Court Opinion

ID: 9647437
Source: CourtListenerOpinion
Date Created: 2023-08-23 13:36:28.990237+00
Date Added: 2024-06-11T18:11:49.624872
License: Public Domain

Justice SPECTOR,
joined by Justice GONZALEZ, Justice DOGGETT, and Justice GAMMAGE,
dissenting.
This case demonstrates the weakness of the safeguards relied upon today in State of Texas v. Public Utility Commission, 883 S.W.2d 190 (Tex.1994). In that ease, the majority defends its approval of deferred accounting treatment on the ground that deferred cost assets will be included in rate base only to the extent that they are deemed “prudent, reasonable and necessary.” Id. at 197-198 n. 12. In the present case, however, the majority approves the Public Utility Commission’s application of a similar standard, despite a total lack of evidence supporting the Commission’s findings. I dissent.
At the rate hearings below, the City of El Paso presented extensive evidence concerning the imprudence of El Paso Electric Company’s decisions to become involved in the Palo Verde Project and to remain involved at the 15.8 percent participation level. See Tex. Pub. Utils. Comm’n, Application of El Paso Electric Company for Authority to Change *190Rates, Docket No. 7460, 14 Tex.P.U.C.Bull. 932, 965-84 (June 16, 1988). The City’s expert testimony concluded that 50 percent of the cost of all three Palo Verde units should be disallowed as imprudent. Id. at 983. Using this figure, some $350 million should have been disallowed for Unit 1 alone.
The Commission agreed that El Paso Electric was “not entirely prudent” in planning and managing its participation in the Palo Verde project. Id. at 1250. In determining the amount of the disallowance, however, the Commission chose not to rely on the evidence presented; instead, it seized upon a figure of $32 million that had been discussed in the course of settlement negotiations. Id. at 1250-51. El Paso Electric’s own expert testified, in regard to the settlement amount, “I don’t think it really relates to anything.” The $32 million figure has no basis in reality; it resulted solely from the parties’ efforts to buy peace.
The majority cites no evidence in support of the $32 million disallowance, because none exists. Nonetheless, the majority upholds the Commission’s findings as supported by substantial evidence. Supra at 186.
With the standard of review applied today, it is difficult to imagine any Commission decision relating to prudence that would be set aside by the Court. This lack of review will be especially pernicious in the context of deferred cost assets. Valuing the prudence of such assets will involve the same degree of complexity as valuing the imprudence in this case. Thus, in approving deferred amounts for inclusion in rate base, the Commission may arbitrarily select a figure within a wide range, and its decision will effectively be immune from judicial review. Judging by the example of this ease, the figure selected will typically be much closer to the utility’s recommended figure than it is to the ratepayers’.
I would hold that the disallowance for deci-sional imprudence must be based on the evi-dentiary record. Additionally, for the reasons stated in my dissenting opinion in State of Texas v. Public Utility Commission, 883 S.W.2d at 205-209, I would hold that no expenses incurred after the beginning of commercial operation may be capitalized and included in rate base. Accordingly, I would remand this cause to the Commission for a determination of rates in keeping with traditional standards.