Full opinion text
ON MOTION FOR REHEARING JONES, Justice. The opinion and judgment issued by this Court on August 14, 1991, are withdrawn, and this opinion is filed in place of the earlier one. The district court affirmed an order of the Public Utility Commission (“Commission”) setting rates to be charged by El Paso Electric Company (“EPEC”). The Commission issued the order, after hearing, pursuant to the Public Utility Regulatory Act (PURA), Tex.Rev.Civ.Stat.Ann. art. 1446c (Supp.1992). The City of El Paso (“City”), the State of Texas (on behalf of various state agencies located in western Texas) (“TSA”), and the Office of Public Utility Counsel (“OPC”), appellants, seek reversal of the trial court’s judgment. We will affirm in part and reverse in part. Disapproving of EPEC’s decision to invest in the Arizona Nuclear Power Project, appellants complain of the Commission’s order permitting EPEC to charge rates that allow it to recover most of the project’s costs. The Commission ordered the rate increase after conducting a lengthy evidentiary hearing, providing many opportunities for all parties to plead and present their cases; the Commission considered two sets of motions for rehearing. The Travis County district court, to which the complaining parties brought their appeal, affirmed the Commission’s order. On appeal, appellants challenge twelve different aspects of the Commission’s decision: (1) adoption of a non-unanimous stipulation; (2) failure to disallow more for “decisional” imprudence; (3) approval of deferred accounting for regulatory-lag expenses; (4) failure to disallow more for constructional imprudence; (5) exclusion of witness Hubbard’s testimony; (6) refusal to find excess capacity in EPEC’s system; (7) inclusion of common facilities in rate base; (8) inclusion of income tax expense in cost of service; (9) inclusion of a portion of Unit 2 lease payments in cost of service; (10) calculation and inclusion of other cost-of-service allowances; (11) temporary exclusion of TSA from the proceedings; (12) determination of rates and rate class for TSA. We will reverse the trial court’s judgment to the extent it affirmed the Commission’s approval and use of “deferred accounting” for the carrying costs EPEC incurred between the date the Palo Verde plant became commercially operational and the date the new rates were effective; we will affirm the remainder of the trial court’s judgment. SETTING At the heart of this dispute is EPEC’s decision to expand its power generation system by obtaining an ownership interest in the Arizona Nuclear Power Project, also known as the Palo Verde Nuclear Generating Station. EPEC and four other utility companies agreed to partially fund and otherwise assist in building one or more nuclear steam electric generating units, with attendant common facilities. In return, EPEC was entitled to 15.8% of the resulting net energy generation and the same percentage of available generating capability. Construction is complete on the common facilities and two of the five units originally planned. At the time this proceeding was heard by the Commission, a third unit was still under construction. Factors arising after construction began have induced EPEC to alter its ownership interest in the units. Originally, EPEC owned an undivided interest in each of the units as a tenant in common with the other four project participants. Although EPEC retains its undivided interest in Unit 1,'the company has sold its interest in Unit 2 and made arrangements to lease the unit back for the duration of EPEC’s involvement in the project. Because of the complexity of appellants’ points of error, we will supply additional facts from the record throughout this opinion as necessary to clarify the discussion. PROCEDURAL BACKGROUND On October 31, 1986, EPEC filed an application requesting the Commission to determine whether EPEC’s arrangement to sell and lease back its ownership interest in Unit 2 was in the public interest. On April 6, 1987, EPEC filed applications with various affected cities and the Commission to raise its rates based on the inclusion of the new nuclear plant in its generation system. The City of El Paso, one of the affected cities, approved rates within the El Paso city limits that would not have allowed EPEC to recover any of its nuclear plant investment; EPEC appealed the City’s decision to the Commission. The Commission consolidated EPEC’s appeal with its appeals from the decisions of other municipalities and with the environs case (affecting areas outside the cities) that was already before it. Because of the voluminous evidence to be presented, the Commission initially divided the proceedings in the rate case into three phases. The Commission added a fourth phase after several parties tendered a non-unanimous “stipulation”- to the Commission and requested that the Commission base its decision on the stipulation. In addition, pursuant to an agreed motion, the Commission consolidated the rate case with the proceeding to approve the sale/leaseback arrangement. An examiner convened hearings on each of the four phases during August, September, October, and November of 1987. On February 1, 1988, the hearings examiner filed a report with the Commission recommending against adoption of the stipulation. On March 31, 1988, the Commission signed an order adopting and incorporating the terms of an amended and restated stipulation and increasing rates to permit EPEC to earn a return on part of its investment. The order withheld approval of the sale/leaseback arrangement until a later proceeding, effectively undoing the earlier consolidation. On May 10, 1988, the Commission made minor changes to its order in response to motions for rehearing filed by the City, OPC, TSA, and others. The City, OPC, and TSA filed second motions for rehearing which the Commission overruled on June 16, 1988. The City, OPC, and TSA each appealed the Commission’s order to a Travis County district court, and the Commission obtained a consolidation of those appeals. All the appellants participated in the ensuing district-court review, which resulted in an af-firmance of the Commission’s order. The City, OPC, and TSA each raise several challenges to the trial court’s judgment and, through it, to the Commission’s order. THE NON-UNANIMOUS STIPULATION The threshold complaint of the City and OPC is that the Commission erred in basing its final order, in part, on a non-unanimous stipulation. Both appellants argue that there is no substantial evidence to support the stipulated matters and that the Commission violated its own procedural rules by considering the stipulation. In addition, OPC asserts that some necessary findings or statements of underlying facts are lacking and that, by considering and basing its final order on the stipulation, the Commission “improperly attempt[ed] to negate statutorily created rights belonging solely to OPC.” An unarticulated assumption underlies the majority of appellants’ challenges to the Commission’s decision in these and other points of error; although they do not say so explicitly, appellants impliedly urge us to presume that, by basing its final order partially on stipulated matters, the Commission completely abdicated its responsibility to determine disputed issues. We may not so presume; indeed, the law compels a contrary presumption. In reviewing a challenged administrative order, we must presume its validity. The challenger bears the burden of showing error. Texas Health Facilities Comm’n v. Charter Medical-Dallas, Inc., 665 S.W.2d 446, 453 (Tex.1984); Continental Cars, Inc. v. Texas Motor Vehicle Comm’n, 697 S.W.2d 438, 441 (Tex.App.1985, writ ref’d n.r.e.). We may not substitute our discretion or our judgment for that of the agency; we may reverse an agency’s decision only if it is unsupported by substantial evidence, is arbitrary, or results from an abuse of discretion. Railroad Comm’n v. Continental Bus System, Inc., 616 S.W.2d 179, 181 (Tex.1981). An agency’s decision is arbitrary or results from an abuse of discretion if the agency: (1) failed to consider a factor the legislature directs it to consider; (2) considers an irrelevant factor; or (3) weighs only relevant factors that the legislature directs it to consider but still reaches a completely unreasonable result. Gerst v. Nixon, 411 S.W.2d 350, 360 n. 8 (Tex.1966); Statewide Convoy Trans., Inc. v. Railroad Comm’n, 753 S.W.2d 800, 804 (Tex.App.1988, no writ). Appellants analogize the present case to a civil cause in which the court has rendered an agreed judgment without the consent of all parties. The analogy is not apt. In the present case, the decision-maker did not impose the terms of a settlement on non-settling parties. Although the parties signing the stipulation believed its terms fairly resolved disputed issues, tender of the stipulation to the examiner did not bind the Commission to “adopt” it. Furthermore, the Commission did not, as appellants suggest we presume, adopt the stipulation as its final order without scrutiny- The non-signing parties had ample opportunity to argue their positions both before and after the Commission rendered its decision. A fourth phase was added to the hearings to provide a forum in which parties could object to the Commission’s use of the stipulation as a partial basis for its final order. In addition to presenting evidence, the parties submitted briefs concerning use of the stipulation, filed exceptions to the proposed final order incorporating stipulated matters, and moved for rehearing after the Commission rendered its decision. Having urged their objections to the Commission’s use of the stipulation at each of these stages, appellants yet failed to show that basing a final order on a non-unanimous stipulation would be improper. In a similar case, coincidentally involving the Palo Verde Nuclear Generating Station, the New Mexico Supreme Court approved the state Public Service Commission’s adoption of a non-unanimous stipulation: [The Commission] can adopt a contested stipulation by, first, affording any non-stipulating party an opportunity to be heard on the merits of the stipulation (i.e., whether it is a fair and reasonable resolution of the controversy before the Commission) and second, making an independent finding, supported by substantial evidence in the record, that the stipulation does indeed resolve the matters in dispute in a way that is fair, just and reasonable and in the public interest. Attorney General of New Mexico v. New Mexico Public Service Comm’n, 111 N.M. 636, 640, 808 P.2d 606, 610 (1991). The New Mexico court relied on Mobil Oil Corp. v. Federal Power Commission, 417 U.S. 283, 94 S.Ct. 2328, 41 L.Ed.2d 72 (1974), where the United States Supreme Court noted the distinction between considering a proposal “as a settlement” and considering it “on its merits”: “[E]ven if there is a lack of unanimity [in the stipulation], it may be adopted as a resolution on the merits_” 417 U.S. at 414, 94 S.Ct. at 2282 (quoting Placid Oil Co. v. FPC, 483 F.2d 880, 893 (5th Cir.1973)) (emphasis in original). In the present case, the requirements mentioned in the foregoing cases for the adoption of a non-unanimous stipulation were satisfied. First, the non-stipulating parties were given an opportunity to be heard on the merits of the stipulation. Indeed, as stated above, the Commission added a fourth phase to the proceedings devoted exclusively to receiving evidence and argument on the propriety of using the stipulation as a basis for resolving the contested issues. Second, the Commission made the requisite independent findings. The initial part of the Commission’s Order recited: 4. Even where some parties to a proceeding do not agree to a stipulated result, it is reasonable to adopt such a stipulation if: (a) The parties opposing the stipulation have notice that the stipulation may be considered by the Commission and an opportunity to be heard on their reasons for opposing the stipulation; (b) The matters contained in the stipulation are supported by a preponderance of the credible evidence in the case; (c) The stipulation is in accordance with applicable law; (d) The stipulation results in just and reasonable rates;- (e) The results of the stipulation are in the public interest, including the interest of those customers represented by parties opposing the stipulation. 5. Pursuant to the Findings of Fact and Conclusions of Law set forth below, the Commission finds the Amended and Restated Stipulation, as modified, is a reasonable basis for resolution of the issues in this case and that adoption of the Amended and Restated Stipulation, as modified, as the basis of the Commission’s Order in this proceeding is in the public interest. In addition, Finding of Fact No. 237 stated: “The provisions of the Amended and Restated Stipulation are reasonable and supported by a preponderance of the credible evidence in this record and should be adopted.” Conclusion of Law No. 28 stated: “The Amended and Restated Stipulation, as modified per Finding of Fact No. 6, represents a reasonable resolution of the contested issues in this docket, is supported in the record, is in the public interest, and should therefore be adopted, as the basis for the Commission’s Order in this case.” Appellants have not shown that use of the stipulation as a partial basis for the final order is arbitrary, unreasonable, an abuse of discretion, or involves consideration of factors other than those the legislature has directed the Commission to consider. Under such circumstances, we conclude that the Commission may generally set just and reasonable rates in an order based, in part, on a non-unanimous stipulation. On a procedural level, OPC asserts that the Commission’s rules, specifically Public Utility Commission Rules of Practice & Procedure § 21.151, 16 Tex.Admin. Code § 21.151 (1990), prohibit it from basing its order on a non-unanimous stipulation. Section 21.151 provides: After the expiration of the time for filing exceptions and replies thereto, the examiner’s report and proposal for decision will be considered by the commission and either adopted, modified and adopted, or remanded to the examiner.... OPC admits the Commission has the power to reject an examiner’s recommendation; however, it claims the Commission may not modify and then adopt a stipulation. OPC argues that the Commission violated section 21.151 by basing its final order on a modified stipulation over the examiner’s contrary recommendation. The argument is meritless. Paragraph six of the Commission’s final order expressly adopts findings of fact and conclusions of law proposed by the parties who signed the stipulation. The Commission accepted the proposed findings and conclusions rather than those recommended by the examiner only when there was a conflict between the two. The Commission expressly adopted the “examiner’s report” to the degree it was consistent with the proposed findings and conclusions; it expressly repudiated the section of the examiner’s report concerning EPEC’s prudence in investing and remaining involved in the project. We hold that the Commission was not required to accept or reject the examiner’s report in its entirety. The Commission’s authority undoubtedly extends to repudiating a part of the examiner’s report and modifying it by deletion. Within its challenge to the Commission’s use of the stipulation, OPC claims that paragraph 4(e) of the Commission’s final order “supplants” OPC’s authority to represent the interest of residential and small business consumers in ratemaking cases of this type. Paragraph 4(e) provides: “The results of the stipulation are in the public interest, including the interest of those customers represented by parties opposing the stipulation.” OPC’s interpretation of the order and of its own enabling legislation is incorrect. The legislature created OPC to “advocate” the interests of residential and small commercial consumers. PURA § 15A(a). However, the Commission must set just and reasonable rates in ratemaking cases. PURA § 38. In addition, only the Commission has the authority to determine whether a sale of utility assets is in the public interest. See PURA § 63. Authority to advocate a position on behalf of small businesses and residential consumers is not equivalent to authority to decide what is in the public’s best interest. The only authority OPC possesses is the former. OPC’s contention is overruled. One challenge to the Commission’s use of the non-unanimous stipulation remains. Appellants argue that some findings of fact phrased in statutory language lack the required accompanying concise statements or findings of underlying facts. This argument, addressed to all the findings accompanying the final order, is too general to preserve error. To the extent that appellants assert generally that necessary findings of underlying fact are missing, they have waived their complaint by failing to demonstrate any error prejudicing their substantial rights. See Administrative Procedure and Texas Register Act (hereinafter “APTRA”), Tex.Rev.Civ.Stat.Ann. art. 6252-13a, § 19(e) (Supp.1992). The order addresses numerous issues, and appellants have made several specific substantial-evidence and finding-of-fact challenges. We will discuss appellants’ specific (and consequently preserved) challenges while disposing of their remaining points of error. “DECISIONAL” IMPRUDENCE The Commission concluded that due to imprudent decisions, $32 million of EPEC’s costs should not be included in rate base. The City’s third point of error and OPC’s second point contend that the disallowance is unsupported by substantial record evidence, arguing that the amount disallowed should have been greater. OPC also charges that the Commission acted arbitrarily and abused its discretion in selecting the $32 million figure and that it made insufficient findings of underlying facts. Based on its anticipated load demand, EPEC first decided to participate in the nuclear power project at a 15.8% level. Confident that its decision was a prudent one, EPEC has continued to participate at the same level. When appellants challenged the prudence of EPEC's decisions, the City, EPEC, and the Commission staff each offered expert testimony on whether EPEC had acted prudently in deciding to participate in the project and in continuing to participate at the 15.8% level. The Commission concluded EPEC had not been entirely prudent in making decisions about its level of participation in the project. The issues we must resolve are: (1) whether substantial evidence supports the findings underlying the Commission’s disal-lowance of the precise $32 million figure, and (2) whether the Commission made the necessary findings of fact to allow this Court to conduct a meaningful review of imprudently incurred costs. A. Substantial Evidence and Abuse of Discretion. In conducting a substantial-evidence review, we must determine whether the evidence as a whole is such that reasonable minds could have reached the conclusion the agency must have reached in order to take the disputed action. Texas State Bd. of Dental Examiners v. Sizemore, 759 S.W.2d 114, 116 (Tex.1988), cert. denied, 490 U.S. 1080, 109 S.Ct. 2100, 104 L.Ed.2d 662 (1989); Texas Health Facilities Comm’n v. Charter Medical-Dallas, Inc., 665 S.W.2d 446, 453 (Tex.1984). We may not substitute our judgment for that of the agency and may consider only the record on which the agency based its decision. Sizemore, 759 S.W.2d at 116. The appealing party bears the burden of showing a lack of substantial evidence. Charter Medical, 665 S.W.2d at 453. It cannot meet this burden merely by showing that the evidence preponderates against the agency decision. Id. at 452. If substantial evidence would support either affirmative or negative findings, we must uphold the agency’s order, resolving any conflict in favor of the agency’s decision. Auto Convoy Co. v. Railroad Comm’n, 507 S.W.2d 718, 722 (Tex.1974); Warner v. City of Lufkin, 582 S.W.2d 165, 167 (Tex.Civ.App.1979, writ ref’d n.r.e.). Appellants’ position is that only the City’s witness, Ben Johnson, provided a method by which the Commission could quantify the amount of imprudently incurred costs. Johnson offered the opinion that EPEC had made several imprudent decisions and that, as a result, the Commission should disallow 50% of its costs. The City contends that because no other witness suggested a quantification method, the Commission, upon a finding of some decisional imprudence, should have adopted Johnson’s quantification method and, necessarily, his result. We do not agree. The Commission is empowered to hold hearings, receive evidence, make decisions, issue orders, and find facts. PURA § 16. In addition, the Commission impliedly possesses those powers necessary and convenient to making findings and decisions. PURA § 16(a). PURA does not expressly confer on the Commission power to judge witnesses’ credibility; however, the requirement that the Commission make decisions, findings of fact, and conclusions of law implies the necessary corollary power to judge credibility and to accept or reject a witness’s testimony in whole or in part. Gerst v. Guardian Sav. & Loan Ass’n, 434 S.W.2d 113, 116 (Tex.1968); Texas State Bd. of Dental Examiners v. Silagi, 766 S.W.2d 280, 283 (Tex.App.1989, writ denied). EPEC maintains that, based on information available at the time it made its decisions, its continued participation in the project would enable it to supply ratepayers with needed electricity at the lowest possible cost. Consequently, EPEC contends that all its costs should be included in rate base. The City, on the other hand, argues that available data would have informed a prudent utility manager that involvement in a nuclear project would be unduly burdensome to ratepayers. Consequently, Johnson recommended that the Commission disallow half of EPEC’s costs. However, the evidence encompassed more than Johnson’s recommendations. All the witnesses who offered their opinions about EPEC’s decisional prudence recognized the complexity of a decision to construct or purchase new generating capacity. A utility must weigh many competing concerns before undertaking an expansion project. EPEC, as a part of its decision to participate in the Arizona Nuclear Power Project, considered the following factors, among others: (1) the feasibility of obtaining financing; (2) the effect of long-term financing on EPEC’s financial integrity; (3) the potential impact on ratepayers of increasing system capacity by a significant percentage; (4) predicted expenses, revenues, and load demands for the relevant time periods; (5) EPEC’s degree of financial flexibility; and (6) the availability of alternative sources for the additional capacity that forecasts had shown would be necessary. The effects these factors have on total project costs are not susceptible of ready quantification. Requiring the Commission to adopt or reject witnesses' testimony in toto, especially when the testimony concerns a multifaceted issue such as this one, would hobble the Commission’s ability to assess each witness and render its decision based solely on the testimony it found credible. Having deduced that the Commission may properly accept less than all of a witness’s testimony, we conclude the Commission committed no error in disallowing a lesser percentage of costs than Johnson recommended. The Commission could properly identify the factors which credible evidence showed EPEC should have considered when making its decisions. Likewise, the Commission could also decide that prudence would not have required EPEC to consider other factors because the evidence to the contrary was not credible. The record contains substantial evidence to support a disallowance figure of zero for decisional imprudence; the Commission would, therefore, have been acting within its discretion had it agreed that EPEC was entirely prudent in its management and planning. The substantial evidence would also have supported a Commission finding that 50% of EPEC’s costs should have been disallowed. Appellants assert that the stipulation is the only possible evidence of the exact $32 million disallowance. Because the appellants do not admit that the stipulation has any evidentiary weight, they contend there is no evidence to support the $32 million figure. We disagree. Because it is a statement contrary to EPEC’s pecuniary interest, the concession has some evidentiary weight. A declaration contrary to a party’s position on a disputed issue is akin to a quasi-admission. While not binding on the declarant, as a judicial admission would be, such a concession constitutes some evidence. Mendoza v. Fidelity & Guar. Ins. Underwriters, Inc., 606 S.W.2d 692, 694 (Tex.1980); Texas Distillers, Inc. v. Howell, 409 S.W.2d 888, 890 (Tex.Civ.App.1966, writ ref’d n.r.e.). It is for the trier of fact to determine the weight to be assigned to a quasi-admission. Mendoza, 606 S.W.2d at 694. EPEC’s position has always been that it acted prudently in deciding to participate in the project at the 15.8% level. Nevertheless, EPEC conceded through the stipulation that, if its decision had been imprudent, the resulting costs that should be disallowed totaled $32 million. Such a statement is clearly contrary to EPEC’s position. Therefore, the Commission could properly consider and weigh the stipulation in quantifying the imprudently incurred costs. The range of figures supported by the testimony of expert witnesses, the complexity of the issues the Commission had to review to determine whether EPEC made prudent decisions, the difficulty of assigning a value to the effects of any component on project costs, and EPEC’s admission against interest all combine to compel our conclusion that substantial record evidence supports the $32 million disallowance. We overrule the substantial-evidence challenge to the disallowance for decisional imprudence. In addition, because OPC’s contention that the Commission abused its discretion rests on the premise that the stipulation has no evidentiary weight, and because we have concluded to the contrary, we overrule this contention as well. B. Findings of Fact. As its final challenge within this point, OPC asserts that “[t]he Commission’s findings are insufficient to comply with AP-TRA.” However, instead of arguing that specific findings of underlying fact are insufficient, OPC complains that the Commission failed to provide “explicit statements of underlying facts to support its findings as required by Tex.Rev.Civ.Stat.Ann. art. 6252-13a, § 16(e) (APTRA).” Section 16(b) of APTRA provides, in part, that “[fjindings of fact, if set forth in statutory language, must be accompanied by a concise and explicit statement of the underlying facts supporting the findings.” (Emphasis added.) The Texas Supreme Court has concluded that an agency’s findings of fact need the additional support of findings of underlying facts only when the ultimate findings are in terms taken directly from the enabling legislation or when they “represent the criteria that the legislature has directed the agency to consider in performing its function.” Charter Medical, 665 S.W.2d at 451. The “statutory language” to which AP-TRA § 16(b) refers is the language in the statute that confers authority on the agency to take the complained-of action. Id. In PURA, the legislature authorized the Commission to make orders setting rates. PURA § 37. A number of PURA’s sections also detail the criteria the Commission is to consider in setting rates. See PURA §§ 38, 39, 41, and 43. Therefore, only when the Commission’s findings are stated in PURA’s express terms, or when they represent criteria the legislature has directed the Commission to consider, must the Commission also make findings of underlying fact. OPC does not direct us to a particular finding that requires, but is not accompanied by, findings of underlying fact. However, we conclude from its argument that Findings 101 through 103 are the subjects of its complaint, because those findings address the prudence and disallowance issues. Although PURA does not expressly require the Commission to make a finding of prudence before including costs in rate base, once the Commission finds a major project to have been imprudently planned or managed, it should generally disallow project costs to the extent of the imprudence. See PURA § 41(a); supra note 3. Finding of Fact 101 is phrased in statutory terms; the Commission therein decided that EPEC was “not entirely prudent in its planning and management” of the project. The phrasing of that finding in statutory terms required the Commission to make findings of underlying fact showing the basis for the Commission’s determination of imprudence and supplying the amount of the disallowance. Findings 102 and 103 accomplish these goals. Neither Finding 102 or 103 is phrased in statutory terms. Finding 103 states that “[qjuantification of the effects of imprudence requires the exercise of judgment based upon the evidence. In light of the evidence relating to prudence and the difficulties in quantification, the quantification of decisional imprudence at $32 million for Units 1 and 2 is reasonable and appropriate.” Finding 102 indicates the Commission concluded that imprudence existed only with respect to “the Company’s continuing evaluation of the level of its participation in the Palo Verde Project.” (Emphasis added.) Taken together, these findings adequately supply the required concise statement of underlying facts supporting Finding 101. OPC contends that, in order to be sufficient, the Commission’s findings of underlying fact must identify “the processes and acts found to be imprudent, the nexus between those acts and the disallowance amount, [and] the evidentiary support for the disallowance figure.” OPC fails to point either to statutory provisions or case law mandating that the Commission make such findings. Not having discovered any such authority ourselves, we conclude that such findings are not required. We overrule the City’s third point of error and OPC’s second point of error. DEFERRALS EPEC requested that its rate base be increased by the amount of carrying costs and operating and maintenance costs it incurred during “regulatory lag.” The utility had “deferred” these types of costs for Units 1 and 2, aggregating each type of cost for each unit into a separate capital account. EPEC obtained the Commission’s prior permission to defer Unit 1 costs. The Commission reserved the right, however, to refuse subsequently to include the deferred costs in rate base to the extent they were unreasonable, related to plant not used and useful, or were spent or incurred imprudently. Although EPEC did not obtain prior permission to defer its post-in-service costs for Unit 2, it nevertheless deferred them, apparently assuming that obtaining prior approval a second time was unnecessary. After the rate-increase proceeding was completed, the Commission included the deferred costs for both units in rate base. In this appeal, the City and OPC contend the Commission erred, first, in entering an order permitting EPEC to defer Unit 1 costs and, second, in subsequently including the “deferred-costs assets” for both units in rate base. OPC and the City lodge several arguments against the deferred accounting procedure used here, including that the practice constitutes impermissible retroactive ratemaking and that it violates the “original-cost” standard contained in PURA § 41(a). Thus, they assert that the Commission exceeded its authority by including the deferred post-in-service costs in rate base. A reviewing court's role in construing a statute is to “seek out the legislative intent from a general view of the enactment as a whole, and, once the intent has been ascertained, to construe the statute so as to give effect to the purpose of the Legislature.” Hightower v. State Comm’r of Educ., 778 S.W.2d 595, 597 (Tex.App.1989, no writ); see also Medeiros v. Insurance Co. of N. Am., 781 S.W.2d 404, 406 (Tex.App.1989, no writ); Sexton v. Mount Olivet Cemetery Ass’n, 720 S.W.2d 129, 137 (Tex.App.1986, writ ref'd n.r.e.). As a general rule, an administrative agency is a creation of the legislature and, as such, has only those powers expressly conferred and those necessary to the accomplishment of its duties. State v. Jackson, 376 S.W.2d 341, 344 (Tex.1964); Sexton, 720 S.W.2d at 137; Railroad Comm’n v. Atchison, T. & S.F. R.R., 609 S.W.2d 641, 643 (Tex.Civ.App.1980, writ ref'd n.r.e.). The present case is governed by PURA, which expressly grants to the Commission “the general power to regulate and supervise the business of every public utility within its jurisdiction and to do all things, whether specifically designated in this Act or implied herein, necessary and convenient to the exercise of this power and jurisdiction.” PURA § 16(a). A reviewing court may determine, as a matter of law, the scope of an agency’s statutory authority. See Gage v. Railroad Comm’n, 582 S.W.2d 410, 412 (Tex.1979). The power of an agency to take such actions as may be “necessary” to perform an express duty is not without limits. This Court has previously held that [t]he agency may not, however, on a theory of necessary implication from a specific power, function, or duty expressly delegated, erect and exercise what really amounts to a new and additional power or one that contradicts the statute, no matter that the new power is viewed as being expedient for administrative purposes. Sexton, 720 S.W.2d at 137-38 (emphasis added). Thus, if there is no specific express authority for a challenged action, and if the action is inconsistent with a statutory provision or ascertainable legislative intent, we must conclude that, by performing the act, the agency has exceeded its grant of statutory authority. PURA requires the Commission to set rates at a level that will permit each utility “a reasonable opportunity to earn a reasonable return on its invested capital used and useful in rendering service to the public over and above its reasonable operating expenses.” PURA § 39(a). This provision imposes many complex tasks on the Commission: What are the utility’s reasonable operating expenses? What portion of the utility’s expenditures constitute capital investment? What portion of the utility’s invested capital is used and useful in rendering service? How should the value of the utility’s used-and-useful invested capital be calculated? What is a reasonable return on the utility’s used-and-useful invested capital? Historically, one of the most vexing questions for regulatory authorities has been how to calculate the value of a utility’s invested capital. See Charles F. Phillips, The Regulation of Public Utilities 305-29 (2nd ed. 1988) (hereinafter cited as “Phillips”). In the landmark case of Smyth v. Ames, 169 U.S. 466, 18 S.Ct. 418, 42 L.Ed. 819 (1898), the United States Supreme Court established the legal basis of the so-called “fair value” doctrine: [T]he basis of all calculations as to the reasonableness of rates to be charged by a corporation ... must be the fair value of the property being used by it for the convenience of the public. And in order to ascertain that value, the original cost of construction, the amount expended in permanent improvements, the amount and market value of its bonds and stock, the present as compared with the original cost of construction, the probable earning capacity of the property under particular rates prescribed by statute, and the sum required to meet operating expenses, are all matters for consideration, and are to be given such weight as may be just and right in each case. We do not say that there may not be other matters to be regarded in estimating the value of the property. What the company is entitled to ask is a fair return upon the value of that which it employs for the public convenience. Id. at 546-47, 18 S.Ct. at 434. Smyth v. Ames commanded that both the original cost of construction, on the one hand, and the current reproduction or replacement cost, on the other hand, must be “considered” in setting rates. As debate raged as to which of the two cost measures should receive the greater weight or emphasis, the Smyth fair-return doctrine received increasing criticism over the years. Finally, Smyth was abandoned by the Supreme Court in Federal Power Comm’n v. Hope Natural Gas Co., 320 U.S. 591, 64 S.Ct. 281, 88 L.Ed. 333 (1944). The Court in Hope held that regulatory commissions are not bound by any particular formula in determining rates, as long as the rates established “enable the company to operate successfully, to maintain its financial integrity, to attract capital, and to compensate its investors for the risks assumed.” 320 U.S. at 605, 64 S.Ct. at 289. The Texas experience roughly paralleled that of the federal system. In Railroad Commission v. Houston Natural Gas Corporation, 289 S.W.2d 559 (Tex.1956), after a thorough historical review, the Texas Supreme Court held that pre-PURA statutes mandated a fair-value method of valuation, which the court defined as “a reasonable balance between original cost less depreciation and replacement cost new less an adjustment for present age and condition.” Id. at 572. As originally adopted in 1975, PURA incorporated this fair-value definition. In 1983, however, the legislature amended PURA to make Texas a pure “original-cost” state. Section 41(a) of PURA now provides: Sec. 41. The components of invested capital ... shall be determined according to the following rules: (a) Invested Capital. Utility rates shall be based upon the original cost of property used by and useful to the public utility in providing service including construction work in progress at cost as recorded on the books of the utility. The inclusion of construction work in progress is an exceptional form of rate relief to be granted only upon the demonstration by the utility that such inclusion is necessary to the financial integrity of the utility. Construction work in progress shall not be included in the rate base for major projects under construction to the extent that such projects have been inefficiently or imprudently planned or managed. Original cost shall be the actual money cost, or the actual money value of any consideration paid other than money, of the property at the time it shall have been dedicated to public use, whether by the utility which is the present owner or by a predecessor, less depreciation. PURA § 41(a) (emphasis added). In addressing the arguments made by the City and OPC in the present case, we deem it convenient to discuss separately the two different types of costs for which the Commission allowed deferred-accounting treatment: (1) carrying costs, and (2) operating and maintenance costs. A. Carrying Costs. As a general rule, the only assets that may be included in a utility’s rate base (so that the utility earns a return on the value of such assets) are those found to be “used and useful” in providing service to the utility’s customers. As quoted above, for example, section 41(a) of PURA specifically states that rates must be based on “the original cost of property used by and useful to the public utility in providing service.” When a new plant is built, the utility must invest large amounts of capital during construction. Until the plant is completed, however, it is usually not considered a used and useful asset. Accordingly, a rigid application of the used-and-useful rule could prohibit the utility from earning a return on this invested capital until the new plant is completed and its cost is included in rate base by the regulatory authority. Thus, under such a rigid application, equity capital that had been or could have been earning a return for the utility would, when devoted to construction of the new plant, be unable to earn a return until the new plant was completed and its cost included in rate base; further, any interest actually paid on borrowed funds would not earn a return, even though the payment of such interest might have required the investment of additional capital. It has been widely if not universally conceded that utilities should, in fairness and occasionally out of economic necessity, be compensated for these carrying costs, especially for major capital construction projects. Two methods have been developed to compensate utilities for such costs. The first method capitalizes the carrying charges incurred during the construction period as allowance for funds used during construction (AFUDC). AFUDC is recorded part as current income, part as an offset to interest expenses, but no cash payments are made by ratepayers during construction. The payments from ratepayers to recover the carrying charges begin when the completed plant goes on stream. The entire cost of the plant (including AFUDC) is added to rate base, and it earns a rate of return on investment and is depreciated over the life of that plant. James Bonbright, et al., Principles of Public Utility Rates 246 (2nd ed. 1988) (hereinafter cited as “Bonbright”). The second method, as the Bonbright treatise explains it, is to include construction work in progress (CWIP) in the rate base. (CWIP includes accrued AFUDC on investment not in rate base.) The regulatee recovers its carrying charges currently from ratepayers through the return component of its rates, rather than adding them to the cost of construction for recovery when the plant is in service. The return on CWIP is recorded as income on a current basis (like AFUDC), and actual cash payments are made by the ratepayers currently (unlike AFUDC). Id. Section 41(a) of PURA expressly permits the inclusion of CWIP in rate base where the utility demonstrates that “such inclusion is necessary to the financial integrity of the utility,” and CWIP may be included only to the extent that the project has not been “inefficiently or imprudently planned or managed.” PURA § 41(a). In the present case, CWIP was not requested; rather, EPEC accrued AFUDC in a capital account while the plant was under construction. When the new plant began commercial operation, FERC accounting rules required EPEC to cease accruing AFUDC in a capital account; any such costs that continue after commercial operation begins must thereafter be recorded as expenses. Except for deductions for imprudence, the “original cost” of the plant, including AFUDC, was included by the Commission in EPEC’s rate base. In addition, however, the Commission allowed EPEC to defer, and later included in rate base, the carrying costs that EPEC incurred between the date of commercial operation and the effective date of the new rates that included in rate base the “original cost” of the Palo Verde plant. These carrying costs appear to be simply a continuation of AFUDC under a different name. OPC contends that the Commission’s action violated the provision in section 41(a) permitting only the cost of the new plant “at the time it shall have been dedicated to public use” to be included in rate base. We agree. The legislature has made it clear in section 41(a) that the value of new plant is, for rate-base purposes, to be measured by its original cost at the time the plant is dedicated to public use. As stated above, it has been generally recognized that carrying costs associated with the construction of a new plant are essentially part of the “original cost” of constructing the plant, and the utility should be compensated for them by including at least part of those costs in rate base. Nonetheless, the legislature apparently chose to simplify the calculation of a plant’s original cost by placing a “cut-off date” on construction and acquisition costs: such costs must be calculated as of the time the physical asset being constructed or acquired is placed in public service. As stated earlier, the post-in-service carrying costs that were allowed to be “deferred” and which were included in rate base in the present case are indistinguishable from the AFUDC that was properly accrued and capitalized before commercial operation began. Accordingly, any procedure that permits such costs to be included in rate base would effectively allow the inclusion in rate base of a construction cost of the plant that was incurred after the plant’s dedication to public use, thereby violating the mandate of section 41(a) that the original cost of new plant be calculated as of the date the plant is placed in public service. In effect, such a procedure would, by an accounting device, permit the Commission to let in through the back door what the legislature has expressly prohibited coming in the front door. Even without the unique wording of section 41(a), the Washington Utilities and Transportation Commission reached the same conclusion when faced with a request to extend the period of capitalization of AFUDC from the in-service date of a new plant to the date when new rates went into effect: [AJccrual of AFUDC after the in-service date of a utility plant would result in a utility plant with a value exceeding its “original” cost. The original cost concept requires that the value of utility plant be determined at the time it is first placed in service to the public. To grant this petition would establish a dangerous and unwarranted precedent leading to further requests to disregard the original cost concept. In re Puget Sound Power & Light Co., 62 PUR4th 436, 440 (Wash. Util. & Transp. Comm’n 1984). Whether or not one agrees that the original-cost method of valuation requires, as a general proposition, that the value of a utility plant must be determined at the time it is first placed in service to the public, the language of section 41(a) clearly mandates that approach. Accordingly, the Commission contravened section 41(a) when it allowed post-in-service carrying costs to be included in EPEC’s rate base. EPEC and the Commission present several arguments against such a construction of section 41(a). First, they argue that the phrase “at the time it shall have been dedicated to public use” does not mean the time the plant itself is placed in service. They assert, instead, that the phrase refers to the money spent to construct the plant, and that such money is dedicated to public use at the time it is spent. We cannot agree with this interpretation of section 41(a). For example, section 41(a) states that “original cost” is “the actual money cost... of the property at the time it shall have been dedicated to public use.” Thus, the reference to “property” in section 41(a) is obviously to property being acquired or constructed in exchange for the payment of money, not to the funds themselves used to pay for its acquisition or construction. Just as clearly, the term “it” in the phrase “at the time it shall have been dedicated to public use” refers back to the “property” being acquired or constructed. Thus, in the case of new plant, section 41(a) requires that the plant’s original cost be determined as of the time the new plant is placed in service. EPEC and the Commission next argue that “dedicated to public use” does not refer to the time a plant begins commercial operation. We disagree. Having determined that the “cut-off date” contained in section 41(a) refers to the property being acquired or constructed, and not to the money used to pay for its acquisition or construction, the question becomes: When is a new plant dedicated to public use? We conclude that new plant is dedicated to public use when it is first placed in public service. First, the plain meaning of the statutory provision supports the proposition that a plant has not been “dedicated to public use” until it has been placed in public service, and a plant is placed in public service when it begins operating commercially. Second, under FERC rules and Commission practice, a utility must cease accruing AFUDC when a new plant begins commercial operation. Simple logic dictates that the most appropriate time to determine the original cost of a capital asset is when existing accounting rules require that a significant, ongoing cost of that asset cease being capitalized and start being expensed. In this connection, EPEC and the Commission also argue that section 41(a) does not contain any temporal limitation (i.e., “cut-off date”) on the determination of the original cost of capital assets. They stress that section 41(a) provides that original cost is the actual money cost of property “at the time it shall have been dedicated to public use, whether by the utility which is the present owner or by a predecessor.” They contend’ that the emphasized clause above shows that the purpose of section 41(a) is simply to prevent utilities from selling or transferring a plant to another utility and having the purchasing utility use its purchase price as the original cost of the plant. Thus, they argue, the last sentence of section 41(a) merely requires that original cost be the cost to whichever utility first placed the plant in public service, not that original cost must necessarily be determined at the specific time that the plant was placed in service. We disagree. The language of section 41(a) could hardly be clearer in this regard: “Original cost shall be the actual money cost ... of the property at the time it shall have been dedicated to public use_” The clause that follows, “whether by the utility which is the present owner or by a predecessor,” is simply one of clarification, emphasizing that the time of dedication to public use is the critical date, irrespective of whether that dedication was made by the current owner or a predecessor. Ignoring the statute’s plain language, EPEC cites Office of Consumers’ Counsel v. Public Utilities Commission, 18 Ohio St.3d 264, 480 N.E.2d 1105 (1985), in which the Ohio Supreme Court construed the relevant Ohio statute to mean that original cost would be the cost “to the person that first dedicated the property to the public use”; the court went on to hold that the statute “establishes which entities’ costs are to be utilized in establishing a rate base. [It] does not affect the timing of property valuation.” Id. 480 N.E.2d at 1107. A comparison of the Ohio statute with the Texas statute, however, shows why the Texas statute cannot rationally be given the same construction. The Ohio statute provided: “Such original cost of property ... shall be the cost, as determined to be reasonable by the commission, to the person that first dedicated the property to the public me_” Ohio Rev.Code Ann. § 4909.-05(E) (emphasis added). The Texas statute provides: “Original cost shall be the actual money cost ... of the property at the time it shall have been dedicated to public use, whether by the utility which is the present owner or by a predecessor, less depreciation.” PURA § 41(a). The two statutes could not be more different in their focus and meaning. The Ohio statute focuses on “who”; the Texas statute focuses on “when.” Accordingly, the Office of Consumers’ Counsel case is inapposite. EPEC and the Commission next argue that our construction of section 41(a) will prevent the inclusion in rate base of recognized elements of invested capital, such as working capital, “accumulated deferred federal income tax,” and rate case expenses, none of which have a “commercial operation” date or an “in-service” date. We disagree that our holding will have such an effect. As stated above, the purpose of section 41(a) was to establish a method of valuing tangible property acquired or constructed by the utility. Although the term “property” can, in an appropriate context, certainly have a meaning broader than just tangibles, the history of the original-cost/replacement-cost debate as to the proper method of valuing a utility’s invested capital indicates that the crux of the dispute has related primarily, if not exclusively, to plant-in-service. Indeed, the supreme court in the Alvin Case held that “the Texas statutes require a physical property valuation rate base.” Houston Natural Gas, 289 S.W.2d at 564 (emphasis added). We recognize that a utility’s invested capital — and therefore its rate base — can include more than plant-in-service. For example, one noted commentator identifies the following four elements of a utility’s rate base: (1) “tangibles, which includes ‘used and useful’ land, buildings, and equipment (plant)”; (2) “other elements of value, [which] includes working capital, property held for future use, and intangibles”; (3) “customer contributions and tax deferrals, [which are] frequently deducted from the rate base, since those components do not represent investor-supplied capital”; and (4) “construction work in progress.” Phillips, supra at 302. The Bonbright treatise also identifies four elements of rate base, although it arranges the categories somewhat differently: “(1) net plant in service; (2) property held for future use; (3) working capital; and (4) construction work in progress (CWIP) — no AFUDC.” Bon-bright, supra at 237. Although “invested capital” can include more than tangible assets, it is simply not feasible to apply the original-cost formula contained in section 41(a) to certain types of assets, e.g., intangibles and working capital. Such assets have no money “cost” by which they are acquired or constructed; indeed, in some instances they more closely resemble the payment of money than a tangible asset for which money is paid. Nonetheless, we do not believe the legislature intended for section 41(a) to limit a utility’s rate base to the original cost of tangible assets, and we do not so hold. We hold only that the original-cost formula (“the actual money cost ... of the property at the time it shall have been dedicated to public use”) states a mandatory method for the valuation of tangible assets, i.e., plant-in-service. This holding neither addresses nor affects the issue of whether — and to what extent — other types of assets may be included in rate base. EPEC and the Commission next argue that sections 2, 16, 27, and 39 of PURA grant broad enough powers to the Commission to allow it to use “deferred accounting” procedures. Without discussing those statutory provisions in detail, we note our general agreement that they grant broad power and discretion to the Commission. However, they do not expressly authorize inclusion of post-in-service carrying costs in rate base, and we cannot construe them to impliedly permit an action that is contrary to or inconsistent with another section of PURA. Sexton, 720 S.W.2d at 137-38. And as we have held, allowing post-in-service carrying costs to be included in rate base is inconsistent with section 41(a). We conclude, therefore, that the Commission exceeded its authority when it included in EPEC’s rate base the carrying costs incurred by EPEC after the Palo Verde plant began commercial operation. B. Operating and Maintenance Costs. 1. PURA § 41(a) The foregoing discussion makes it clear that we consider the purpose of PURA § 41(a) to be the establishment of a method of determining the value of tangible capital assets that a utility has acquired or constructed. Section 41(a) prohibits post-in-service carrying costs from being included in rate base because carrying costs constitute part of the actual money cost of acquiring or constructing new plant. Operating and maintenance (0 & M) costs, on the other hand, are not part of the cost of acquiring or constructing new plant; rather, they are expenses associated with maintaining the plant after it is already in service. To illustrate the distinction, if the Palo Verde plant had been completely shut down and abandoned the day after it became operational, EPEC’s carrying costs would have continued unabated until all funds borrowed for its construction were repaid; the 0 & M costs, however, would have ceased. Because post-in-service 0 & M costs are not part of the “actual money cost” of acquiring or constructing the plant, the original-cost formula contained in section 41(a) simply has no application to such expenditures. Accordingly, whatever other objections may be made to the inclusion in rate base of post-in-service 0 & M costs, such inclusion is not inconsistent with PURA § 41(a). 2. Retroactive Ratemaking Initially, we note that EPEC applied for and received from the Commission permission to defer post-in-service 0 & M costs on Palo Verde Unit 1 before that unit became commercially operational. Accordingly, we question whether the inclusion of Unit 1 0 & M costs has any retrospective effect at all. Indeed, the City does not even lodge a retroactive-ratemaking complaint about the inclusion in rate base of 0 & M costs as to Unit 1. However, because we must address whether the inclusion in rate base of 0 & M costs for Unit 2 constitutes improper retroactive ratemaking, we will assume without deciding that the Commission’s inclusion of Unit 1 0 & M costs in rate base did have a retrospective effect. As stated previously, sections 2, 16, 27, and 39 of PURA expressly grant broad powers to the Commission. We believe those provisions give the Commission discretionary authority to allow deferral and capitalization of post-in-service 0 & M costs, and to permit the Commission to include such costs in rate base, unless such a procedure is inconsistent with other state law. Thus, to determine the validity of the Commission’s action in the present case, we must determine whether the deferral, capitalization, and inclusion in rate base of such costs is inconsistent with a statutory or constitutional prohibition of retroactive ratemaking. See Texas Ass’n of Long Distance Tel. Cos. (TEXALTEL) v. PUC, 798 S.W.2d 875, 881-82 (Tex.App.1990, writ denied); Southwestern Bell Tel. Co. v. PUC, 615 S.W.2d 947, 953 (Tex.Civ.App.), writ ref'd n.r.e., 622 S.W.2d 82 (Tex.1981). a. Statutory prohibitions. In order to satisfy the first prong of the retroactivity test, the action allegedly having retrospective effect must not contravene any statutory prohibition. As stated above, we have concluded that the deferral, capitalization, and later inclusion in rate base of post-in-service 0 & M costs is not contrary to PURA § 41(a). Appellants also contend, however, that inclusion of such 0 & M costs is inconsistent with PURA § 43(f). Section 43(f) provides that if, after hearing, the Commission finds the existing rates to be unreasonable or in violation of law, it shall fix new rates “by order,” which rates are “thereafter to be observed until changed.” Although many jurisdictions have construed the term “thereafter” to give the regulatory authority power to prescribe rates prospectively only, the Texas Supreme Court stated in one case that the term in section 43(f) gives Texas agencies “discretion” in setting the effective date of new rates. See Railroad Comm’n v. Lone Star Gas Co., 656 S.W.2d 421, 425-26 (Tex.1983). Nonetheless, this Court has held that PURA § 43(f) prohibits the Commission from making new rates effective at a date earlier than the date of the order fixing those rates. See PUC v. GTE-SW, 833 S.W.2d 153 (Tex.App.—Austin, 1992, writ denied); PUC v. General Tel. Co., 777 S.W.2d 827 (Tex.App.1989, writ dism’d); cf. TEXALTEL, 798 S.W.2d at 882-84 (rates may be made effective after order fixing the level of revenues but before final approval of tariffs). In the present case, the effective date of the new rates was not prior to the date of the order fixing the rates. Therefore, the Commission’s action here was not inconsistent with our holdings in GTE-SW and General Telephone. Appellants argue, however, that the inclusion in rate base of deferred 0 & M costs had the effect of implementing the new rates as of the date the Palo Verde plant became commercially operational, i.e., retroactively. We decline to construe the term “thereaft