A View of Administrative Litigation from the Utility Pole

The initial PUC, created by the Public Utility Regulatory Act of 1975 ("PURA"), originally regulated electric, telephone, water, and sewer utilities. Its purpose was to ensure safe, reliable, high-quality utility service at reasonable rates for all Texans. Changes through the years have altered the PUC's responsibilities. The Gas Regulatory Act of 1983 transferred all natural gas regulation to the Texas Railroad Commission, and in 1986 legislation created the Texas Water Commission, now the Texas Natural Resource Conservation Commission, to regulate water and sewer utilities. Telecommunication, telephone, and electric utility companies are now regulated under the PURA of 1995. Regulation includes establishing geographic service areas, standards, and quality of service; developing long-term statewide energy forecasts; and filing numerous reports. Of particular importance to consumers, the PUC sets the rates we pay the utilities for the service we consume.

PURA prescribes the makeup, functions, and operating standards for the PUC, which consists of three salaried commissioners appointed by the governor with the Senate's advice and consent. The commissioners serve staggered six-year terms, and the governor designates the commission's chairman. The PUC is one of Texas' largest regulatory agencies, with 245 full- time employees, organized into three operating divisions:

1. The Office of Executive Director-oversees the agency's daily operations;
2. Office of Regulatory Affairs-litigates all cases before the commission, and provides expert testimony and legal representation; and
3. Office of Policy Development-advises the commissioners on policy issues, drafts preliminary orders in contested cases, and monitors industry trends.

Funding to operate the PUC is in part through assessments on gross receipts from rates charged by public utilities and access-line charges to telephone companies.

The PUC's mission is to "assure the availability of safe, reliable, high quality services that meet the needs of all Texans at just and reasonable rates." Public Utility Commission of Texas, Agency Strategic Plan for the 1997-2001 Period, p.8. The PUC's basic functions are divided into several areas:

1. To issue certificates of convenience and necessity ("CCN")-a requirement for a utility to change or expand its service area, or to build new electric generating units or transmission lines or a new substation outside its already certificated area;
2. To set rates for public utilities-a substitution for competition by maintaining service and rates that are fair and reasonable to both the consumer and the utility;
3. To hold fuel-related proceedings-fuel factor, fuel reconciliation, and fuel refunds. A fuel factor case looks ahead and sets rates at levels intended to allow the utility to earn a reasonable rate of return. A fuel factor is established by dividing the projected fuel expenses by projected sales; it allows the utility to recover a certain amount of the costs through a customer charge for each kilowatt-hour consumed. A fuel reconciliation case looks back at fuel procurement and actual costs, and the PUC determines the reasonableness of actual costs compared with the fuel factor to determine whether the charge to the customer is over or under that set by the fuel factor. A fuel refund case returns to the customers excess revenues resulting from the fuel factor charge; and
4. To approve rates, tolls, and charges paid by the consumer; to monitor the basis for dividends paid to shareholders; to review acquisitions and mergers involving public utilities; to monitor activities between a public utility and its affiliated interests; and to provide customer assistance through the Consumer Affairs Office and the Public Information Office. The PUC has the authority to levy enforcement actions against a utility for violating agency rules and regulations.

Proceedings before an administrative body are quasi-judicial proceedings, and one does not have to be a licensed attorney to appear before a regulatory commission. An uncontested matter brought before the commission is like an uncontested divorce with no minor children. Such a proceeding moves along at a relatively smooth, fast rate. In some instances, a case can be completed in 60 days. On the other hand, a contested matter can take eons to be completed.

A contested case, although it is still a quasi-judicial proceeding, might be compared to a large estate probate involving a will contest between many heirs-it just goes on and on, and even when a settlement is reached, there are "strings" attached which can require continued reporting for years. Contested cases are litigated by the State Office of Administrative Hearings ("SOAH"), established in 1991 by the Seventy-second Texas Legislature pursuant to Senate Bill ("S.B.") 884.

Before the establishment of SOAH, state agencies which did not employ their own hearings examiners or administrative law judges ("ALJs") contracted with private attorneys to serve as ALJs. The SOAH is an independent agency established to hear contested cases and make proposals for final decisions, although the commission actually makes all final decisions. Before the Seventy-fourth Legislative session, the PUC conducted its own hearings; however, S.B. 373 transferred the utility hearings division to SOAH, effective September 1, 1995. Unlike some other agencies, the PUC commissioners retain authority under S.B. 373 to conduct hearings in cases before the PUC; however, the bill mandates that hearings in contested cases not conducted by one or more PUC commissioners be conducted by the Utility Division of SOAH. The PUC also may delegate to the Utility Division of SOAH the authority to make a final decision and to issue findings of fact, conclusions of law, and other necessary orders in an uncontested proceeding and must allow the Utility Division access to its computer systems, databases, and library resources.

SOAH acquires jurisdiction over a case when the agency with subject-matter jurisdiction refers the case. Generally, hearings are conducted in the SOAH offices in Austin, Texas. A contested case proceeds very much like civil litigation, with prehearing conferences, scheduling orders, discovery, settlement negotiations, and hearings. The Texas Rules of Civil Procedure and Rules of Evidence apply. As with any litigious matter, parties must resolve disputes over discovery issues, evidence documents, and many other controversial aspects. Normally, the disputed matters are settled by order of the ALJ, similar to a trial court judge's settling a dispute. Responsive deadlines are much shorter in administrative matters than in civil matters. Because of these short turn-around deadlines, an accurate counting calendar and tickle system must be kept. The PUC Rules of Procedure has different ways of counting response deadlines. For instance, a deadline may be five days (regular calendar days) or five working days (excludes Saturday, Sunday, and legal holiday). Scheduling orders will normally state specific deadlines for various types of responsive pleadings. If a deadline is missed, that party has waived all rights it may have had before the deadline and, in particular, any right of appeal.

As well as rules of procedure, regulatory bodies have Substantive Rules, "a comprehensive regulatory system to assure rates, operations, and services which are just and reasonable to the consumer and the utilities and to establish the rights and responsibilities of both the utility and consumer." PUC Subs.R.23.1. The Substantive Rules state the required forms and information to be furnished to the PUC by the type of case, such as an application for a CCN or a rate case filing package. In addition to the PUC's prescribed forms and required information, the applicant files direct testimony to support its position. Opposing parties are allowed to file direct testimony after the initial case has been filed, and General Counsel for the PUC may file its direct testimony after any intervenor testimony has been filed. The applicant is then permitted to file rebuttal testimony. The testimony is used for the foundation of the case positions, for negotiating settlements, and to narrow the contested issues which will then be taken to a public hearing where witnesses may be cross-examined.

Sometimes it takes many years for an order to become final before it can be appealed to a state district court. Unlike a civil court action, where an order or judgment becomes final 30 days after the judge signs it, administrative orders must go through numerous layers of rules and regulations before they can be appealed. Administrative decisions are issued through interim orders and final orders. An interim order can be appealed to the commission, subject to the commissioners' votes of whether to hear an appeal of an interim order. An interim order is not a final order. Interim orders may be issued by the commission, a hearings officer, an ALJ, the OPD, or any of the various levels of authority within the PUC. If the commission votes to refuse to consider an appeal of an interim order, the order stands.

A "final order" must state that it is a "final order." Before a "final order" can be appealed to a district court, the party must exhaust all administrative levels and file a motion for rehearing before the commission. The commission must vote to rehear the case or to deny a rehearing, or the motion for rehearing will expire by operation of law without commission action before it can be appealed to a district court.

Administrative law is an interesting area, moving at a much faster pace than court litigation, although with probably not as much variety and certainly with no "high profile" case work. Rarely does an administrative case receive a small article in a newspaper, much less become a "media feeding frenzy." Government regulation is a constantly expanding, ever-changing area of law as regulation increases on both federal and state levels. Administrative law and working with regulatory agencies are areas which suggest future job security for paralegals.

TEXAS PARALEGAL JOURNAL
Summer 1997
©1997 Legal Assistants Division, State Bar of Texas

Return to TPJ Eighth Edition

Return to TPJ Home Page