Untitled Texas Attorney General Opinion

OFFICE OF THE ATTORNEY GENERAL . STATE OF TEL-IS

JOHN CORNYN

September 14,200l

The Honorable Michael L. Williams Opinion No. JC-0408
Chair, Railroad Commission of Texas
P.O. Box 12967 Re: Whether section 39.9048 of the Utilities
Austin, Texas 787 1 l-2967 Code requires the Railroad Commission to initiate
“a program to keep the costs of fuel, such as
natural gas, used for generating electricity low”
TEX. UTIL. CODE ANN. 5 39.9048(2) (Vernon
Supp. 2001) (RQ-0372-JC)

Dear Comrnissioner Williams:

You ask whether section 39.9048 of the Utilities Code vests the Railroad Commission with
the responsibility to initiate “a program to keep the costs of fuel, such as natural gas, used for
generating electricity low,” TEX.UTIL.CODE ANN. 8 39.9048(2) (Vernon Supp. 2001), and, if so,
what the scope of that responsibility is. * We conclude that section 39.9048 does not require the
Railroad Commission to initiate a program. Given our answer to your first question, we do not
address the second.

During the seventy-sixth legislative session, the Texas Legislature adopted an extensive
provision, Senate Bill 7, to deregulate the electric utility industry. Section 39 of that bill added
chapter 39, entitled “Restructuring of Electric Utility Industry,” to the Utilities Code. Subchapter
2 of that chapter, entitled “Miscellaneous Provisions,” includes the following provision, section
39.9048, which is the source of your question:

Itis the intent of the legislature that:

(1) the cost of generating electricity remain as low as
possible; and

(2) the state establish and publicize a program to keep the
costs offuel, such as natural gas, usedfor generating electricity low.

Id. 0 39.9048 (emphasis added).

‘See Letter from Honorable Michael L. Williams, Chair, Railroad Commission of Texas, to Honorable
John Cornyn, Texas Attorney General (Apr. 2, 2001) (on file with Opinion Committee) [hereinafter Request Letter].
The Honorable Michael L. Williams - Page 2 (JC-0408)

You ask whether the Railroad Commission, which regulates the production of natural gas
in this state, and, to some extent, its sale, is responsible for initiating the program described in
subsection (2) of section 39.9048. See Request Letter, supra note 1, at 3; see also TEX.NAT. RES.
CODE ANN. ch. 86, subch. C (Vernon 1993 & Supp. 2001) (Railroad Commission’s powers and
duties with respect to regulation of production of natural gas), TEX. UTIL.CODE ANN. ch. 121
(Vernon 1998 & Supp. 2001) (Railroad Commission’s regulatory authority with respect to gas
utilities). Reading section 39.9048 in the context of chapter 39, and particularly in light of section
39.9044, we conclude that section 39.9048 does not charge the Railroad Commission with
establishing a program.

Subchapter Z of chapter 39 is a catchall for various provisions, not all related to each other,
that pertain to deregulation and its effects, such as its effects on school funding, the tax revenues of
other taxing units, and electric utility workers. See TEX.UTIL.CODE ANN. 89 39.901, .9015, .906
(Vernon Supp. 2001). Several provisions contain goals for energy use and efficiency in this state.
See id. $8 39.904, .9044, .9048, .905. Section 39.904, for example, establishes a goal with respect
to renewable energy. See id. 8 39.904.

Section 39.9048, the provision at issue in your request, follows another lengthy provision
regarding goals with respect to natural gas, section 39.9044. That provision states the legislature’s
intent that half the generating capacity installed in this state after January 1,2000, use natural gas.
See id. 4 39.9044(a). It charges the Public Utilities Commission (the “PUC”) with establishing a
program to encourage utilities to comply with this goal by using natural gas produced in Texas as
the preferential fuel and with establishing a natural gas energy credits trading program. See id.
8 39.9044(a), (b). Subsections (c) and (d) of section 39.9044 reference duties of both the PUC and
the Railroad Commission:

(c) Not later than January 1,2000, the commission shall adopt
rules necessary to administer and enforce this section and to perform
any necessary studies in cooperation with the Railroad Commission
of Texas. At a minimum, the rules shall:

(1) establish the minimum annual natural gas generation
requirement for each power generation company, municipally owned
utility, and electric cooperative operating in this state in a manner
reasonably calculated by the commission to produce, on a statewide
basis, compliance with the requirement prescribed by Subsection (a);
and

(2) specify reasonable performance standards that all
natural gas capacity additions must meet to count against the
requirement prescribed by Subsection (a) and that:
The Honorable Michael L. Williams - Page 3 (JC-0408)

(4 are designed and operated so as to maximize
the energy output from the capacity additions in accordance with
then-current industry standards and best industry standards; and

(W encourage the development, construction, and
operation of new natural gas energy projects at those sites in this state
that have the greatest economic potential for capture and development
of this state’s environmentally beneficial natural gas resources.

(d) The commission, with the assistance of the Railroad
Commission of Texas, shall adopt rules allowing and encouraging
retail electric providers and municipally owned utilities and electric
cooperatives that have adopted customer choice to market electricity
generated using natural gas produced in this state as environmentally
beneficial. The rules shall allow a provider, municipally owned
utility, or cooperative to:

(1) emphasize that natural gas produced in this state is the
cleanest-burning fossil fuel; and

(2) label the electricity generated using natural gas
produced in this state as “green” electricity.

Id. 8 39.9044(c), (d) (emphasis added); see also id. 5 1 I .003(4) (defining “commission” for purposes
of title 2 of the Utilities Code as “the Public Utility Commission of Texas”).

Sections 39.9044 and 39.9048 were enacted together as part of the same legislation, Senate
Bill 7, and both deal with the use of natural gas to generate electricity in the context of deregulation
of the electric utility industry. Thus, we read them together. See Bridgestone/Firestone, Inc. v.
Glyn-Jones, 878 S.W.2d 132,133 (Tex. 1994); Sharp v. House ofLloyd, Inc., 815 S.W.2d 245,249
(Tex. 1991); S ay re v. Mullins, 681 S.W.2d 25,27 (Tex. 1984); Barr v. Bernhard, 562 S.W.2d 844,
849 (Tex. 1978) (court must look to entire act, not just one provision, to determine legislative intent);
see also TEX. GOV'T CODE ANN. 8 3 11.023 (Vernon 1998) (providing that in construing statute,
court may consider legislative objective, circumstances under which statute was enacted, legislative
history, and consequences of particular construction). We believe it is clear from these provisions
that the PUC is charged with taking the lead role in implementing natural gas goals and that the
legislature did not intend section 39.9048 to require the Railroad Commission to establish a program.

First, section 39.9044, the more specific of the two statutes, charges the Railroad
Commission with nothing more than assisting the PUC. Subsection (c) requires the Railroad
Commission to cooperate with the PUC to perform any necessary studies in connection with use of
natural gas to generate electricity. See TEX.UTIL.CODE ANN. 9 39.9044(c) (Vernon Supp. 2001).
In addition, subsection (d) requires the Railroad Commission to assist the PUC to adopt rules
The Honorable Michael L. Williams - Page 4 (JC-0408)

allowing and encouraging electric providers that have adopted customer choice programs to market
electricity generated using natural gas produced in this state as environmentally beneficial. See id.
0 39.9044(d). The primary duty to take action is vested in the PUC; the Railroad Commission’s duty
is to assist the PUC in its efforts.

Second, section 39.9048 does not vest the Railroad Commission with the authority to
establish a program regarding the cost of natural gas or other fuels in the generation of electricity.
By contrast, section 39.9044 specifically vests the PUC with rule-making authority to implement
the programs outlined in that provision. If the legislature had intended to require the Railroad
Commission to establish a program pursuant to section 39.9048, we believe it would have given the
Commission the authority to adopt rules to implement such a program, as it did with respect to the
PUC in section 39.9044. The legislative history supports our conclusion that the legislature did not
intend Senate Bill 7 to vest the Railroad Commission with any additional rule-making authority.
The final bill analysis for Senate Bill 7 notes that the legislation grants rule-making authority to the
PUC, the Texas Natural Resource Conservation Commission, the Commissioner of Education, the
Comptroller, municipal utilities, and electric cooperatives. See SENATE COMM. ON ECONOMIC
DEVELOPMENT, BILL ANALYSIS, Tex. S.B. 7, 76th Leg., R.S. (1999). The bill analysis expressly
refers to the PUC’s authority under section 39.9044(c) to adopt rules to administer and enforce a
program to encourage the use of natural gas in the generation of electricity.2 The bill analysis’
discussion of rule-making authority makes no mention of the Railroad Commission.

In sum, section 39.9048, when read together with section 39.9044 and in context with the rest
of Senate Bill 7, does not require the Railroad Commission to adopt a program regarding the cost
of fuels used to generate electricity.

*The bill analysis states in pertinent part:

Rulemaking authority is granted to the Public Utility Commission in
SECTION 36 (Section 38.005(a), Utilities Code) and SECTION 39 (Sections
39.101(e) and (f), 39.153 (e) and (f), 39.155(a), 39.157(d) and (e), 39.352(g),
39.903(f), (g), (i), (j), 39.904(c), 39.044(c) and (d), 39.905(b), Utilities Code), and
SECTION 65; the governing body of a municipally owned utility in SECTION 39
(Section 39.10 1(g), Utilities Code); Texas Natural Resource Conservation
Commission in SECTION 39 (Sections 39.264(f), (g), and (i), Utilities Code);
commissioner of education in SECTION 39 (Section 39.901 (g), Utilities Code);
comptroller ofpublic accounts in SECTION 39 (Section 39.901 (g), Utilities Code);
and the board of directors of electric cooperatives in SECTION 39 (Section
41.003(a), Utilities Code).

SENATECOMM.ONECONOMICDEVELOPMENT,BILLANALYSIS,
Tex.S.B.7,76thLeg.,R.S.(1999).
The Honorable Michael L. Williams - Page 5 (JC-0408)

SUMMARY

Section 39.9048 of the Utilities Code does not require the
Railroad Commission to initiate “a program to keep the costs of fuel,
such as natural gas, used for generating electricity low.” TEX.UTIL.
CODE ANN. 8 39.9048(2) (Vernon Supp. 2001).

Attorney General of Texas

HOWARD G. BALDWIN, JR.
First Assistant Attorney General

NANCY FULLER
Deputy Attorney General - General Counsel

SUSAN D. GUSKY
Chair, Opinion Committee

Mary R. Crouter
Assistant Attorney General, Opinion Committee