I’

JIM MATTOX Attorney General

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An Equal OppOrtunitYI Affirmative Action Employer 

# The Attorney General of Texas

Smeptember

10, 1985

Mr. Philip F. Riclcetts OpinionNo. JM-353 Chairman of theC~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 elfictricenergy and steam, heat, or some other form of useful energy that ituses for its own industrialpurposes. 16U.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). Cogeneratorsmay produce excess electricity,which they traditionally hax.ebeen 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 InstituteV. AmericanElectric Power, 461 U.S. 402, 422 n. 12 (1983).

As part of 1978 legislationdesigned to conserve energy, Congress enacted provisions encouraging increased use of excess electricitv produced by a ccgenerator. Federal Energy Regulatory Commission v: Mississippi, 9~; PublicUtility Regulatory PoliciesAct 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. FISRCis 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 facilitiesmay be exemptedby FERC rule from cogeneration

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State laws and ::ogulationsrespecting the rates, or respecting .:Ilefinancial or organizstional regulation, of electric utilities

. . . if the Commission determines such exemption is necessary to encouragecogmleration.

. . . 16U.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 definitionsof "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 csnnbinationthereof, 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,ationin this state equipment or facilities for:
(1) producing, generating, transmitting, distributing, sell.ing, or furnishing electricity ('electricutilj.ties' hereinafter) provided. however, that this E:efinitionshall not be construed to apply to or -includea 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) (addedl.anguage emphasized). The Bill Analysis to Senate Bill No. 605 statesin part

The [CogeneratiNx1] Task Force determined that a need exists tomodifyTexas law to complywith the federalmandate that the states act in such a way that cogenerato.:s will not be treated as 'public utilities.' Potential cogeneratorshave not fully pursued production of electric power by cogeneration due to the PUC designation as 'public utility.' Give~lthe opportunity to sell surplus power back to t,h,e utility companies, industrials and private individualswould have the incentive to actively develop cogeneration plants, sources of valuable energy.

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Bill Analysis to Senate B:J.lNo. 605 prepared for House Committee on State Affairs, filed in Bj.llFile to Senate Bill No. 605. 67th Leg., LegislativeReference 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 inapplicableto :wch entities.

The questionyou present iswhether the 1981amendment to section 3(c) rendered article VII:of PURA (sections 49 through 62). which governs certificates of ~:onvenienceand 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 thepurposes 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:Lesfor 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;ctionof theRailroadCommission. [For the purpos& of this article only. 'public utility' includ~:s a water supply or se&r service corporation]. (Emphasisandbrackets added).

Art. 1446c, §49 (language Lnbrackets 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:tonin the briefs submitted to us iswhether 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 canno longerbe a "retailpublic utility" argue that "retail publfc utility" in section 49 is a subset of "publicutility- in section 3(c) and that "retailpublicutilityW can, therefore, be no broader than "public utility" except insofar as section 49 explicitlybroafdensthe 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 readwithout reference to the

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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'tingwould 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 languageof section49, however, suggests that theydid 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 couldhave simplywritten,

A 'retailpublicutility' is a publicutility that providesretail :;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 49was originally ,tiritten without referenceto section3(c).

Another reason for assuming that articleVII 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 logicallyapply to all entities thatmust obtain a certificate of convenience and necessity under articleVII. Applying the section 3(c:sdefinition of "public utility" to those provisions would exclude "retail public utilities" from the scope of those provisions. We think such a readingwould be nonsensical. The supreme court came to the s.nme conclusion& City of Coahomav. Public Utility Commission, 626 S.W.2d 488 (Tex. 1981). In Coahoma the court considered whether "pub1.i.cutility" in section 53 included a municipality, which is-not a "public utility" as defined in section 3(c) but is a "retail pu>:Licutility" under section 49. The court held that "public utility" in section 53 included a "retail public utility,"because, given the obviouspurpose of articleVII, itwould be unreasonable to conclude that the legislature meant "public utility" as defined in s'ection3(c) when it used the term "public utility" in section 53. Thus,,Coahoma supports the argument that articleVII was writtenwithout reference to section 3(c).
Given thewording of articleVII and the sensicalconstructionof the article, we think it is reasonable to conclude that the legislature did not Intend "rel:ailpublic utility" in section 49 to be

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limited by the definiticln. of "public utility" in section 3(c). Further,we think thatwhen the legislatureexempted 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 surpluspowerback 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, thebil:Lanalysis states that the amendmentwas to bring Texas law into complL.ance with the federalmandate. The mandate of the federal law on it:;face is that state regulation should not discourage cogenerators fwm selling electricity to and buying electricity fromutility companies --* See also 16U.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 certificateof cowenience and necessity.

SUMKARY

The Public ‘JtilityCommission of Texas has jurisdictionunder the Public UtilitiesRegulatory Act, article 1446c,V.T.C.S., topromulgatea rule requiring qualiEying cogenerators making or planning to make retail sales to obtain a certificate of convenienceand necessity.

JIM MATTOX AttorneyGeneral of Texas

TOM GREEN FirstAssistantAttorney C:eneral

DAVID R. RICBARDS ExecutiveAssistantAttorney General

ROBERT GRAY SpecialAssistantAttorney General

RICK GILPIN Chairman,Opinion Ccmmittw

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.
Preparedby SarahWoelk AssistantAttorney General

APPROVRD: OPINION COMMITTEE
Rick Gilpin, Chairman SteveDavis Tony Guillory Mary Keller JennifeqRiggs SarahWoelk

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