Opinion ID: 2454404
Heading Depth: 1
Heading Rank: 2

Heading: retroactive effective date of rates

Text: The PUC argues that it has the authority to make GTE's new rates effective on a date prior to the issuance of the final rate order. Under the circumstances present in this case, we disagree. This case involves ratemaking proceedings over which the PUC has exclusive original jurisdiction under sections 42 and 43 of PURA. Section 42 sets forth the procedure for the PUCon its own motion or on complaint by any affected personto review a utility's existing rates. After notice and hearing, if the PUC finds the utility's rates to be unreasonable or in violation of any provision of law, the PUC will determine the just and reasonable rates to be charged by the utility by an order which is served upon the utility. These rates are to be thereafter observed and in force ... and such rates shall constitute the legal rates of the public utility until changed as provided in this Act. TEX.REV.CIV.STAT. art. 1446c, § 42. Section 43 sets forth the required procedure for a utility to change its existing rates. The utility must file a statement of intent to change its rates with the PUC at least 35 days before the effective date of the proposed change. TEX.REV.CIV.STAT. art. 1446c, § 43(a). If the proposed rate change constitutes a major change, if any affected person complains or if the PUC so desires, the PUC may conduct hearings to determine the propriety of the change. TEX.REV.CIV.STAT. art. 1446c, § 43(b) & (c). Pending the hearing and decision, the PUC may suspend the effective date of the utility's proposed rate change up to 150 days after the date on which the proposed rate change would otherwise go into effect. The suspension period will be extended two days for each day of actual hearing on the merits of the proposed rate change that exceeds 15 days. If the PUC suspends the proposed rate change, the utility's existing rates continue in effect unless the PUC fixes temporary rates in lieu of the existing rates. TEX.REV.CIV.STAT. art. 1446c, § 43(d). If the PUC fails to make its final determination of rates prior to expiration of the period or periods of suspension, the proposed rate change shall be considered approved by the PUC. However, [t]his approval is subject to the authority of the ... [PUC] to continue a hearing in progress. TEX.REV.CIV.STAT. art. 1446c, § 43(d). [7] If the 150 day suspension period is extended and the PUC fails to make its final determination of rates within 150 days from the date that the proposed effective date of the rate change otherwise would have gone into effect, the utility may implement a changed rate up to, but not exceeding, the proposed rate, provided the utility files and the PUC approves a bond to secure the utility's obligation to refund (or credit against future bills) all sums collected during the period of suspension over and above the rate finally determined by the PUC. TEX.REV.CIV.STAT. art. 1446c, § 43(e). After the hearing, if the PUC finds the proposed rates to be unreasonable or in violation of any provision of law, the PUC will determine and fix the rates to be charged by the utility by an order which is served upon the utility. [T]hese rates are thereafter to be observed until changed, as provided by this Act. TEX.REV. CIV.STAT. art. 1446c, § 43(f). These procedures are designed, in part, to compensate a utility for regulatory lag. See Railroad Comm'n v. Lone Star Gas Co., 656 S.W.2d 421, 426 (Tex.1983). Regulatory lag is that period of time between the utility's filing of a statement of intent to change rates and the PUC's issuance of a final rate order. [8] Section 42 includes no provisions which authorize the PUC to set a retroactive effective date for a rate change and does not include any procedures to avoid regulatory lag. However, section 43 limits the periods of suspension, grants the agency authority to fix temporary rates, and permits the utility to institute its new rates by filing an adequate bond approved by the agency. In addition, the setting of a retroactive effective date for a rate change is also a method of compensating for regulatory lag. However, the setting of a retroactive effective date for a rate change has been characterized as prohibited retroactive ratemaking. See Public Util. Comm'n v. United Fuel Gas Co., 317 U.S. 456, 464, 63 S.Ct. 369, 374, 87 L.Ed. 396 (1943); Stefan H. Krieger, The Ghost of Regulation Past: Current Applications of the Rule Against Retroactive Ratemaking in Public Utility Proceedings, 1991 U.ILL.L.REV. 983, 1009-1012 (1991). The basic premise underlying the prohibition against retroactive ratemaking is that the setting of utility rates is a legislative function, even if carried out by administrative agency; therefore, utility rates, like any other legislation, generally can have only prospective application and cannot be used to recoup losses or gains incurred under prior legal rates. Texas Ass'n of Long Distance Tel. Co. (TEXALTEL) v. Public Util. Comm'n, 798 S.W.2d 875, 882 (Tex.App.Austin 1990, writ denied).
In determining whether the PUC has the authority to make GTE's new rates effective on a date prior to the issuance of the final rate order in this case, we first consider whether sections 42 or 43 of PURA confer such authority upon the PUC. [9] Through the enactment of PURA, the legislature has granted the PUC broad powers in regulating public utilities. See TEX.REV.CIV.STAT. art. 1446c, §§ 2, 16, 18, 37, 38, 89. Section 2 of PURA states: This Act is enacted to protect the public interest inherent in the rates and services of public utilities.... The purpose of this Act is to establish a comprehensive regulatory system which is adequate to the task of regulating public utilities as defined by this Act, to assure rates, operations, and services which are just and reasonable to the consumers and to the utilities. TEX.REV.CIV.STAT. art. 1446c, § 2. Section 16 states that the PUC has the general power to regulate and supervise the business of every public utility within its jurisdiction and to do all things, whether specifically designated in this Act or implied herein, necessary and convenient to the exercise of this power and jurisdiction. TEX.REV.CIV.STAT. art. 1446c, § 16(a). Concerning telecommunications utilities, section 18 provides: It is the policy of this state to protect the public interest in having adequate and efficient telecommunications service available to all citizens of the state at just, fair, and reasonable rates.... It is the purpose of this section to grant to the commission the authority and the power under this Act to carry out the public policy herein stated. TEX.REV.CIV.STAT. art. 1446c, § 18(a). Section 37 states that the PUC is hereby vested with all authority and power of the State of Texas to insure compliance with the obligations of public utilities of this Act. For this purpose the regulatory authority is empowered to fix and regulate rates of public utilities.... TEX.REV.CIV.STAT. art. 1446c, § 37. Section 38 states that [i]t shall be the duty of the regulatory authority to insure that every rate made, demanded, or received by any public utility ... shall be just and reasonable. TEX.REV.CIV.STAT. art. 1446c, § 38. Section 89 provides that PURA shall be construed liberally to promote the effectiveness and efficiency of regulation of public utilities to the extent that such construction preserves the validity of this Act and its provisions. TEX.REV.CIV.STAT. art. 1446c, § 89. However, the PUC is a creature of the legislature and has no inherent authority. Denton County Elec. Co-op v. Public Util. Comm'n, 818 S.W.2d 490, 492 (Tex.App. Texarkana 1991, writ denied). See Texas DHS v. Christian Care Ctrs., 826 S.W.2d 715, 719 (Tex.App.Austin 1992, writ denied). An agency may exercise only those specific powers that the law confers upon it in clear and express language. As a general rule, the legislature impliedly intends that an agency should have whatever power is reasonably necessary to fulfill a function or perform a duty that the legislature has expressly placed in the agency. Kawasaki Motors v. Motor Vehicle Comm'n, 855 S.W.2d 792, 797 (Tex. App.Austin 1993, writ denied); Texas DHS v. Christian Care Ctrs., 826 S.W.2d at 719. The agency may not, however, on a theory of necessary implication from a specific power, function, or duty expressly delegated, erect and exercise what really amounts to a new and additional power or one that contradicts the statute, no matter that the new power is viewed as being expedient for administrative purposes. Sexton v. Mount Olivet Cemetery Ass'n, 720 S.W.2d 129, 137-38 (Tex.App.Austin 1986, writ ref'd n.r.e.) (citations and emphasis in original omitted); Kawasaki Motors v. Motor Vehicle Comm'n, 855 S.W.2d at 798. Reviewing the pertinent sections of PURA, we find that PURA generally confers authority upon the PUC to regulate and supervise public utilities, to fix and regulate rates of public utilities, and to insure rates, operations, and services which are just and reasonable to the consumers and to the utilities. Reviewing section 42, we find no express provisions which authorize the PUC to set a retroactive effective date for GTE's rate change. [10] Reviewing section 43, we find express provisions which authorize the PUC to set a retroactive effective date for GTE's rate change; however, these provisions are not applicable under the circumstances present in this case. Section 43 provides several limited procedures for the PUC to set a retroactive effective date for a rate change. [11] First, under certain circumstances, section 43(e) permits the utility to institute its new rate provided that the utility files and the PUC approves a bond to secure the utility's obligation to refund or credit against future bills all sums collected during the period of suspension over and above the rate finally determined by the PUC. However, GTE did not attempt to institute its new rate by filing a bond. Second, concerning rates of a local exchange company such as GTE, section 43(i) states that if the PUC fails to make its final determination ... of rates prior to the expiration of the 150-day suspension period, the schedule of rates finally approved by the commission shall become effective and the local exchange company shall be entitled to collect such rates from the date the 150-day suspension expired. However, GTE agreed to extend the 150-day suspension period until February 23, 1989the date of the final order. Third, although technically not a procedure for setting a retroactive effective date for a rate change, under certain circumstances, section 43(d) permits the PUC to fix temporary rates in lieu of existing rates until the PUC makes its final determination of rates. However, in this case, the PUC redesignated GTE's current rates as temporary rates on January 4, 1989. [12] In determining whether authority for the PUC to set a retroactive effective date for a rate change is implied in PURA, we consider the purpose of setting a retroactive effective date. The setting of a retroactive effective date for a rate change is a method of compensating for regulatory lag. See Railroad Comm'n v. Lone Star Gas Co., 656 S.W.2d at 426. As noted above, section 43 provides a detailed procedure to avoid regulatory lag. As a result, it is not necessary to imply authority in PURA for the PUC to set a retroactive effective date for a rate change. Neither section 42 nor 43 confers implied authority upon the PUC to make GTE's new rates effective on a date prior to the issuance of the final rate order under the circumstances present in this case. See Public Util. Comm'n v. General Tel. Co., 777 S.W.2d 827, 830 (Tex.App.Austin 1989, writ dism'd). Consequently, we conclude that under the circumstances present in this case, the PUC does not have the authority to make GTE's new rates effective on a date prior to the issuance of the final rate order.
In determining whether the PUC has the authority to make GTE's new rates effective on a date prior to the issuance of the final rate order under the circumstances present in this case, we must also consider Railroad Comm'n v. Lone Star Gas Co., 656 S.W.2d 421 (Tex.1983). In Lone Star, this court discussed the authority of a regulatory agency to determine the effective date of a new rate, stating generally that [t]he courts of this state have provided that in order to compensate for `regulatory lag,' the Commission in its discretion may make the new rates effective at any date prior to the issuance of the order but following the attachment of the agency's jurisdiction. Id. at 426. However, Lone Star is distinguishable from the present case. Lone Star primarily involved the appellate jurisdiction of the Railroad Commission under section 26 of PURA, although a relatively small portion of the rates at issue were before the Commission under section 43. Lone Star had filed for rate increases with the City of Kaufman, and upon rejection of those rates, Lone Star appealed to the Commission. Lone Star also filed for a rate increase to the environs of the City of Kaufman (those living outside the limits of the City). This was filed directly with the Commission, invoking its original jurisdiction under section 43. In applying Lone Star in this case, we must first recognize that the Commission was exercising its appellate jurisdiction with respect to most of the rates at issue. Just as an appellate court would have the authority to make its judgment effective as of the date of the trial court judgment under review, the Commission had the authority to make rates effective as of a date earlier than its final order. [13] In Lone Star, this court did not discuss the source, if any, of the Commission's authority to make rates under section 43 retroactive. In fact, neither party in Lone Star disputed the PUC's authority under section 43 to make the new rates effective on a date prior to the issuance of the final rate order. Consequently, Lone Star does not stand for the proposition that the PUC has the implied authority under section 43 to make rates effective retroactively.