Court Opinion

ID: 9673405
Source: CourtListenerOpinion
Date Created: 2023-08-24 04:11:11.610447+00
Date Added: 2024-06-11T18:16:21.993186
License: Public Domain

POWERS, Justice,
dissenting.
The Court withdraws the concurring opinion issued April 5, 1995 and substitutes the following opinion in its place.
In its fourth point of error, EPEC complains that the Commission’s final order is not accompanied by findings of underlying fact that “support” the Commission’s conclusions of law on the ultimate issues of deci-sional prudence and used-and-useful investment as these pertain to Palo Verde Unit 3 and its exclusion from rate base. I would sustain the point of error and remand to the Commission on this basis.
EPEC refers to certain formalities with which agencies must comply in formulating their final orders as set out in section 2001.141 of the Administrative Procedure Act:
§ 2001.141 Form of Decision; Findings of Fact and Conclusions of Law
* * * ⅜ # *
(b) A decision ... must include findings of fact and conclusions of law, separately stated.
⅜ ⅜ ⅜: ⅜ ⅜ %
(d) Findings of fact, if set forth in statutory language, must be accompanied by a concise and explicit statement of the underlying facts supporting the findings.
Administrative Procedure Act (APA), Tex. Gov’t Code Ann. § 2001.141(b), (d) (West 1995) (emphasis added). These requirements are designed to assure notice, fairness, and a proper division between the functions of the agencies and the courts that review their decisions. See John Powers, Judicial Review of the Findings of Fact Made by Texas Administrative Agencies in Contested Cases, 16 Tex.Tech.L.Rev. 475, 481 (1985); Revised Model State Administrative Procedure Act § 12, 14 U.L.A. 419 (1961).1 It has *868never been suggested that compliance with section 2001.141(b) and (d) is optional with an agency. The issue on appeal is whether the Commission’s final order contains findings of underlying fact that fairly and reasonably support the agency’s conclusions of law regarding prudence and used-and-useful investment.
THE “PRUDENCE” FINDINGS
The Commission determined, in a single declaration entitled “conclusion of law,” that “EPEC has not sustained its burden of proof with respect to the amount of the prudent investment it claimed in Palo Verde Unit 3.” 2 In ostensible “support” of this conclusion of law, the Commission’s final order offers six purported findings of underlying fact. They are as follows:
1. The Commission granted a Certificate [of convenience and necessity] for Palo Verde in Docket No. 1981 in part to facilitate EPEC’s ability to sell a portion of its Palo Verde entitlement [to a share of the power generated] on reasonable and favorable terms.
2. EPEC’s Board of Directors affirmatively decided not to attempt to market or otherwise dispose of any portion of its Palo Verde entitlement prior to 1981, notwithstanding the intent of its regulators that it do so.
3. The studies EPEC relied upon to justify its refusal to sell a portion of its Palo Verde entitlement are flawed, and EPEC’s reliance on them was unreasonable.
4. EPEC failed to demonstrate by a preponderance of the evidence that EPEC could not have sold an interest in Palo Verde prior to 1981 had it tried.
5. EPEC’s management was imprudent in failing to attempt to market an interest in Palo Verde during the 1978-1981 time frame following the entry of the Commission’s final order in Docket No. 1981 [wherein the certificate of convenience and necessity was issued to authorize the building of Palo Verde Unit 3].
6. Based on the evidence in the record, Palo Verde [therefore] represents excess capacity.
The general theory evident in these findings 3 is as follows: The Commission in 1978 *869approved construction of Palo Verde Unit 3, intending simultaneously that EPEC sell a part of its “entitlement” before 1981; (2) relying unreasonably on certain studies, EPEC decided not to sell any of its “entitlement” in Palo Verde Unit 3; (3) in the contested case, EPEC failed to show that it could not have sold its “entitlement” before 1981; therefore, (4) EPEC acted imprudently and, as a result, its “entitlement” was “excess capacity.” 4
Do the Commission’s “findings of fact,” quoted above, enable us to conclude “fairly and reasonably” that they support the agency’s ultimate determination that EPEC was imprudent in not attempting to sell its “entitlement” or “interest” in Palo Verde Unit 3 during 1978-1981? I conclude that the quoted “findings of fact” patently do not permit that conclusion.
I.
Firstly, the Commission’s theory includes a silent but essential assumption: that the Commission communicated to EPEC its “intent” that the company sell a part of its “interest” or “entitlement” in Palo Verde Unit 3. Without that assumption, the Commission’s theory fails. There is no finding, however, to establish the assumed fact, although the matter was disputed in the agency proceeding and the hearing examiner expressly found that the Commission sent EPEC “mixed signals” on whether to sell.5 *870The hearing officer found the essential fact, the Commissioners did not. The issue is not whether the Commission is bound by the recommendations of its hearing officers. Instead, the issue is whether the findings of fact set forth in the final order, whatever their origin, fairly and reasonably support the Commission’s conclusion that EPEC was imprudent in not attempting to sell or otherwise dispose of its “interest” or “entitlement” in Palo Verde Unit 3. Without the essential finding, the theory of “support” in the Commissioners’ stated findings collapses.
II.
Secondly, the theory of the findings is insupportable because it contradicts earlier Commission decisions on the prudence issue without explanation or reason, stated as findings or in some other form. In Docket 1981, decided October 20, 1978, the Commission authorized the issuance of a certificate of convenience and necessity, including Palo Verde Unit 3. In its order, the Commission determined as follows:
EPEC’s participation in Palo Verde Nuclear Generation Station will provide the Company’s ratepayers fuel diversification along with base load generating capacity using low cost fuel.
It is necessary for the service, accommodation, convenience and safety of the public that [EPEC] be granted a certificate [of convenience and necessity] for its participation in the Palo Verde Nuclear Generation Station.
In reaching these conclusions of fact and law, the Commission necessarily considered “the adequacy of existing service [and] the need for additional service,” among other specified statutory factors, and determined by necessary implication that the generating capacity of Palo Verde Unit 3, would not be “excess capacity.” See Public Utility Regulatory Act, Tex.Rev.Civ.StatAnn. art. 1446c, § 54(c) (West Supp.1995) (“PURA”).
An administrative agency may or may not possess the power to reopen an issue previously decided in a contested case; whether the agency possesses such power depends upon the terms of its constitutive statute or “enabling act.” If the power to reopen exists, the issue is not one of res judicata, rather “the problem is to determine when a reopening should be permitted and when not.” Kenneth C. Davis, Res Judicata in Administrative Law, 25 Tex.L.Rev. 199, 236 (1947); see Sexton v. Mount Olivet Cemetery Ass’n, 720 S.W.2d 129, 138-42 (Tex.App.-Austin 1986, writ ref'd n.r.e.). I will assume, for purposes of discussion only, that PURA delegates to the Commission a power to reopen the 1978 issue of whether Palo Verde Unit 3 constituted excess capacity. Even if the Commission has such power, it must still decide the excess-capacity issue in accordance with the findings-of-fact requirements of APA section 2001.141(b) and (d). What occurred between October 1978 and February 1992 to render “excess” the generating capacity of Palo Verde Unit 3 that was, in 1978, “necessary for the service, accommodation, convenience and safety of the public?” Did the circumstances change materially between 1978 and 1992? Had there been a mistake of some kind or a change in administrative policy that required some new consideration, notwithstanding that EPEC has spent large sums in the interim? The Com*871mission’s final order, including its findings of fact and conclusions of law, is absolutely silent as to any such justification. Indeed, the Commission’s 1992 decision seems to rest upon a new factor heretofore unrelated to the “excess capacity” issue so far as agency policy was concerned.6
III.
Finally, the Commission’s theory of support, as stated in its findings of fact and conclusions of law, rests on the stated premise that the agency issued the certificate of convenience and necessity in 1978 “in part” to facilitate a sale of the Palo Verde Unit 3 interest on reasonable and favorable terms because the result of construction would be excess capacity. This is a rather stark and absolute contradiction in terms. At any rate, nothing in the 1978 order indicates that the Commission acted with such intent or that the certificate was issued “in part” to facilitate a sale of the unit. These could only have been subjective thought processes, motivations, or reasonings of the 1978 Commissioners, if they existed at all. We cannot ourselves extract factual explanations from the body of evidence in support of the agency order. We may look only to the agency’s expressed findings of fact in that regard. We may judge the sufficiency of the agency’s findings of fact based solely on the terms of the agency order itself. See Morgan Drive Away, Inc., 498 S.W.2d at 152; Allied Chem. Corp. v. Railroad Comm’n, 660 S.W.2d 124, 132-33 (Tex.App.—Austin 1983, writ ref'd n.r.e.). And, of course, we may not inquire into the subjective thought processes or motivations of the 1978 Commissioners in deciding “whether the agency order is reasonably sustained by appropriate findings and conclusions that have support in the evidence.” Pedernales Elec. Coop., Inc. v. Public Util. Comm’n, 809 S.W.2d 332, 342 (Tex.App.—Austin 1991, no writ).
In the case before us, there may exist a valid basis for the Commission’s decision regarding “excess capacity.” That basis, however, is not fairly and reasonably supported by any findings of fact and conclusions of law given us in the agency order. The agency decision must therefore be reversed. See Texas Health Facilities Comm’n v. Presbyterian Hosp. N., 690 S.W.2d 564, 567 (Tex.1985).
THE USED-AND-USEFUL FINDINGS
Before EPEC’s investment in Palo Verde Unit 3 may be included in rate base, the Commission must determine that the unit is “used and useful” in rendering service to the public. PURA §§ 39(a), 41(a). The Commissioner’s final order contains only one reference to the used-and-useful issue: EPEC did not carry “its burden of proof that Palo Verde is currently used by and useful to the public utility in providing service.” No finding of fact supports this ultimate determination in statutory language. The insufficiency of the final order under APA § 2001.141(b), (d) is obvious and I would hold accordingly. Presbyterian Hosp. N., 690 S.W.2d at 567.
In summary, I would sustain the assignments of error in EPEC’s fourth point of error. APA §§ 2001.141(b), (d), 2001.174(2)(C).

. The language of APA section 2001.141 is taken almost verbatim from section 12 of the 1961 Model State Administrative Procedure Act. The comment to section 12 states that the drafters' intent was "to require the degree of explicitness imposed by decisions such as Saginaw Broadcasting Co. v. FCC ... where the court required a statement of the ‘basic or underlying facts.’" Revised Model State Administrative Procedure Act § 12, 14 U.L.A. 419 (1961); see also Saginaw Broadcasting Co. v. Federal Communications Comm'n, 96 F.2d 554 (D.C.Cir.), cert. denied, 305 U.S. 613, 59 S.Ct. 72, 83 L.Ed. 391 (1938). The Saginaw court described in the following words the transcending importance of the findings-of-fact requirement found in our section 2001.141: The requirement that courts, and commissions acting in a quasi-judicial capacity, shall make findings of fact, is a means provided by Congress for guaranteeing that cases shall be decided according to the evidence and the law, rather than arbitrarily or from extralegal considerations; and findings of fact serve the additional purpose, where provisions for review are made, of apprising the parties and the reviewing tribunal of the factual basis of the action of the court or commission, so that the parties and the reviewing tribunal may determine whether the case has been decided upon the evidence and the law or, on the contrary, upon arbitrary or extralegal considerations. When a decision is accompanied by findings of fact, the reviewing court can decide whether the deci*868sion reached by the court or commission follows as a matter of law from the facts stated as its basis, and also whether the facts so stated have any substantial support in the evidence. In the absence of findings of fact the reviewing tribunal can determine neither of these things. The requirement of findings is thus far from a technicality. On the contrary, it is to insure against Star Chamber methods, to make certain that justice shall be administered according to facts and law. This is fully as important in respect of commissions as it is in respect of courts.
Id. at 559 (emphasis added).

. I do not agree that EPEC bore such burden of proof. See Gulf States Utils. Co. v. Coalition of Cities, 883 S.W.2d 739, 757 (Tex.App.—Austin 1994, writ requested). The Commission’s findings in the present case indicate some confusion and inconsistency on its part regarding where the burden of proof actually lay on the prudence issue. While the Commission’s conclusion of law expressly placed the burden on EPEC to prove itself innocent of imprudence, the agency's purported finding of underlying fact number five necessarily means that EPEC did not bear such a burden; it lay instead upon EPEC's opponents to prove that EPEC was imprudent, which burden the opponents carried in the Commission’s judgment.

. Items one and two of the purported findings of "underlying fact” are more accurately characterized as findings of ultimate fact, while items three through six are patently conclusions of law because they have legal effect in and of themselves. Their character is not changed by the agency’s placing them under the heading "underlying facts." As mere conclusions themselves, they can hardly be claimed as “underlying facts” that “support” the Commission’s single conclusion of law that "EPEC has not sustained its burden of proof with respect to the amount of the prudent investment it claimed in Palo Verde Unit 3.” See Gage v. Railroad Comm’n, 582 S.W.2d 410, 414 (Tex.1979); Morgan Drive Away, Inc. v. Railroad Comm’n, 498 S.W.2d 147, 152 (Tex.1973); Thompson v. Railroad Comm’n, 150 Tex. 307, 240 S.W.2d 759, 761-62 (1951). Nevertheless, I will in the text evaluate the Commission’s final order on the factual basis the agency itself gives in the order, i.e., the six findings quoted in the text. The ultimate issue is whether these six findings are such that the reviewing court can "fairly and reasonably say that they support ” the statutorily required criteria. Railroad Comm’n v. Entex, Inc., 599 S.W.2d 292, 298 (Tex.1980) (emphasis added); see also Railroad Comm’n v. Graford Oil Corp., 557 S.W.2d 946, 950 (Tex.1977).
While the “prudence” requirement is not per se a "statutory criterion” under PURA, it is a crite-*869non of similar generality and a requirement essential to Commission ratemaking under PURA. The text of PURA necessarily implies that relevant expenditures by regulated utilities be "prudent.” Hence, APA section 2001.141 applies to the Commission’s ultimate conclusion of law that EPEC failed to carry its burden of proof on the prudence issue. That is to say, section 2001.141 required the Commission to furnish in its final order "a concise and explicit statement of the underlying facts supporting” that conclusion of law. APA § 2001.141. Unless this be the case, the Commission’s conclusion of law on the prudence issue is totally immune from judicial review insofar as its factual basis is concerned. The legislature could hardly have intended such a result in its enactment of section 2001.141. See Powers, supra, at 503. Consequently, we impose the requirements of section 2001.141 upon the conclusion of law regarding prudence. See City of El Paso v. Public Util. Comm’n, 839 S.W.2d 895, 908 (Tex.App.—Austin 1992), aff'd in part and rev’d in part, 883 S.W.2d 179 (Tex.1994). The matter is discussed further in Kerry McGrath, Substantial Evidence Review in Texas—Still Insubstantial After All These Years, 44 Baylor L.Rev. 223, 237-43 (1992) and in the comment following section 12 of the Revised Model State Administrative Procedure Act, 14 U.L.A. 491 (1961), from which section 2001.141 is taken almost verbatim.

. By thus resting its prudence decision on this single ground — that EPEC was imprudent in not attempting to sell Palo Verde Unit 3 during the period 1978-1981 — the agency was relieved of the necessity of making findings of fact and conclusions of law as to all the other claims of decisional imprudence in the contested case, upon which the hearings examiner made recommended findings of fact and conclusions of law in a proposal for decision. These disputed issues pertained generally to such things as whether EPEC prudently used certain planning models in evaluating its risk exposure in connection with the unit; whether EPEC's load forecasting in the period was within industry standards; whether EPEC responded “reasonably” with regard to the desire of regulators that the unit be sold; whether EPEC was reasonable in choosing nuclear power over coal power to drive the unit; and many subsidiary issues within each of these. Each of the major and subsidiary issues required a decision under the following definition of "prudent investment”:
The exercise of that judgment and the choosing of one of that select range of options which a reasonable utility manager would exercise or choose in the same or similar circumstances given the information or alternatives available at the point in time such judgment is exercised or option is chosen.
Ron Moss, Ratemaking in the Public Utility Commission of Texas, 44 Baylor L.Rev. 825, 852 (1992). The hearing examiner, in the proposal for decision, set out the findings of fact and conclusions of law favorable to EPEC on the great majority of the relevant factors. Interestingly, the examiner determined from the evidence that EPEC did, on two occasions during 1978-1981, attempt to sell a part of its interest in Palo Verde Unit 3. The record does not explain this patent contradiction of the findings discussed in the text of this opinion.

. A hearing examiner’s proposed findings are an essential part of the proposal-for-decision process required by APA section 2001.062 for contested cases in which a majority of the agency heads have not read the agency record. They are also a part of the "agency record” under APA section 2001.060, the veiy "record” to which our review is limited. The examiner’s proposed findings do not vanish from the record when agency heads disregard the proposed findings and substitute their own after a hearing on the parties' exceptions, replies, or briefs. APA § 2001.062(d). Indeed, any conflict between the *870hearing examiner’s proposed findings and those finally adopted hy the agency heads may give rise to complaints on judicial review. See generally Alfred C. Aman, Jr. & William T. Mayton, Administrative Law § 13.4.2, at 450-52 (1993). In the present case, my references to the hearing examiner's proposed findings are merely for purpose of illustration. The general principle that agency heads may depart from the examiner’s proposed findings is not disputed. The issue in the present case, as stated in the text, is whether the Commissioners’ final findings, as they stand, are sufficient to satisfy the statutory requirement that they support the Commissioners’ conclusions of law as required by APA section 2001.141.
In the present case, the hearing examiner’s proposed findings of fact and conclusions of law are in many instances supported hy undisputed evidence “in the record as a whole’’ and they decide issues vigorously disputed in the contested case proceeding. Thus, the Commissioners could disregard them only on the ground they were irrelevant to the decision. I have assumed the Commissioners omitted findings on these points on the ground that the disputed issues were irrelevant. I believe the Commissioners erred in this respect, but I do not wish to prolong this opinion unduly by discussing the matter further.

. According to the proposal for decision, it was Commission policy that the issue of "excess capacity” is determinable by reference to the following factors: whether the plant, on balance, provides a benefit to ratepayers based on a consideration of factors such as projective reserve margins; the aggregate system capacity; whether the plant provides flexibility in unit maintenance scheduling; whether the plant contributes to fuel diversification; whether the plant contributes to the stability of fuel prices; and whether the utility’s margin is within the industry standard. While the hearing officer decided the "excess capacity” issue in favor of EPEC based on the indicated factors, the Commission’s final order does not mention them.