Opinion ID: 1984632
Heading Depth: 1
Heading Rank: 8

Heading: respondents' challenge to the access fee

Text: Our conclusion that the Commission lacks authority under chapter 35 to set rates for San Antonio means we need not reach San Antonio's remaining issues. For its part, HL & P argues that, even if the Commission had the authority to set its wholesale transmission rates generally (which HL & P has conceded), the Commission exceeded that authority in creating the access fee portion of the facilities charge, because the access fee violates a variety of PURA95's requirements. The Commission contends that we should remand this issue to the court of appeals, which did not reach it. Because the Legislature has already amended the statute in ways which limit the relevance of this case to the 1996-1999 time period, there is nothing to be gained by a remand but further delay. We will therefore consider the issue. [78] HL & P argues that the access fee is inconsistent with PURA95's provisions because it creates subsidies among utilities, and because it does not set rates for wholesale transmission service that are comparable with each utility's use of its own system. We agree that the access fee does not comport with the statute.
The access fee is inconsistent with the statute because it requires payments without regard to whether actual services are provided. The statute contemplates that one utility will request transmission service from another, and that the amount paid for that service will be based on the cost to provide it. [79] But the access fee is not related in any way to whether a utility actually uses another utility's transmission lines to transport wholesale power. Nor is it based on the cost of providing wholesale transmission service in any particular transaction, even though the Commission itself acknowledges that the distance power must travel is a significant factor in that cost. [80] Each utility pays each other utility the fee regardless of the proximity of transmission systems or any amount of actual use. Thus, one utility may pay an access fee to another utility even if it never uses the other's lines for a single transmissioneven if it has no wholesale transmissions at all. For example, the Commission's own impact fee calculations, done using the VAMM method, demonstrate that HL & P's transmission has no effect on the transmission lines of several utilities located far from Houston; yet, HL & P pays these utilities a percentage of their transmission costs based on HL & P's percentage of usage at ERCOT's peak. [81] The same is true for San Antonio. [82] The end result of the access fee requirement is that some utilities pay out more for transmission service than they recover. Thus, as a practical matter, these utilities do not recover their transmission costs from the entities for whom wholesale transmission is provided, contravening the statute. [83] And to the extent they do recover their costs, it may be from utilities for whom they provided no service. What is more, this shortfall, the Commission itself has said, should be factored into the rates that retail customers pay for electric service. [84] Consequently, in direct violation of the statute's requirements, a utility's other customers bear the costs of wholesale transmission service. [85] The Commission argues that the access fee is consistent with PURA95. First, it points out that in Rule 23.67( o ), which has not been challenged, it required all utilities to make filings with the Commission separating out their component costs for generation, distribution and transmission operations. [86] Rule 23.67( o ) further requires each utility to functionally unbundle certain operations. [87] The Commission argues that this unbundling means that a utility's functions as transmission customer and transmission provider are treated as belonging to completely separate companies, so that it is not surprising, and in fact doesn't matter, that a utility may pay more for service as a transmission customer than it receives for service as a transmission provider. Second, the Commission argues that VAMM does not accurately measure the effects one utility's transmissions have on another utility's lines at all times. Rather, VAMM is a snapshot of usage at one instant. Because of the nature of electricity, the Commission asserts, a utility's transmissions have overflow effects on other utilities' lines, even if those effects are unintended. Electricity, says the Commission, follows the path of least resistance and doesn't observe man-made boundaries. The access fee accounts for this inadvertent usage. Third, the Commission insists that the access fee fosters wholesale competition because any utility in ERCOT can buy power from any other utility on the grid without having to factor in transmission costs. The access fee is constant regardless of the distance power must travel or how many wholesale transactions a utility conducts. We are not persuaded by the Commission's arguments. With respect to unbundling, Rule 23.67( o ) does not require the transmission-providing and transmission-consuming operations of a utility to be treated as separate companies. Rather, it is the transmission operations and the wholesale purchase and sale activities that are to be separated. [88] Moreover, the Commission fails to explain why both aspects of transmission would not be included in a utility's transmission operations, even if the other functions were unbundled. And in any event, since any unbundling is merely functional, the overall effect remains the same-a utility that pays out more than it takes in, as a whole, does not recover its transmission costs. And the Commission expects those costs to be passed on to other customers. With respect to VAMM, certainly the Commission itself thought the method sufficient to measure one utility's effects on another for purposes of setting the impact fee. Indeed, in adopting the method, the Commission said: The [VAMM] method measures all changes in the use of the transmission lines; it is more stable than the other variants of the megawatt-mile methodology; it will aid in accurate transmission pricing; and it sends the appropriate price signals to generators and loads. [89] Moreover, in the Commission's own words, while a utility such as HL & P may own transmission lines that connect all of its generators to its loads, the power produced by its generators may actually flow over both its own transmission lines and the transmission lines of neighboring utilities. [90] This does not explain why, for example, HL & P must pay an access fee to the Rio Grande Electric Cooperative, which is certainly not a neighboring utility. In any event, in PURA95 the Legislature did not direct the Commission to compensate utilities for occasional inadvertent power flows over their transmission systems. Finally, although the access fee may encourage wholesale competition, that cannot make up for the fact that it violates the explicit command that the rules be consistent with PURA95's standards. As we noted earlier, an administrative agency may not exercise a new power, or one that is inconsistent with the agency's statutory mandate, simply because the agency perceives that power as expedient. [91]
HL & P also argues that the access fee violates PURA95's mandate that the rates a utility charges for wholesale transmission service be comparable to its own use of its system. The Commission maintains that the fee is consistent with the comparability requirement because each utility pays itself for transmission service at the same rate as others pay it for the same service. HL & P points out, however, that the rates set by the access fee are not comparable to the existing rates charged retail customers. Those rates are based on a utility's own invested capital and costs. [92] The access fee, on the other hand, is based on the aggregate of all uses and costs in the ERCOT grid. Thus, the access fee is not based on a utility's use of its own system, as the statute contemplates. Nor is it comparable to what a utility charges its retail customers for service. For these reasons, the access fee also violates section 35.004(a)'s comparability requirement.
Petitioner Texas-New Mexico Power Company offers an additional argument in support of the rules. It asserts that the Legislature accepted the Commission's construction of PURA95 when it codified the statute in 1997. But the doctrine of legislative acceptance applies when an agency interpretation of an ambiguous statute has been in effect for a long time and the Legislature re-enacts the statute without change. [93] That is not the case here. The Legislature did not re-enact PURA95, but rather codified it. And the Commission's interpretation of the statute at that time was new, and already subject to a court challenge in this case. Finally, in 1999 the Legislature did amend chapter 35. In the 1999 amendments to chapter 35, the Legislature specified that the Commission: shall price wholesale transmission services within ERCOT based on the postage stamp method of pricing under which a transmission-owning utility's rate is based on the ERCOT utilities' combined annual costs of transmission divided by the total demand placed on the combined transmission systems of all such transmission-owning utilities within a power region. [94] Thus, the Legislature has now affirmatively told the Commission to price wholesale transmission services entirely by the postage stamp method previously used to set only the access fee. The parties agree that, following this change, the Commission has the authority to set rates for both investor-owned and municipally owned utilities using the postage stamp method. [95] The Commission argues that the 1999 amendments simply clarified the authority it already had, while HL & P argues that they bestowed an entirely new power. For our purposes, subsequent statutory amendments are of limited usefulness. We must be guided by what the law was in the relevant time period1995. And PURA95 was not ambiguous with respect to the powers it gave the Commission. The Commission also points out that, although the Legislature added the postage stamp provision, it did not change those provisions of the statute with which we have found the Commission's rules to be inconsistent. The Commission suggests that this means the Legislature did not think there was any inconsistency. But the Legislature can, and does, choose to amend a statute without reconciling all inconsistencies. In fact, the Legislature has offered instructions for interpreting apparently irreconcilable amendments. [96] And this case does not require us to interpret chapter 35 as it currently appears. Because we have determined that the access fee is inconsistent with the statute's command, we do not reach the further question of whether the rules are contrary to federal law. If, as the Commission argues, the access fee is consistent with orders from the FERC, that still cannot supply statutory authority that our own Legislature has not given. We express no opinion on the court of appeals' discussion of this point. Finally, the Commission argues that, even if the access fee portions of the rules are invalid, the court of appeals erred in striking Rule 23.67(m) because that rule does nothing more than articulate the statutory requirement that all utilities file tariffs. But in fact the rule mandates that tariffs shall comply with the provisions of this rule, many of which are invalid. Thus, because Rule 23.67(m) requires compliance with invalid portions of the rules, Rule 23.67(m) itself is invalid.