Opinion ID: 1525205
Heading Depth: 1
Heading Rank: 8

Heading: Test Year Requirement

Text: PURA requires utilities to file for a rate increase by presenting revenue and expense data from the same 12-month period using an historical test year. Tex.Rev.Civ. Stat.Ann. art. 1446c, § 3(t); 16 Tex.Admin.Code § 23.21(a); Suburban Utility Corp. v. Public Utility Comm'n, 652 S.W.2d 358, 366 (Tex.1983). In State of Texas v. Public Utility Commission , we held that an accounting order authorizing deferred accounting treatment does not violate the test year requirement because there is no requirement in PURA or the Commission's procedures that the Commission must follow a test year when determining accounting policy. However, in the context of a rate case, the test year requirement applies. Thus, we must address the argument that the actual inclusion of deferred costs in a utility's rate base violates the test year requirement. The State argues that post-in-service costs were deferred for up to 25 months and thus, the inclusion of such rates in EPEC's rate base violated the test year requirement. [18] However, the Commission may, in its discretion, go outside the test year when necessary to achieve just and reasonable rates. In Suburban Utility Corp. v. Public Utility Commission, 652 S.W.2d 358, 366 (Tex.1983), we stated that [c]hanges occurring after the test period, if known, may be taken into consideration by the regulatory agency to help mitigate the effects of inflation and in order to make the test year data as representative as possible of the cost situation that is apt to prevail in the future. Because it ordered the deferral of post-in-service costs, the Commission understood the impact of deferring post-in-service costs on the test year. It is within the discretion of the Commission to consider expenditures that occur outside the test year if such consideration will assist the Commission in making the test year as representative as possible to the cost situation expected in the future.