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The Attorney General of Texas
December 8, 1981
MARK WHITE
Attorney General
SupremeCowl BulldIng Mr. George l-l. Cowden, Chairman Opinion No. W-406
P. 0. Box 12545 Texas Public Utility Commission
AIlstIn. TX. 78711 7800 Shoal Creek Boulevard Be: Appeals to Texas Public
51214752501 Suite 400N Utility Commission of
Telex 9101874-1367 Austin. Texas 78757 municipal rate orders
Telecooier 5121475J3266
regarding municipally owned
electric utilities
1607 MaIn St.. suite 1400
Dallas, TX. 75201 Dear Chairman Cowden:
21417428944
You have requested an opinion on questions concerning the meaning
4824 Alberta Ave.. Suite 160 of several provisions of the Public Utility Regulatory Act, article
El Paso, TX. 79905 1446(c), V.T.C.S. [hereinafter "the act"]. The hey sections,
915/533.34S4 26(c)-(e), read as follows:
1220 Dallas Ave.. Suite 202
(c) Ratepayers of a municipally owned gas or
Houston. TX. 77002 electric utility outside the municipal limits may
7131850.0665 appeal any action of the governing bady affecting
the rates of the municipally owned gas or electric
utility through filing with the commission or
505 Broadway, Suite 312
Lubbock. TX. 79401
railroad commission, as appropriate, petition for
5061747.5238 review signed by the lesser of 10,000 or 5 percent
of the ratepayers served by such utility outside
the municipal limits. For purposes of this
4309 N. Tenth. Suite 6
subsection each person receiving a separate bill
McAllen. TX. 78501
512B524547 shall be considered as a ratepayer. But no person
shall be considered as being more than one
ratepayer notwithstanding the number of bills
200 u*kl Plaza, .9&e 400 received. Such petition for review shall be
San Antonio. TX. 75205 considered properly signed by any person. or
51a2254191
spouse of any such person, in whose name
residential utility service is carried.
An Equal Opportunity/
Atflrrnative Action Employer (d) The appeal process shall be instituted
within 30 days of the final decision by the
governing body with the filing of a petition for
review with the commission or railroad cormsission
and copies served on all parties to the original
rate proceeding.
p. 1379
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Mr. George M. Cowden - Page 2 (MJ-406)
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(e) The commission or railroad comission
shall hear such appeal de novo and by its final
order shall fix such rates as the municipality
should have fixed in the ordinance from which the
appeal was taken.
Your first question is:
Since the commission has jurisdiction over an
appeal from a municipal rate order regarding a
municipally owned utility, does this jurisdiction
include jurisdiction to set rates charged both
outside and within municipal limits? If the
commission has jurisdiction to set rates both
within and outside municipal limits, then, when a
petition for review is filed pursuant to section
26(c). is the commission required to set rates
charged both outside and within municipal limits?
Municipalities are excluded from the definitions of “public
utility” or “utility” set forth in section 3(c) of the act. But see
V.T.C.S. art. 1446~ )49(a) (municipality within definition of ‘“retail
public utility” for purposes of -article VII of the act); Public
Utility Commission v. City of Coahoma, 25 Tex. Sup. Ct. J. 155 (Nov.
25, 1981). Although section 27(f) prescribes that a municipally owned
utility is subject to the reporting requirements of thst~ section,
article III, which prescribes the basic jurisdiction of the regulatory
authorities subject to the act, provides at section 20:
Nothing in this article shall be construed to
confer on the colmnission or railroad conaaission
power or jurisdiction to regulate or supervise the
rates or service of any utility owned and operated
by any municipality within its boundaries either
directly or through a municipally owned
corporation, or to affect or limit the power,
jurisdiction, or duties of the municipalities that
have elected to regulate and supervise public
utilities within their boundaries, except as
provided in this Act. (Emphasis added).
Your query is whether or not section 26(e). which requires the
commission to “fix such rates as the municipality should have fixed in
the ordinance from which the appeal was taken,” impliedly confers upon
the commission the authority to set rates for those customers inside
the city limits upon an appeal under section 26(c). We conclude that
it does not. Under section 3(c). a municipslity is expressly excluded
from the definition of “public utility.” Section 20 expressly
excludes the commission from regulating a municipal utility within its
boundaries “except as provided in this Act.” Whenever the act seeks
to make exceptions to these exclusions, it does so expressly, as In
section 27(f) concerning reports to the commission. and section 49(a)
p. 1380
Mr. George M. Cowden - Page 3 (HW-406)
involving certification. It does not follow that there could be an
implied inclusion of a subject that had previously been expressly
excluded.
Your second question is as follows:
If in sn appeal brought pursuant to section
26(c) the commission may set rates charged outside
municipal limits only. then in setting such rates,
may the commission consider system-wide data?
Section 22 of the act provides as follows:
Notwithstanding any other provision of this
section. municipalities shall continue to regulate
each kind of local utility service inside their
boundaries until the commission has assumed
jurisdiction over the respective utility pursuant
to this Act. If a municipality does not surrender
its jurisdiction, local utility service within the
boundaries of the municipality shall be exempt
from regulation by the commission under the
provisions of this Act to the extent that this Act
applies to local service, and the municipality
shall have, regarding service within its
boundaries, the right to exercise the same
regulatory powers under the same standards and
rules as the commission, or other standards and
rules not inconsistent therewith. Notwithstanding
any such election, the commission may consider a
public utility’s revenues and return on investment
in exempt areas in fixing rates and charges in
nonexempt areas, and may also exercise the powers
conferred necessary to give effect to orders under
this Act, for the benefit of nonexempt areas.
Likewise. in fixing rates and charges in the
exempt area, the governing body may consider a
public utility’s revenues and return on investment
in nonexempt areas. Utilities serving exempt
areas shall be subject to the reporting
requirements of this Act. Such reports shall be
filed with the governing body of the municipality
as well as with the commission. Nothing in this
section shall limit the duty and power of the
commission to regulate service and rates of
municipally regulated utilities for service
provided to other areas in Texas. (Emphasis
added).
The Texas Supreme Court, In City of Corpus Christ1 v. Public
Utility Commission, 572 S.W.Zd 290 (Tex. 1978). held that the
commission could consider system-wide data in setting rates for
p. 1381
Mr. George M. Cowden - Page 4 @W-406)
I
customers within the city limits which were served by a public
utility. Although a municipally owned utility is not a “public
utility” for purposes of section 22. the final sentence of that
section clearly imports that the commission has the same powers with
regard to municipal utilities operating outside the city limits as are
given with regard to public utilities under the former provisions of
that section. Since under those provisions data from nonexempt areas
may be used, the commission may consider system-wide data in fixing
rates in a section 26(c) appeal.
Your third and fifth questions are as follows:
Inan appesl brought pursuant to section
26(c), does the commission have power to compel
the municipally-owned utility to provide data,
such as expense, revenue, rate base, and financial
information, relevant to the ratemaking issues?
If so, can the commission compel the municipally
owned utility to provide such data on a
system-wide basis? Are there any limits on the
commission’s power to require the municipally
owned utility to provide data relevant to the
ratemaking issues?
Does the commission have jurisdiction to
compel the municipally-owned utility to provide
data, such as customer lists, relevant to the
determination of the validity of the petition for
review filed pursuant to section 26(c)?
Section 27 of the act provides that the commission may require
the reporting of certain information from public utilities, including
municipal utilities:
(a) Every public utility shall keep and
render to the regulatory authority in the manner
and form prescribed by the commission...
commission uniform accounts of all business
transacted. The commission or railroad commission
t=Y also prescribe forms of books. accounts,
records, and memoranda to be kept by such
utilities, including the books, sccounts. records,
and memoranda of the rendition of and capacity for
service as well as the receipts and expenditures
of moneys, and any other forms, records, and
memoranda which in the judgment of the commission
or railroad commission may be necessary to carry
out any of the provisions of this Act.
. . . .
p. 1382
Mr. George M. Cowden - Page 5 @W-406)
(c) Every public utility shall keep separate
accounts to show all profits or losses resulting
from the sale or lease of appliances, fixtures.
equipment, or other merchandise. No such profit
or loss shall be taken into consideration by the
regulatory authority in arriving at any rate to be
charged for service by any such public utility, to
the extent thst such merchandise is not integral
to the provision of utility service.
(d) Every public utility is required to keep
and render its books, accounts, records, and
memoranda accurately and faithfully in the manner
and form prescribed by the commission or railroad
commission, and to comply with all directions of
the regulatory authority relating to such books,
accounts, records, and memoranda. The regulatory
authority may require the examination and audit of
all accounts.
. . . ,
(0 For the purposes of this section,
“public utility” includes “municipally owned
utility.” (Emphasis added).
Subsections (a) and (d) require each public utility to render its
books, accounts and records to the commission. Municipally owned
utilities are subject to this requirement. Sec. 27(f). Furthermore.
section 16 provides the commission with “the general power... to do
all things, whether specifically designated in this Act or implied
herein, necessary and convenient to the exercise of this power and
jurisdiction.” That section goes on to state:
The commission may call and hold hearings,
administer oaths, receive evidence at hearings,
issue subpoenas to compel the attendance of
witnesses and the production of papers and
documents, and make findings of fact and decisions
with respect to administering the provisions of
this Act or the rules, orders, or other actions of
the commission. (Emphasis added).
We conclude that since section 26(c) authorizes the commission to
review the ordinance of the city upon the filing of the petition
therein, the commission may compel the production of informa,tion
necessary to perform that function pursuant to the portion of section
16 cited above. Thus. the commission may compel the production of the
information specified in your questions three and five.
Your fourth and sixth questions respectively are as follows:
p. 1383
Hr. Ccorge U. CuwJcn - i’:tgc! 6 (MU-406)
Must a petition for review brought pursuant
to section 26(c) be filed within 30 days of the
final decision of the governing body of the
municipality, in accordance with section 26(d)?
Must the commission hear appeals brought
pursuant to section 26(c) de novo. in accordance
with section 26(e)?
The query here is whether the provisions of sections 26(d) and
(e) apply to appeals under section 26(c). Section 26 provides in
full:
(a) Any party to a rate proceeding before
the governing body of a municipality may appeal
the decision of the governing body to the
commission or railroad commission.
(b) Citizens of a municipality may appeal
the decision of the governing body in any rate
proceeding to the commission or railroad
commission through the filing of a petition for
review signed by the lesser ~of 20,000 or 10
percent of the number of qualified voters of such
municipality.
(c) Ratepayers of a municipally ovned gas or
electric utility outside the municipal limits may
appeal any action of the governing body affecting
the rates of the municipally owned gas or electric
utility through filing with the commission or
railroad commission, as appropriate, petition for
review signed by the lesser of 10.000 or 5 percent
of the ratepayers served by such utility outside
the municipal limits. For purposes of this
subsection each person receiving a separate bill
shall be considered as a ratepayer. But no person
shall be considered as being more than one
ratepayer notwithstanding the number of bills
received. Such petition for review shall be
considered properly signed if signed by any
person. or spouse of any such person, in whose
name residential utility service is carried.
(d) The appeal process shall be instituted
within 30 days of the final decision by the
governing body with the filing of a petition for
review with the commission or railroad commission
and copies served on all parties to the original
rate proceeding.
p. 1384
Hr. George M. Cowden - Page 7 (MU-406)
a
(e) The cossnission or railroad emission
shall hear such appeal de novo and by its final
order shall fix such rates as the municipality
should have fixed in the ordinance from which the
appeal was taken. (Emphasis added).
Section 26 thus provides for three forms of appeal from the
governing body of the municipality to the commission:
(a) Party to proceeding before commission;
(b) Petition of citizens of the municipality;
(c) Petition of ratepayers outside the city limits.
All three provisions refer to sn “appeal” of the municipal
ordinance, while subsections (d) and (e) refer to the “appeal process”
and “such appeal .‘I Also, subsection (e) refers to the “petition for
review.” All five provisions are grouped together under one section.
Because of this, we conclude that both subsections Cd) and (4
prescribe the procedure for the .three types of appeal listed under
(a), (b), and (c). Therefore, subsections (d) and (e) do apply to
appeals made under subsection (c).
Your seventh question is as follows:
If the commission is required to hear appeals
brought pursuant to section 26(c) de novo, does
that require the commission to establish the total
revenue requirement of the utility even if the
petition for review is limited to revenue
allocation and rate design?
Under section 26(e) the review of the city ordinance is de novo.
Since the effect of this requirement is that the commission must make
a complete redetermination of the rates, the commission would
necessarily be required to redetermine the revenue requirement.
However, this would not preclude the commission from honoring an
agreement of the parties as to what the revenue requirement would be.
Your final question is as follows:
In a petition for review brought pursuant to
section 26(c). do all of the ratemaking provisions
of article VI apply?
As previously stated, municipalities are excluded from the
meaning of “public utility” and “utility” by section 3(c). All
provisions under article VI refer to public utilities or utility. No
exceptions are made for municipal utilities as under sections 27 and
49. Therefore, we conclude that the provisions of article VI do not
apply to appeals under section 26(e).
p. 1385
Hr. George kl. Cowden - Page 8 (MJ-406)
SUtiMARY
In hearing an appeal pursuant to section
26(c) of article 1446(c). V.T.C.S., from
ratepayers of a municipally owned utility outside
of the municipal limits, the Texas Public Utility
Commission does not have authority to set rates
for customers inside the city limits. In setting
the rates for ratepayers outside of the city it
may consider system-wide data, and may require
municipal utilities to submit the indicated
information. The procedural requirements found in
sections 26(d) and (e) apply to an appeal under
section 26(c). In hearing such appeals, the
commission must redetermine the revenue
requirement.
Very truly yours,
MARK WHITE
Attorney General of Texas
JOHN W. FAINTER, JR.
First Assistant Attorney General
RICHARD E. GRAY III
Executive Assistant Attorney General
Prepared by J. Scott Wilson and Jon Bible
Assistant Attorneys General
APPROVED:
OPINION COMMITTEE
Susan L. Garrison, Chairman
Jon Bible
Rick Gilpin
Jim Moellinger
J. Scott Wilson
p. 1386