CourtListener 10675094•The City of College Station v. Public Utility Commission of Texas
The City of College Station v. Public Utility Commission of Texas
CourtListener 10675094Txctapp15Sep 15, 2025
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ACCEPTED
15-25-00096-CV
FIFTEENTH COURT OF APPEALS
AUSTIN, TEXAS
9/15/2025 4:10 PM
No. 15-25-00096-CV CHRISTOPHER A. PRINE
CLERK
IN THE COURT OF APPEALS FILED IN
15th COURT OF APPEALS
FOR THE FIFTEENTH JUDICIAL DISTRICT AUSTIN, TEXAS
AUSTIN, TEXAS 9/15/2025 4:10:18 PM
CHRISTOPHER A. PRINE
Clerk
CITY OF COLLEGE STATION,
Appellant,
v.
PUBLIC UTILITY COMMISSION OF TEXAS,
Appellee.
On Appeal from the 200th District Court of Travis County, Texas
The Hon. Daniella DeSeta Lyttle, Presiding Judge, Cause No. D-1-GN-24-005680
RESPONSE BRIEF OF APPELLEE
PUBLIC UTILITY COMMISSION OF TEXAS
KEN PAXTON JORDAN PRATT
Attorney General of Texas Assistant Attorney General
State Bar No. 24140277
BRENT WEBSTER Jordan.Pratt@oag.texas.gov
First Assistant Attorney General
RALPH MOLINA JOHN R. HULME
Deputy First Assistant Attorney General Special Counsel
State Bar No. 10258400
AUSTIN KINGHORN John.Hulme@oag.texas.gov
Deputy Attorney General for Civil
Litigation Environmental Protection Division
Office of the Attorney General
KELLIE E. BILLINGS-RAY P.O. Box 12548, MC-066
Chief, Environmental Protection Austin, Texas 78711-2548
Division (512) 463-2012 | Fax: (512) 320-0911
ATTORNEYS FOR APPELLEE
PUBLIC UTILITY COMMISSION OF
September 15, 2025 TEXAS
ORAL ARGUMENT REQUESTED
TABLE OF CONTENTS
INDEX OF AUTHORITIES.................................................................................... iv
GLOSSARY OF ACRONYMS AND TECHNICAL TERMS .............................. vii
STATEMENT REGARDING ORAL ARGUMENT ........................................... viii
STATEMENT REGARDING CITATIONS ......................................................... viii
ISSUES PRESENTED............................................................................................. ix
INTRODUCTION .....................................................................................................1
STATEMENT OF FACTS ........................................................................................3
A. Legal background and regulatory framework .......................................3
B. College Station’s first comprehensive transmission
rate application and three interim rate applications ..............................6
C. College Station’s 2021 comprehensive rate application
and the Commission’s reconciliation of the three
interim rate orders .................................................................................9
STANDARD OF REVIEW .....................................................................................13
SUMMARY OF THE ARGUMENT ......................................................................16
ARGUMENT ...........................................................................................................18
I. The Commission correctly concluded that College
Station improperly added GFTs in it interim rates
because they were not first approved in its
comprehensive rates. ...........................................................................18
A. The GFTs were not a change in invested capital
or a change in taxes associated with changes in
invested capital. .........................................................................19
B. The Commission’s practice and precedent is to
update GFTs in an interim proceeding in
ii
proportion to the approved amount in the
utility’s comprehensive transmission revenue
requirement. ..............................................................................24
C. Interim applications serve a narrow purpose and
are not designed for utilities to add expenses
that were not approved, or that they forgot to
request, in their comprehensive rates. .......................................28
D. The Commission did not adopt an ad hoc rule to
reach its conclusion. ..................................................................30
II. The Commission correctly applied the reconciliation
provision in its rule to order a refund of the full amount
of over-recovery. .................................................................................33
A. The rule provides that any amount of over-
recovery shall be refunded. .......................................................34
B. The Commission correctly concluded that the
circumstances of this case did not constitute
good cause to excuse the full-refund
requirement. ..............................................................................36
i. The Commission’s conclusion was
supported by substantial evidence. .................................37
ii. The Commission’s conclusion was not an
abuse of discretion. .........................................................40
iii. The Commission properly rejected the
ALJs’ recommendation...................................................44
PRAYER ..................................................................................................................46
CERTIFICATE OF COMPLIANCE .......................................................................48
CERTIFICATE OF SERVICE ................................................................................49
INDEX TO APPENDIX ..........................................................................................50
iii
INDEX OF AUTHORITIES
Cases Page(s)
Cent. Power & Light Co. v. Pub. Util. Comm’n of Tex.,
36 S.W.3d 547 (Tex. App.—Austin 2000, pet. denied) .....................................39
Cities for Fair Util. Rates v. Pub. Util. Comm’n of Tex.,
924 S.W.2d 933 (Tex. 1996) ..............................................................................20
City of El Paso v. Pub. Util. Comm’n of Tex.,
883 S.W.2d 179 (Tex. 1994) ..............................................................................15
City of Frisco v. Tex. Water Rights Comm’n,
579 S.W.2d 66 (Tex. App.—Austin 1979, writ ref’d n.r.e.) ..............................38
Dyer v. Tex. Comm’n on Env’t Quality,
646 S.W.3d 498 (Tex. 2022) ..............................................................................14
Heritage on San Gabriel Homeowners Ass’n v. Tex. Comm’n on
Env’t Quality,
393 S.W.3d 417 (Tex. App.—Austin 2012, pet. denied) ...................................16
Lone Star Gas Co. v. State,
153 S.W.2d 681 (Tex. 1941) ..............................................................................20
Pub. Util. Comm’n of Tex. v. GTE-Sw., Inc.,
901 S.W.2d 401 (Tex. 1995) ..............................................................................19
Pub. Util. Comm’n of Tex. v. Tex. Indus. Energy Consumers,
620 S.W.3d 418 (Tex. 2021) ....................................................................... 14, 15
Reliant Energy, Inc. v. Pub. Util. Comm’n of Tex.,
153 S.W.3d 174 (Tex. App.—Austin 2004, pet. denied) ...................................19
Suburban Util. Corp. v. Pub. Util. Comm’n of Tex.,
652 S.W.2d 358 (Tex. 1983) ....................................................................... 19, 30
Sw. Pub. Serv. Co. v. Pub. Util. Comm’n of Tex.,
962 S.W.2d 207 (Tex. App—Austin 1998, pet. denied) ............................. 44, 45
iv
Tex. Ass’n of Long Distance Tel. Cos. (Texaltel) v. Pub. Util.
Comm’n of Tex.,
798 S.W.2d 875 (Tex. App.—Austin 1990, writ denied)...................................31
Tex. Comm’n on Env’t Quality v. Friends of Dry Comal Creek,
669 S.W.3d 506 (Tex. App.—Austin 2023, pet. denied) ............................ 15, 16
Tex. Comm’n on Env’t Quality v. Maverick Cnty.,
642 S.W.3d 537 (Tex. 2022) ..............................................................................14
Tex. Health Facilities Comm’n v. Charter Med.-Dall., Inc.,
665 S.W.2d 446 (Tex. 1984) ....................................................................... 16, 40
Tex. State Bd. of Pharmacy v. Witcher,
447 S.W.3d 520 (Tex. App.—Austin 2014, pet. denied) ...................................31
Vance v. My Apartment Steak House of San Antonio, Inc.,
677 S.W.2d 480 (Tex. 1984) ..............................................................................46
W. Tex. Utils. Co. v. Off. of Pub. Util. Counsel,
896 S.W.2d 261 (Tex. App.—Austin 1995, no writ.) ................................. 31, 32
Statutes
Tex. Gov’t Code
§ 1502.059.............................................................................................................4
§ 2001.058...........................................................................................................45
§ 2001.174...........................................................................................................14
§ 2001.174(2) ......................................................................................................14
§ 2001.174(2)(F) .................................................................................................15
§ 2001.175(e) ......................................................................................................14
§ 2003.049(g)(1)(B) ............................................................................................44
Tex. Util. Code
§ 11.002(a) ..................................................................................................... 3, 43
§ 12.001...............................................................................................................38
§ 12.051...............................................................................................................38
§ 15.001...............................................................................................................13
§ 35.004(c) ..................................................................................................... 3, 29
§ 35.004(d) ............................................................................................................3
§ 39.151.................................................................................................................3
v
Rules
16 Tex. Admin. Code
§ 22.5(b) ..............................................................................................................36
§ 22.35(a) ..............................................................................................................6
§ 25.192.................................................................................................................2
§ 25.192(c) ............................................................................................................4
§ 25.192(h) ............................................................................................................4
§ 25.192(h)(1) .................................................................. 5, 16, 18, 19, 20, 25, 35
§ 25.192(h)(2) .................................................................... 5, 6, 17, 33, 34, 35, 40
§ 25.192(h)(4)(C) ..................................................................................................6
Other Authorities
Pub. Util. Comm’n of Tex., Rulemaking Proceeding to Amend
SUBST. R. § 25.192(g) Related to Transmission Service Rates,
Project No. 37519, Order Adopting Amendment to § 25.192 as
Approved at the July 30, 2010 Open Meeting (Aug. 4, 2010),
https://interchange.puc.texas.gov/search/documents/?controlNu
mber=37519&itemNumber=39 ..........................................................................42
vi
GLOSSARY OF ACRONYMS AND TECHNICAL TERMS
Term Meaning
ALJs Administrative Law Judges
AR Administrative Record
College Station The City of College Station
Commission Public Utility Commission of Texas
ERCOT Electric Reliability Council of Texas
GFT General Fund Transfer
PFD Proposal for Decision
PURA Public Utility Regulatory Act
SOAH State Office of Administrative Hearings
TCOS Transmission Cost of Service
TCOS Rule Commission Rule 25.192
vii
STATEMENT REGARDING ORAL ARGUMENT
The Commission respectfully requests oral argument. This case involves the
complex statutory and regulatory scheme regarding wholesale transmission rates and
the Commission’s reconciliation process for interim transmission rates. Oral
argument will provide an opportunity for the Commission to answer questions
regarding its transmission rate application procedures to aid in the Court’s decision-
making process.
STATEMENT REGARDING CITATIONS
In this brief, citations to the Clerk’s Record will be in the following form: CR
at [Page number]. Citations to the Reporter’s Record will be in the following form:
RR at [Page number]. Citations to the Administrative Record, which was admitted
into evidence in the Reporter’s Record, will be in the following form: RR, AR [Item
number] at [Page number]. All cited page numbers refer to the document’s original
page numbers when practical. Otherwise, the PDF page number will be cited in the
following form: RR, AR [Item number] at PDF [Page number].
viii
ISSUES PRESENTED
1. Does substantial evidence, and the transmission cost of service rule,
support the Commission’s conclusion that College Station’s General Fund
Transfer (“GFT”) was not a “change in invested capital” and therefore not
permitted to be recovered via an interim update of transmission rates?
2. Did the Commission abuse its discretion by not finding good cause to
excuse College Station from the requirement to refund the full amount,
plus carrying charges, of the over-recovered expenses?
ix
INTRODUCTION
The Public Utility Commission of Texas (“Commission”) regulates the
wholesale transmission rates that every transmission provider in the Electric
Reliability Council of Texas (“ERCOT”) grid charges. By statute and rule, those
rates must be just, reasonable, and grounded in the utility’s actual Transmission Cost
of Service (“TCOS”). To that end, the Commission administers two complementary
rate processes. A utility first establishes its baseline rates in a comprehensive rate
case, where the Commission thoroughly reviews its finances and sets both its
revenue requirement and rate of return. Between comprehensive cases, a utility may
file interim applications to update its rates—but only to reflect changes in its
“invested capital,” such as the addition or retirement of transmission facilities and
changes in taxes and depreciation associated with changes in invested capital.
Interim rates are expedited, temporary measures, and by rule they are always subject
to reconciliation in the next comprehensive rate case.
The City of College Station (“College Station”), a municipally owned utility,
filed three interim applications over a 15-year span. Each time it included a General
Fund Transfer (“GFT”)—money it moved from its utility to the city’s coffers—
under the other associated taxes category. But GFTs are not changes in invested
capital; they are revenue transfers, and College Station expressly agreed it would not
recover any GFT in its initial comprehensive rate case. By including them, College
1
Station nearly doubled its transmission revenue requirement, inflated its effective
rate of return far above the 6.71% approved in its last comprehensive case, and
shifted tens of millions of dollars in added costs onto ERCOT consumers.
When College Station finally returned for a comprehensive rate case in 2021,
the Commission had its first opportunity to reconcile these interim rates. Applying
Commission Rule 25.192 (“TCOS Rule”), the Commission concluded that College
Station improperly included GFTs in interim rates that the Commission did not first
approve in its comprehensive rates and required College Station to refund
approximately $26 million—the amount of over-recovery, net of under-recovery,
over the same 15-year period that the charges were collected.
This case therefore presents a straightforward question: did the Commission
act within its authority and on the basis of substantial evidence when it determined
that (1) GFTs are not “changes in invested capital” that may be added through
interim filings, and (2) the governing rule required College Station to refund the full
amount of its over-recovery? The Commission’s order reflects both the plain
language of its rule and its statutory duty to ensure just and reasonable rates. The
Commission did not disaffirm any prior orders, which all stated that the interim rates
were subject to later review and reconciliation. However, this was an issue of first
impression for the Commission and the first opportunity to apply the TCOS Rule to
these circumstances in a contested case hearing.
2
STATEMENT OF FACTS
A. Legal background and regulatory framework
The Texas Legislature enacted the Public Utility Regulatory Act (“PURA”)
in 1975 to establish a comprehensive regulatory scheme over the electric industry.
PURA created the Commission and charged it with the general power to regulate
and supervise the utilities within its jurisdiction for the purpose of ensuring that
electricity rates were just and reasonable. Tex. Util. Code § 11.002(a). The
Commission designated ERCOT as the independent grid operator to oversee the
intrastate electric grid. Tex. Util. Code § 39.151. In carrying out its statutory duty to
ensure that rates are just and reasonable, the Commission sets transmission rates for
all utilities that interconnect to the ERCOT transmission system. Transmission rates
are paid by all utilities that use the transmission system, and these costs are passed
on to all electric consumers in the ERCOT region.
The Commission sets wholesale transmission rates for a wholesale
transmission provider based on its TCOS. Tex. Util. Code § 35.004(d). This allows
transmission providers to recover both the costs they incur in the management and
maintenance of their transmission systems and an appropriate return on investment.
Id. Utilities are only permitted to recover the reasonable and necessary costs of
providing transmission service by including those costs in their wholesale
transmission rates. Tex. Util. Code § 35.004(c). The Commission’s rules establish
3
the procedures setting transmission rates. There are two different types of
transmission rate applications a utility can file with the Commission: (1) a
comprehensive rate application, and (2) an interim rate application. 16 Tex. Admin.
Code § 25.192(c), (h).
Comprehensive rate applications are thorough reviews of the applicant’s
financial information in which the Commission sets the utility’s rate structure and
rate of return. The Commission calculates transmission rates based on the
transmission provider’s annual transmission revenue requirement. The categories of
expenses that a utility can include in its revenue requirement include: (1)
transmission operation and maintenance expenses plus depreciation; (2) federal
income tax and other associated taxes; and (3) the Commission-allowed rate of
return. 16 Tex. Admin. Code § 25.192(c).
Under the TCOS Rule, municipally owned utilities are permitted to include
GFTs in their transmission revenue requirement under some circumstances. GFTs
are the transfer of revenue from a municipal utility to the city’s general fund for
general or special purposes. Tex. Gov’t Code § 1502.059. GFTs are referred to by
different names depending on how the city ordinance or policy that created it is
designed. RR, AR Item 30 at 4:22-5:2. Under these policies, municipalities can
include GFTs in the retail rates they charge their own residents and therefore use
GFTs as a mechanism for transferring utility revenues to the city’s coffers for general
4
use. But to determine whether a municipally owned utility can recover GFTs through
the transmission rates it charges ERCOT ratepayers, the Commission evaluates the
city’s stated purpose of the transfer and the reasonableness of the proposed transfer
in light of that purpose. Id. at 5:14-18. Because every city has a unique GFT, there
is no express category in the TCOS Rule for including them in transmission rates. If
the Commission allows the GFT to be included in the utility’s transmission revenue
requirement, it is commonly categorized as taxes other than income taxes or as a
component of its rate of return. Id. at 5:18-21.
A utility can file interim applications between comprehensive applications to
update transmission rates on an interim basis to reflect changes in its invested capital.
16 Tex. Admin. Code § 25.192(h)(1). Interim rates reflect the addition and
retirement of transmission facilities and include appropriate depreciation, federal
income tax and other associated taxes, and the Commission-approved rate of return
on such facilities as well as changes in loads. Id. The Commission-approved rate of
return that is applied to interim rates is the rate of return that the utility receives in
its comprehensive rate case. By their nature, interim rates are temporary and are
subject to reconciliation during the utility’s next comprehensive rate application. 16
Tex. Admin. Code § 25.192(h)(2). During reconciliation, the Commission reviews
the additional expenses included in the utility’s interim filings to determine if they
were reasonable and necessary. Id. The utility is required to refund any amount, with
5
carrying costs, that the Commission determines were unreasonable or unnecessary.
Id.
The interim rate application process is designed to be an expedited review of
the application and does not contain the stringent analysis of a comprehensive rate
case. Interim rate applications are conducted following the Commission’s informal
disposition procedures. 16 Tex. Admin. Code § 25.192(h)(4)(C). Under this
expedited process, the presiding officer of the Commission shall issue a notice of
approval within 60 days from the application being deemed materially sufficient. Id.
Under the Commission’s informal disposition process, the Commission approves
applications without an evidentiary hearing. 16 Tex. Admin. Code § 22.35(a).
B. College Station’s first comprehensive transmission rate application and
three interim rate applications
College Station filed its first comprehensive rate application, Docket No.
15762, to set its wholesale transmission rates in 1996. In that application, College
Station included a GFT totaling $1,434,060 categorized as taxes other than income
taxes. RR, AR Item 38 at 16:14-17:4. However, College Station’s transmission rate
application was resolved by a settlement agreement that allocated the full amount of
the GFT to its distribution function. RR, AR Item 30 at 16:3-5. Under the terms of
the settlement agreement, College Station’s revenue requirement did not include any
6
“payments in lieu of taxes.” 1 Id. at 15:16-18. Thus, College Station could not recover
any GFT from its transmission rates. In other words, College Station would recover
the full amount of GFTs through the retail rates that it charged its residents. In 1997,
the Commission issued a final order adopting the settlement agreement and set
College Station’s rate of return at 6.71%, its total transmission revenue requirement
at $495,211, and its taxes other than income taxes at $0. Id. at PDF 85.
College Station filed its first interim rate application with the Commission in
2007 (Docket No. 34230). While processing the application, Commission staff
reminded College Station to also update its “payment-in-lieu of taxes.” RR, AR Item
36 at PDF 17. College Station informed Commission staff that they did not include
this expense in their initial comprehensive rates and asked how to proceed. Id. at
PDF 23. Commission staff informed College Station that they could include this
increase in the interim rate application and the Commission would determine if it
was allowed. Id. at PDF 17-18. College Station then included a GFT of $833,330
categorized as taxes other than income taxes. Id. at PDF 25. Commission staff
recommended that the Commission approve the interim rate application and
specifically noted the approval was conditional on “the updated transmission rate
and underlying facility additions being subject to a comprehensive analysis and
1
Payment-in-lieu of taxes represent payments of ad valorem taxes that a municipally owned utility
would be required to pay a municipality if it were an investor-owned utility. RR, AR Item 30 at
12:5-7.
7
reconciliation at the next complete review of [College Station]’s transmission cost
of service.” Id. at PDF 56. The order approving College Station’s interim rates
provided “[t]he updated rate is subject to reconciliation at the next complete review”
and “[a]ny over-recovery of costs, as a result of update, is subject to refund.” Id. at
PDF 57.
Shortly after its first interim update, College Station filed its second interim
rate application with the Commission in 2008 (Docket No. 35837). College Station
updated the taxes-other-than-income-taxes category to increase its GFT to
$1,228,955, RR, AR Item 30 at PDF 82, and reached out to Commission staff to
inquire as to whether their GFT calculation was correct. RR, AR Item 36 at PDF 64.
Commission staff replied that College Station could “go ahead with your
inclination” but to “fully explain the issue in any testimony you include with your
filing.” Id. at PDF 59. Commission staff’s approval recommendation memos
provided that their review of the interim application was “limited in scope and not
the final accounting” and that the “administrative review is not intended to determine
the reasonableness of any interim costs.” Id. at PDF 79, 81. Commission staff again
recommended approval subject to review and reconciliation at the next
comprehensive rate review. Id. at PDF 71. The order approving College Station’s
interim rates again provided that the updated rate was subject to review and
reconciliation. Id. at PDF 72.
8
College Station filed its third and final of the interim rate applications at issue
in 2017 (Docket No. 46847). The interim rate application again updated the taxes-
other-than-income-taxes category to increase its GFT to $1,476,306. RR, AR Item
30 at PDF 82. College Station did not reach out to Commission staff regarding the
GFT inclusion for this interim update. Commission staff again recommended
approval subject to review and reconciliation. RR, AR Item 36 at PDF 75-76. The
order approving the interim update again provided that the updated rate was subject
to review and reconciliation. Id. at PDF 77-78.
C. College Station’s 2021 comprehensive rate application and the
Commission’s reconciliation of the three interim rate orders
College Station filed this comprehensive rate application on November 3,
2021. In its application, College Station included a 9% GFT as a component of its
rate of return that it characterized as an in-lieu-of franchise fee. RR, AR Item 2 at
PDF 45. On April 18, 2022, the Commission referred the case to the State Office of
Administrative Hearings (“SOAH”). RR, AR Item 19.
In reviewing the requested rates for reasonableness, the Commission staff
expert witness, Ruth Stark, found that College Station did not have an approved GFT
included in the taxes-other-than-income-taxes category in its last comprehensive
rates. RR, AR Item 30 at 8:9-11. Ms. Stark then reviewed College Station’s three
interim rate applications and found that it included GFTs in its interim revenue
requirements. Id. at 8:11-15. Because this is the next comprehensive rate proceeding
9
following College Station’s first comprehensive rate case, College Station’s interim
rates were subject to reconciliation and Ms. Stark performed a thorough review to
determine the effect of including GFTs in its interim rates. Id. at 8:15-19.
In comparing College Station’s interim rate applications with its
comprehensive rate application, Ms. Stark found that the inclusion of GFTs in its
interim revenue requirements resulted in a much higher effective rate of return than
its Commission-approved rate of return of 6.71%. Id. at 14:1-3. In its 2007 case, the
$833,330 additional compensation to the city through the GFT together with its
$564,002 approved return on rate base totaled $1,397,332. Id. at PDF 82. College
Station’s total rate base in the interim proceeding was $8,405,393; therefore, the total
return gave College Station an effective rate of return of 16.62%. Id. Similarly, the
inclusion of GFTs in its interim rates in 2008 brought its effective rate of return to
16.82%, and in 2017 to 13.34%. Id.
Ms. Stark noted that under the terms of the 1997 settlement agreement adopted
in its first comprehensive rate case, College Station’s transmission rates did not
include payments-in-lieu of taxes, and College Station had agreed to allocate 100%
of its GFT to its distribution function. RR, AR Item 30 at 15:16-16:5. However, the
three interim rate applications changed this allocation by including GFTs in College
Station’s transmission revenue requirement. The inclusion of GFTs constituted
47.04% of its total revenue requirement in Docket No. 34230, 48.73% in Docket No.
10
35837, and 39.43% in Docket No. 46847. Id. at 17:13-17. Ms. Stark concluded that
it was improper for College Station to use the interim rate proceedings to change the
allocation of its GFT between its transmission and distribution functions. Id. at
17:20-22. Ms. Stark concluded that the improper inclusion of GFTs in College
Station’s interim rates resulted in an over-recovery, with carrying charges, of $31.5
million between 2007 and June 30, 2022. Id. at 18:14-15.
On August 16, 2022, the parties filed an unopposed settlement agreement
resolving all contested issues related to College Station’s application and requiring
College Station refund $3.9 million. RR, AR Item 192 at 1-2. However, on January
26, 2023, the Commission rejected the settlement agreement because the evidentiary
record revealed that College Station included GFTs in its interim rates that were not
included in its most recently approved comprehensive TCOS review. RR, AR Item
68 at 1-2. The Commission then remanded the proceeding to SOAH for further
processing in accordance with its order.
On May 2, 2023, SOAH held a hearing on remand. The presiding
Administrative Law Judges (“ALJs”) issued a Proposal for Decision (“PFD”)
finding that the Commission had already determined that College Station violated
the TCOS Rule, and the only issue was the amount of the refund. RR, AR Item 102
at 26. The PFD provided numerous options for calculating the refund but
recommended that the Commission exercise its discretion in determining the refund
11
amount. Id. at 40. On September 14, 2023, the Commission rejected the PFD because
the ALJs did not provide their own findings of fact and conclusions of law on all
contested issues. RR, AR Item 113 at 1. The Commission remanded the proceeding
to address all issues, including whether it was permissible for College Station to
include GFT payments in its interim TCOS filings. Id.
On December 21, 2023, the ALJs issued a PFD on remand finding that
Commission policy and precedent did not support the recoverability of the GFTs
included in College Station’s interim rates. RR, AR Item 134 at 2. The ALJs found
that College Station did not “update” its previously approved expenses but instead
included an entirely new expense that had not been approved in its prior
comprehensive rates. Id at 27. The ALJs concluded that the purpose of interim rate
applications is to provide an expedited process to update invested capital, not to set
a new rate structure. Id. Therefore, the ALJs concluded that College Station’s interim
TCOS proceedings resulted in an over recovery of costs and that the Commission
has the discretion to require a full, partial, or no refund. Id. at 41. The ALJs
recommended the Commission grant a good-cause exception to the full-refund
requirement and instead require a partial refund. Id. at 47.
During the open meeting on February 15, 2024, the Commission adopted the
PFD in part and rejected it in part. The Commission adopted the ALJs’ finding that
a refund of the over-recovered amounts was appropriate. RR, AR Item 167 at 13.
12
The Commission also concluded that College Station violated the TCOS Rule when
it included GFTs as an expense item in its interim TCOS rates that were not approved
in its comprehensive rate case. Id. at 3. However, the Commission rejected the ALJs’
recommendation that College Station partially refund the over-recovered costs. The
Commission concluded that the circumstances of the case did not constitute good
cause to grant an exception to the full refund required by the rule. Id. at 4. The
Commission also found that College Station had understated its depreciation
expenses in each of its interim TCOS filings, which resulted in $3,485,333 of under-
recovery. Id. at 13. The Commission concluded that College Station’s under-
recovery should be netted against its over-recovery. Id. Therefore, the Commission’s
Final Order required College Station to refund $26,254,093, the full amount of over-
recovered costs minus under-recovered costs, including carrying charges, over a
fifteen-year period. Id. at 19.
STANDARD OF REVIEW
This is an administrative appeal of a final order of the Commission following
a contested-case hearing. PURA authorizes judicial review of a final order of the
Commission under the substantial evidence rule. Tex. Util. Code § 15.001.
Under the substantial evidence rule, the Court may reverse and remand for
further proceedings an agency decision that is: (1) in violation of a constitutional or
statutory provision; (2) in excess of the agency’s statutory authority; (3) made
13
through unlawful procedure; (4) affected by other error of law; (5) not reasonably
supported by substantial evidence; or (6) otherwise arbitrary, capricious, or
characterized by abuse of discretion. Tex. Gov’t Code § 2001.174(2).
However, even if the Court finds error on any of these six bases, the Court
may only reverse the agency’s decision if the substantial rights of the appellant have
been prejudiced by the error. Id.; Dyer v. Tex. Comm’n on Env’t Quality, 646 S.W.3d
498, 514 (Tex. 2022). Review of an agency decision under the substantial evidence
rule is confined to the record developed before the agency, and the Court may not
substitute its judgment for that of the agency on the weight of the evidence on
questions committed to agency discretion. Tex. Gov’t Code §§ 2001.174,
2001.175(e); Tex. Comm’n on Env’t Quality v. Maverick Cnty., 642 S.W.3d 537,
544 (Tex. 2022).
In reviewing an agency’s factual findings and conclusions for substantial
evidence, the issue before the Court is not whether the agency reached the correct
conclusions but whether there is some basis in the record for its action. Maverick
Cnty., 642 S.W.3d at 544. Although substantial evidence is more than a mere
scintilla, the evidence in the record may preponderate against the agency’s decision
and nonetheless amount to substantial evidence. Pub. Util. Comm’n of Tex. v. Tex.
Indus. Energy Consumers, 620 S.W.3d 418, 427 (Tex. 2021). The Court may even
disagree with the reasons given by the agency in its order and still affirm the order
14
as long as the Court finds that a reasonable basis exists in the record for the action
taken by the agency. Id. at 426. The Court presumes that the agency’s findings,
inferences, conclusions, and decisions are supported by substantial evidence. City of
El Paso v. Pub. Util. Comm’n of Tex., 883 S.W.2d 179, 185 (Tex. 1994). The burden
to prove otherwise is on the party challenging the agency decision. Id.
The reviewing court also considers whether an agency decision is arbitrary,
capricious, or characterized by an abuse of discretion. Tex. Gov’t Code
§ 2001.174(2)(F). “Although an administrative decision that is supported by
substantial evidence is generally not arbitrary and capricious,” there are a few
“narrow circumstances” where a court may reverse an agency order as arbitrary and
capricious even when it is supported by substantial evidence. Tex. Comm’n on Env’t
Quality v. Friends of Dry Comal Creek, 669 S.W.3d 506, 517 (Tex. App.—Austin
2023, pet. denied) (internal quotation omitted). Those circumstances may arise when
the agency: (1) fails to consider a factor the Legislature directs it to consider; (2)
fails to follow the clear, unambiguous language of its own regulations; (3) denies the
appellant due process so as to prejudice its substantial rights; (4) considers an
irrelevant factor; or (5) considers only relevant factors but still reaches a completely
unreasonable result. Id.
Essentially, the reviewing court must determine whether the agency genuinely
engaged in reasoned decision-making. Heritage on San Gabriel Homeowners Ass’n
15
v. Tex. Comm’n on Env’t Quality, 393 S.W.3d 417, 423 (Tex. App.—Austin 2012,
pet. denied). While the arbitrary-and-capricious standard encourages the Court to
examine whether the agency has “taken a hard look at the salient problems,” it should
not be interpreted as a broad, all-encompassing standard for reviewing the rationale
of agency decisions. Friends of Dry Comal Creek, 669 SW.3d at 518; see also Tex.
Health Facilities Comm’n v. Charter Med.-Dall., Inc., 665 S.W.2d 446, 454 (Tex.
1984).
SUMMARY OF THE ARGUMENT
The Commission’s Final Order requiring College Station to refund $26
million in over-recovered costs is supported by substantial evidence and was not
arbitrary, capricious, or an abuse of discretion. In each of its points of error, College
Station fails to show that the Commission committed reversible error. Accordingly,
this Court should affirm the district court’s judgment upholding the Commission’s
Final Order.
First, the Commission properly concluded that the TCOS Rule did not permit
College Station to include GFTs in its interim rates that were not approved in its
comprehensive rates. Interim rates serve the narrow purpose of allowing utilities to
update their transmission rates to reflect changes in invested capital resulting from
the addition or retirement of transmission facilities. 16 Tex. Admin. Code §
25.192(h)(1). The GFT that College Station included in its interim rates was not a
16
change in invested capital but rather an entirely new expense that College Station
expressly agreed not to recover in its comprehensive rate case and constituted
additional revenue for the city. College Station’s rate of return was set in its
comprehensive rate case at 6.71%, and College Station was required to maintain that
rate of return in its interim rates. The inclusion of GFTs in its interim rates
substantially increased its effective rate of return above the rate of return approved
in its comprehensive rate case. Because the inclusion of GFTs in College Station’s
interim rates was not a change in invested capital and it increased College Station’s
effective rate of return above the return set in its comprehensive rate case, the
Commission correctly concluded that it was improper for College Station to include
GFTs in its interim rates.
Second, the Commission properly applied the TCOS Rule that required
College Station to refund the full amount of over-recovery from the improper
inclusion of GFTs in its interim rates. Interim rates are temporary and subject to
review and reconciliation during the utility’s next comprehensive rate case. Any
amounts that the Commission determines are unreasonable or unnecessary are
subject to full refund. 16 Tex. Admin. Code § 25.192(h)(2). Because the
Commission concluded following comprehensive review that the inclusion of GFTs
in its interim rates was improper, the TCOS Rule required that the full amount of
over-recovery be refunded. The Commission concluded that the circumstances of
17
this case did not satisfy a good cause exception to excuse compliance with the full-
refund requirement. Therefore, the Commission concluded that College Station was
required to refund ERCOT ratepayers the full amount of over-recovery, plus
carrying charges, that College Station received from its interim rates.
ARGUMENT
I. The Commission correctly concluded that College Station improperly
added GFTs in it interim rates because they were not first approved in
its comprehensive rates.
The Commission did not adopt a new rule or standard and apply it
retroactively to College Station. This case raised an issue of first impression and was
the first instance of a utility including a GFT in its interim rates that was not first
approved in its comprehensive rates. The interim rate procedure serves the limited
purpose of allowing utilities to update their transmission rates to reflect changes in
invested capital, and changes to taxes and depreciation resulting from changes in
invested capital. 16 Tex. Admin. Code § 25.192(h)(1). College Station violated both
the TCOS Rule, and the 1997 rate order, by including GFTs in its interim
transmission rates that were not first approved in its comprehensive rate case. Under
the settlement agreement adopted in the 1997 rate order, College Station agreed that
it would not recover any GFTs in its transmission rates. Then, starting in 2007,
College Station violated that order by including GFTs in its interim transmission
rates. GFTs are unquestionably not invested capital—they are transfers of revenue
18
to the city designed as a return on investment. Thus, College Station’s inclusion of
GFTs in its interim rates impermissibly increased its rate of return above that
established by the Commission in its first comprehensive rate case.
A. The GFTs were not a change in invested capital or a change in taxes
associated with changes in invested capital.
This is a case setting College Station’s transmission rates, and the
Commission’s discretion extends throughout the ratemaking process. Pub. Util.
Comm’n of Tex. v. GTE-Sw., Inc., 901 S.W.2d 401, 409 (Tex. 1995). Courts have
recognized that ratemaking is a complex process that relies on the informed
judgment and expertise of the Commission to make projections and estimates in
virtually all areas. Id. The Commission’s discretion in the ratemaking process
includes the authority to disallow improper expenses. Suburban Util. Corp. v. Pub.
Util. Comm’n of Tex., 652 S.W.2d 358, 362 (Tex. 1983).
Under the TCOS Rule, interim rates are designed to be an expedited process
and allow for utilities to adjust their wholesale transmission rates to reflect changes
in invested capital. 16 Tex. Admin. Code § 25.192(h)(1). Invested capital is also
referred to as the utility’s rate base and “consists of the cost, less depreciation, of
property ‘used by and useful to the utility in providing service.’” Reliant Energy,
Inc. v. Pub. Util. Comm’n of Tex., 153 S.W.3d 174, 185 (Tex. App.—Austin 2004,
pet. denied). In turn, “‘[u]sed and useful’ refers to ‘such property as has been
acquired . . . in good faith and held for use in the reasonably near future in order to
19
enable [a utility] to supply and furnish adequate and uninterrupted . . . service.’”
Cities for Fair Util. Rates v. Pub. Util. Comm’n of Tex., 924 S.W.2d 933, 935 (Tex.
1996) (quoting Lone Star Gas Co. v. State, 153 S.W.2d 681, 698 (Tex. 1941)). Thus,
the TCOS Rule allows for updates to invested capital, or the utility’s rate base, to
reflect additions or retirements of transmission facilities and changes in taxes and
depreciation associated with added or retired transmission facilities. 16 Tex. Admin.
Code § 25.192(h)(1).
The rate-filing package for interim rate applications, under the title “Eligible
Costs,” provides instructions that reiterate the TCOS Rule’s requirement that “[t]he
update of the rates shall reflect only changes in return on rate base because of
additions and retirements of transmission facilities and the associated depreciation
expense.” RR, AR Item 30 at 10:16-18. Additionally, “[t]he net rate of return (after
tax) used in the last TCOS proceeding shall be used.” Id. at 10:22-23. The initial
version of the TCOS Rule did not include the “other associated taxes” category for
interim updates, and the rate-filing package was never updated to reflect this change
in the rule. RR, AR Item 87 at 7. Absent an update to the rate-filing package to reflect
the new category included in the rule, Commission staff treats the “other associated
taxes” category the same as depreciation expenses and the rate of return when
reviewing a utility’s interim rate application. RR, AR Item 94 at PDF 6. Thus,
consistent with the plain language of the rule, any new amount included in interim
20
rates must be associated with the addition or retirement of transmission facilities.
RR, AR Item 30 at 11:3-4.
The TCOS Rule does not permit College Station to include GFTs in its interim
rates that were not included in its comprehensive rates. GFTs as a standalone
expense item are not an addition or retirement of transmission facilities, the only
update that can be made with interim rates. Therefore, any GFT that was previously
approved under the category of other associated taxes could only be updated in an
interim case to reflect changes associated with the addition or retirement of
transmission facilities. Additionally, because the rate of return established in a
utility’s comprehensive rate case is applied to its interim updates, the utility cannot
adjust the rate of return in an interim proceeding through inclusion of previously
unapproved revenue transfers to the municipality that are not the result of changes
in invested capital.
The inclusion of GFTs in College Station’s interim rates was improper
because it was not associated with the additions of transmission facilities. Any
changes in invested capital could not result in changes in other associated taxes
because College Station’s rates did not allow for it to recover any amount under this
category. RR, AR Item 30 at PDF 85. Thus, the GFTs were not associated with any
additional transmission investment but rather to its total revenue requirement
established in its comprehensive rate case. College Station admitted this in its 2007
21
interim rate case when it said, “the adjustment in this filing is based on total
transmission revenue requirements since Docket 15762 did not include a payment
in lieu of taxes amount.” RR, AR Item 30 at 11:30-32. Because the amounts
associated with College Station’s rate base in Docket No. 15762 are not related to
changes in invested capital in College Station’s 2007 interim update, they were
impermissibly included in College Station’s interim TCOS rates.
In College Station’s 2007 interim rates, it included $833,330 in the category
of taxes other than income taxes to reflect the city’s policy of requiring a GFT of
10.5%. RR, AR Item 30 at 13:1. Although this expense was categorized as
“payment-in-lieu of taxes,” the city policy in effect at the time characterized the GFT
as a return on investment and stated that the intent of the transfer was to provide a
benefit to the citizens for the ownership of the electric utility. Id. at 12:22-24. Thus,
the inclusion of this in interim rates was merely extra revenue to the city, not an
adjustment of taxes associated with additional transmission facilities, which, again,
College Station agreed that it would not recover through its transmission rates.
College Station then filed additional interim rate applications in 2008 and 2017, both
designed to further increase city revenue by using the same method of calculation
for the GFT included in the interim revenue requirement. Id. at 12:4-5. The GFT
included in College Station’s 2008 interim rates was based on the same 2007 city
policy, and the city policy in place during the 2017 interim update similarly stated
22
that the GFT was designed to provide a benefit to the citizens for the ownership of
the electric utility. Id. at 12:21-13:24.
The Commission concluded that the inclusion of GFTs in College Station’s
interim rates significantly increased its effective rate of return above the
Commission-approved rate of return agreed to in 1997. RR, AR Item 167 at 13. In
its 2007 case, the $833,330 additional compensation to the city together with its
approved return on rate base of $564,002 totaled $1,397,332. RR, AR Item 30 at
PDF 82. College Station’s total rate base in the interim proceeding was $8,405,393;
therefore, the total return gave College Station an effective rate of return of 16.62%.
Id. Similarly, the inclusion of GFTs in its interim rates in 2008 brought its effective
rate of return to 16.82%, and in 2017 to 13.34%. Id. Commission staff’s witness,
Ruth Stark, noted that “College Station tacitly acknowledges that this item was
additional return in the interim TCOS rates by using the [GFT] amount from its 2017
interim case, Docket No. 46847, to justify the reasonableness of its requested return
in the current rate case (Docket No. 52728).” Id. at 14:11-14. These substantial
increases over College Station’s Commission-approved rate of return of 6.71% were
not permitted by the plain language of the TCOS Rule, which requires the rate of
return in the comprehensive rate case to be applied to interim rates.
Contrary to College Station’s assertion, the Commission never approved the
inclusion of GFTs in its interim rates. Appellant Br. 48-49. “Instead, in those
23
proceedings, the Commission issued orders approving College Station’s request to
make interim adjustments to its transmission revenue requirement and wholesale
transmission rate in advance of a comprehensive TCOS.” RR, AR Item 167 at 3. The
approval orders all stated the updated transmission revenue requirement resulting
from College Station’s changes in invested capital was approved, without making
any finding about the permissibility of including GFTs through the interim rate
procedures. RR, AR Item 36 at PDF 57, 72, 77. These approval orders all stated that
they were subject to review during College Station’s next comprehensive rate
proceeding, and any amount that the Commission determined was unreasonable or
unnecessary was subject to refund during reconciliation. Id. Thus, the approvals
were conditional on this later comprehensive review, and the interim rates, although
approved, were temporary and subject to later reconciliation and review. In this
proceeding, the Commission’s first opportunity to reconcile College Station’s three
interim rate applications, the Commission concluded that College Station’s inclusion
of GFTs in its interim rates was unreasonable in light of the 1997 rate order and the
TCOS Rule. RR, AR Item 167 at 13.
B. The Commission’s practice and precedent is to update GFTs in an
interim proceeding in proportion to the approved amount in the
utility’s comprehensive transmission revenue requirement.
The Commission’s conclusion that College Station improperly included GFTs
in its interim rates does not mean that GFTs are categorically excluded from a
24
utility’s interim rates. The inclusions by College Station were improper based on the
facts of this case, but the Commission has approved GFTs in interim rates under
different circumstances following the next comprehensive review.
When a utility increases its GFTs in an interim filing, the Commission has
consistently calculated the incremental increase for payments-in-lieu of taxes based
on the effective rate the utility received in its last comprehensive rate case. RR, AR
Item 30 at 18:3-7. Under this analysis, the Commission looks at the proportional
allocation of GFTs in the utility’s comprehensive revenue requirement and will
allow an increase in GFTs in interim rates that is proportional to the increase in the
interim revenue requirement. RR, AR Item 87 at 8. This is consistent with the TCOS
Rule, which allows for increases in other associated taxes in the interim revenue
requirement if they are associated with the additions of transmission facilities. 16
Tex. Admin. Code § 25.192(h)(1). Commission staff explained that this method is
also consistent with the principles of interim rate proceedings because it does not
introduce a contentious issue to the expedited interim procedures that do not allow
for thorough analysis or an evidentiary hearing for the applicant’s request. RR, AR
Item 87 at 8. The Commission concluded that this is a reasonable method to update
taxes in an interim proceeding. RR, AR Item 167 at 12.
The proportional allocation analysis is what the Commission used in each of
the four prior cases relied on by College Station in which a utility increased its GFTs
25
in interim rates. RR, AR Item 186 at 21:19-22:5. In fact, College Station
acknowledges that this is how those interim applications were processed. RR, AR
Item 173 at 106:9-107:1. In each of the four cases, the update to GFTs was based on
the effective rate from the most recent comprehensive rate case, the increase was
tied to the increase in transmission investment, and each of the four utilities
maintained the proportionate relationship between the GFT and the revenue
requirement component in the utility’s last comprehensive rate case. Id. For
example, in CPS Energy’s comprehensive rate case, Docket No. 33197, it included
a GFT of $13,898,083 and total transmission revenue requirement of $99,272,021.
Id. at 86:9-15. The GFT proportion of the total revenue requirement was 14%. In its
interim rates, CPS Energy adjusted its GFT to $24,299,941 and its total revenue
requirement increased to $173,571,010. Id. at 87:5-9. Therefore, the increased GFT
in its interim rates was 14% of the increased total revenue requirement, and the utility
maintained a proportional relationship to the GFT and revenue requirement between
its comprehensive rate case and interim rate case. Similarly, in the City of Bryan’s
interim rate application, it maintained a proportional relationship with its GFT and
revenue requirement and explained that its GFT increased because of plant additions
and that the TCOS Rule allows an increase in other associated taxes because of an
increase in plant additions. Id. at 103:2-8.
26
College Station’s inclusion of the GFT in its interim rates, however, was not
proportional with the transmission revenue requirement in its comprehensive rate
case. The 1997 rate order set College Station’s other associated taxes at $0 and its
revenue requirement at $495,211. RR, AR Item 30 at PDF 85. In its first interim rate
case, College Station included $833,000 in other associated taxes, and its revenue
requirement was increased to $1,771,509. Id. at PDF 82. Thus, its GFT inclusion
was 47.04% of its total revenue requirement, whereas in its comprehensive rate case
its proportion of GFT to transmission revenue was 0%. Likewise, in its other two
interim cases its GFT proportion to total transmission revenue was 48.73% in 2008
and 39.43% in 2017. Id. at 17:15-17. Therefore, the inclusion of GFTs in its interim
rates was not proportional to the transmission revenue requirement the Commission
set in its final order for Docket No. 15762.
The Commission correctly concluded that the inclusion of GFTs in College
Station’s interim rates was unreasonable in light of the 1997 rate order and the TCOS
Rule. RR, AR Item 167 at 13. The Commission’s conclusion is supported by the
plain language of the TCOS Rule and expert witness analysis of College Station’s
comprehensive and interim rates. Thus, the Commission’s conclusion was supported
by substantial evidence and was not arbitrary or capricious.
27
C. Interim applications serve a narrow purpose and are not designed
for utilities to add expenses that were not approved, or that they
forgot to request, in their comprehensive rates.
College Station’s claim that it inadvertently did not include a GFT in its first
comprehensive rate application because it was dealing with a new regulatory
scheme, Appellant Br. 20, is contradicted by the record. College Station did include
a GFT in its 1996 comprehensive rate application, but that application was resolved
by settlement agreement that allocated 100% of the GFT to its distribution function.
RR, AR Item 30 at 16:3-5. Furthermore, as Ms. Stark pointed out, College Station
was a party to another utility’s transmission rate proceeding during the same time as
its first comprehensive rate case, and that utility received a GFT in its transmission
rates. Id. at 16:14-17. Thus, College Station was aware that a GFT could be requested
in its transmission rate application. But even if College Station mistakenly allocated
100% of its GFT to its distribution function, this would not excuse it from violating
the TCOS Rule and including expenses through the interim rate procedure that it
“forgot” to include in its comprehensive rates. The proper method under the rule
would be for College Station to file a new comprehensive rate case to allow the
Commission to conduct a thorough analysis of College Station’s request.
There is no basis for College Station’s assertion that it “indisputably” would
have received these expenses if it had included them in its first comprehensive rate
application. Appellant Br. 50. College Station could have requested to include a GFT
28
in its initial comprehensive rate case, but the Commission would have reviewed the
inclusion to determine whether it was a reasonable and necessary cost for providing
transmission service. Tex. Util. Code § 35.004(c). The Commission would need to
look at the specific purpose of the GFT in place at that time to determine whether it
was reasonable and necessary. RR, AR Item 30 at 5:14-15.
Based on the record evidence, College Station did request to include the GFT
in its comprehensive rates, but it appears that the request was rejected, and it was
instead allocated to College Station’s distribution function under the settlement
agreement. But even if that were not the case, the size of College Station’s GFTs in
its interim rates—doubling its revenue requirement—raises doubts that the
Commission would have approved them even if they were requested in its original
comprehensive rate case. It is doubtful that these substantial revenue transfers that
were designed as a return on investment and unrelated to the cost of providing
transmission service would have been approved as a separate expense item in
College Station’s first comprehensive rate case.
College Station argues that it is significant that the Commission allowed it to
recover GFTs in the transmission rates set going forward in this comprehensive rate
proceeding. Appellant Br. 24. However, this supports the Commission’s conclusion
that these expenses can only be approved in a comprehensive rate case. In this
proceeding, College Station requested a 9% GFT as a component of its rate of return.
29
RR, AR Item 2 at PDF 43:17-21. The Commission ultimately granted College
Station a 10% rate of return, which includes its requested 9% GFT. RR, AR Item
167 at 15. In other words, College Station is not recovering its requested 9% GFT
on top of its Commission approved rate of return, as it was doing by including the
GFT under the other associated taxes category in its interim rates. Rather, it received
a GFT as its rate of return. The fact that College Station was awarded a 9% GFT as
its rate of return just reinforces the Commission’s conclusion that the inclusion of
GFTs in College Station’s interim rates impermissibly increased its effective rate of
return above its Commission-approved rate of return.
D. The Commission did not adopt an ad hoc rule to reach its
conclusion.
The Commission is not adopting a new standard or a new rule and
retroactively applying it to College Station in this proceeding. The Commission’s
application of the TCOS Rule and its conclusion that these expenses were
improperly included in College Station’s interim rates falls within its discretion
under its statutory ratemaking authority. Suburban Util. Corp., 652 S.W.2d at 362.
However, even if the Commission adopted an ad hoc rule to reach this conclusion,
which the Commission denies, such rule was validly adopted.
When balancing competing policy considerations, the Commission can
choose to implement its policy choice on an ad hoc basis. Tex. Ass’n of Long
Distance Tel. Cos. (Texaltel) v. Pub. Util. Comm’n of Tex., 798 S.W.2d 875, 886
30
(Tex. App.—Austin 1990, writ denied). An ad hoc rule is an agency statement that
interprets, implements, or prescribes agency law or policy. Id. An agency can make
a policy choice through an ad hoc rule if the agency “is confronted with (1) an issue
of first impression, (2) a new or amended statutory scheme or administrative rules,
or (3) an issue that cannot be adequately captured within the bounds of a general rule
because the problem is so specialized and varying in nature.” Tex. State Bd. of
Pharmacy v. Witcher, 447 S.W.3d 520, 535 (Tex. App.—Austin 2014, pet. denied).
“When the agency promulgates an ad hoc ‘rule,’ the appropriate standard of review
for an appellate court is not whether the agency’s policy choice is supported by
substantial evidence, but whether the choice was arbitrary and capricious.” W. Tex.
Utils. Co. v. Off. of Pub. Util. Counsel, 896 S.W.2d 261, 272 (Tex. App.—Austin
1995, no writ.).
The Commission’s conclusion here, if it is an ad hoc rule, is a valid ad hoc
rule because it addressed an issue of first impression. College Station is correct that
other utilities have updated GFTs in interim rate proceedings. Appellant Br. 38.
However, this is the first case in which a utility included GFTs in its interim rates
that were not first approved in its comprehensive rate case and those inclusions were
challenged in the reconciliation of rates during the utility’s next comprehensive rate
case. RR, AR Item 143 at 3. Therefore, the Commission applied the TCOS Rule to
these circumstances in a contested case for the first time in this proceeding. Id.
31
College Station can point to no other case in which a utility included GFTs in interim
rates that were not first approved in a comprehensive rate case. Thus, College Station
is incorrect that the issue of first impression was in 2007 when College Station
updated its rates, Appellant Br. 40; instead, this is the first time the Commission has
had to reconcile a utility’s interim rates that included GFTs not first approved in a
comprehensive rate case.
College Station is incorrect that the Commission created a distinction between
utilities that included and those that didn’t include GFTs in comprehensive rates.
Appellant Br. 39. On the contrary, the Commission applied the TCOS Rule that only
allows a utility to update its taxes that changed because of the addition or retirement
of transmission facilities. That College Station’s taxes other than income taxes were
set at $0 under the 1997 rate order means that no taxes changed as a result of its
updated invested capital. The Commission’s interpretation is not a change to the rule
or a change to the categories of costs that may be updated in an interim rate
proceeding.
“[W]hen an agency decision involves the balancing of competing interests—
such as recovery of revenues proportionate to the costs of providing services versus
the impact that large rate increases can have on utility customers—and an evaluation
of the equities of the situation, the agency is making a fundamental policy choice.”
W. Tex. Utils. Co., 896 S.W.2d at 272. Therefore, the Commission’s conclusion here
32
is a fundamental policy choice about what expenses a utility can include in its interim
rates. This conclusion is based on the plain language of the TCOS Rule, which only
allows for interim updates to reflect changes in invested capital. Thus, if the
Commission’s conclusion was an ad hoc rule, then the ad hoc rule is valid because
this is an issue of first impression and the Commission’s conclusion has a rational
basis.
II. The Commission correctly applied the reconciliation provision in its rule
to order a refund of the full amount of over-recovery.
The record evidence demonstrates that College Station improperly included
expenses in its interim rates that were not first approved in its comprehensive rates.
Under the TCOS Rule, any amounts that the Commission determines are
unreasonable or unnecessary are required to be refunded to the ratepayers. 16 Tex.
Admin. Code § 25.192(h)(2). The Commission concluded that the circumstances of
this case did not constitute good cause to excuse College Station from complying
with the full refund required by the rule. Thus, the Commission concluded that
College Station must refund the ERCOT ratepayers the full amount of over-
recovery, plus carrying charges, over a 15-year period—the same amount of time
that it was overcharging ERCOT ratepayers with the improper inclusion of GFTs in
its transmission rates.
33
A. The rule provides that any amount of over-recovery shall be
refunded.
College Station’s wholesale transmission rates have been interim rates since
the effective date of its first interim TCOS proceeding in 2007. Under the TCOS
Rule, College Station’s interim transmission rates resulting from its three interim
rate filings were temporary and subject to reconciliation during its next
comprehensive rate case. The TCOS Rule requires that any amounts that the
Commission determines are unreasonable or unnecessary, including the
corresponding return and taxes associated with plant additions and retirement, be
refunded with carrying costs. 16 Tex. Admin. Code § 25.192(h)(2). The interim rate
procedure allows for an expedited process for utilities to recover costs of
transmission investment without the thorough and time-consuming procedure of a
comprehensive rate case. However, the trade-off for this expedited process is that
interim rates are temporary and still subject to that thorough review during the
utility’s next comprehensive rate case.
College Station argues that the reconciliation process only looks at the
reasonableness and necessity of plant additions in interim rates and cannot order a
refund for separate expense categories. Appellant Br. 49. That reading is contrary to
the plain language of the rule. The first sentence of the rule states that “[a]n update
of transmission rates under paragraph (1) of this subsection shall be subject to
reconciliation” at the utility’s next comprehensive rate case. 16 Tex. Admin. Code §
34
25.192(h)(2) (emphasis added). Paragraph (1) states that “the new rates shall reflect
the addition and retirement of transmission facilities and include appropriate
depreciation, federal income tax and other associated taxes, and the commission
authorized rate of return on such facilities.” Id. § 25.192(h)(1). Therefore, the rates
themselves are subject to reconciliation, including the expense categories that were
included in the interim filings and constitute the basis of the interim rates.
The second part of the rule reads “at which time the commission shall review
the costs of the interim transmission plant additions to determine if they were
reasonable and necessary.” Id. § 25.192(h)(2). This provision does not supersede the
first part of the rule explaining that interim transmission rates are subject to
reconciliation. The instruction merely limits the scope of interim TCOS proceedings
and reinforces their expedited nature by dictating that the review of plant additions
will be conducted during the next comprehensive rate case. This makes clear that the
reconciliation of interim rates will occur at the same time the Commission reviews
the reasonableness and necessity of interim plant additions. Furthermore, this section
of the rule simply emphasizes that the only purpose of interim rate proceedings is to
update invested capital. College Station’s interpretation of the rule would mean that
utilities could circumvent the Commission’s oversight by including improper
expenses in an expedited interim rate proceeding, and the Commission would have
35
no authority to recover those improper inclusions during the utility’s next
comprehensive review.
Because the inclusion of GFTs was improper, the full amount of over-
recovery that College Station received during the 15-year period that it was charging
interim rates is subject to refund. The Commission’s conclusion is based on the plain
language of the TCOS Rule and was not arbitrary or capricious.
B. The Commission correctly concluded that the circumstances of this
case did not constitute good cause to excuse the full-refund
requirement.
The Final Order is not a penalty for College Station, but a refund, required by
the rule, to all the consumers in the ERCOT market that paid excessive transmission
rates resulting from the improper inclusion of GFTs in College Station’s interim
rates. However, under the Commission’s procedural rules, the Commission can grant
an exception to comply with any requirement of its rules for good cause. 16 Tex.
Admin. Code § 22.5(b). Therefore, the core of College Station’s argument is not
whether it was impermissible to include GFTs in its interim rates (it was) or whether
it is required under the rule to refund the full amount (it is) but that the Commission
should exercise its discretion to find that good cause exists to excuse the full-refund
requirement. The Commission concluded based on the totality of the facts in the
record that the circumstances of this case did not constitute good cause to excuse
compliance with the requirement that College Station refund the full amount of over-
36
recovery in its interim rates. RR, AR Item 167 at 5. Thus, in reaching this decision,
the Commission effectively declined to depart from the default rule of requiring a
full refund of over-recovery.
i. The Commission’s conclusion was supported by substantial
evidence.
The basis of College Station’s good cause argument is communications
between College Station and Commission staff during two of the interim rate
proceedings. However, these communications do not create the definitive conclusion
that College Station portrays and, in fact, show that College Station was informed
that the ultimate decision on whether GFTs were allowed in interim rates would be
made by the Commission and, ultimately, subject to review and reconciliation. In its
2007 interim rate proceeding, Commission staff informed College Station it could
include the GFT and “they would make the call as to whether it would be allowed.”
RR, AR Item 36 at PDF 17. In its 2008 interim rate proceeding, College Station
again contacted Commission staff and explained its intended calculation for
including GFTs in its interim rates, and Commission staff said, “to go ahead with
your inclination” but to “be sure and fully explain the issue in any testimony you
include with your filing.” Id. at PDF 59.
These statements by Commission staff were not statements by the
Commission nor do they bind the Commission. The decision-making authority
resides in the Commission, not the Commission staff. City of Frisco v. Tex. Water
37
Rights Comm’n, 579 S.W.2d 66, 72 (Tex. App.—Austin 1979, writ ref’d n.r.e.).
Furthermore, the two statements by Commission staff never affirmatively said that
it was allowed, and both pointed towards a future determination by the Commission
at the next comprehensive review. College Station only sought the Commission
staff’s guidance in the 2007 and 2008 interim rate cases, but not in 2017. What was
not anticipated or known in the 2007 and 2008 proceedings was that College Station
would go so long between filing the interim rate applications and the comprehensive
rate application and forestall the Commission’s review and interpretation of the
application of the TCOS Rule. RR, AR Item 143 at 3. Commission staff’s
communications with College Station are entirely consistent with the orders
approving interim rates and the Commission’s ultimate conclusion in this proceeding
that it was improper to include GFTs in its interim rates.
The statutory scheme establishing the Commission grants decision-making
authority with the Commissioners. See Tex. Util. Code §§ 12.001, .051. Commission
staff serve the agency, and the Commission may accept or reject Commission staff
recommendations in whole or in part. City of Frisco, 579 S.W.2d at 72. In this case,
the Commission staff and the ALJs recommended that the Commission find good
cause to excuse the full-refund requirement. The Commission was authorized to, and
did, reject their recommendation. RR, AR Item 167 at 5.
38
College Station argues that there was no evidence in the record to support the
Commission’s discretionary conclusion declining to find good cause to excuse the
refund required by the TCOS Rule. Appellant Br. 51. The basis of College Station’s
argument is that the Commission staff witness, Ruth Stark, supplemented her
testimony to recommend the Commission find good cause. Id. However, Ms. Stark
did not change her testimony regarding the impermissibility of College Station
including GFTs in its interim rates that were not included in its comprehensive rates.
RR, AR Item 44 at 1:23-2:12. Ms. Stark merely changed her recommendation from
requiring a full refund to finding good cause existed to require only a partial refund
upon learning about the prior communications between Commission staff and
College Station. Id. at 2:13-3:2.
However, the Commission has the discretion of whether to grant a good cause
exception, not its staff, and other portions of Ms. Stark’s testimony support the
Commission’s Final Order. Cent. Power & Light Co. v. Pub. Util. Comm’n of Tex.,
36 S.W.3d 547, 561 (Tex. App.—Austin 2000, pet. denied) (“In weighing evidence,
the agency may accept or reject the testimony of witnesses or may accept part of a
witness’s testimony and disregard the remainder.”). Therefore, the record evidence
supporting the Commission’s decision to not grant a good cause exception includes
the applications themselves (showing that College Station impermissibly included
GFTs in its interim rates) and Ms. Stark’s testimony analyzing these applications.
39
RR, AR Item 44 at 1:23-2:12. The default rule, applied by the Commission here, is
that the full amount of over-recovery is subject to refund. 16 Tex. Admin. Code §
25.192(h)(2). Thus, the Commission’s decision is consistent with the law and
supported by substantial evidence. Charter Med.-Dall., Inc., 665 S.W.2d at 452
(“The true test is not whether the agency reached the correct conclusion, but whether
some reasonable basis exists in the record for the action taken by the agency.”).
ii. The Commission’s conclusion was not an abuse of discretion.
This case is an example of the risks that College Station willingly undertook
by relying on interim rates for 15 years. College Station had some understanding
that there was an issue with including GFTs in its interim rates that it had not
included in its comprehensive rates; otherwise, it would not have sought guidance
from Commission staff on how to proceed. It also knew that the rates were temporary
and subject to reconciliation during the next comprehensive rate proceeding, as
stated in the approval orders. Despite this, and without ever receiving a
determination by the Commission that it was proper to include GFTs in its interim
rates, College Station waited 15 years before filing a new comprehensive rate case.
The risks College Station undertook in these circumstances are particularly glaring
because this is an issue that the Commission has never addressed. RR, AR Item 94
at PDF 4-5. Commission staff themselves were without guidance on how the
Commission interpreted the TCOS Rule under these circumstances because the
40
Commission had never done so before. College Station could have resolved any
uncertainty about its interim rates by filing a comprehensive rate case, but it chose
to rely on the Commission staff’s interpretation for 15 years before coming to the
Commission to get the definitive answer.
The difference between the comprehensive and interim proceedings is evident
in the timeframes in which they are processed. For example, College Station’s 2007
interim rate proceeding was 84 days from when its application was filed to when the
Commission issued its approval order, see RR AR Item 36 at PDF 54, 58, its 2008
interim application was 74 days, see id. at PDF 69, 73, and in 2017 it was 36 days.
See id. at PDF 75, 78. In contrast, College Station’s first comprehensive rate case
was 14 months from filing the application to approval, see id. at PDF 35, and the
comprehensive rate application at issue here was almost three years from the date
College Station filed its application to the date the Commission issued its Final
Order. See RR, AR Item 167 at 6, 22. As these timeframes demonstrate, the time and
resources devoted to a comprehensive review is considerably more than an expedited
interim rate proceeding. The Commission has consistently rejected proposed
changes to the interim TCOS process that would “complicate and undermine the
purpose of and process for interim TCOS filings” 2 or “substantially alter the nature
2
Pub. Util. Comm’n of Tex., Rulemaking Proceeding to Amend SUBST. R. § 25.192(g) Related to
Transmission Service Rates, Project No. 37519, Order Adopting Amendment to § 25.192 as
41
of interim TCOS filings and significantly complicate and lengthen their
processing.” 3
The Office of Public Utility Counsel (“OPUC”) and Texas Industrial Energy
Consumers (“TIEC”), intervenors in the administrative proceeding, consistently
argued that College Station refund the full amount of over-recovery, as required by
the TCOS Rule. In fact, even after Ms. Stark supplemented her testimony, OPUC
and TIEC continued to adopt the recommendation in her direct testimony that
College Station refund the full amount of over-recovery. RR, AR Items 74, 75. As
OPUC pointed out, they were not a party to any of the interim rate proceedings, and
this was the first opportunity to contest College Station’s inclusion of GFTs in its
interim rates. RR, AR Item 119 at 5.
Generally, no parties intervene in interim rate proceedings. As TIEC
explained, the interim rate process is designed to be formulaic and uncontroversial.
RR, AR Item 128 at 1. TIEC argued that allowing College Station to retain the over-
recovery would invite abuse to the interim rate procedure because Commission staff
and intervenors would have a difficult time analyzing and responding to requests
that fall outside the limited scope of interim updates because of the expedited nature
of the process. Id. at 11. This would incentivize utilities to overcharge ratepayers by
Approved at the July 30, 2010 Open Meeting, at 17 (Aug. 4, 2010),
https://interchange.puc.texas.gov/search/documents/?controlNumber=37519&itemNumber=39.
3
Id. at 19.
42
including improper expenses in their interim rates just as College Station did. Id.
Furthermore, it would be unjust to ratepayers to prevent them from recouping the
over-recovery that College Station received from including improper expenses in its
interim rates. Id. at 9. The size of the refund, resulting from College Station waiting
15 years to file a comprehensive rate application, does not provide an excuse to the
full refund requirement and to shift the risk that College Station willingly undertook
onto the ERCOT ratepayers. Id.
The Commission has the statutory duty to ensure that rates are just and
reasonable. Tex. Util. Code § 11.002(a). What did not change despite Ms. Stark’s
later recommendation, and what OPUC and TIEC consistently argued, was the
reason she initially recommended a full refund. Granting College Station an
exception to the full-refund requirement would not serve as a strong deterrent for
adding inappropriate items to interim transmission rates, an action that negatively
impacts not only other utilities, but consumers in the entire ERCOT market. RR, AR
Item 30 at 20:15-19. Granting an exception for College Station would allow it to
circumvent Commission rules and procedures to recover costs that other utilities
would not be permitted to recover. To ensure that all utilities are treated the same,
and to ensure that all ratepayers in ERCOT are charged just and reasonable rates, the
Commission concluded that College Station must comply with the full refund as
required by the TCOS Rule. College Station’s choice to not file a comprehensive
43
rate application for 15 years does not allow it to retain over-recovered costs that
other utilities would not be permitted to recover.
The Commission concluded that good cause did not exist to excuse the full-
refund requirement. The Commission’s conclusion was based on application of the
TCOS Rule to the evidence in the record, and the Commission did not abuse its
discretion by not finding good cause to excuse compliance with its rules.
iii. The Commission properly rejected the ALJs’
recommendation.
The Commission properly modified the PFD to reject the ALJs’
recommendation that the Commission find good cause to excuse the full refund
required by the rule. The Legislature granted the Commission more authority to
modify an ALJ’s findings than other state agencies. Sw. Pub. Serv. Co. v. Pub. Util.
Comm’n of Tex., 962 S.W.2d 207, 214 (Tex. App—Austin 1998, pet. denied). Under
the Texas Government Code, the Commission has the authority to modify an ALJ’s
finding of fact if it is not supported by a preponderance of the evidence. Tex. Gov’t
Code § 2003.049(g)(1)(B). Therefore, the Legislature granted the Commission the
authority to assume an original fact-finding role. Sw. Pub. Serv. Co., 962 S.W.2d at
213. Consequently, the Commission has the authority to substitute its judgment for
the ALJ’s on a question of fact and to reevaluate the evidence to determine whether
the ALJ’s findings are supported by a preponderance of the evidence. Id. at 214.
44
When the Commission modifies an ALJ’s findings, it is required to state the specific
reason and legal basis for the modification. Id.
College Station’s incorrectly relies on Texas Government Code § 2001.058 to
challenge the Commission’s decision to modify the PFD. Appellant Br. 56. The
Austin Court of Appeals held that “[s]ection 2003.049(g), a statute applicable only
to Commission proceedings, expressly supercedes APA section 2001.058.” Sw. Pub.
Serv. Co., 962 S.W.2d at 212. Thus, the Commission is not required to give any
deference to an ALJ’s findings and has the authority to weigh the evidence anew. Id.
at 214. The court found that the Legislature intended the Commission to have more
control over the ultimate disposition of cases because of the complexity of public
utility matters. Id.
The Commission stated both the specific reason and the legal basis for
rejecting the ALJs’ recommendation to find good cause. The Commission explained
that “Commission Staff’s communications or College Station’s good faith are [not]
circumstances that constitute good cause to grant an exception to the full refund
required by the rule.” RR, AR Item 167 at 4. The legal basis was that the ALJs
applied an inapplicable legal standard used when the Commission exercises its
discretion to order a mitigated refund to weigh the evidence to find good cause. Id.
at 6. Rather, under the TCOS Rule a utility is required to refund the full amount of
over-recovery to the ratepayers, and College Station requested a good-cause
45
exception under the Commission’s procedural rules to excuse the requirement of the
TCOS Rule. Therefore, College Station had the burden to prove good cause. Vance
v. My Apartment Steak House of San Antonio, Inc., 677 S.W.2d 480, 482 (Tex. 1984)
(the burden of proof is on the party seeking affirmative relief).
Based on the evidence in the record, the Commission concluded that College
Station did not meet its burden. The fact that Commission staff incorrectly told
College Station to include GFTs in its interim rates (subject to Commission review
and reconciliation) and College Station’s good faith are not grounds to excuse it from
compliance with the Commission’s rules and to allow it to retain $26 million in over-
recovery.
PRAYER
For the foregoing reasons, the district court correctly affirmed the
Commission’s Final Order. College Station has failed to show any reversible error.
Accordingly, the Commission respectfully requests that the Court affirm the district
court’s judgment affirming the Final Order.
Respectfully submitted,
KEN PAXTON
Attorney General of Texas
BRENT WEBSTER
First Assistant Attorney General
46
RALPH MOLINA
Deputy First Assistant Attorney General
AUSTIN KINGHORN
Deputy Attorney General for Civil
Litigation
KELLIE E. BILLINGS-RAY
Chief, Environmental Protection Division
/s/ Jordan Pratt
JORDAN PRATT
Assistant Attorney General
State Bar No. 24140277
Jordan.Pratt@oag.texas.gov
JOHN R. HULME
Special Counsel
State Bar No. 10258400
John.Hulme@oag.texas.gov
Environmental Protection Division
Office of the Attorney General
P.O. Box 12548, MC 066
Austin, Texas 78711-2548
Phone: (512) 463-2012
Fax: (512) 320-0911
Attorneys for Appellee Public Utility
Commission of Texas
47
CERTIFICATE OF COMPLIANCE
Pursuant to Rule 9.4(i)(3) of the Texas Rules of Appellate Procedure, I certify
that this brief contains 11,408 words, as calculated by Microsoft Word, the computer
program used to create this document.
/s/ Jordan Pratt
JORDAN PRATT
48
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing document has
been forwarded to the following attorneys via the Court’s electronic filing case
management system and/or electronic mail on September 15, 2025.
Thomas L. Brocato Benjamin Barkley
tbrocato@lglawfirm.com benjamin.barkley@opuc.texas.gov
Roslyn M. Warner Justin Swearingen
rwarner@lglawfirm.com justin.swearingen@opuc.texas.gov
LLOYD GOSSELINK ROCHELLE & Chris Ekoh
TOWNSEND, P.C. chris.ekoh@opuc.texas.gov
816 Congress Avenue, Ste. 1900 OFFICE OF PUBLIC UTILITY
Austin, Texas 78701 COUNSEL
Tel: (512) 322-5800 1701 N. Congress Avenue, Ste. 9-180
Fax: (512) 472-0532 P.O. Box 12397
Austin, Texas 78711
Adam C. Falco Tel: (512) 936-7500
afalco@cstx.gov Fax: (512) 936-7525
City Attorney
COLLEGE STATION CITY Counsel for Intervenor
ATTORNEY’S OFFICE Office of Public Utility Counsel
P.O. Box 9960
1101 Texas Ave.
College Station, Texas 77842
Tel: (979) 764-3746
Fax: (979) 764-3481
Counsel for Appellant
City of College Station
/s/ Jordan Pratt
JORDAN PRATT
49
INDEX TO APPENDIX
Tab 1 Direct Testimony of Ruth Stark (AR 30)
Tab 2 Attachment RS-6 to Direct Testimony of Ruth Stark (AR 30)
Tab 3 OPUC’s Statement of Position (AR 74)
Tab 4 TIEC’s Statement of Position (AR 75)
Tab 5 16 Tex. Admin. Code § 25.192
Tab 6 16 Tex. Admin. Code § 22.35
Tab 7 16 Tex. Admin. Code § 22.5
50
Appendix Tab 1
Direct Testimony of Ruth Stark (AR 30)
Appendix Tab 2
Attachment RS-6 to Direct Testimony of
Ruth Stark (AR 30)
Appendix Tab 3
OPUC’s Statement of Position (AR 74)
PUBL~ 4
~* TEX>~
Filing Receipt
Filing Date - 2023-04-26 03:24:57 PM
Control Number - 52728
Item Number - 106
SOAH DOCKET NO. XXX-XX-XXXX
PUC DOCKET NO. 52728
APPLICATION OF THE CITY OF § PUBLIC UTILITY COMMISSION
COLLEGE STATION TO CHANGE §
RATES FOR WHOLESALE § OF TEXAS
TRANSMISSION SERVICE §
OFFICE OF PUBLIC UTILITY COUNSEL'S
STATEMENT OF POSITION
The Office of Public Utility Counsel ("OPUC"), representing the interests of residential
and small commercial consumers in Texas, respectfully submits this Statement of Position
pursuant to 16 Texas Administrative Code ("TAC") § 22.124. Having reviewed the application
and filings of the parties, OPUC takes the following position:
Just as Texas Industrial Energy Consumers ("TIEC") has, 1 OPUC adopts and supports the
positions taken by Staff of the Public Utility Commission' s (" Staff') witness Ruth Stark in her
Direct Testimony filed June 23,2022.2 City of College Station' s ("College Station") most recent
comprehensive transmission cost of service ("TCOS") review before the Commission was
approved on July 8, 1997 in Docket No. 15762,3 and at no time has the Public Utility Commission
of Texas ("Commission") authorized College Station to recover payments-in-lieu-of-taxes
(" PILOT"), categorized as taxes other than income taxes, in its wholesale transmission rates.
OPUC wholly supports the position taken by the Commission in its January 26, 2023,
Order Remanding Proceeding:
Under 16 TAC § 25.192(h), each transmission service provider in the Electric
Reliability Council of Texas (ERCOT) region may apply to update its transmission
1 Texas Industrial Energy Consumers' Statement of Position (Aug. 1, 2022). ("TIEC Statement").
2 Direct Testimony of Ruth Stark (Jun. 23,2022). ("Stark Direct").
3 City of College Station Filing in Compliance with Subst. R. 23. 67, Docket No . 15762 . Order ( Jul . 8 , 1997 ).
1
rates on an interim basis "to reflect changes in its invested capital. " The updated
rates "shall reflect the addition and retirement oftransmission facilities and include
appropriate depreciation, federal income tax and other associated taxes, and the
commission-authorized rate of return on such facilities as well as changes in loads. "
Rates updated in an interim TCOS proceeding are subject to reconciliation and
amounts resulting from an update that are found to have been unreasonable or
unnecessary, plus the corresponding return and taxes, must be refunded.
College Station's most recent comprehensive TCOS review before the Commission
was approved on July 8, 1997, in Docket No. 15762. The Commission-approved
revenue requirement in that proceeding did not include payments-in-lieu-of-taxes
or any taxes. Instead, the Commission ordered that College Station' s tax expense
allocated to the transmission function was $0.
The evidentiary record shows that College Station included general fund transfers
(categorized as taxes other than income) in its interim TCOS. The record also
shows that by including the general fund transfers in its interim TCOS, College
Station has been increasing its rate ofreturn above what the Commission approved
in Docket No. 15762.
College Station was not authorized to include general fund transfer payments in its
interim TCOS by either Commission order or rule. College Station's general fund
transfers were not transmission-related invested capital, federal income tax, or
other associated taxes under 16 TAC § 25.192(h). The amounts were not taxes owed
to any taxing entity but were instead transfers from the electric department of the
City of College Station to the general funci Thus , under the rule , College Station
was not authorized to include the general fund transfers in the interim revenue
requirements in an interim TCOS proceeding. Additionally, because the
Commission did not approve the inclusion of general fund transfers in College
Station's revenue requirement in Docket No. 15762, College Station violated the
Commission' s order by including the amounts in the updated revenue requirements
in the interim TCOS proceedings.
Thus, the Commission finds that College Station's wholesale transmission rates
updated in the interim TCOS proceedings were in violation of 16 TAC § 25.192 and
the Commission 's order in Docket No. 15762 . 4 [Emphasis addedl
4 Order Remanding Proceeding at 1-2 (Jan. 26,2023). (internal citations omitted).
2
As TIEC has accurately noted: Although the Commission never authorized
College Station to allocate any portion of its PILOT to the transmission function
or recover those amounts in its wholesale transmission rates, College Station
began allocating PILOT to the transmission function beginning in its 2007
interim TCOS proceeding. This practice continued throughout its next two
interim TCOS filings in 2008 and 2017. In those interim filings, College Station
modified the Commission-approved allocation percentage for its "Taxes Other
Than Income Taxes," and that modification allowed College Station [toi collect
approximately $19.2 million through its wholesale transmission rates that was
never authorized by a Commission rate order. Taking carrying charges into
account, College Station has recovered approximately $31.5 million in
unauthorized transmission charges. These amounts should be refunded so
ratepayers do not ultimately bear the cost of College Station charging rates that
were never authorized by the Commission.5
In keeping with Ms. Stark's direct testimony, TIEC' s Statement of Position, and the
Commission's Order Remanding Proceeding, OPUC recommends that the applicant be directed to
refund the over-collected $19.2 million, which amounts to approximately $31.5 million with
carrying charges, 6 over such period of time as the Commission deems reasonable.
OPUC reserves the right to participate in the hearing, cross-examine witnesses, and file
briefs related to the issue addressed herein. OPUC further requests such other relief to which it
may be entitled.
5 TIEC Statement at 2. (internal citations omitted).
6 See Stark Direct at 18 (noting, "College Station has over-collected approximately $19.2 million through
June 30,2022...The inclusion of carrying charges at College Station's authorized rate of return increases the
over-collected balance to $31.5 million through June 30,2022.").
3
Date: April 26,2023
Respectfully submitted,
Courtney K. Hj altman
Chief Executive & Public Counsel
State Bar No. 24070294
A=·ln-
Jktin Sweanngen
Senior Assistant Public Counsel
State Bar No. 24096794
Renee L. Wiersema
Assistant Public Counsel
State Bar No. 24094361
Chris Ekoh
Deputy Public Counsel
State Bar No. 06507015
OFFICE OF PUBLIC UTILITY COUNSEL
1701 N. Congress Avenue, Suite 9-180
P.O. Box 12397
Austin, Texas 78711-2397
512/936-7500 (Telephone)
512/936-7525 (Facsimile)
justin.swearingen@opuc.texas.gov (Service)
renee.wiersema@opuc.texas.gov (Service)
chris.ekoh@opuc.texas.gov (Service)
opuc_eservice@opuc.texas.gov (Service)
CERTIFICATE OF SERVICE
I hereby certify that a copy of the foregoing document was served on all parties of record
in this proceeding on this 26th day of April 2023, by facsimile, electronic mail, and/or first class,
U. S. Mail.
A=Ln-
Jw<tin Swearingen
4
Appendix Tab 4
TIEC’s Statement of Position (AR 75)
PUBL~ 4
~* TEX>~
Filing Receipt
Filing Date - 2023-04-27 02:32:38 PM
Control Number - 52728
Item Number - 107
SOAH DOCKET NO. XXX-XX-XXXX
PUC DOCKET NO. 52728
APPLICATION OF CITY OF §
BEFORE THE STATE OFFICE
COLLEGE STATION TO CHANGE §
RATES FOR WHOLESALE §
OF
ADMINISTRATIVE HEARINGS
TRANSMISSION SERVICE §
TEXAS INDUSTRIAL ENERGY CONSUMERS' STATEMENT OF POSITION
I. INTRODUCTION
Texas Industrial Energy Consumers (TIEC) files this statement of position pursuant to 16
Tex. Admin. Code § 22.124(a). TIEC represents businesses that own large manufacturing and
industrial sites throughout ERCOT and who have wholesale transmission costs passed through to
them in their retail rates. As such, TIEC has an interest in ensuring that transmission providers
like the City of College Station ("College Station") only recover Commission-authorized costs for
providing wholesale transmission service. As explained below, there is no dispute that since 2007,
College Station recovered approximately $19.2 million through its transmission rates that it was
never authorized to collect by the Commission.1 Those amounts should be refunded, plus carrying
charges, over a period of time that the Commission finds to be reasonable.
II. STATEMENT OF POSITION
TIEC adopts and supports the positions taken by Commission Staff witness Ruth Stark in
her direct testimony filed on June 23,2022.2 As Ms. Stark explained, College Station was not
authorized to recover payments in lieu of taxes (PILOT)-also referred to as "Taxes Other Than
Income Taxes"-in its wholesale transmission rates.3 PILOT are payments that College Station' s
electric utility makes to the city to compensate it for the use of public rights-of-way and to provide
residents with what amounts to a return on their ownership interest in the utility.4 In College
Station's last full transmission cost-of-service (TCOS) case, which concluded twenty-five years
ago, the Commission's order stated that College Station's tax expense for the transmission function
1 Order Remanding Proceeding at 2 (Jan. 26,2023)
2 Direct Testimony of Ruth Stark (Stark Dir.) (June 23,2022).
3 Stark Dir. at 11-13.
4 Stark Dir. at 12- 13.
1
would be $0.5 Even College Station witness Mr. Dreyfus interprets that order to mean that $0 of
College Station' s requested amount for "Taxes Other Than Income Taxes" was allocated to the
transmission function.6 That order was the last time the Commission conducted a full review of
College Station' s transmission rates.
Although the Commission never authorized College Station to allocate any portion of its
PILOT to the transmission function or recover those amounts in its wholesale transmission rates,
College Station began allocating PILOT to the transmission function beginning in its 2007 interim
TCOS proceeding.7 This practice continued throughout its next two interim TCOS filings in 2008
and 2017.8 In those interim filings, College Station modified the Commission-approved allocation
percentage for its "Taxes Other Than Income Taxes," and that modification allowed College
Station collect approximately $19.2 million through its wholesale transmission rates that was never
authorized by a Commission rate order: Staff witness Ms. Stark calculated carrying charges using
the method specified in 16 TAC § 25.192(h)(2), which states that carrying charges on over-
recoveries shall be calculated using the same rate of return that was applied to transmission
investments included in the update. As of Ms. Stark' s calculations in her testimony filed on June
23, 2022, the total amount of College Station' s over-collections plus carrying charges was
approximately $31.5 million.10
~ City of College Station Filing in Compliance with Subst. R. 23 . 67, Docket No . 15762 , Order at
Order 15 attachment (July 8, 1997) ("College Station's tax expense for the transmission function is $0.").
6 See Rebuttal Testimony of Mark K. Dreyfus (Dreyfus Reb.) at 17 ("I conclude that in adoption
of the settlement, the Commission considered and approved a transfer of $1,434,060 in the Revenue
Requirement and the allocation ofthat component ofthe Revenue Requirement to the transmission function
was $0.").
~ Application of the City of College Station for Interim Update of Wholesale Transmission Rates
Pursuant to Substantive Rule § 25. 192(g*1 ), Docket No . 34230 , Direct Testimony of Timothy Crabb at 5 -
6 (May 1,2007) ("Yes, the filing includes payments in lieu of taxes that are transfers by the Electric
Department to the general revenues ofthe City of College Station. ").
8 Application ofthe City of College Station for Interim Update of its Wholesale Transmission Rate
Pursuant to PUC Subst. R. § 25. 192 (g)( 1 ), Docket No . 35837 , Direct Testimony of Timothy Crabb at 6
(July 1 , 2008 ); Application of the City of College station for Interim Update of W-holesale Transmission
Rates, Docket No. 46847, Direct Testimony of Timothy Crabb at 6 (Feb. 10, 2017).
9 Stark Dir. at 18.
10 Id.
2
As the Commission explained in its Order Remanding Proceeding, under 16 TAC § 25.192,
College Station was not authorized to recover the PILOT costs in any of its interim TCOS
proceedings.11 Interim TCOS filings are designed to be formulaic to allow a utility to quickly
update its rates "to reflect changes in invested capital."12 The interim TCOS mechanism does not,
however, permit utilities to change or deviate from the rate structure that the Commission approved
in the utility' s last full rate review. 13 Doing so would be contrary to the intention of the rule and
make the expedited TCOS updates ripe for abuse because the process involves strict time
limitations that preclude a full review of each interim application.14 Accordingly, the Commission
determined that College Station' s wholesale transmission rates updated in its interim TCOS
proceedings violated 16 TAC § 25.192 and the Commission' s order in College Station' s last full
TCOS case. 15
Because College Station was never authorized to recover the PILOT charges, College
Station should refund the over-collected $19.2 million, which amounts to approximately $31.5
million with carrying charges, so ratepayers do not ultimately bear the cost of College Station
charging rates that were not authorized by the Commission. Specifically, TIEC supports Ms.
Stark's initial recommendation that College Station return $31.5 million over a period of fifteen
11 Order Remanding Proceeding at 2.
12 See 16 Tex. Admin. Code § 25.192(h)(1) ("Each TSP inthe ERCOT region may apply to update
its transmission rates on all interim basis not more than once per calendar year to reflect changes in its
invested capital"j ( emphasis added ); see also Rulemaking Proceeding to Revise PUC Transmission Rules
Consistent with the New ERCOT Market Design, Project No . 23157 at 37 ("The purpose of § 25 . 192 ( g)( 1 )
is to spedfy the basis for an interim update oftransmission rates, which is change in invested capital"j
(May 31,2001) (emphasis added).
13 Contrary to College Station witness Mr. Dreyfus's claims, other utilities may have changed the
amount of PILOT in their rates in an interim case, but the record in those cases demonstrates that those
utilities simply applied their existing, Commission-approved PILOT allocation to the new invested capital
being added in their interim rate update. However, none of those utilities sought to modify the percentage
oftheir PILOT that was allocated to the transmission function, as College Station did here.
14 16 TAC § 25.192 (h)(4)(C) ("A proceeding initiated pursuant to paragraph (1) ofthis subsection
is eligible for disposition pursuant to §22.35(b)(1) of this title (relating to Informal Disposition). If the
requirements of §22.35 ofthis title are met, the presiding officer shall issue a notice of approval within 60
days of the date a materially sufficient application is filed unless good cause exists to extend this deadline
or the presiding officer determines that the proceeding should be considered by the commission.").
15 Order Remanding Proceeding at 2.
3
years with carrying charges on the over-collection at a rate equal to the rate of return that College
Station is awarded in this proceeding.16 That approach is consistent with the Commission' s rules,
which contemplate a mandatoo; true-up to make ratepayers whole by refunding any over-collected
amounts with carrying cost equal to the TSP' s authorized rate of return.17 Further, fifteen years is
a reasonable amount of time for College Station to return the amount because the over-collection
occurred over a period of fifteen years.18
The Commission should not allow College Station to keep the amounts that it over-
collected simply because the amount of refund is large compared to its total TCOS revenue
requirement. Utilities should regularly file rate cases to ensure that interim TCOS updates remain
just and reasonable. Nevertheless, College Station opted to forego a comprehensive rate case since
1997, and that led to it over-collecting on its transmission investment for many years. It was
College Station' s decision to forego a full rate review, and the risk of that decision should be borne
by the utility rather than wholesale and retail ratepayers. Every one of the Commission' s interim
rate orders explicitly warned College Station that its updated transmission rates would be subject
to reconciliation at its next complete rate review , and „ Ialny over-recovery of costs, as aresult of
the [interiml updatelsl, is subject to refund." l' Xs such , TIEC takes the position that the
Commission should order College Station to refund the over-collected amount over 15 years with
16 Stark Dir. at 19.
17 16 TAC § 25.192 (h)(2) ("An update oftransmission rates under paragraph (1) ofthis subsection
shaH be subject to reconciliation at the next complete review of the TSP ' s transmission cost of service , at
which time the commission shall review the costs ofthe interim transmission plant additions to determine
ifthey were reasonable and necessary.") (emphasis added); see Stark Dir. at 19.
18 Stark Dir. at 19.
19 Crabb Reb. at TRC-6 (Order in 2007 TCOS Case, Docket No. 34230) page 4, Ordering Para. 4
("The updated rate is subject to reconciliation at the next complete review of College Station's TCOS.
Any over-recovery of costs, as a result of the update, is subject to refund") (emphasis added), id. at 3,
FoF 7 (" Staffrecommended that [ College Station ' s applicationl be approved as filed on May 1 , 2007 , with
the updated transmission rate and underlyingfacility additions being subject to a comprehensive analysis
and reconciliation at the next complete review of COCS's transmission cost of service."j (emphasis
added); see also id. at TRC - 10 , page 4 , Ordering Para . 4 ( Order in Docket No . 35837 ) ( same ); id at 9 FoF
11 ( same ); see also id. el 4, Ordering Para . 3 ( Order in Docket No . 46847 ) ( same ); id at 1 - 2 FoF 5 ( same )
4
carrying cost equal to College Station' s rate of return. While this over-collection is large, that is
even more reason why College Station should not be allowed to retain the over-collected amounts.
III. CONCLUSION
TIEC reserves the right to participate in the hearing on the merits and post-hearing briefing,
and to update its position based on any additional information presented at the hearing.
Respectfully submitted,
O'MELVENY & MYERS LLP
/s/ Michael A. McMillin
Katherine L. Coleman
State Bar No. 24059596
Michael A. McMillin
State Bar No. 24088034
John R. Hubbard
State Bar No. 24120909
303 Colorado St., Suite 2750
Austin, TX 78701
(737) 261-8600
kcoleman@omm.com
mmcmillin@,omm.com
ihubbard@omm.com
OMMeservice@omm.com
ATTORNEYS FOR TEXAS INDUSTRIAL
ENERGY CONSUMERS
CERTIFICATE OF SERVICE
I, John R. Hubbard, Attorney for TIEC, hereby certify that a copy of this document was
served on all parties of record in this proceeding on this 27~h day of April, 2023 by electronic mail,
facsimile, and/or First Class, U.S. Mail, Postage Prepaid.
/s/ John R. Hubbard
John R. Hubbard
5
Appendix Tab 5
16 Tex. Admin. Code § 25.192
§ 25.192. Transmission Rates for Export from ERCOT, 16 TX ADC § 25.192
Texas Administrative Code
Title 16. Economic Regulation
Part 2. Public Utility Commission of Texas
Chapter 25. Substantive Rules Applicable to Electric Service Providers
Subchapter I. Transmission and Distribution
Division 1. Open-Access Comparable Transmission Service for Electric Utilities in the Electric Reliability
Council of Texas
16 TAC § 25.192
§ 25.192. Transmission Rates for Export from ERCOT
Currentness
(a) Tariffs. Each transmission service provider (TSP) shall file a tariff for transmission service to establish its rates and other
terms and conditions and shall apply its tariffs and rates on a non-discriminatory basis. The tariff shall apply to all distribution
service providers (DSPs) and any entity scheduling the export of power from the Electric Reliability Council of Texas (ERCOT)
region. The tariff shall not apply to any entity engaging in wholesale storage as described by §25.501(m) of this title (relating
to Wholesale Market Design for the Electric Reliability Council of Texas) (storage entity).
(b) Charges for transmission service delivered within ERCOT. DSPs, excluding storage entities, shall incur transmission service
charges pursuant to the tariffs of the TSP.
(1) A TSP's transmission rate shall be calculated as its commission-approved transmission cost of service divided by
the average of ERCOT coincident peak demand for the months of June, July, August and September (4CP), excluding
the portion of coincident peak demand attributable to wholesale storage load. A TSP's transmission rate shall remain in
effect until the commission approves a new rate. The TSP's annual rate shall be converted to a monthly rate. The monthly
transmission service charge to be paid by each DSP is the product of each TSP's monthly rate as specified in its tariff and
the DSP's previous year's average of the 4CP demand that is coincident with the ERCOT 4CP.
(2) Payments for transmission services shall be consistent with commission orders, approved tariffs, and §25.202 of this
title (relating to Commercial Terms for Transmission Service).
(c) Transmission cost of service. The transmission cost of service for each TSP shall be based on the expenses in Federal Energy
Regulatory Commission (FERC) expense accounts 560-573 (or accounts with similar contents or amounts functionalized to the
transmission function) plus the depreciation, federal income tax, and other associated taxes, and the commission-allowed rate of
return based on FERC plant accounts 350-359 (or accounts with similar contents or amounts functionalized to the transmission
function), less accumulated depreciation and accumulated deferred federal income taxes, as applicable.
(1) The following facilities are deemed to be transmission facilities:
© 2025 Thomson Reuters. No claim to original U.S. Government Works. 1
§ 25.192. Transmission Rates for Export from ERCOT, 16 TX ADC § 25.192
(A) power lines, substations, reactive devices, and associated facilities, operated at 60 kilovolts or above, including
radial lines operated at or above 60 kilovolts, except the step-up transformers and a protective device associated with
the interconnection from a generating station to the transmission network;
(B) substation facilities on the high side of the transformer, in a substation where power is transformed from a voltage
higher than 60 kilovolts to a voltage lower than 60 kilovolts;
(C) the portion of the direct-current interconnections with areas outside of the ERCOT region (DC ties) that are
owned by a TSP in the ERCOT region, including those portions of the DC tie that operate at a voltage lower than
60 kilovolts; and
(D) capacitors and other reactive devices that are operated at a voltage below 60 kilovolts, if they are located in a
distribution substation, the load at the substation has a power factor in excess of 0.95 as measured or calculated at
the distribution voltage level without the reactive devices, and the reactive devices are controlled by an operator or
automatically switched in response to transmission voltage.
(E) As used in subparagraphs (A)-(D) of this paragraph, reactive devices do not include generating facilities.
(2) For municipally owned utilities, river authorities, and electric cooperatives, the commission may permit the use of the
cash flow method or other reasonable alternative methods of determining the annual transmission revenue requirement,
including the return element of the revenue requirement, consistent with the rate actions of the rate-setting authority for
a municipally owned utility.
(3) For municipally owned utilities, river authorities, and electric cooperatives, the return may be determined based on
the TSP's actual debt service and a reasonable coverage ratio. In determining a reasonable coverage ratio, the commission
will consider the coverage ratios required in the TSP's bond indentures or ordinances and the most recent rate action of
the rate setting authority for the TSP.
(4) A municipally owned utility that is required to apply for a certificate of public convenience and necessity to construct,
install, or extend a transmission facility within ERCOT pursuant to §25.101 of this title (relating to Certification Criteria)
is entitled to recover, through the utility's wholesale transmission rate, reasonable payments made to a taxing entity in lieu
of ad valorem taxes on that transmission facility, provided that:
(A) The utility enters into a written agreement with the governing body of the taxing entity related to the payments;
(B) The amount paid is the same as the amount the utility would have to pay to the taxing entity on that transmission
facility if the facility were subject to ad valorem taxation;
(C) The governing body of the taxing entity is not the governing body of the utility; and
© 2025 Thomson Reuters. No claim to original U.S. Government Works. 2
§ 25.192. Transmission Rates for Export from ERCOT, 16 TX ADC § 25.192
(D) The utility provides the commission with a copy of the written agreement and any other information that the
commission considers necessary in relation to the agreement.
(5) The commission may adopt rate-filing requirements that provide additional details concerning the costs that may be
included in the transmission costs and how such costs should be reported in a proceeding to establish transmission rates.
(d) Billing units. No later than December 1 of each year, ERCOT shall determine and file with the commission the current
year's average 4CP demand for each DSP, or the DSP's agent for transmission service billing purposes, as appropriate, excluding
the portion of coincident peak demand attributable to wholesale storage load. This demand shall be used to bill transmission
service for the next year. The ERCOT average 4CP demand shall be the sum of the coincident peak of all of the ERCOT DSPs,
excluding the portion of coincident peak demand attributable to wholesale storage load, for the four intervals coincident with
ERCOT system peak for the months of June, July, August, and September, divided by four. As used in this section, a DSP's
average 4CP demand is determined from the total demand, coincident with the ERCOT 4CP, of all customers connected to a
DSP, including load served at transmission voltage, but excluding the load of wholesale storage entities. The measurement of
the coincident peak shall be in accordance with commission-approved ERCOT protocols.
(e) Transmission rates for exports from ERCOT. A transmission service charge for exports of power from ERCOT must be
assessed to transmission service customers for transmission service within the boundaries of the ERCOT region, in accordance
with this section and the ERCOT protocols.
(1) A transmission service customer must be assessed a transmission service charge for the use of the ERCOT transmission
system in exporting power from ERCOT based on scheduled exports and the rates established under subsections (c) and
(d) of this section. The intervals must consist of one hour.
(2) The hourly transmission rate for exports from ERCOT will be the TSP's annual rate established under subsections (c)
and (d) of this section divided by 8760.
(3) The entity scheduling the export of power over a DC tie is solely responsible to the TSP for payment of transmission
service charges under this subsection.
(4) Beginning with the January 2023 reporting month, ERCOT must file a public report with the commission stating the
total amount of energy imported and the total amount of energy exported over each DC tie for the calendar month. The
report must also include the total amount of energy exported from the ERCOT region during the reporting month and each
of the preceding 11 calendar months, reported by scheduling entity. Each report must be filed within 45 days of the end
of the reporting month.
(f) Transmission revenue. Revenue from the transmission of electric energy out of the ERCOT region over the DC ties that
is recovered under subsection (e) of this section shall be credited to all transmission service customers as a reduction in the
transmission cost of service for TSPs that receive the revenue.
© 2025 Thomson Reuters. No claim to original U.S. Government Works. 3
§ 25.192. Transmission Rates for Export from ERCOT, 16 TX ADC § 25.192
(g) Revision of transmission rates. Each TSP in the ERCOT region shall periodically revise its transmission service rates to
reflect changes in the cost of providing such services. Any request for a change in transmission rates shall comply with the
filing requirements established by the commission under this section.
(h) Interim Update of Transmission rates.
(1) Frequency. Each TSP in the ERCOT region may apply to update its transmission rates on an interim basis not more
than once per calendar year to reflect changes in its invested capital. Upon the effective date of an amendment to §25.193
pursuant to an order in Project Number 37909, Rulemaking Proceeding to Amend P.U.C. Subst. R. 25.193, Relating to
Distribution Service Provider Transmission Cost Recovery factors (TCRF), that allows a distribution service provider to
recover, through its transmission cost recovery factor, all transmission costs charged to the distribution service provider by
TSPs, each TSP in the ERCOT region may apply to update its transmission rates on an interim basis not more than twice
per calendar year to reflect changes in its invested capital. If the TSP elects to update its transmission rates, the new rates
shall reflect the addition and retirement of transmission facilities and include appropriate depreciation, federal income tax
and other associated taxes, and the commission authorized rate of return on such facilities as well as changes in loads. If
the TSP does not have a commission-authorized rate of return, an appropriate rate of return shall be used.
(2) Reconciliation. An update of transmission rates under paragraph (1) of this subsection shall be subject to reconciliation
at the next complete review of the TSP's transmission cost of service, at which time the commission shall review the costs
of the interim transmission plant additions to determine if they were reasonable and necessary. Any amounts resulting
from an update that are found to have been unreasonable or unnecessary, plus the corresponding return and taxes, shall be
refunded with carrying costs determined as follows: for the time period beginning with the date on which over-recovery is
determined to have begun to the effective date of the TSP's rates set in that complete review of the TSP's transmission cost
of service, carrying costs shall be calculated using the same rate of return that was applied to the transmission investments
included in the update. For the time period beginning with the effective date of the TSP's rates set in that complete review
of the TSP's transmission cost of service, carrying costs shall be calculated using the TSP's rate of return authorized in
that complete review.
(3) Future consideration of effect on TSP's financial risk and rate of return. For a TSP that has increased its rates pursuant to
paragraph (1) of this subsection, the commission may, in setting rates in the next complete review of the TSP's transmission
cost of service, expressly consider the effects of reduced regulatory lag resulting from the interim updates to the TSP's
rates and the concomitant impact on the TSP's financial risk and rate of return.
(4) Commission processing of application. The commission shall process an application filed pursuant to paragraph (1)
of this subsection in the following manner.
(A) Notice and intervention deadline. The applicant shall provide notice of its application to all parties in the
applicant's last complete review of the applicant's transmission cost of service and all of the distribution service
providers listed in the last docket in which the commission set the annual transmission service charges for the Electric
Reliability Council of Texas. The intervention deadline shall be 21 days from the date service of notice is completed.
(B) Sufficiency of application. A motion to find an application materially deficient shall be filed no later than 21 days
after an application is filed. The motion shall be served on the applicant by hand delivery, facsimile transmission,
© 2025 Thomson Reuters. No claim to original U.S. Government Works. 4
§ 25.192. Transmission Rates for Export from ERCOT, 16 TX ADC § 25.192
or overnight courier delivery, or by e-mail if agreed to by the applicant or ordered by the presiding officer. The
motion shall specify the nature of the deficiency and the relevant portions of the application, and cite the particular
requirement with which the application is alleged not to comply. The applicant's response to a motion to find an
application materially deficient shall be filed no later than five working days after such motion is received. If within
ten working days after the deadline for filing a motion to find an application materially deficient, the presiding officer
has not filed a written order concluding that material deficiencies exist in the application, the application is deemed
sufficient.
(C) Review of application. A proceeding initiated pursuant to paragraph (1) of this subsection is eligible for disposition
pursuant to §22.35(b)(1) of this title (relating to Informal Disposition). If the requirements of §22.35 of this title are
met, the presiding officer shall issue a notice of approval within 60 days of the date a materially sufficient application
is filed unless good cause exists to extend this deadline or the presiding officer determines that the proceeding should
be considered by the commission.
(5) Filing Schedule. The commission may prescribe a schedule for providers of transmission services to file proceedings
to revise the rates for such services.
(6) DSP's right to pass through changes in wholesale rates. A DSP may expeditiously pass through to its customers changes
in wholesale transmission rates approved by the commission, pursuant to §25.193 of this title (relating to Distribution
Service Provider Transmission Cost Recovery Factors (TCRF)).
(7) Reporting requirements. TSPs shall file reports that will permit the commission to monitor their transmission costs and
revenues, in accordance with any filing requirements and schedules prescribed by the commission.
Credits
Source: The provisions of this §25.192 adopted to be effective April 13, 1999, 24 TexReg 2874; amended to be effective
September 30, 1999, 24 TexReg 8162; amended to be effective December 29, 1999, 24 TexReg 11722; amended to be effective
June 20, 2001, 26 TexReg 4440; amended to be effective August 25, 2010, 35 TexReg 7195; amended to be effective April
18, 2012, 37 TexReg 2613; amended to be effective July 5, 2016, 41 TexReg 4805; amended to be effective December 20,
2022, 47 TexReg 8267.
Current through 50 Tex.Reg. No. 5018, dated July 25, 2025, as effective on or before August 1, 2025. Some sections may be
more current. See credits for details.
16 TAC § 25.192, 16 TX ADC § 25.192
End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works.
© 2025 Thomson Reuters. No claim to original U.S. Government Works. 5
Appendix Tab 6
16 Tex. Admin. Code § 22.35
§ 22.35. Informal Disposition, 16 TX ADC § 22.35
Texas Administrative Code
Title 16. Economic Regulation
Part 2. Public Utility Commission of Texas
Chapter 22. Procedural Rules
Subchapter C. Classification of Applications or Other Documents Initiating a Proceeding
16 TAC § 22.35
§ 22.35. Informal Disposition
Currentness
(a) Applications qualified for informal disposition. An application, other than a major rate proceeding, may be approved by the
commission without a hearing under the following conditions:
(1) at least 15 days have passed since the completion of all notice requirements;
(2) the decision is not adverse to any party other than the commission staff; and
(3) the commission finds that no hearing is necessary.
(b) Methods of disposition.
(1) Notice of approval. Upon delegation by the commission, certain uncontested applications may be approved by the
presiding officer through a notice of approval without consideration by the commission at open meeting. The commission
shall maintain a list of the types of applications eligible for disposition by notice of approval.
(2) Proposed order. For all other applications, the presiding officer shall prepare a proposed order which shall be served
on all parties no less than 20 days before the commission is scheduled to consider the application in open meeting.
(c) Corrections and exceptions.
(1) Corrections to notice of approval. Parties may file suggested corrections to a notice of approval within 15 days of the
issuance of such notice. Corrections may be made at the discretion of the presiding officer.
(2) Exceptions to proposed order. Parties may file exceptions or suggested corrections to the proposed order, no less than
seven days before the commission is scheduled to consider the application in an open meeting.
(d) Rehearing. Nothing in this section shall be construed to alter a party's ability to request rehearing pursuant to § 22.264 of
this title (relating to Rehearing).
© 2025 Thomson Reuters. No claim to original U.S. Government Works. 1
§ 22.35. Informal Disposition, 16 TX ADC § 22.35
(e) Notice requirements. Nothing in this section shall be construed to alter any notice requirement imposed on any proceeding
by statute, rule, or order.
(f) Time limits. Nothing in this section shall be construed to alter any time limit imposed on any proceeding by a statute, rule,
or order.
Credits
Source: The provisions of this § 22.35 adopted to be effective September 8, 1995, 20 TexReg 6627; amended to be effective
July 22, 1998, 23 TexReg 7364; amended to be effective March 26, 2001, 26 TexReg 2351.
Current through 50 Tex.Reg. No. 5018, dated July 25, 2025, as effective on or before August 1, 2025. Some sections may be
more current. See credits for details.
16 TAC § 22.35, 16 TX ADC § 22.35
End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works.
© 2025 Thomson Reuters. No claim to original U.S. Government Works. 2
Appendix Tab 7
16 Tex. Admin. Code § 22.5
§ 22.5. Suspension of Rules and Commission-Prescribed Forms, 16 TX ADC § 22.5
Texas Administrative Code
Title 16. Economic Regulation
Part 2. Public Utility Commission of Texas
Chapter 22. Procedural Rules
Subchapter A. General Provisions and Definitions
16 TAC § 22.5
§ 22.5. Suspension of Rules and Commission-Prescribed Forms
Currentness
(a) Suspension. The commission may suspend the operation of one or more of the sections in this chapter if there exists a public
emergency or imperative public necessity and the commission ascertains that suspension will best serve the public interest and
will not prejudice the rights of any party.
(b) Good cause exception. Notwithstanding any other provision of this chapter, the presiding officer may grant exceptions to
any requirement in this chapter or in a commission-prescribed form for good cause.
Credits
Source: The provisions of this § 22.5 adopted to be effective November 1, 1993, 18 TexReg 6641.
Current through 50 Tex.Reg. No. 5018, dated July 25, 2025, as effective on or before August 1, 2025. Some sections may be
more current. See credits for details.
16 TAC § 22.5, 16 TX ADC § 22.5
End of Document © 2025 Thomson Reuters. No claim to original U.S. Government Works.
© 2025 Thomson Reuters. No claim to original U.S. Government Works. 1
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certificate of service that complies with all applicable rules.
David Laurent on behalf of Jordan Pratt
Bar No. 24140277
david.laurent@oag.texas.gov
Envelope ID: 105609254
Filing Code Description: Brief Requesting Oral Argument
Filing Description: Response Brief of Appellee Public Utility Commission
of Texas
Status as of 9/15/2025 4:49 PM CST
Associated Case Party: City of College Station
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