Untitled Texas Attorney General Opinion

OFFICE ofthe ATTORNEY GENERAL
GREG ABBOTT

January lo,2003

The Honorable Steven D. Wolens Opinion No. GA-001 0
Chair, Committee on State Affairs
Texas House of Representatives Re: Whether the divestiture provision in section
P. 0. Box 2910 12.152(b) of the Utilities Code applies to an
Austin, Texas 78768-2910 interest under section 12.053(b)(l)(B)
(RQ-0575-JC)

Dear Representative Wolens:

You ask about the relationship between section 12.053 and section 12.152 of the Utilities
Code, both of which provide that a person with certain pecuniary interests is not eligible for
appointment as commissioner of the Public Utility Commission (the “PUC” or “Commission”).’
Unlike section 12.053, section 12.152 provides that a person who discloses and divests certain types
of interests is not ineligible. You ask in essence whether the divestiture provision in section
12.152(b) applies to an interest under section 12.053(b)(l)(B). We conclude that the section
12.152(b) divestiture provision cures a disqualification due to an interest under section 12.053(b)( 1)
that also falls within section 12.152(a)(2)(B). It does not cure a disqualification due to an interest
that falls under section 12.053(b)(l) but that is not within the scope of section 12.152(a)(2)(B).

Section 12.053(b)(l)(B) and section 12.152(a)(2)(B) contain similar but not identical
restrictions on a person’s eligibility for appointment as commissioner of the PUC. Section
12.053(b) p rovides in pertinent part as follows:

(b) A person is not eligible for appointment as a commissioner ifthe
person:

(1) at any time during the two years preceding appointment:

‘See Letter from Honorable Steven D. Wolens, Chair, Committee on State Affairs, Texas House of
Representatives, to Honorable John Cornyn, Texas Attorney General (July 9,2002) (on file with Opinion Committee)
[hereinafter Request Letter].

An Equal Employment Opportunity Employer . Printed on Recycled Paper
The Honorable Steven D. Wolens - Page 2 (GA-0010)

(B) owned or controlled, directly or indirectly, stocks or
bonds of any class with a value of $10,000 or more in a public utility,
affiliate, or direct competitor of a public utility; or

(2) is not qualified to serve under Section 12.15 1, 12.152, or
12.153.

TEX. UTIL. CODE ANN. $12.053 (Vernon 1998) (emphasis added); see aZso id. @11.003(2) (Vernon
Supp. 2003) (defining “affiliate”), 11.004 (Vernon 1998) (defining “utility”), 11.006 (defining
“affiliate”).

Similarly, section 12.152 provides in pertinent part:

(a) A person is not eligible for appointment as a commissioner or
executive director of the commission if:

(2) the person or the person’s spouse:

(B) directly or indirectly owns or controls more than a 10
percent interest or a pecuniary interest with a value exceeding
$10,000 in:

(i) a business entity or other organization that is
regulated by or receives funds from the commission; or

(ii) a utility competitor, utility supplier, or other
entity affected by a commission decision in a manner other than by
the setting of rates for that class of customer.

Id. $ 12.152(a) (Vernon Supp. 2003) (emphasis added); see also id. 5s 11.003( 1) (defining “affected
person”), 11.005 (Vernon 1998) (“In this title, an entity, including a utility competitor or utility
supplier, is considered to be aflected in a manner other than by the setting of rates for that class of
customer if during a relevant calendar year the entity provides fuel, utility-related goods,
utility-related products, or utility-related services to a regulated or unregulated provider of
telecommunications or electric services or to an affiliate in an amount equal to the greater of $10,000
or 10 percent of the person’s business.“) (emphasis added). Section 12.152, in speaking in terms of
ownership or control of a “pecuniary interest” rather than “stocks or bonds” and including within the
list of prohibited interests ownership or control in a business that “receives funds from the
commission” or in another “entity affected by a commission decision in a manner other than by the
setting of rates for that class of customer,” applies to a broader universe of interests than section
12.053(b)(l). See id. @ 12.053(b)(l) (V ernon 1998), 12.152(a)(2)(B) (Vernon Supp. 2003).
Furthermore, section 12.053 applies only to interests owned by the potential PUC member, whereas
The Honorable Steven D. Wolens - Page 3 (GA-0010)

section 12.152 applies to interests owned both by the potential PUC member and his or her spouse.
See id. $5 12.053(b)(l)(B), 12.152(a)(2). On the other hand, section 12.053 applies to interests
owned at any time during the two years preceding appointment, whereas section 12.152 applies to
interests owned at the time of appointment. See id. $5 12.053(b)(l), 12.152(a)(2)(B).

Unlike section 12.053, section 12.152 contains an exception that provides that a person who
has a pecuniary interest described by section 12.152(a)(2)(B) may be appointed commissioner if he
or she discloses and divests the interest:

(b) A person otherwise ineligible because of Subsection
(a)(2)(B) may be appointed to the commission and serve as a
commissioner or may be employed as executive director if the person:

(1) notifies the attorney general and commission that the
person is ineligible because of Subsection (a)(2)(B); and

(2) divests the person or the person’s spouse of the
ownership or control:

(A) before beginning service or employment; or

(B) if the person is already serving or employed,
within a reasonable time.

Id. $ 12.152(b) (Vernon Supp. 2003).

Certain pecuniary interests, such as the ownership of stock with a value exceeding $10,000
in a public utility or a direct competitor of a public utility, fall under both section 12.053(b)(l)(B)
and section 12.152(a)(2)(B). See id. $8 12.053(b)(l)(B) (V ernon 1998) (a person is ineligible for
appointment if he or she at any time during the preceding two years “owned or controlled, directly
or indirectly, stocks or bonds of any class with a value of $10,000 or more in a public utility,
affiliate, or direct competitor of a public utility”), 12.152(a)(2)(B) (Vernon Supp. 2003) (a person
is ineligible for appointment if the person “directly or indirectly owns or controls more than a 10
percent interest or a pecuniary interest with a value exceeding $10,000 in . . . a business entity or
other organization that is regulated by. . . the commission” or “a utility competitor”). In light of this
overlap, you ask whether the divestiture provision in section 12.152(b) cures a conflict under section
12.053(b)(l)(B):

Can an appointee to the Public Utility Commission of Texas who
owns or controls, directly or indirectly, stocks or bonds with the value
of $10,000 or more [in a public utility, affiliate, or direct competitor
of a public utility], at any time during the two years preceding
appointment, cure that conflict and therefore be eligible for service if
that person notifies the attorney general and commission that the
person is ineligible because of this conflict, and divests him/herself
The Honorable Steven D. Wolens - Page 4 (GA-0010)

of the ownership or control of the stock either before the beginning
of service or employment or within a reasonable period of time?

Request Letter, supra note 1, at 2. Or you ask, “Put a different way, does the cure provision on
eligibility in Sec. 12.152(b) apply to the conflict provision of Sec. 12.053(b)(l)?” Id. at 3. Based on
the legislative history, we conclude that the section 12.152(b) divestiture provision “cures a conflict”
due to an interest under section 12.053(b)( 1) that also falls within section 12.152(a)(2)(B). It does
not “cure a conflict” due to an interest that falls under section 12.053(b)( 1) but that is not within the
scope of section 12.152(a)(2)(B).

In construing these provisions, we must attempt to give effect to the legislature’s intent. See
TEX. GOV’T CODE ANN. $ $ 3 11.02 1, 3 11.023 (Vernon 1998); Mitchell Energy Corp. v. Ashworth,
943 S.W.2d 436,438 (Tex. 1997). To do so, we construe statutes according to their plain language.
See RepublicBank Dallas, N.A. v. Interkal, Inc., 691 S.W.2d 605, 607-08 (Tex. 1985); Bouldin v.
Bexar County SherifS’s Civil Serv. Comm’n, 12 S.W.3d 527,529 (Tex. App.-San Antonio 1999, no
pet.); see also Fleming Foods of Tex., Inc. v. Rylander, 6 S.W.3d 278, 284 (Tex. 1999) (where
codified statute is unambiguous, plain-meaning rule applies even if codification is inconsistent with
its statutory predecessor). When a statute is ambiguous, we may consider, among other things, the
object sought to be attained, the circumstances under which a statute was enacted, legislative history,
and the consequences of a particular construction. See TEX. GOV’T CODE ANN. 5 3 11.023 (Vernon
1998); see also id. 8 3 11.021 (“In enacting a statute, it is presumed that . . . the entire statute is
intended to be effective[ ,] a just and reasonable result is intended[, and] a result feasible of execution
is intended . . . .“).

Sections 12.053 and 12.152 conflict, creating an ambiguity that cannot be resolved on the
basis of the statutes’ plain language. Both provisions address eligibility for appointment as
commissioner of the PUC and describe overlapping disqualifying interests, such as ownership of
stock in a public utility or a public utility competitor. See TEX.UTIL. CODEANN. 8s 12.053(b)(l)(B)
(Vernon 1998), 12.152(a)(2)(B) (Vernon Supp. 2003). Importantly, however, section 12.152
contains a divestiture provision, whereas section 12.053 does not. See id. $8 12.053, 12.152(b).
Section 12.152 permits the divestiture of interests that pose an absolute bar to appointment under
section 12.053. Although subsection (b)(2) of section 12.053 mentions section 12.152, that reference
does not indicate how the two provisions should be reconciled. See id. 5 12.053(b)(2) (Vernon 1998)
(“A person is not eligible for appointment . . . if the person . . . is not qualified to serve under Section
12.151, 12.152, or 12.153.“).

Because of this ambiguity, we turn to the legislative history for guidance. The language in
section 12.053 predates the language in section 12.152 by twenty years. When the Public Utility
Regulatory Act was first enacted in 1975, as article 1446c, it contained a provision, section 6(a), that
made a person ineligible for appointment to the PUC “if at any time during the two year period
immediately preceding his appointment . . . he owned or controlled, directly or indirectly, stocks or
bonds of any class with a value of $10,000, or more in a public utility or any affiliated interest.” Act
The Honorable Steven D. Wolens - Page 5 (GA-0010)

of June 2, 1975,64th Leg., R.S., ch. 721, art. II, § 6(a), 1975 Tex. Gen. Laws 2327,233 1 (codified
as article 1446c, 8 6(a) of the Revised Civil Statutes).2

In 1995, the Seventy-fourth Legislature adopted Senate Bill 3 19, a nonsubstantive
recodification of the Public Utility Regulatory Act, that repealed article 1446~ and enacted article
1446c-0, titled the “Public Utility Regulatory Act of 1995.“3 In Senate Bill 3 19, section 6(a) of
article 1446~ became section 1.023(c) of article 1446~-0.~

Later in the same session, the legislature adopted Senate Bill 373, which substantively
amended the Public Utility Regulatory Act of 1995 and continued the PUC following sunset review .’
In Senate Bill 373, the legislature substantively amended section 1.023(~)~ and added subsections
(e> and (0 t o section 1.023.7 Those two subsections are the genesis of what is now section 12.152.
Because the legislature amended section 1.023(c), the legislature clearly did not intend the addition
of section 1.023(e) and (f) to repeal section 1.023(c). The divestiture provision, section 1.023(f),
very clearly applied only to an interest under section 1.023(e)(2)(B), but it applied
“[nlotwithstanding any other provision of this Act.” Act of May 27, 1995,74th Leg., R.S., ch. 765,
9 1.06, sec. 1.023(f), 1995 Tex. Gen. Laws 3972,3973 (“Notwithstanding any otherprovision of this
Act, a person otherwise ineligible because of the application of Subsection (e)(2)(B) of this section
may be appointed . . . if the person . . . .“) (emphasis added).

*A separate provision, section 6(b), prohibited a commissioner from having certain interests “during his period
of service,” and section 6(f) provided for divestiture by a commissioner “upon becoming the owner of any stocks or
bonds or other pecuniary interest in a public utility or other affiliated interest. . . otherwise than voluntarily.” Act of June
2, 1975, 64th Leg., R.S., ch. 721, art. II, 0 6(b), (f), 1975 Tex. Gen. Laws 2327, 2331-32. The substance of these two
provisions now appears in section 12.154(f) of the Utilities Code, which applies to a commissioner “[dluring the period
of service with the commission.” TEX. UTIL.CODEANN. $ 12.154(a), (f) (Vernon 1998). As section 12.154 applies to
interests acquired by a commissioner while serving on the PUC, it is not relevant here.

3See Act of Mar. 29, 1995,74th Leg., R.S., ch. 9, 1995 Tex. Gen. Laws 3 1.

%ee id. at 34.

‘See Act of May 27, 1995,74th Leg., R.S., ch. 765, 1995 Tex. Gen. Laws 3972; SENATECOMM. ON STATE
AFFAIRS,BILL ANALYSIS,Tex. S.B. 373, 74th Leg., R.S. (Apr. 24, 1995) (bill continues and revises functions of the
PUC).

“See Act of May 27,1995,74th Leg., R.S., ch. 765,1995 Tex. Gen. Laws 3972,3973 (adding interest in “direct
competitor of a public utility” to list of disqualifying interests).

7See id. New subsection (e) of section 1.023 began with the language - “[a] person is not eligible for
appointment as a public member of the commission” - even though the 1995 amendments did not provide for a special
category of “public” member of the PUC. See id. (emphasis added). Rather, Senate Bill 373 amended the provision
establishing qualifications for commissioners to provide that to be eligible for appointment as a commissioner a person
must be “a representative of the general public,” so all members were “public members.” See id. (amending section
1.023(a)). A bill analysis indicates that both amendments were based on standard Sunset Commission language. See
HOUSECOMM. REPORT,BILLANALYSIS,Tex. S.B. 373 (May 20, 1995). In 1997, the legislature deleted the reference
to a “public” member when it codified section 1.023(e) in section 12.152 of the Utilities Code. See TEX. UTLL.CODE
ANN. 9 12.152 revisor’s note (Vernon 1998) (“Because, under the law as amended [in 19951, each member of the
commission must be a ‘public’ member, the reference to ‘public’ is omitted from the revised law as unnecessary.“).
The Honorable Steven D. Wolens - Page 6 (GA-0010)

The legislative history indicates that the purpose of this legislation was to prevent conflicts
of interest on the part of commissioners. A bill analysis states that the amendment to section
1.023(c) “[slpecifies that conflict of interest provisions apply to direct competitors of utilities” and
that section 1.023(e) applies standard Sunset Commission language to “prohibit[] conflicts of interest
for commission members.” HOUSECOMM. REPORT,BILLANALYSIS,Tex. S.B. 373,74th Leg., R.S.
(May 20, 1995). In addition, an interim report to the Seventy-fourth Legislature that appears to be
the genesis of the bill recommended that the conflict of interest provisions for PUC commissioners
be tightened. See TEXAS ALTERNATIVES: COMPETITIVE AND REGULATORY OPTIONS IN
TELECOMMUNICATIONSAND ELECTRICPOWER, A REPORT TO THE 74~~ LEGISLATURE,JOINT
INTERIMCOMM. ON TELECOMMUNICATIONS, JOINTINTERIMCOMM. ON THEPUC, AND THETEXAS
SUNSETADVISORY COMM’N, at 16- 17 (Jan. 10, 1995) (“Recommendation 7: Tighten the conflict
of interest provisions for PUC commissioners and apply them to the executive director, the general
counsel, and the public counsel.“); see also TEXAS SUNSET COMM'N REPORT TO THE 74~~
LEGISLATURE, at 3 (1995) (explaining that Sunset Commission made no independent
recommendations on the PUC but rather joined with interim committees in publication of a final
report and recommendations).

In 1997, the legislature codified the Public Utility Regulatory Act of 1995 in Title 2 of the
Utilities Code as part of the state’s continuing statutory revision program. See TEX. UTIL. CODE
ANN. $5 1.001, 11.001 (Vernon 1998). The legislature intended the codification to be
nonsubstantive. See id. 5 1.001(a). Interestingly, the legislature separated section 1.023(c), the
eligibility provision dating from 1975, and section 1.023(e) and (f), the eligibility and divestiture
provisions dating from 1995, into separate statutes in separate subchapters. Section 1.023(c) became
Utilities Code section 12.053 in Subchapter B, entitled “Commission Appointment and Functions”;
section 1.023(e) and (f) became Utilities Code section 12.152 in Subchapter D, entitled “Prohibited
Relationships and Activities.” A cross-reference to section 12.152 was added to section 12.053 as
subsection (b)(2). See id. 3 12.053 revisor’s note (“The revised law adds a cross-reference to
Sections 12.15 1, 12.152, and 12.153, which also specify eligibility for appointment as a
commissioner.“). Section 12.152(b), the codification of the divestiture provision, omitted the
language “notwithstanding any other provision of this Act” that had been included in section
1.023(f). See id. 5 12.152 (Vernon Supp. 2003). The Revisor’s Note to section 12.152 does not
mention this omission. See id. revisor’s note. Significantly, the 1997 codification of the Public
Utility Regulatory Act of 1995 did not clarify the relationship between the two provisions. See
Fleming Foods of Tex., Inc. v. Rylander, 6 S.W.3d 278,286 (Tex. 1999) (when “specific provisions
of a ‘nonsubstantive’ codification and the code as a whole are direct, unambiguous, and cannot be
reconciled with prior law, the codification rather than the prior, repealed statute must be given
effect”).

Based on this legislative history, we conclude that sections 12.053 and 12.152 must be
harmonized to the extent possible and that meaning must be given to both. The critical legislative
history dates from 1995, when the legislature inserted the new eligibility provision, now section
12.152, into the Public Utility Regulatory Act of 1995 as standard sunset language, while amending
the older eligibility provision, now section 12.053, that dated from 1975. From these two actions,
it is clear that the legislature did not intend to repeal the older provision. It is also evident from the
express language of the former statute, however, that the legislature intended the divestiture
The Honorable Steven D. Wolens - Page 7 (GA-0010)

provision to apply “[nlotwithstanding any other provision of this Act.” Act of May 27, 1995,74th
Leg., R.S., ch. 765, $ 1.06, sec. 1.023(f), 1995 Tex. Gen. Laws 3972,3973 (“Notwithstanding any
other provision of this Act, a person otherwise ineligible because of the application of Subsection
(e)(2)(B) of this section may be appointed . . . if the person . . . .“). Thus, while the legislature did
not intend to repeal the older provision, it appears to have intended the new divestiture provision to
apply to interests that would fall under both provisions. Moreover, under the rules of statutory
construction, to the extent section 12.053 and the section 12.152 divestiture provision conflict,
section 12.152 prevails as the more recently enacted provision. See TEX. GOV’T CODE ANN. 5
3 11.025(a) (Vernon 1998) (“if statutes enacted at the same or different sessions of the legislature are
irreconcilable, the statute latest in date of enactment prevails”) (Code Construction Act). This
construction gives meaning to both provisions and, because it requires the divestiture of interests that
may pose a conflict, effectuates the legislature’s intent to prevent conflicts of interest on the part of
Commission members.

Accordingly, we conclude that the section 12.152(b) divestiture provision cures a
disqualification due to an interest under section 12.053(b)(l)(B) that also falls within section
12.152(a)(2)(B). By its plain language, section 12.152(b) does not cure disqualification due to an
interest that falls under section 12.053(b)(l) but that is not within the scope of section
12.152(a)(2)(B). See TEX.UTIL. CODEANN. $ 12.152(b) (Vernon Supp. 2003) (“A person otherwise
ineligible because of Subsection (a)(2)(B) may be appointed to the commission and serve as a
commissioner . . . if the person . . . .“) (emphasis added).

Finally, we note that the two statutes conflict in yet another respect, which we do not resolve
here. Section 12.053 ineligibility is triggered by interests owned at any time during the two years
preceding appointment, whereas section 12.152 ineligibility is triggered by interests owned at the
time of appointment. See id. $5 12.053(b)(l)(B) (Vernon 1998), 12.152(a)(2)(B) (Vernon Supp.
2003). It may be the case that a person who is a candidate for appointment to the Commission had
an interest under section 12.053(b)(l)(B) within the preceding two years but does not presently have
the interest. If that interest was of a type covered by section 12.152(a)(2)(B), it would make sense,
as a practical matter, that the prospective appointee could satisfy the divestiture provision by
disclosing the interest under section 12.152(b)( 1). See id. 5 12.152(b)( 1) (“A person otherwise
ineligible . . . may be appointed to the commission and serve as a commissioner . . . if the person .
. . notifies the attorney general and commission . . . .“). However, section 12.152(b) permits the
divestiture of only those interests that fall within section 12.152(a)(2)(B), which does not appear to
contemplate interests owned or controlled prior to the time of appointment. See id. 9
12.152(a)(2)(B) (“A person is not eligible for appointment as a commissioner . . . if . . . the person
or the person’s spouse . . . owns or controls. . . . “), (b) (“A person otherwise ineligible because of
Subsection (a)(2)(B) may be appointed to the commission and serve as a commissioner . . . if the
person . . . .“) (emphasis added).
The Honorable Steven D. Wolens - Page 8 (GA-0010)

SUMMARY

Utilities Code section 12.053 and section 12.152 provide that a
person with certain pecuniary interests is not eligible for appointment
as commissioner of the Public Utility Commission. Unlike section
12.053, section 12.152 provides that a person who discloses and
divests certain types of interests is not disqualified. The section
12.152(b) divestiture provision cures a disqualification due to an
interest under section 12.053(b)( 1) that also falls within section
12.152(a)(2)(B). It does not cure a disqualification due to an interest
that falls under section 12.053(b)( 1) but that is not within the scope
of section 12.152(a)(2)(B).

BARRY R. MCBEE
First Assistant Attorney General

NANCY FULLER
Deputy Attorney General - General Counsel

RICK GILPIN
Deputy Chair, Opinion Committee

Mary R. Crouter
Assistant Attorney General, Opinion Committee