### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-10-00647- CV

Harris County Hospi tal Distric t, Appellant

v. The Public Utility Com m ission of T exas, Appellee

F ROM TH E DISTRI CT COURT O F TRAVIS CO UNTY, 250 TH JUDICI AL DISTRICT NO. D-1 -GN-0 9-0 0211 6, H ONO RAB LE SUZ ANNE COVI NGTON, J UDGE P RESIDING

M E M O R A N D U M O P I N I O N Appellant Har

ris County Hospital District appea ls the trial court’s order aff irming a final order by the Public Utility Commi ssion of Texas which g rante d in part the District’s complaint ag ainst Southwestern Be ll Telephon e , L P d/b/a AT& T (“A T& T”). The District soug ht a ref und from AT& T, the District’s telecommunica tions provider, for overc harg es from 1995 to September 2008 under the Prompt Pay

ment Act (“PPA”). I n its final order , the Commi ssion order ed AT& T to pay 1 the overchar g es for half of this period—six and one- half y ear s—with interest until paid. Be cause we conclude that the C ommiss i o n ’s o rder was arbitrary and capricious and prejudice d substantial rig hts of the District, we reve rse the trial court’s order and rema nd with instructions that the case be

rema nded to the Commissi on for f urther pr ocee dings c onsistent with thi s opinion.

See Tex. Gov’t Code Ann. §§ 2251.001–.055 (West 2008). 1BACK GR OUND Fr om 1995 to September 2008, AT& T char g ed the District late pay ment fee s for telephone service

. I n 2007, the District filed a formal complaint with the Commi ssion alleg ing that AT& T had impro p er l y charg ed the late pay ment fee s in violation of the PPA. The Offic e of the Attorney Gene ral on be half of the State intervene d, and the matter was ref err ed to the State Offic e of Administrative He aring s for a hear ing on the merits. After the Commi ssion deter mined that the District was subject to the PPA, the parties stipulated that the amount of overc har ges an d interest during the thirteen y ear period was $487,273.32. The only issue then at the hear ing on the merits was the appropr iate amount of ref und. The position of the State and the District was that the District should rec eive a full ref und of the stipulated amount of overc harg es for the entire period. Citi ng the Commi ssion’s rules and AT& T’s tariff , they arg ued that t h er e wa s no leg al basis for the ref und to be any

thing less than the full
amount. AT& T and Commi ssion staf f counter ed that the Commi ssion had discretion to order less than the full ref

und and that it should exercise that discretion and limit the ref und to approximately four y ea rs o f o verbilling

. They arg ued that the District was not “blamele ss” and that AT& T’s conduct was in “ g ood faith.” The Commi ssion staff also arg ued that “public interest” require d the District’s fa ilure to complain for thirteen y ear s to be taken into ac count. I n his pr oposal for decision, the administrative law judg e (“A L J ”) rec ommended a ref und of the full stipulated amount. He concluded that he could find no “basis in statute or rule”
to “re commend any

thing less than a full ref

und.” The AL J also provided an al y s i s o f t h e parties’ policy arg uments but stated that he could not “make such a p olicy deter mination” and that “any

2policy exceptions

. . . must be made by the C o m m i ssion itself.” He further stated that the “only 2 arg uable basis upon which the Commi ssion c ould or der less than a full ref und would be for policy

rea sons not previously enumer ated in Commi ssion prec ede n t. ” His conclusions of law included that, under Commi ssion substantive rule 26.27(a) (3)( B) (i) and the terms of AT& T’s tariff , t h e ref und
must be for the entire period of overbilling

. See 16 Tex. Admin. Code § 26.27 (2011) (Public Util. Comm’n of Tex., Bill P ay ment and Adjustments). After an open meeting , the Commi ssion adopted the AL J ’s proposal for deci s io n with the exception that the Commi ssion limit ed the ref und to the prec eding six and one-ha lf y ear s rathe r than the full 13-y ear period of overbilling

. I n its order , the Commi ssion stated its rea sons for the partial re fund:

The Commi ssion notes that the period of overbilling in this case , 1995 to 2008, is an extraordinary long one, particula rly when considering the nature of the complainant. [The District] is a larg e, sophisticated public entity with sufficie nt resour ces to have

I n his an al y s i s , t h e AL J found the arg uments of AT& T and the Commi ssion staff to be 2 “unjust and untena

ble.” He explained: S t aff and AT& T essentially arg ue that [t he District]’s lack of dilige n ce i n complaining of late pay

ment char g es should serve to limit the amount of ref und paid back t o [t he District]. On close examination, this arg ument seems patently inequitable. Put bluntly , Staff and AT& T’s arg ument is this: beca use [t he District] should have never paid AT&T t h e l at e pay ment char g es and beca

use [ the Dis trict] did not rea liz e it and complain for a long time, AT& T should be allowed to keep the money —money it was never en t i t led t o rec eive. To the AL J , this arg ument seems unjust and untenable. I t allows AT& T to have a windfall simply beca use both AT& T and [t he District] wer e alleg edly mistaken in their belief as to the applicability of the PPA. At a minimum , it seems that equity would dictate that the parties at least be restore d to the positions they would have been in if the law had been followed by all parties. Namely , all amounts that should not have been paid by [t he District] should be re funded to it. 3discovere d and addr essed this situation long befor e it broug ht this complaint t o the

Commi ssion in 2007. I t is in a better position than most other customers to discover the overbilling of late cha rges at issue in this case . Thus, the Commi ssion finds it appropr iate to hold [t he District] partially responsible for t h e prolong ed acc rual of overc harg es in this case. I n addition, the Commi ssion acknow ledg es that the question of whether the Prompt Pay ment Act applied to late char g es to entities such as [ t he District] was unsettled until last y ear when the Commi ssion issued its order deny ing the appea l of Orde r No. 19. Prior to the decision , t h e Commi ssion rec og nizes that telecommunica tions utilit ies had a rea sonable basis to the pos ition t h at [ t h e Public Ut i l i t y Reg ulatory Act] g overne d this question. Fur ther, the Commi ssion notes AT& T’s assurance s during the Marc h 27, 2009 open meeting that it is confor ming i ts billing to the Prompt Pay ment Act, and the Commi ssion expects that all other telecommunica tions uti lities will simil arly follow the Prompt Pay

ment Act.

“Consistent with the above discussion,” the Commiss ion deleted the AL J ’s findi ng of fact 13 and conclusions of law 8 and 11. The Commi ssion also added the following finding s of fac t 10A, 10B, 3 and 15A a

nd conclusions of law6A and 11A: Finding s of Fa ct 10A. [The District] knew, or should have known, that from at least 1995 until 2008 AT& T was improperly char g ing [t he District] late pay ment char g es that wer e not permitted under the Prompt P ay ment Act. 10B. I t is appropr iate to hold [t he District] partially responsible for the prolong ed acc rual of ove rcha

rg es in this case.

I n the AL J ’s proposal for decision, finding of fac t 13 stated: “As far back as 2000, AT& T 3 rec og nized that the issue of pay ment penalties applicable to g overnme ntal entities was addre ssed by the P rompt Pay

ment Act.” I n i t s fi n al order , the C ommissi on stated t hat i t deleted finding of fac t 13 beca use it was “pre mised, at least in part, on statements attributable to AT& T that wer e actua lly made by a pre dece ssor entity

that is not . . . a party

to this current c ase.” The AL J ’s conc lusions of l aw 8 and 11 stated that the District wa s entitled to a full ref und plus interest from 1995 to 2008 and that the District’s complaint an d re q u es t for relief should be g rante d. 4. . . .

15A. Given the specific fac ts of this case , it is appropr iate to limit the amount that AT& T should ref

und to the amount of overc harg es over the last six and onehalf y ear s, plus interest. Conclusions of L aw 6A. Under P.U.C. Subst. R. 26.3, the Commi ssion po s s es ses the discretion to order a full ref

und, partia l re fu nd, or no ref und as a result of overbilling by a utility

.

. . . . 11A. The complaint of [t he District] ag ainst AT& T and the req u es t fo r the Commi ssion to gra

nt relief to [the District] shoul d be g rante d in part.

The State and the Di s t ri ct fi led motions for rehe aring which wer e overr uled by operation of law. The District then filed its petition for judicial revie w of the Commi ssion’s order

. See Tex. Util. Code Ann. § 15.001 (West 2007). After a hear ing, the trial court signe d its order aff irming the Commi ssion’s final order . This appea l followed.

ANALYSIS The District raises five issu es o n ap p eal. The District contends that: (1) the Commi ssion violated section 2003.049(g )–(h) of the g overnme nt code when it modified the AL J ’s proposal for decision, see Tex. Gov’t Code Ann. § 2003.049(g )–(h) (West 2008); (2) the Commi ssion exceede d its a uthority when it or dere d a ref und of only half of the period of admitted overbilling or that it was an ab u s e of discretion, arbitra ry and capr icious, a prohibited ad hoc rulemaking , or not rea sonably supported by substantial evidenc e; (3) the Commi ssion exceede d its authority , abused its discretion and/or acte d arbitra rily or capr iciously by decla ring it in the “public

5interest” and there fore g ood cause to order a partial ref und on admitted overbilling by AT& T; (4) the Commi ssion exceede d its authority , abused its discretion and/or acte d arbitra rily or capr iciously by relying upon substantive rule 26.3 to make an exception to substantive rule 26.27(a) (3)( B) (i) when the exception had a substantial neg ative fiscal impact on the Di s t ri ct , s ee 16 Tex. Admin. Code § 26.3 (2011) (Public Util. Comm’n of Tex., Severa bility Clause), § 26.27(a) (3)( B) (i)); and (5) the Commi ssion exceede d its authority , abused its discretion and/or acte d arbitra rily or capr iciously by relying on substantive r

ule 26.3 to make a

n exception to AT&T’ s g ener al exchang e tar iff. Standard of Review

We revie w the Commi ssion’s order in this case under the substantial evidenc e standard of revie w descr ibed in section 2001.174 of the g overnme nt code. See Tex. Util. Code Ann. § 15.001; Tex. Gov’t Code Ann. § 2001.174 (West 2008). Among the statutory g rounds requiring

reve rsal or rema

nd, a court apply ing the substantial evidenc e rule s h al l re v er se or rema nd an ag ency ’s order “if substantial rig hts of the appellant have been prejudice d beca use the administrative finding s, infere nces, conclusions, or decisions are . . . not rea sonably s u p p o rt ed by substantial evidenc e” or are “ar

bitrary or capr icious or char acte rized by abuse of discretion o r cl ear ly

unwar rante d exercise of

discretion.” T ex. Gov’t Code Ann. § 2001.174(2)( E), (F ). “I n deter mining whether an ag ency has acte d arbitra rily or capr iciously the revie wing court must decide whether the ag ency

order was ba sed on a c onsideration of a ll releva nt fac tors.” Starr Cnty. v. Starr Indus. Servs., Inc. , 584 S.W .2d 352, 355 (Tex. Civ. App.—Austin 1979, writ ref ’d n.r.e.) ; see a l

so Flores v. Employe es Ret. Sys. of Tex ., 74 S.W .3d 532, 544–45 (Tex. App.—Austin 2002, pet. denied)

. “The major fa c to r th a t r u n s th r o u g hout arbitra

ry -ca pricious revie w 6case s is that parties must be able to know what is expected of them in the administrative proce ss.”

Starr Cnty. , 584 S.W .2d at 356. An ag ency also acts arbitra rily and capr icious l y wh en it fails t o follow the cle ar, una mbiguous lang uag e of its own rule s. See Rodriguez v. Service Ll oyds Ins. Co. , 997 S.W .2d 248, 255 (Tex. 1999); Public Util. Comm’n of Tex. v. Gulf States Utils. C o. , 809 S.W .2d 201, 207 (Tex. 1991) (citation omitted) (“[I ]f the Co m m i s s ion has failed to follow the clea r, unambig uou s l an guag e of its own reg ulation, we must reve rse its action as arbitra ry and capr icious.”); see also Texas Health Facilities Comm’n v. Charter Med.–D allas, Inc ., 665 S.W .2d 446, 4 5 4 (T ex . 1984) (discussing examples of ag ency action that are arbitra ry and ca pricious). The District’s issues also addre ss the cons t ru ction of t he C ommissi on’s rules. We revie w these questions de novo. Rodriguez , 997 S.W .2d at 254. “We construe administrative rules, which have t he same forc e as statutes, in the same manne r as statutes.” Id. (citation om itted); see also State v. Shumake , 199 S.W .3d 279, 284 (Te x . 2006) (addr essing statutory construction). “Unless the rule is ambig uous, we follow the rule’s clea r lang uag e.” Rodriguez , 997 S.W .2d at 254 (citation omitted). We de fer to an ag ency ’s interpre tation where there is vag ueness, ambiguity , or

room for policy deter

minations in the reg ulation, but “we cannot defe r t o an administrative interpre tation that is ‘plainly err oneous or inconsistent with the reg ulation.’” Id

. at 254–55 (quoting Public Util. Comm’n of Tex. , 809 S.W .2d at 207); BFI W aste Sys. of

N. Am., Inc. v. Martinez Envtl. Grp ., 93 S.W .3d 570, 575 (Tex. App.—Austin 2002, pet. denied).

7Amount of Refund Be cause they are dispositi ve, we turn to arg uments made by the District in its second and third issues. The District contends that the Commi ssion acte d arbitra rily and capr iciously when it order ed a ref

und of fees from only half of the per i o d of admit ted overbilli ng and by decla ring it in the “public interest” and there fore g ood cause to order a partial ref und. To support its arg uments, the District points to rule 26.27(a) (3)( B) (i), which sta tes:

Over billing. I f char g es are found to be highe r than authorized by the DCTU’s tariff s or the terms and conditions of servi ce , an appropr iate ref und shall be made to the customer. . . . The ref

und shall be made for the e ntire per iod of the over billing.

16 Tex. Admin. Code § 26.27(a) (3)( B) (i). The Commi ssion does not dispute that rule 4 26.27(a) (3)( B) (i) is clea

r and unambig uous and that its plain lang uag e supports a full ref und “for the entire period” to the District. See id. ; Rodriguez , 9 9 7 S

. W

. 2 d at 254. Rather, the Commi ssion contends that under section 51.001(a) of Public Utility Reg ulatory Act and rule 26.3, it wa s within its discretion to make an exception to rule 26.27’s re fu n d re q u irement. See Tex. Util. Code Ann. § 51.001(a) (West 2007); 16 Tex. Admin. C ode § 26.3.

a) Section 51.001(

a) The Commi ssion arg ues that it has wide discreti o n u n der section 51.001(a) to balanc e customer protec tion with public interest and that this discretion authorized it to order less than a full

Rule 26.27 uses the acr ony m DCTU to ref

er to a dominant cer

tificated telecommunica tions 4 utilit y . 16 Tex. Admin. Code § 2 6

. 2 7 (a ) (2011) (Public Util. Comm’n of Tex., Bill Pay ment and Adjustments). 8ref

und to the District. See Public Util. Comm’n of Tex. v. Texas Tel. Assoc ., 163 S.W .3d 204, 212–13 (Tex. App.—Austin 2005, no pet.) (discussing public interest deter minations by Commi ssion). During the re levant time per iod, section 51.001(a) stated in rele vant par t:

I t is the purpose of this s u b t i t l e t o g rant the commission authority to make and en fo rc e rules nece ssary to protec t customers of telecommunica tions service s consistent with the public interest.

Tex. Util. Code Ann. § 51.001(a)

. The Commi ssion arg ues that this section authorizes it to balanc e 5

cu s t o m er protec tion with public interest. Viewing the plain lang uag e of this section, howeve r, it does not support the Commi ssion’s asser tion that it has discretion to hold a customer responsible for

a utilit y ’s overbilling or to protec t a utilit y by not enfor cing one of its rules. S ee Rodriguez , 997 S.W .2d at 254. Rather, the plain lang uag e of section 51.001(a) authorized the Commi ssion to enfor ce its rule “to protec t customers of telecommunica tions service s,” the District in this instance. See id. We turn then to rule 26.3.

b) Rule 26.3 Rule 26.3 provides in rele vant part that the Commi ssion “may make exceptions to this chapte r for g ood cause .” 16 Tex. Admin. Code § 26.3. I n its final ord er , t h e C o m mission conclude d that, under rule 26.3, “the Commi ssi o n p o s s es s es the discretion to order a full ref und,

This section was amende d in May 2011, and the amendments deleted the quoted sentenc e 5 relied upon by the Commi ssion here

. See Act of May 1, 2011, 82d L eg ., R.S., ch. 98, § 1, 2011 Tex. Gen. L aws 98 (ef

fec tive September 2011). Our ref ere nces to section 51.001(a) ref er to the section prior to the 2011 ame ndments. 9partial ref

und, or no ref

und as a result of overbilling by a utilit y .” On appea l, the C o mmissi on explains that it “dete rmined t hat good cause ex isted to make a policy decision to enc ourag e lar g e, sophisticated entities to verify their phone bills more ofte n than once ever y thirteen y ear s.” To support its discretion under rule 26.3 to order a p artial ref und or no ref

und for overbilling for g ood cause on public interest g rounds, the Commi ssion points to pr ior decisions in which it has stated its discretion to order partial or no ref u n ds. See Tex. Pub. Util. Comm’n, Application of Guadalupe Valley Elec. Coop., Inc ., Docke t No. 13168 (Nov

. 4, 1994) (orde r) (citing and addre ssing comm ission case prec edent) ; see also Tex. Pub. Util. Comm’n, Complaint of Memorial Hermann Healthcare Sys. Against Verizon Sw. , Docke t No. 34138 (Jul y 31, 2007) (pre liminary order ) (re co g n iz in g Co mm is s io n ’ s d iscretion); Tex. Pub. Util. Comm’n, Complaint of Southwestern Tarif f on Behalf of Frank Gillman Pontiac Against Sw. Bell Tel. Co. , Docke t No. 16310 (F eb. 5, 1997) (pre liminary order ) (same) ; Tex. Pub. Util. Comm’n, Complaint of Manor Downs Against Sw. Bell Tel. Co. , Docke t No. 14452 (Nov. 25, 1996) (orde r on rehe aring ) (same)

. These de cisions, however , support the AL J ’s rec ommendation here to or der a full ref und. I n the Guadalupe Valley proce eding , the Commi ssion adopted and incorporated the portion of the AL J ’s proposal f or dec ision in which the AL J stated that the Commi ssion “ has long followed a public interest standard i n d et ermining whether it is appropr iate to order ref unds in various contested case s” and set out five “broa d considerations” that the Commi ssion used to decide the amount of re fund: (1) the intent of the utilit y ; (2) the char acte r of the illega l char g e; (3) the difficulty to make a ref und; (4) whe ther the utility (or sha reholde rs) re ceive d excess profits due

10to the i l leg al char g e; and (5) whether the case arose as a result of a customer

complaint.

See Application of Guadalupe Valley , at 5–6. The A L J noted that not ever y fac tor was mentioned in eac h decision but that “the five ident i fi ed i s s ues encompa ss the g ener ally applicable fac tors balanc ed by the Commi ssion in ref und decisions.” See id

. at 6. I n that case , the issue of whether to order a refund ar ose during a complianc e audit initiated by the C ommissi on, and the Commi ssion adopted the AL J ’s finding that the utility “demonstra ted g ood cause not to order ref unds.” See id

. at 15. The AL J noted t hat n o cu s t o m er s complained or soug ht to intervene to seek refunds in the proce eding and found that “[i] t would be a long and tedious proce ss . . . to deter mine a more acc urate ref und.” See id . at 17, 20.

I n both the Manor Downs and Gillman Pontia c proce eding s, the Commi ssion ref ere nced the Guadalupe Valley fac tors and its discretion to order a partial or no ref und but order ed a full ref und for overbilling. I n contra st with the Guadalupe V alley proce eding , these subsequent proce eding s wer e initiated by customer complaints seeking ref unds for overbilling

. I n rea ching its decision in Manor Downs , the Commi ssion found that “the equities in this instance might justify a partial refund of the overchar g es” but t h at it was “understanda ble t hat a customer overcha rg ed by

a utilit y , such as Manor Downs, might presume that a full ref und is forthcoming , based on the rule’s prese nt lang uag e.” Complaint of Manor Downs , at 6. The Commi ssion direc ted its Staff “to develop

a substantive rule co d i fy i ng the Guadalupe Valley fac tors” and to “incor porate any additional

co n s i d er at ions, principles, requirements, or limit ations it finds to be in the publ ic i ntere st.” Id

. at 6–7. Simi larly , the Commi ssion in Gillman Pontiac found as a threshold matter that the proce eding

11should not be abate d pending the adoption of an amende d rule codify ing the Guadal u

p e Valley fac tors and that a “full ref und should be require d” if it was deter mined that the utilit y had

overc harg ed the complainants. Complaint of Sw. Tarif f on Behalf of Frank Gillman Pontiac , at 4. The Commi ssion expressly ref ere nced i t s o rd er in the Manor Downs proce eding and the “lac k of specific ity in the rule” as to the fa ctors. Id

. at 4–5. To date, the Commi ssion has not codified the Guadalupe Valley fac tors into a substantive rule.

As such, the AL J obser v ed t h e Guadalupe Valley fac tors and followed the Commi ssion’s prec edent. The AL J revie wed the five fac tors in his proposal for decision, concluding that “thr ee o f these five fac tors clea rly weig h ag ainst AT& T’s reque st to limit the ref und” and “[a]rgua bly ” that a f

ourth fac tor also supported a full ref und: Specifica lly , fac tors three to five all support a full ref und. I t is easy to make a ref und, AT& T would rec eive a windfall and excess profits if allowed to keep the unauthorized late pay

ment char g es, and the case has arisen as a result of a customer compl aint. Arg uably , the char acte r of the illega l char g e—a late pay ment ch ar ge prohibited by

the PPA—might also support a full re fund.

The AL J conclude d: “Thus, even considering past prec edent that would allow less than a full ref und, the AL J does not find it warra nts such a re commendation in this case” and that “the only arg uable b as i s upon which the Commi ssion could order l ess t han a full ref und would be for policy reas o n s not previously

enumer ated in Commissi on prec edent.” T he Commi ssion adopted the AL J ’s proposal for decision except as to the relief g rante d but s et forth other fac tors that it considere d to deter mine the appropr iate amount of the ref und, such as the District’s siz e, sophisti ca t i o n , resour ces, and responsibility for the

12“extraordinar ily long” period of overbilling

. The Commi ssion in its final order also “empha siz e[d]

that its conclusion in this docket reg arding a partial ref und [was] based on fac ts unique to this case and [di d] not signa l a prec edential d eviation from prior Commi ssion ruling s reg arding customer ref unds from utilit ies.” The Commi ssion a rg ues that, beca

use there is no rule in pla ce specific ally addre ssing the Guadalupe Valley fac tors, that it “continues to b al an ce competing interests to deter mine on a case -by -ca se basis wh at , i f any amount, is appropr iate to order for a ref und” and “continues to consider which, if any , of the fac tors are proper in a g iven cas e, and what policy considerations to evaluate to dete rmine the a ppropriate amount of a r efund.” Ass u m i n g without deciding that the Guadalupe Valley fac tors are valid, the Commi ssion fails to follow its own prec edent

. T h e Commi ssion depar ts from its ear lier administrative pol icy to consider and balance the Guadalupe Valley fac tors in determining ref und

case s and relies on fac tors afte r the hear ing on the merits and t h e re cord was closed—such as the

s i z e, sophistication, and resour ces of the customer and the customer’ s fault in the period o f overbilling—contra dicting the p l ai n l an guag e of its rules. See 16 Tex. Admin. Code § 26.27(a) (3)( B) (i); Gulf States Utils. C o. , 809 S.W .2d at 207. The Com mission does not dispute that rule 26.27(a) (3)( B) (i) supports a full ref und “for the entire period” to the District. We also note that the Commi ssion has failed to cite, and we have not found, a Commi ssion decision order ing less than a full ref

und when the proce eding was initiated by customer complaint and the parties stipulated
to the amount of overbilling by the utilit y . Given the “cle ar, unambig uous lang uag e” of rule 26.27, Commi ssion prece dent, and the absenc e of a codif ied rule se tting for

th fac tors to be consider ed in

13ref

und case s for overbilling , we conclude that the Commi ssion’s failure to follow rule 26.27’s ref und require ment was “ arbitra

ry and ca pricious.” See G ulf States Util s. Co. , 809 S.W .2d at 207. We also find the analy sis in the Flores opinion instructive. I n that case , the Board of Trustee s for the Employ ees Retirement S y s t em of Texas denied Flore s’s application for occupational disability benef its based upon a poli cy that it adopted in a resolution sever al m onths afte r Flore s’s hear ing. 74 S.W .3d at 544. This Court conclude d that the post-hear ing actions of the Boa rd were arbitrary and capricious. Id

. at 545. We noted t hat, although admini strative age ncies

are not bound to follow their decisions in contested case h earing s in the same way that courts are bound, that courts “freque ntly require that an age ncy explain its rea soning when i t ‘appe ars to the revie wing court that an ag ency has depar ted from its ear lier administrative policy or there exis ts an appar ent inconsistency in ag ency deter minations.’” Id

. at 544–45 (quoting City of El Paso v. El Paso Elec. Co. , 851 S.W .2d 896, 900 (Tex. Ap p . — Au stin 1993, writ denied) ). Citi ng due proce ss

conce rns, this Court further noted that had Flore s known about the chang e in policy , “she might have prese nted her case differ ently .” Id

. at 545. “F or a hear ing to be meaning ful, the parties must be able
to prese nt e vidence on the issues to be decide d.” Id

. Apply ing this re asoning here , at a minimum , had the District known that the Com m i s sion would be considering the fac tors that it did as deter minative of the amount of ref und, the District “mig ht have prese nted its case differ ently .” Id. For these rea sons, w e c o n c lu d e th a t th e Co mmissi on’s finding that “it was appropr iate
to limit the amount that AT& T should ref und to the amo u n t of overc harg es over the last six and one-ha lf y ear s, plus interest” and its cor ollary decision to order

a par tial refund to be arbitra

ry and capr icious. See id. ; Starr C n t y. , 5 8 4 S .W.2d at 356. We also conclude that the Commi ssion’s

14arbitra

ry limit ation on the rec overy period p re judiced substantial rig hts of the District. See Tex. Gov’t Code Ann. § 2001.174(2). We sustain the District’s second and third issues on this basis and need not a ddress the D istrict’s rema ining a rg uments and issues. See Tex. R. App. P . 47.1. 6

CONCLUSION Be cause we conclude that the Commi ssion’s order was arbitra ry and capr icious and prejudice d substantial rig hts of the District, we reve rse the order of the trial court and rema nd with instructions that the cas e b e re m an d ed to the C ommissi on for further procee dings consistent with this opini on.

__________________________________________ Melissa Goodwin, Jus tice Be fore J ustices Pury ear , Rose and Goodwin Reverse d and Remande d Filed: Jul y

13, 2012

To the extent that the District seeks to have this Court order the Commi ssion to adopt the 6 AL J ’s proposal for decision and to a war d it e x pert’s fee s and attorne y ’s fe es, we decline to do so. See Tex. Gov’t Code Ann. § 2001.174(2) (West 2008); Tex. Util. Code Ann. § 15.003 (West 2007); Ford Motor Co. v. Butnaru , 157 S.W .3d 142, 149 (Tex. App.—Austin 2005, no pet.) (“I n a suit for judicial revie w of an ag ency action, the revie wing court is empower ed to issue only a g ener al rema nd when it finds er

ror that pr ejudices a

n appellant’ s substantial rights.” ).

15