Opinion ID: 895304
Heading Depth: 3
Heading Rank: 2

Heading: Carrying Costs on Capacity Auction True-Up

Text: Intervenors complain that the PUC erred in allowing CenterPoint to recover $168 million in interest on the capacity auction true-up award. The trial court and court of appeals [111] agreed with the PUC on this issue, as do we. In Texas Industrial Energy Consumers v. CenterPoint Houston Electric, LLC, we recently held that interest on the capacity auction true-up and other non-stranded costs awarded in a Section 39.262 true-up proceeding was recoverable. [112] We upheld the validity of the portion of PUC Rule 25.263( l )(3) providing for carrying costs on the true-up balance, even though in CenterPoint Energy we had invalidated another portion of the Rule specifying the date at which interest begins to accrue. [113] We noted that invalidating the whole rule and barring any recovery of interest whatsoever would contradict our view in CenterPoint Energy `that the Legislature intended electric utilities to recover carrying costs on stranded costs to compensate for the financial costs incurred during the stranded cost recovery period,' consistent with the prior ratemaking principle that `carrying costs on investments in generation plants were included in rates.' [114] While, as discussed above, general ratemaking principles need not always be applied to a Chapter 39 true-up proceeding, we again see no valid reason the PUC cannot provide for interest on true-up balances under Rule 25.263( l )(3), including interest on the capacity auction true-up balance. The parties in TIEC challenged the amount of interest specified under Rule 25.263 ( l )(3), and did not necessarily question the authority vel non of the PUC to award interest, but in today's case we see no error in the PUC's decision to award interest on the capacity auction true-up to reflect the time value of money. Since, as discussed above, this true-up award is designed to assure the recovery of revenues projected in the ECOM model for 2002 and 2003, the PUC reasonably concluded that a full recovery of this amount must include interest to reflect the time value of money. It correctly found in its Order: Awarding the time value of the capacity auction true-up award puts the joint applicants in the same economic position they would have been in had they received this amount in 2002 and 2003. Intervenors provide no persuasive reason that interest on the capacity auction true-up cannot be awarded in this case as in other cases where utilities are allowed to recover costs with interest.