Opinion ID: 1493809
Heading Depth: 1
Heading Rank: 1

Heading: Accounting Proceeding v. Rate Proceeding

Text: The OPUC argues that Docket No. 7289 was actually a ratemaking proceeding, and therefore, the Commission erred in failing to follow the ratemaking procedures set forth in PURA section 43. We disagree. In State of Texas v. Public Utility Commission, 883 S.W.2d 190 (Tex.1994), we held that the Commission's authorization of deferred accounting treatment for post-in-service costs does not constitute a ratemaking proceeding under PURA section 43. Thus, we overrule the OPUC's first point of error. In an argument not presented by the parties in State of Texas v. Public Utility Commission , the OPUC contends that the Commission erred by failing to develop a record that would support its conclusion that shareholders did not receive just compensation during the period of deferred expenses but, instead, contributed funds for those expenses. The OPUC contends that the only way to develop a sufficient record is to make factual inquiries into ratemaking issues and that was not done in Docket 7289. The OPUC's argument mistakenly presupposes that Docket No. 7289 was a rate hearing. As noted, Docket No. 7289 involved a change in accounting procedures and did not constitute a ratemaking action. As we held in State of Texas v. Public Utility Commission , the Commission possesses the authority to grant deferred accounting treatment for post-in-service costs. 883 S.W.2d at 195. The Commission is not required to conduct a full rate hearing in order to determine whether to grant deferred accounting. Further, it is within the Commission's authority to hold a limited scope hearing to determine whether to allow deferred accounting. TEX.REV.CIV. STAT.ANN. art. 1446c, §§ 16, 27. See City of El Paso v. Public Util. Comm'n of Texas, 609 S.W.2d 574, 579 (Tex.Civ.App.Austin 1980, writ ref'd n.r.e.) (the Commission has a large degree of latitude in the methods it uses to accomplish its regulatory function). In a related point of error, the OPUC argues that the scope of the hearing was too narrow because it did not allow the Commission to consider the total increases and decreases in costs of service or whether the Oklaunion plant was used and useful. [4] Again, the OPUC mistakenly presupposes that the Commission must conduct a rate hearing in order to authorize deferred accounting. Pursuant to the scope established at the outset of the hearing, the Commission considered whether the deferral of post-in-service costs was necessary to protect WTU from measurable harm to its financial condition. The Commission's final order approving deferred accounting treatment explicitly provides that the deferred costs will be subject to review at a subsequent rate hearing and will be included in the rate base only to the extent that they are prudent, reasonable and necessary and are related to property that is used and useful in providing service. [5] As the court of appeals recognized, at the subsequent rate hearing the utility must also prove that all operating expenses have been actually incurred. 808 S.W.2d 497, 499. Public Util. Comm'n v. Houston Lighting & Power, 748 S.W.2d 439, 441-42 (Tex.1987), appeal dism'd, 488 U.S. 805, 109 S.Ct. 36, 102 L.Ed.2d 16 (1988). Thus, the deferred cost asset will be reviewed as any other asset at a subsequent rate hearing.