AEP Texas Commercial & Industrial Retail Limited Partnership v. Public Utility Commission of Texas Alliance for Retail Markets Texas Energy Association for Marketers CPL Retail Energy, LP WTU Retail Energy, LP And Direct Energy Business, LLC "Permanent Archive Case" "Permanent Archive Case"
TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-13-00358-CV
AEP Texas Commercial & Industrial Retail Limited Partnership, Appellant
v.
Public Utility Commission of Texas; Alliance for Retail Markets;
Texas Energy Association for Marketers; CPL Retail Energy, LP; WTU Retail Energy, LP;
and Direct Energy Business, LLC, Appellees
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 353RD JUDICIAL DISTRICT
NO. D-1-GN-12-003944, HONORABLE STEPHEN YELENOSKY, JUDGE PRESIDING
DISSENTING OPINION
The portions of Chapter 39 of the Utilities Code and its related rules at issue in this
case are unambiguous. The Public Utility Commission (PUC or the Commission) has failed to
provide a reasonable alternative construction of the statutes and rules at issue to create ambiguity.
Because the Court has deferred to the PUC in the face of unambiguous statutes and rules, I dissent.
The majority has provided a thorough discussion of the underlying dispute and the
historical backdrop for the issue presented. I will not attempt to replow that ground here. The
majority also sustained AEP’s first appellate issue, and I agree with its analysis in that regard.
However, the majority nevertheless upheld the PUC’s decision and overruled AEP’s second
appellate issue. It is at that point of the majority’s analysis where my view of the case diverges.
As the majority correctly points out, the sole ground for PUC’s denial of AEP
REP’s application was its Conclusion of Law 10, which stated:
The sharing of the AEP acronym and AEP’s red parallelogram logo by both AEP
Retail Energy and its affiliated TDUs as described in this case violates the prohibition
in PURA § 39.157(d)(6) [and] P.U.C. Subst. R. 25.272(h)(2) of joint advertising and
promotional activities that favors a competitive affiliate.
The PUC made no finding or conclusion with regard to whether AEP REP’s application ran afoul
of any other prohibition or requirement under other statutes or rules.
Thus, we must examine whether the PUC’s sole stated ground for ruling against
AEP REP is consistent with the language of the statute and rule it cited in its conclusions. In doing
so, we cannot consider whether the PUC’s position in its brief—its litigation position—is a reasonable
interpretation of the statutes and rules that should be afforded deference; rather, we must focus solely
on the actual conclusion of the PUC in its final order, as well as the language of the statutes and rules
relied upon by the PUC and its interpretation of them in the administrative proceedings below. See
Railroad Comm’n of Tex. v. Texas Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 624-25
(Tex. 2011) (noting that “formal” agency interpretations are entitled to “serious consideration”);
Fiess v. State Farm Lloyds, 202 S.W.3d 744, 747 (Tex. 2006) (noting that deference to agency
interpretations applies “to formal opinions adopted after formal proceedings”).
According to the parties’ briefing, there are two statutes directly in play here, Sections
39.157(d)(5)(B) and 39.157(d)(6), as well as the corresponding rules, found in Rules 25.272(h)(1),
(2). The PUC incorrectly concluded that Section 39.157(d)(5)(B) and Rule 25.272(h)(1), the only
provisions that directly relate to the sharing of a name or logo by a utility and its competitive
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affiliate, are inapplicable.1 The majority correctly concluded that the PUC’s interpretation of this
statute and the corresponding rule—to the extent the PUC asserts that Section 39.157(d)(5)(B)
expired in its entirety in 2005—was unreasonable. Nothing in this Section and the corresponding
Rule suggests, even remotely, that there is anything wrong with the logo-sharing AEP REP
requests. I also agree with the majority that this conclusion does not necessarily end the inquiry
because there could be other bases within Section 39.157(d) or the corresponding rules that
support the Commission’s decision.2 Unlike the majority, however, I conclude that there are no
other such bases.
1
Section 39.157(d)(5)(B) provides, in relevant part, that a utility cannot:
(B) allow a competitive affiliate, before September 1, 2005, to use the utility’s
corporate name, trademark, brand, or logo unless the competitive affiliate
includes on employee business cards and in its advertisements of specific
services to existing or potential residential or small commercial customers
locating within the utility’s certificated services a disclaimer . . . .
Tex. Util. Code § 39.157(d)(5)(B). Similarly, Rule 25.272(h)(1) states that:
(1) Utility or logo. Before September 1, 2005, a utility shall not allow
the use of its corporate name, trademark, brand, or logo by a
competitive affiliate, on employee business cards or in any written or
auditory advertisements of specific services . . . .
16 Tex. Admin. Code §25.272(h)(1) (Pub. Util. Comm’n, Code of Conduct for Electric Utilities and
Their Affiliates).
2
While the majority’s conclusion concerning the PUC’s unreasonable interpretation of this
statute and corresponding rule should not end the inquiry, the PUC’s flawed interpretation of the
statute and its own rule—again, the only statute and rule directly applicable to use of shared logos
by utilities and their competitive affiliates—should not be discarded completely because it
underscores the Commission’s flawed analytical framework for addressing this issue generally.
3
Section 39.157(d)(6) is a legislative enactment instructing the Commission to
adopt a rule to ensure that “a utility does not conduct joint advertising or promotional activities with
a competitive affiliate in a manner that favors the competitive affiliate.” See Tex. Util. Code
§ 39.157(d)(6). AEP REP is a competitive affiliate of AEP TDU, the utility. The plain language of
this statute instructs the Commission to promulgate rules that do not allow utilities, like AEP TDU,
to conduct joint advertising or promotional activities with their competitive affiliates, like AEP REP,
that favor the competitive affiliate.
The Commission drafted corresponding rules as instructed by the Legislature, in
Rule 25.272(h)(2)(A) and Rule 25.272(h)(2)(B). Rule 25.272(h)(2)(A) specifies certain conduct
that is considered joint marketing, advertising, or promotional activities and is expressly prohibited.
Under this Rule:
(A) A utility shall not:
(i) provide or acquire leads on behalf of its competitive affiliates;
(ii) solicit business or acquire information on behalf of its competitive
affiliates;
(iii) give the appearance of speaking or acting on behalf of any of its
competitive affiliates;
(iv) share market analysis reports or other types of proprietary or non-
publicly available reports, including, but not limited to, market
forecast, planning, or strategic reports, with its competitive affiliates;
(v) represent to customers or potential customers that it can offer
competitive retail services bundled with its tariffed services; or
(vi) request authorization from its customers to pass on information
exclusively to its competitive affiliate.
16 Tex. Admin. Code § 25.272(h)(2)(A) (2013) (Pub. Util. Comm’n, Code of Conduct for Electric
Utilities and Their Affiliates).
4
The Commission also promulgated Rule 25.272(h)(2)(B), which is the rule on which
the Commission’s sole conclusion in this case was based. This Rule provides:
(B) A utility shall not engage in joint marketing, advertising, or promotional
activities of its products or services with those of a competitive affiliate in
a manner that favors the affiliate. Such joint marketing, advertising, or
promotional activities include, but are not limited to, the following activities:
(i) acting or appearing to act on behalf of a competitive affiliate in any
communications and contacts with any existing or potential customers;
(ii) joint sales calls;
(iii) joint proposals, either as requests for proposals or responses to
requests for proposals;
(iv) joint promotional communications or correspondence, except that a
utility may allow a competitive affiliate access to customer bill
advertising inserts according to the terms of a commission-approved
tariff so long as access to such inserts is made available on the same
terms and conditions to non-affiliates offering similar services as the
competitive affiliate that uses bill inserts;
(v) joint presentations at trade shows, conferences, or other marketing
events within the State of Texas; and
(vi) providing links from a utility’s Internet web site to a competitive
affiliate’s Internet web site.
16 Tex. Admin. Code § 25.272(h)(2)(B) (2013) (Pub. Util. Comm’n, Code of Conduct for Electric
Utilities and Their Affiliates).
The parties do not dispute, nor does the majority hold, that AEP REP’s application
was rejected under any of the enumerated examples of “joint marketing, advertising, or promotional
activities” contained in Rules 25.272(h)(2)(A) or (h)(2)(B). That means that none of the examples
provided by the Commission anywhere in its rules—in all of Section 25.272—apply to demonstrate
that AEP REP’s requested use of the logo was prohibited.3
3
And, as the majority correctly held, Section 39.157(d)(5)(B) and Rule 25.272(h)(1) do not
prohibit AEP REP’s request.
5
Our analysis of these examples, however, cannot and should not end there. The
examples the Commission provided are instructive because they show the type of conduct the
PUC intended to specifically prohibit. Each example requires proof of actions by the utility itself
or certain joint activities between the utility and the competitive affiliate. For example, the utility
cannot (1) provide or acquire leads for its competitive affiliate; (2) solicit business or acquire
information for its competitive affiliate; (3) represent to customers or potential customers that it can
bundle its tariffed services with competitive retail services; (4) act or appear to act on behalf of a
competitive affiliate; or (5) provide links on its website to a competitive affiliate’s website. See id.
§ 25.272(h)(2)(A)(i), (ii), (v), (B)(i), (vi). Each of these examples—and there are others in the
rules—requires some sort of affirmative act by the utility on the competitive affiliate’s behalf.
There are also four examples provided by the Commission of prohibited “joint
marketing, advertising, or promotional activities”: (1) joint sales calls; (2) joint proposals; (3) joint
promotional communications or correspondence (with an exception not applicable here); and
(4) joint presentations at trade shows, conferences, or other marketing events in Texas. See id.
§ 25.272(h)(2)(B)(ii)-(v). Each of these examples—the only specific examples of joint conduct
found under Section 25.272(h)(2)(B)—contemplates dual actions by the utility and the competitive
affiliate. To make “joint sales calls,” representatives of the utility and its competitive affiliate
would have to make the calls together or as a joint effort. To make “joint proposals,” there would
presumably have to be proof that the utility and the competitive affiliate worked on the proposals
together. For “joint promotional communications or correspondence” to occur, presumably the
utility and the competitive affiliate would have to make the communications or correspondence
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together as a joint effort. And, finally, to make “joint presentations at trade shows, conferences, or
other marketing events,” presumably representatives of the utility and the competitive affiliate
would have to work together to make the presentations or events occur. The examples of prohibited
conduct that the Commission itself provided require either specific unilateral actions by the utility
or joint actions between the utility and the competitive affiliate.
Yet, in this case, the Commission ignored the Rule’s specificity and requirement of
joint actions in interpreting Rule 25.272(h)(2), the rule upon which the Commission expressly
relied. Before providing specific examples, Rule 25.272(h)(2)(B) prohibits a utility generally from
engaging in “joint marketing, advertising, or promotional activities of its products or services
with those of a competitive affiliate in a manner that favors the competitive affiliate.” See id.
§ 25.272(h)(2)(B). This Rule by its very language requires the same type of joint efforts specified
in the Commission’s own specific examples of what constitutes prohibited conduct. There is no
evidence that AEP TDU and AEP REP actively engaged in such joint efforts here; in fact, the record
is devoid of evidence of action by AEP TDU at all in this regard. Nevertheless, even if there were
evidence of such joint efforts, the Commission’s interpretation of this Rule ignores and gives
no effect to the next phrase of the Rule, a phrase specifically added by the Commission and which
does not appear in the corresponding statute.
The Rule prohibits only joint marketing, advertising, or promotional activities by
the utility of “its products or services with those of a competitive affiliate.” See id. (emphasis
added). The Commission’s interpretation gives no effect to this language. There is no evidence in
the record indicating that AEP TDU was involved in prohibited joint advertising of AEP TDU’s own
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products or services with those of AEP REP. Based on this unambiguous language alone, Rule
25.272(h)(2)(B) does not apply to the situation at hand, and the Commission’s conclusion to the
contrary is not reasonable.4
Instead of giving any weight to the plain language of the rule, the Commission, as
well as the majority, focuses unduly on evidence of potential customer confusion if AEP REP’s
application were granted. The problem with this focus is that it is placed on a factor not present
anywhere in Section 39.157(d)(6) or Rule 25.272(h)(2)(B), the only statute and rule on which
the Commission based its ruling. In fact, the only place potential consumer confusion can even
indirectly be found as an informing factor is in Rule 25.107(e)(1)(B)’s prohibition of deceptive,
misleading, or vague business names.5 The Commission, however, made no findings or conclusions
that AEP REP’s request was deceptive, misleading, or vague. To the extent Rule 25.107 played a
role in the Commission’s decision, it was solely because the Commission considered the application
“otherwise contrary to § 25.272 of this title,” the Code of Conduct.6 See 16 Tex. Admin. Code
§ 25.107(e)(1)(B) (2013) (Pub. Util. Comm’n, Certification of Retail Electric Providers). Ultimately,
4
Interestingly, in its final order, the Commission omits this particular phrase from its near-
quotation of the rule in its Conclusion of Law 10.
5
This assumes that evidence of potential customer confusion is enough to support a finding
that a business name is “deceptive,” “misleading,” or “vague,” an issue we need not reach here.
6
Rule 25.107(e)(1)(B) states:
Business names shall not be deceptive, misleading, vague, or otherwise contrary to
§ 25.272 of this title . . . or duplicative of a name previously approved for use by a
REP certificate holder.
16 Tex. Admin. Code § 25.107(e)(1)(B) (2013) (Pub. Util. Comm’n, Certification of Retail
Electric Providers).
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the Commission’s sole basis was its flawed interpretation of the unambiguous language of Section
39.157(d)(6) and Rule 25.272(h)(2)(B).
As a Court, we must take statutes as we find them and interpret them as written.
Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 437 (Tex. 2009). We must also apply
Commission rules based on their plain language and cannot allow an agency to contravene the
plain language of a rule, regardless of the latitude it normally enjoys in its regulatory function.
Oncor Elec. Delivery Co. v. Public Util. Comm’n of Tex., 406 S.W.3d 253, 270 (Tex. App.—Austin
2013, no pet.) (explaining that courts will give some deference to agency’s interpretation of rule, so
long as the rule is ambiguous and agency’s interpretation is reasonable and does not contradict
rule’s plain language). Here, the statutes at issue, as well as the Commission’s rules promulgated
under those statutes, are unambiguous. We are therefore duty-bound to apply them as written and
not to defer to a Commission interpretation that is inconsistent with their plain language.
The majority incorrectly deferred to the Commission’s unreasonable interpretation
of an unambiguous statute and rule. As a result, I dissent and would reverse the Commission’s
final order and remand AEP REP’s application to the agency for further proceedings.
__________________________________________
Scott K. Field, Justice
Before Chief Justice Jones, Justices Pemberton and Field
Filed: July 17, 2014
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