I’ 

JIM MATTOX 

Attorney General 

Supreme Court Building 

P. 0. Box 12548 

APSE. TX. 7a71+ 2548 

51214752501 

Telex 9101874.1367 

Telecopier 512/475-0266 

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Dallas, TX. 75202.4506 

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ace Broadway, Suite 312 

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51212254191 

An Equal OppOrtunitYI 

Affirmative Action Employer 

The Attorney General of Texas 

Smeptember 10, 1985 

Mr. Philip F. Riclcetts Opinion No. JM-353 

Chairman of the C~xmnission 

Public Utility Colmoission of Texas Re: Authority of the Public 

7800 Shoal Creek :3oulevard Utility Commission of Texas to 

Suite 400N certificate facilities of coAustin, Texas 7:x157 generators making retail sales 

of electricity 

Dear Mr. Ricketts: 

You ask whether the Public Utility Commission of Texas [PUC] has 

authority under section 49(a) of the Public Utility Regulatory Act, 

article 1446c. V.T.C.S., to certificate facilities of cogenerators 

making retail sale:; of electricity. 

We will proTide some background about cogenerators and relevant 

federal law before addressing your specific question. A cogenerator 

produces both elfictric energy and steam, heat, or some other form of 

useful energy that it uses for its own industrial purposes. 16 U.S.C. 

1796(18)(A) (19i32); Federal Energy Regulatory Commission V. 

Mississippi, 456 U.S. 742, 750 n. 11 (1982); Attorney General Opinion 

uw-45 (1979). Cogenerators may produce excess electricity, which they 

traditionally hax.e been unable to market because electric utilities 

have been relucl.a.ut to purchase from them. Id. Some intrastate 

utilities have refused to connect with other syzms to avoid being 

subject to the full range of federal regulation. American Paper 

Institute V. American Electric Power, 461 U.S. 402, 422 n. 12 (1983). 

As part of 1978 legislation designed to conserve energy, Congress 

enacted provisions encouraging increased use of excess electricitv 

produced by a ccgenerator. Federal Energy Regulatory Commission v: 

Mississippi, 9~; Public Utility Regulatory Policies Act of 1978, 16 

U.S.C. 1824a-3 (1982). The statute directs the Federal Energy 

Regulatory Commission [FFRC] to promulgate rules setting rates for 

purchases and sales of electric energy between "qualifying" 

cogenerators. FISRC is to establish the size, fuel use, and fuel 

efficiency requixments of a 

U.S.C. 5796(18)(D) (1982). 

"qualifying cogeneration facility." 16 

Its rules are to require that electric 

utilities offer to buy electricity from and sell it to cogenerators; 

state regulatory agencies are required to implement these rules. 16 

U.S.C. §824a-3 (,a:~ , (0, (h) (1982). Qualifying 

facilities may be exempted by FERC rule from 

cogeneration 

p. 1612 
Mr. Philip F. Ricketts - P#lge 2 0X-353) 

State laws and ::ogulations respecting the rates, 

or respecting .:Ile financial or organizstional 

regulation, of electric utilities . . . if the 

Commission determines such exemption is necessary 

to encourage cogmleration. . . . 

16 U.S.C. 3824a-3(c) (1982). 

In light of 16 U.S.C:. section 824a-3, the Texas Legislature 

amended the Public Utilit:ies Regulatory Act [PURA]. Senate Bill No. 

605 amended the definitions of "public utility" in subsection 3(c) of 

article 1446~. V.T.C.S., as follows: 

(12) The tern 'public utility' or 'utility,' 

when used in this Act, includes any person, 

corporation, rive,c authority, cooperative corporation, or any csnnbination thereof, other than a 

municipal corporation or a water supply or sewer 

service corporatfon. or their lessees, trustees, 

and receivers, now or hereafter owning or operating for compenf,ation in this state equipment or 

facilities for: 

(1) producing, generating, transmitting, distributing, sell.ing, or furnishing electricity 

('electric utilj.ties' hereinafter) provided. however, that this E:efinition shall not be construed 

to apply to or -include a qualifying small power 

producer or qual:.fying cogenerator, as defined in 

Sections 3(17)(D) and 3(18)(C) of the Federal 

Power Act, as- amended (16 U.S.C. Sections 

796(17)(D) and 726(18)(C)). . . . (Emphasis 

added). 

Acts 1981, 67th Leg., ch. 31. at 70; codified at V.T.C.S. art. 1446c, 

03, subsection (c) (added l.anguage emphasized). The Bill Analysis to 

Senate Bill No. 605 states in part 

The [CogeneratiNx1] Task Force determined that a 

need exists to modify Texas law to comply with the 

federal mandate that the states act in such a way 

that cogenerato.:s will not be treated as 'public 

utilities.' Potential cogenerators have not fully 

pursued production of electric power by cogeneration due to the PUC designation as 'public 

utility.' Give~l the opportunity to sell surplus 

power back to t,h,e utility companies, industrials 

and private individuals would have the incentive 

to actively develop cogeneration plants, sources 

of valuable energy. 

p. 1613 
Mr. Philip F. Ricketts - Pa8e 3 (JM-353) 

Bill Analysis to Senate B:J.l No. 605 prepared for House Committee on 

State Affairs, filed in Bj.ll File to Senate Bill No. 605. 67th Leg., 

Legislative Reference Libr,s:cy (1981). 

The 1981 amendment to subsection 3(c) removed cogenerators from 

the definition of "public utility," and therefore rendered many PUPA 

provisions inapplicable to :wch entities. 

The question you present is whether the 1981 amendment to section 

3(c) rendered article VII: of PURA (sections 49 through 62). which 

governs certificates of ~:onvenience and necessity, inapplicable to 

qualifying cogenerators. At the time the legislature added the 

language regarding cogeneretors to section 3(c), article VII of PURA 

contained the following language: 

Sec. 49. For the purposes of this article only: 

(a) 'Retail public utility' means any person, 

corporation, [water supply or sewer service 

corporation,] m~~n.icipality, political subdivision 

or agency, or cooperative corporation, now or 

hereafter operaMng. maintaining, or controlling 

in Texas facilit:Les for providing retail utility 

service. 

(b) 'Public utility' does not include any 

person, corporat?on, municipality, political subdivision or ag&cy, or cooperative corporation 

under the jurisd;ction of the Railroad Commission. 

[For the purpos& of this article only. 'public 

utility' includ~:s a water supply or se&r service 

corporation]. (Emphasis and brackets added). 

Art. 1446c, §49 (language Ln brackets added by Acts 1979, 66th Leg., 

ch. 57, 54, at 95; unde:r:.ined language deleted by Acts 1983, 68th 

Leg., ch. 263, 524 at 1222,). 

The point of content:ton in the briefs submitted to us is whether 

the exemption of cogenera’rors from the definition of "public utility" 

in section 3(c) automatically exempted cogenerators from the definition of "retail public utility" in section 49. Those who take the 

position that a cogenerator can no longer be a "retail public utility" 

argue that "retail publfc utility" in section 49 is a subset of 

"public utility- in section 3(c) and that "retail public utilityW can, 

therefore, be no broader than "public utility" except insofar as 

section 49 explicitly broafdens the section 3(c) definition of "public 

utility." Since section 49 does not list cogenerators as "retail 

public utilities," they e,rgue, cogenerators cannot be "retail public 

utilities." Those on the other side of the issue argue that "retail 

public utility" in secticn 49 is to be read without reference to the 

p. 1615 
Mr. Philip F. Ricketts - Page 4 (JM-353) 

definition of "public utility" in section 3(c). Thus, because the 

legislature did not amend section 49 to exclude cogenerstors. they 

argue, cogenerators can sl:ill be "retail public utilities." Neither 

interpretation is fatuous; nor is either interpretation wholly 

satisfactory. 

Logic and good draf'ting would dictate that, having already 

defined "public utility," the authors of PURA would define "retail 

public utility" as a "public utility" with the characteristic 

"retail." The language of section 49, however, suggests that they did 

not do so. If the authors of the act had intended to define "retail 

public utility" as a subset of "public utility" in section 3(c), they 

could have simply written, 

A 'retail public utility' is a public utility that 

provides retail :;ervices . . . . For the purposes 

of this Act only, municipalities . . . are public 

utilities. 

Instead, the definition of "retail public utility" consists of a 

seemingly comprehensive list of included entities, as if it were 

written from scratch. Aloo, the language in section 49 is not consistent with the language in section 3(c). For example, section 49 

uses "municipality," while section 3(c) uses "municipal corporation." 

Thus, both the structure and wording of section 49 suggest that 

section 49 was originally ,tiritten without reference to section 3(c). 

Another reason for assuming that article VII was written without 

reference to section 3(c) is that the term "public utility" appears 

repeatedly in article VI:: -- "retail public utility" appears only 

twice -- in provisions that logically apply to all entities that must 

obtain a certificate of convenience and necessity under article VII. 

Applying the section 3(c:s definition of "public utility" to those 

provisions would exclude "retail public utilities" from the scope of 

those provisions. We think such a reading would be nonsensical. The 

supreme court came to the s.nme conclusion& City of Coahoma v. Public 

Utility Commission, 626 S.W.2d 488 (Tex. 1981). In Coahoma the court 

considered whether "pub1.i.c utility" in section 53 included a 

municipality, which is- not a "public utility" as defined in section 

3(c) but is a "retail pu>:Lic utility" under section 49. The court 

held that "public utility" in section 53 included a "retail public 

utility," because, given the obvious purpose of article VII, it would 

be unreasonable to conclude that the legislature meant "public 

utility" as defined in s'ection 3(c) when it used the term "public 

utility" in section 53. Thus,, Coahoma supports the argument that 

article VII was written without reference to section 3(c). 

Given the wording of article VII and the sensical construction of 

the article, we think it is reasonable to conclude that the legislature did not Intend "rel:ail public utility" in section 49 to be 

p. 1615 
Mr. Philip F. Ricketts - PiIge 5 (JM-353) 

limited by the definiticln. of "public utility" in section 3(c). 

Further, we think that when the legislature exempted cogenerators from 

the definition of "public Iutility" in section 3(c), it assumed that 

the amendment would not wempt cogenerators from the definition of 

"retail public utility" jn section 49. The bill analysis of that 

amendment indicates that the legislature's intent was to give cogenerators "the opportunity to sell surplus power back to the utility 

companies." Bill Analysi:; to Senate Bill No. 605, supra, (emphasis 

added). Nothing in the 1c:gislative history indicates that the legislature intended to encourage cogenerators to make retail sales of 

electricity. Also, the bil:L analysis states that the amendment was to 

bring Texas law into complL.ance with the federal mandate. The mandate 

of the federal law on it:; face is that state regulation should not 

discourage cogenerators fwm selling electricity to and buying electricity from utility companies --* See also 16 U.S.C. §824a-3(a) (1982). 

Although the question is a difficult one, we conclude that the 

Public Utility Commissior~ of Texas has jurisdiction to require a 

qualifying cogenerator making or planning to make retail sales to 

obtain a certificate of cowenience and necessity. 

SUMKARY 

The Public ‘Jtility Commission of Texas has 

jurisdiction under the Public Utilities Regulatory 

Act, article 1446c, V.T.C.S., to promulgate a rule 

requiring qualiEying cogenerators making or 

planning to make retail sales to obtain a certificate of convenience and necessity. 

JIM MATTOX 

Attorney General of Texas 

TOM GREEN 

First Assistant Attorney C:eneral 

DAVID R. RICBARDS 

Executive Assistant Attorney General 

ROBERT GRAY 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Ccmmittw 

p. 1616 
Mr. Philip F. Ricketts - Page 6 (JM-353) 

. 

Prepared by Sarah Woelk 

Assistant Attorney General 

APPROVRD: 

OPINION COMMITTEE 

Rick Gilpin, Chairman 

Steve Davis 

Tony Guillory 

Mary Keller 

Jennifeq Riggs 

Sarah Woelk 

p. 1617