulation.
proposal
opposing
non-unanimous
“on its merit:”
proposal enjoys
If a
unanimous
7460, supra
parties,
all of
the immediate
could
added).8
(emphasis
The Commission’s order
certainly
adopted
agree-
as a settlement
continued to conclude that:
approved
if
general
ment
interest
Findings
5. Pursuant
of Fact and
public.
But even if there is a lack
below, the
Conclusions of Law set forth
unanimity, may
adopted
as a resolu-
Re-
Commission finds the Amended and
merits,
tion on the
if
makes an inde-
FPC
modified,
Stipulation, as
is a
stated
reason-
finding
pendent
‘substantial
able basis for resolution of the issues
evidence on the record
whole’
as a
adoption
case
this
Amend-
proposal
‘just and
will
reasonable’
establish
modified,
Stipulation,
ed
Restated
rates for
area.
as the basis of
Commission’s Order
(quoting
In a final to non-stipulation agreement, arbitrary the the agency’s An or use of decision argues ‘stipu- City “[t]he if the non-unanimous results from an abuse of discretion (1) ... is not by used agency: failed consider a factor the lation’ to (2) key and consider; by evidence consid substantial legislature directs to (3) factor; weighs only findings support to final fact drafted ers an irrelevant satisfy statutory legislature inadequate are to re- directs it relevant factors quirements.” spe- will completely We discuss to consider but still reaches a Nixon, finding-of-faet 411 cific substantial-evidence unreasonable result. Gerst (Tex.1966). However, II-III. agree challenges. n. 8 See infra City a City general makes com- that the the extent the appeals with the court stipulation, agree plaint against the we with OPUC have failed establish that use City has waived partial the final court stipulation as basis for point point this as its any argument on of factors other order involves consideration general preserve too error. legislature argument than those the has directed argument City provides no substantive consider. 839 S.W.2d The Commission to legally conclusory statements. its 903-04. testimony expert II. on the decisional fered im- issue, evidentiary con- prudence record Substantial Evidence —“Decisional” specific no amount. Fur- tains reference to Imprudence Disallowance11 ther, contends that court im- The Commission concluded due to relying, part, erred on matters decisions, prudent of EPEC’s million $32 included the non-unanimous costs should not included rate base. was conclude that the Commission’s decision argue Both the OPUC supported by substantial evidence because unsupported disallowance is substantial independently the matters relied were not evidence, claiming record the amount preponderance evi- greater. have disallowed should been dence. core, At its the substantial evidence Fact, Findings In the rule is reasonableness test or a rational provided: basis test. Railroad Comm’n Company entirely pru- 101. The Co., Pend Oreille Oil & Gas management planning in its dent (Tex.1991). court, then, reviewing participation project. in the Palo Verde concerns itself reasonableness of administrative not the correctness of evidence in the 102. There is record test, applying may Id. order. continuing imprudence Company’s weight substitute our as participation of the level of its evaluation agency. the evidence for that of the Id. Project. parties Verde (the “prevents substantial evidence rule Stipulation Amended and Restated have adjudica court from ‘usurping agency’s quantified impru- cost of such [sic] authority though tive even would applied million dence Units $22 ”). have struck a different balance’ Company has conceded Although million additional disallowance to $10 evidence more than scintilla, applied to PVNGS Units 1 and 2. mere record actually may preponderate against the deci Quantification of im- the effects of *7 agency sion of the and amount to nonetheless prudence requires judg- the exercise of substantial evidence. Health Texas Facili In upon light ment based the evidence. Medical-Dallas, ties Comm’n Charter relating prudence to the evidence Inc., (Tex.1984). 665 S.W.2d 452 quantifica- quantification, difficulties agency true test is not whether the reached imprudence tion of decisional million $32 conclusion, the correct but whether some appro- Units 1 reasonable reasonable basis exists in record for the priate. by taken agency. action Id. The find 7460, supra at 1250. inferences, conclusions, ings, and decisions agency presumed administrative to record before this Court is extensive evidence, supported by substantial and the and contains substantial information relevant prove burden is on contestant to other inquiry on to the Commission’s this issue. 453; Imperial wise. Id. at Re American testimony of- expert The evidence includes Fund, Comm’n, sources Inc. v. Railroad by EPEC, City, fered Commis- (Tex.1977); City S.W.2d San An witness, Johnson, Ben sion staff. The Comm’n, tonio v. Texas Water opinion in his had stated EPEC (Tex.1966). 752, 758 that, imprudent several decisions and made although City, argues should disallow EPEC, and staff of- each 50% of its costs.12 EPEC testified that there Although imprudence de- “Decisional” refers to EPEC’s from Mr. Johnson's testi- clear to suggested cisions become involved in Palo Verde mony, approach, impru- under his Project, the extent of its involvement and its $350 disallowance would have exceeded dence project to decisions remain the 15.8% million. participation level. agency reached because there true test is whether
should be
zero disallowance
imprudence. The
simply was
decisional
conclusion,
no
but
some
the correct
whether
testimony that cer-
Commission staff offered
reasonable basis exists
record
mak-
aspects
Company’s
tain
decision
by
agency.
action taken
Texas Health
However,
process
imprudent.
were
Facilities Comm’n v. Charter Medical-Dal-
not conclude
Commission’s witnesses did
(Tex.1984).
las,
Inc., 665 S.W.2d
project
participate in the
the decision to
agree
with the
that the
Rather,
they
imprudent.
focused on
itself
sup-
to
contains substantial evidence
record
perceived
with EPEC’s
errors associated
port
figure
disallowance
zero
deci-
making process. The Commission’s
decision
and, the
contains
imprudence;
sional
record
they
witnesses noted that
were unaware
to
a Commission
substantial evidence
any theory
would enable them to recom-
finding
percent of EPEC’s
that 50
any
project
specific disallowance of
mend
should have been disallowed. See 839
capacity based on their conclusions.13
costs or
because of the admit-
S.W.2d at
The evidence before the Commission
valuing
im-
complexity
ted
the decisional
testimony that
ranged
expert
therefore
case,
there
prudence in this
we hold that
im-
imprudence disallowance should be
no
to,
in its
reasonable basis
testimony
posed,
imprudence
that a 50%
discretion,
range
select an amount within
finally
imposed,
disallowance should
figures
by expert testimony
provided
theory
testimony
known
that there is no
Moreover,
parties.14
OPUC
quantify
mak-
the flaws
EPEC’s decision
explain why any
have
one amount
failed
ing process giving rise
its investment.
words,
range
or
within that
is more reasonable
bet-
experts
significant
had
other
several
proper
opinion
method
differences
than the
ter
the evidence
$32
proper
and the
amount
determine
eventually
figure
million
reached
These
imprudence
EPEC’s
disallowance.
inferences,
findings,
con-
Commission.
consid-
differences are understandable when
clusions,
of an
and decisions
administrative
in a
ering
complexity
involved
enormous
presumed
to be
agency are
purchase
utility’s decision to construct
evidence,
is on
and the burden
generating capacity.
new
prove
the contestant
otherwise.
v. Charter Medi
Health Facilities Comm’n
conducting
a substantial-evidence
(Tex.
cal-Dallas, Inc.,
446, 452
review,
evi
we must determine whether the
Fund,
1984); Imperial American Resources
as a
is such that reasonable
dence
whole
Inc.
Railroad
*8
the
minds could have reached the conclusion
(Tex.1977);
v.
City San Antonio Texas
to take
agency must have reached
order
(Tex.
752, 758
Water
407 S.W.2d
disputed
Bd. Den
the
action. Texas State
City
accept
that the
doWe
Sizemore,
759 S.W.2d
tal Examiners
met
burdens to overcome
OPUC have
their
denied,
(Tex.1988),
cert.
U.S.
(1989).
presumption in this case.
The
A. to in the future.” Because costs, post-in-service ordered the deferral Requirement Test Year impact the Commission understood the deferring post-in-service costs on the test to requires PURA utilities file for year. It is within discretion of the Com- by presenting ex rate increase revenue and expenditures mission to consider occur pense period same data 12-month year if outside the test such consideration using year. an historical test Tex.Rev.Civ. making will assist Commission test 1446c, 3(t); § 16 art. Stat.Ann. Tex.Ad year representative possible as as cost 23.21(a); Corp. Utility Suburban min.Code expected in future. Comm’n, 358, situation Utility v. Public (Tex.1983). In Public 366 State v. Commission, Utility ac we that an held B. counting authorizing deferred account Applied Standards ing year treatment does not violate the test granted request The Commission EPEC’s requirement requirement because there is no post-in-service for 1 to defer costs Unit based procedures PURA or upon integrity viability” a “financial year must follow test 6350, 6, supra note standard. Docket No. at determining accounting policy. How when However, granted 1239^41. case, ever, in the context of rate the test 2 request unit deferred account- EPEC’s requirement year applies. must on a harm” standard. “measurable argument address the that the actual inclu 7460, supra No. 1079. The Docket at in a base sion deferred costs rate City argues that the use of different two year requirement. violates the test arbitrary capricious is because standards argues post-in-service the Commission has created new standards thus, up 25
were deferred
to months and
concerning
for each decision
deferred ac-
rate
the inclusion
such rates
EPEC’s
counting.19
disagree.
year requirement.18
base violated
test
However,
may,
determining
its discre-
whether
to allow a
tion, go
year
necessary
utility
particular
outside
test
when
to defer
costs,
just
pro
the Commission has discretion
achieve
and reasonable rates.
Utility
Utility
“case-by-case”
Corp.
Public
ceed on an ad hoc or
basis.
Suburban
v.
See,
(Tex.1983),
e.g.,
Securities and Exch. Comm’n v.
“[cjhanges occurring
Chenery Corp.,
U.S.
we stated that
after
S.Ct.
known,
(1947);
if
period,
may be taken into
189
denied).
1988,
Further,
stipulation.
Austin
writ
In
Chen
unanimous
based on
SEC v.
194, 202-03,
ery Corp., 332
S.Ct.
U.S.
67
holding in
our
Texas v. Public Utili-
1575, 1580-81,
(1947),
sented the recent arrival of nuclear Justice Justice plants. remaining ation While within the GONZALEZ, DOGGETT, Justice PURA, statutory framework of the Commis- GAMMAGE, dissenting. Justice sion had balance the interests of consum- This case demonstrates the weakness of complex ers with the financial consideration safeguards upon today in State relied by public investing large created utilities Utility v. Public 883 Texas capital amounts of plants. nuclear Pro- (Tex.1994). ease, ceeding “case-by-case” on ad hoc basis fully majority approval context understandable defends its of deferred newly competitive created market in- accounting on ground treatment that de- complex volves technical considerations and cost ferred assets will be included competing statutory objectives. See South only they deemed base extent Comm’n, western Bell Tel. Co. v. Public Util “prudent, necessary.” reasonable and Id. at (Tex.App. 926-27 — Austin however, present case, n. 12. In denied); writ also see Securities and majority approves the Public Chenery Exch. Corp., Comm’n 332 U.S. application of a stan- similar 194, 202-03, 1575, 1580-81, S.Ct. L.Ed. dard, despite support- total lack (1947). As a we hold ing findings. I dissent. the Commission’s pro Commission was within its discretion in ceeding a “case-by-case” or ad hoc basis below, hearings At the rate of El applying different standards different presented Paso extensive evidence concern- proceedings.21 imprudence Paso Electric Com- pany’s decisions to become involved V. Project Palo Verde to remain involved
Conclusion percent participation the 15.8 level. See Tex. Comm’n, Application Pub. Utils. El Paso We hold that the err Commission did not part, its final Company Authority Change on a non- Electric fact, ultimately proceed concluded on a The Commission’s discretion “case-by-case” basis is absolute. When spec- that the measurable harm standard was too underlying considerations that ad hoc See, Comm’n, e.g., ulative. Utils. Peti- Tex.Public longer adjudication present, are no then the Lighting Company tion Houston and Power will be bound to follow formal Approval Accounting Treatment of Deferred rulemaking procedures set out in the Tex.Gov’t Project Limestone Unit and the Unit South See 2001.141. Southwestern Bell Tel. Code Ann. Tex.P.U.C.Bull. Util. 926- Co.v. Public 27 19, 1989). (April denied). (Tex.App. writ —Austin *11 Rates, Accordingly, I in rate would Tex.P.U.C.Bull. included base. (June to the for a ex- remand this cause testimony percent pert concluded that 50 keeping determination of rates tradi- of all Palo units should the cost three Verde tional standards. at 983. imprudent.
be as Id. Us- disallowed figure, some million should have this $350 disallowed for Unit 1 alone.
been agreed El Paso Elec-
The Commission entirely prudent” planning
tric “not managing participation in the determining project. Id. at 1250. In
Verde disallowance, however, amount of the rely Commission chose not The STATE of Texas and Office instead, figure presented; upon it seized Utility Counsel, of Public million that had been discussed $32 Petitioners, negotiations. course of settlement Id. expert tes- 1250-51. Paso Electric’s own amount,
tified, regard “I to the settlement COMMISSION OF PUBLIC UTILITY really anything.” think it don’t relates TEXAS and Central Power reality; has figure million no basis $32 Light Company, Respondents. solely parties’ efforts resulted buy peace. of Texas and Office STATE Utility Counsel, of Public majority cites no evidence Petitioners, disallowance, million because none $32 Nonetheless, upholds majority exists. findings supported by the Commission’s UTILITY COMMISSION OF PUBLIC Supra evidence. at 186. Lighting and and Houston TEXAS applied today, of review With standard Respondents. Company, Power imagine any is difficult to relating prudence decision that would be D-3154, Nos. D-3155. This lack review set aside the Court. of Texas. Supreme Court especially pernicious in the will be context prudence Valuing cost assets. deferred Argued Sept. degree assets involve the same such will June Decided complexity valuing imprudence in this approving amounts deferred case. Rehearing Oct. Overruled base, inclusion in rate arbitrarily figure may within a wide select effectively be
range, and its decision will judicial Judging
immune from review. ease, figure example of selected much typically
will closer figure than it is to rate-
recommended
payers’. hold for deci-
I would disallowance must be on the evi- imprudence
sional
dentiary Additionally, for the rea- record. dissenting opinion in my
sons stated Texas v. Public 205-209, I hold that no would beginning after
expenses incurred may capitalized operation
commercial notes the First National Bank right pursuant died Weaver a short time after suit was filed this case contractual and defendant. executor of his estate was substituted provision assignment. Respondent also grant- contends that the trial court erred plea challenging in abatement Cadle's that, Respondent argues assignee if even corporate standing bring suit in Texas. generally spe- receives benefit of the FDIC's period, expressly cial limitations Cadle waived
Notes
notes OPUC speak ability the Commission’s con that the court of concluded that the stipulations reaching sider non-unanimous inclusion of deferred Second, orders. free and, 41(a); PURA section be- violates accept the examiner’s recommen