Case Name: COALITION OF CITIES FOR AFFORDABLE UTILITY RATES, et al.. Petitioners, v. PUBLIC UTILITY COMMISSION OF TEXAS, et al., Respondents
Court: Supreme Court of Texas
Jurisdiction: Texas
Decision Date: 1990-09-12
Citations: 798 S.W.2d 560
Docket Number: No. C-9287
Parties: COALITION OF CITIES FOR AFFORDABLE UTILITY RATES, et al.. Petitioners, v. PUBLIC UTILITY COMMISSION OF TEXAS, et al., Respondents.
Judges: GONZALEZ and COOK, JJ., dissent.
Reporter: South Western Reporter Second Series
Volume: 798
Pages: 560–569

Head Matter:
COALITION OF CITIES FOR AFFORDABLE UTILITY RATES, et al.. Petitioners, v. PUBLIC UTILITY COMMISSION OF TEXAS, et al., Respondents.
No. C-9287.
Supreme Court of Texas.
Sept. 12, 1990.
Rehearing Overruled Nov. 28, 1990.
Jim Boyle, Jonathan W. Needle, John Laakso, Grace Casstevens, Austin, for petitioners.
Jim Mattox, Mary F. Keller, Larry J. Laurent, Susan D. Bergen, Karen Petti-grew, Barry Bishop, John F. Williams, Mark I. Hefter, Austin, for respondents.

Opinion:
OPINION
DOGGETT, Justice.
In this appeal certain consumers of a public utility urge that it be denied a second opportunity to prove the same facts as justification for an electric rate increase. We agree that the public utility regulatory scheme set forth by the legislature provides that once is enough. The doctrines of res judicata and collateral estoppel bar such relitigation before the Public Utility Commission ("PUC").
Gulf States Utilities Company ("GSU") sought a rate increase which required the PUC to determine whether the $4.5 billion that GSU spent for completion of the River Bend Nuclear Power Plant was a prudently incurred cost. This expense was challenged by the petitioners who intervened in the rate case before the PUC. As GSU has noted, "[ejvery factual, legal and policy issue was thoroughly explored and canvassed", during the resulting hearings that continued for 132 days and cost ratepayers approximately $12 million. Thereafter the PUC issued a final order containing the following findings of fact and conclusions of law that are central to the present controversy:
Finding 164: The preponderance of the evidence in this case establishes that $2,273 billion of River Bend capital costs were prudently and reasonably incurred. The evidence is inadequate to support a finding of either prudence or imprudence with regard to construction costs in excess of $2,273 billion, with the exception of the costs related to the 50-month schedule and TDI, addressed in Findings of Fact Nos. 133 and 145.
Finding 164A: GSU's share of all River Bend capital costs in excess of $2,273 billion should be excluded from plant in service at this time for lack of sufficient evidence as to the prudence and reasonableness of those costs. The amount which should be included in plant in service, given GSU's 70 percent share of the plant, is $1.5911 billion.
Conclusion of Law 10: Pursuant to PURA Sections 16(a), 38, 39(a), and 41, the Commission may reexamine on rehearing or in a subsequent proceeding the prudence and reasonableness of those River Bend construction costs regarding which the evidence is inadequate to support a finding of either prudence or imprudence.
Conclusion of Law 15: Under PURA Section 40 a utility must prove its conduct to have been prudent when decisions or expenditures are reasonably challenged.
Conclusion of Law 18: $1,453,520,982 of GSU's share of end-of-test-year River Bend capital costs should not be included from GSU's rate base as invested capital used and useful in rendering service to the public pursuant to PURA Sections 38, 39, and 41.
Conclusion of Law 18A: GSU has not met its burden of proving that the capital costs of River Bend above a reasonable Definitive Cost Estimate of $2.273 billion were reasonably and prudently incurred.
In summary, the PUC found that GSU had failed to prove that any expenses in excess of $2.273 billion were prudently incurred. Two of the three commissioners voted to allow GSU further opportunity to prove the prudence of an additional $1.453 billion, which apparently represented GSU's share of cost overruns on the project. In taking this action, the PUC rejected its hearing examiner's proposed conclusion of law that res judicata would prohibit reexamination of the prudence issue.
GSU appealed the final order and simultaneously initiated a new proceeding before the PUC on the same prudence question. The petitioners also appealed and, based on res judicata, obtained from the trial court a permanent injunction preventing further consideration of this issue by the PUC. The court of appeals, however, dissolved the permanent injunction and ruled that the doctrine of res judicata was inapplicable because the PUC had specifically reserved the right to rehear the prudence issue in conclusion of law 10. 777 S.W.2d 814, 816. The court cited no authority to support its res judicata holding, but merely compared the PUC action to a severance authorized by Texas Rule of Civil Procedure 41. Id. at 817. Because we disagree with this conclusion, we reverse the court of appeals' judgment.
In Bonniwell v. Beech Aircraft Corp., 663 S.W.2d 816, 818 (Tex.1984), we considered the doctrines of res judicata and collateral estoppel. Res judicata, a matter judicially determined, bars the retrial of claims pertaining to the same cause of action which has been finally adjudicated. Collateral estoppel or issue preclusion is more narrow, precluding only the relitigation of identical issues of fact that have been actually litigated. To invoke either doctrine, the prior judgment must involve, the same issues, subject matter, and parties or those in privity.
Texas has made limited use of res judi-cata in an administrative context. See Sexton v. Mount Olivet Cemetery Ass'n, 720 S.W.2d 129, 138-142 (Tex.App.—Austin 1986, writ ref'd n.r.e.). Voicing an awareness of the usefulness of res judicata in administrative proceedings, this court in Westheimer Indep. School Dist. v. Brochette, 567 S.W.2d 780, 787 (Tex.1978), expressed a strong preference that "[cjontin-ued litigation of issues or piecemeal litigation should be discouraged" in state regulatory agencies.
Ironically, GSU was the first party to urge the applicability of res judicata and collateral estoppel in this proceeding. GSU maintained initially that the doctrines precluded the PUC from considering the prudence of the River Bend construction, which it had previously authorized by granting a certificate of convenience and necessity. Additionally, counsel for the PUC acknowledged during oral arguments before this court that res judicata would prohibit relitigation regarding the $2,273 billion found prudent by the PUC. Petitioners correctly characterize the PUC's position as seeking to apply res judicata to the portion of costs that GSU proved and rejecting its application to costs not proved.
Excepting the oral argument of counsel for GSU, everyone involved in these proceedings agrees with the court of appeals that res judicata could apply to PUC rate-making "[ujnder proper circumstances " 777 S.W.2d at 815. The more narrow question we confront is whether the doctrine should be rejected because of any aspect of this particular proceeding, the PUC's final order, or the statute by which the order was authorized. At issue here is not increased operating expenses or the appropriate rate of return — factors that can change over time. Rather, every fact involved is historical; the amount and wisdom of these construction expenditures will remain constant no matter how many times the PUC permits relitigation addressing them. All of the same parties participated vigorously in the initial contest with each presenting its own evidence and cross-examining its opponent's witnesses. Were this not true, imposition of res judicata principles would be inappropriate.
Given these circumstances, if the PUC's final order had been unequivocal, there could be no question that the doctrine applies. But is it precluded by the PUC's conclusion of law 10, permitting further proceedings and attempting a deferral rather than a determination of the issue? In answering this question we look first to the terms of the order and the controversy it addresses. A utility has the burden to prove the prudence and reasonableness of its expenditures before a rate increase can be approved. PURA § 40; see also Public Util. Comm'n v. Houston Lighting & Power Co., 778 S.W.2d 195, 198 (Tex.App.—Austin 1989, no writ). By simply opening its books to inspection, a utility enjoys no presumption that the expenditures reflected therein have been prudently incurred. A utility carries the burden of proof even when it does not initiate the proceedings. Suburban Util. Corp. v. Public Util. Comm'n, 652 S.W.2d 358, 366 (Tex.1983).
In this rate case, the PUC declared that GSU failed to meet its burden of proof to show that the entire $4.5 billion expense was prudently incurred. Because of a "lack of sufficient evidence", the PUC, in its finding 164A, "excluded from plant in service" all "capital costs in excess of $2.273 billion." A party who fails to meet its burden of proof loses. The party who has the burden but fails to persuade the trier of fact is not entitled to a second trial to present more evidence. By stating that GSU failed to meet its burden of proof on the prudence of the $1,453 billion, the PUC effectively disallowed that amount from the rate base. See Gerst v. Goldsbury, 434 S.W.2d 665, 667 (Tex.1967) (agency determination that applicant offered "insufficient evidence of a public need for the proposed [savings] association" constituted a "negative finding").
More importantly, the PUC order must be considered final unless the PUC has the statutory power to defer and reconsider such critical issues. Such was the holding in Sexton v. Mount Olivet Cemetery Ass'n, 720 S.W.2d at 146, in which the Banking Commissioner sought to revisit an issue determined in a prior order relating to prepaid funeral plan regulation. As in the instant case, the order had expressly reserved the discretion to make new determinations at a later time. Refusing to permit a reopening of the final order, the court held that an attempted reservation of power is meaningless unless the legislature has specifically delegated such authority to an agency.
The PUC sought to base its attempted reservation of the right to reconsider the cost question presented by GSU on PURA sections 16(a), 38, 39(a), and 41. Nothing contained in sections 38, 39(a) and 41, either directly or indirectly, entitles the PUC to grant a utility multiple chances to prove the prudence of its investment. Section 16(a) does state the PUC's power "to do all things, whether specifically designated by this Act or implied herein, necessary and convenient to the exercise of this power and jurisdiction." It was hardly necessary to initiate a new docket to consider the $1.453 billion since the PUC could have sought additional guidance by remanding to the hearing examiner for further development of the evidence. Moreover, the PUC can only do what is necessary and convenient with regard to powers "specifically designated . or implied herein ." by other provisions of PURA. There is no language in this or any other section of PURA that allows the PUC to bifurcate into multiple proceedings the issue of a single investment's prudence.
The only legislative authorization for PUC reexamination of an earlier determination concerns the power to revoke or amend a certificate of convenience and necessity under certain circumstances outlined in PURA section 62(a). This section represents a clear delegation of authority for the PUC to reopen a matter previously considered. The legislature was, thus, quite capable of expressly approving the PUC reexamination of earlier determinations, but chose not to extend this authority to ratemaking. Thus, limited by statute and lacking any inherent power, the PUC was powerless to defer its decision to a future proceeding.
The court of appeals was correct in characterizing the ratemaking proceeding as a trial, but incorrect in comparing the PUC action in conclusion of law 10 "to that of the trial court in severing a claim and proceeding separately with it. Tex.R. Civ.P. 41." 777 S.W.2d at 817. Severance in a trial court is proper only when the suit involves two or more separate and distinct causes of action. Each of these causes must be such that it could be properly tried and determined as if it were the only claim in controversy. Kansas Univ. Endowment Ass'n v. King, 162 Tex. 599, 611-612, 350 S.W.2d 11, 19 (1961). The severed causes of action should not be so interwoven as to require the introduction of evidence on the same facts and issues. Furthermore, severance should not be used merely as a device to save a party from failure to prepare properly for trial or to present adequate evidence. Nor does Rule 41 permit a trial court to sever a case after it has been submitted to the trier of fact. That is the type of "severance" the PUC directed here. What happened in this case is more appropriately compared to an improper post-trial attempt to split a cause of action. Nothing in either PURA or the Administrative Procedure and Texas Register Act, Tex.Rev.Civ.Stat.Ann. art. 6252-13a (Vernon Supp.1990), allows a division of the investment rate base in ratemaking proceedings.
Once the order in the initial docket became final, it was not subject to any further PUC review. Public Util. Comm 'n v. Brazos Elec. Power Coop., Inc., 723 5.W.2d 171, 173 (Tex.App.— Austin 1986, writ ref'd n.r.e.). The prudence of spending the entire $4.5 billion to construct the River Bend Nuclear Power Plant had already been vigorously litigated in hearings that afforded GSU ample opportunity to justify all of its costs. The thrust of the new proceeding was to separate for reconsideration the prudence of $1,453 billion of this expenditure, a part of the total investment. This portion, representing GSU's share of cost overruns, had necessarily been previously considered.
All parties were entitled to a straightforward decision from the PUC the first time that this ease was presented. Permitting relitigation offends the policy reasons supporting the doctrines of res judicata and collateral estoppel. Both a public utility and consumers benefit from a final decision about whether cost overruns at a power plant have been sufficiently justified. With a complex and controversial project like a nuclear power installation, a utility and its investors need a determination to prevent relitigation of the same previous investment decision on each occasion that a rate increase is requested. The same finality that benefits the utility investors can serve the interests of consumers who know that if a utility is once denied relief because of its failure to prove its case, it may not return repeatedly on the same facts until the PUC yields. To reject res judicata for historical investment facts in a ratemaking proceeding would allow a public utility to secure victory not by the strength of its case but simply by outlasting its opponents. Accordingly, we hold that the doctrines of res judicata and collateral estop-pel bar a utility from relitigating before the PUC the prudence of its past investment for inclusion in that utility's rate base. We reverse the judgment of the court of appeals and affirm that of the trial court.
GONZALEZ and COOK, JJ., dissent.
. Gulf States' application for authority to change rates, designated docket no. 7195, was consolidated by the Commission with docket no. 6755, which inquired whether the $4.5 billion spent to construct River Bend was a prudently incurred expense.
. The petitioners are Coalition of Cities for Affordable Utility Rates ("Coalition") representing Conroe, Cut-N-Shoot, Huntsville, Panorama Village, Somerville, West Orange and Willis; the Cities of Bridge City, Groves, Nederland, Port Arthur, Port Neches and Vidor; and the Office of Public Utility Counsel.
. The Public Utility Regulatory Act, Tex.Rev.Civ. Stat.Ann. art. 1446c (Vernon Supp.1990), will be referenced as PURA throughout the opinion.
. The consolidated administrative appeal of GSU and the petitioners is currently pending in the 250th District Court of Travis County as cause no. 447,502. The action before us was severed from that cause and assigned cause no. 447.502A. The new docket granted by the Commission to relitigate the prudence issue has been designated as docket no. 8702.
. By narrowly applying res judicata to historical investment facts in a ratemaking proceeding under the conditions set forth herein, today's opinion continues this tradition of the restricted use of res judicata in administrative proceedings. Contrary to the suggestion of the dissent, the Court is in no way "impart[ing] collateral estoppel and res judicata effect on all actions and inactions by administrative agencies." Page 569 (Gonzalez, J., dissenting).
. We note the difference between a "separate trial" and a "severance". Compare Tex.R.Civ.P. 40(b) with Tex.R.Civ.P. 41. The PUC did not decide at the onset of the initial docket to hold separate hearings on various issues in a manner comparable to Rule 40(b). Rather its conduct was analogous to splitting a cause of action after submission to the trier of fact in violation of Rule 41.
. All issues relating to the merits of the administrative order, including the prudence of all elements of construction costs, remain to be addressed by the trial court where the consolidated appeals of the parties are pending as cause no. 447,502. In this proceeding the burden is upon GSU to show that the PUC's order is not supported by substantial evidence. The claim of the dissent that we have at this point "assess[ed] a S 1.453 billion penalty (permanent dis-allowance) on GSU", page 568 (Gonzalez, J., dissenting), is incorrect.