Citations
- 143 S.W.3d 872
Full opinion text
OPINION
MACK KIDD, Justice.
This appeal concerns the Public Utility Commission’s order increasing the fuel-factor component of the price-to-beat for First Choice Power, Inc. When appellants sought judicial review of that order, the district court dismissed the case in part, concluding that many of appellants’ challenges were untimely challenges to the validity of the rule governing fuel-factor adjustments. In the alternative, the court affirmed the order. We will affirm the district court’s judgment.
BACKGROUND
Texas is in transition from a regulated market for electricity toward a competitive market for the production and sale of electricity. See State v. Public Util. Comm’n, 131 S.W.3d 314, 318-20 (Tex.App.-Austin 2004, pet. filed) (“2003 Rulemaking Case”); see also Tex. Util.Code Ann. ch. 39 (West Supp.2004); see generally id. §§ 11.001-64.158 (West 1998 & Supp.2004) (“PURA”). As part of the transition, integrated utilities were required to “unbun-dle” into companies that respectively generate, transmit and distribute, and provide electricity; the unbundled companies may be wholly separate or remain affiliated. PURA § 39.051(b).
During the transition period, the Public Utility Commission (“the Commission”) sets a price-to-beat for affiliated retail electric providers (“AREPs”) that provide electricity to residential and small commercial customers. See PURA § 39.202(a). The price-to-beat is the base rate of the utility affiliated with the AREP (6% less than the utility’s rate charged on January 1, 1999) as modified by the fuel factor, which adjusts the price-to-beat to account for changes in fuel prices. Id.
Previously, the fuel factor was set so that the utility could recover its estimated fuel cost; the resulting fees charged for fuel were later reconciled with the utility’s actual fuel expenses. See PURA § 36.203; see also Nucor Steel v. Public Util. Comm’n, 26 S.W.3d 742, 745 (Tex.App.-Austin 2000, pet. denied). Companies could not automatically pass through their fuel costs (PURA § 36.201), and were required to show efficient generation, effective cost controls, and negotiation of the lowest reasonable fuel cost for its non-affiliated contracts. Nucor, 26 S.W.3d at 745 (citing 17 Tex. Reg. 7067 (1992), amended 18 Tex. Reg. 836 (1993)). For purchases from affiliated providers, the utility also had to show that the fuel expenses were reasonable and necessary and that the affiliate did not charge the utility any more than it did other utilities in a similar class. Nucor, 26 S.W.3d at 745.
During the transition period, the showing necessary to obtain an adjustment of the fuel factor is streamlined. An AREP may request that the Commission adjust the fuel factor up to twice per year by demonstrating that “the existing fuel factor does not adequately reflect significant changes in the market price of natural gas and purchased energy used to serve retail customers.” PURA § 39.202(l). The Commission’s rule implementing subsection (l) provides in relevant part as follows:
An affiliated retail electric provider may request that the commission adjust the fuel factor(s) established under subsection (f)(3) of this section not more than twice in a calendar year if the affiliated retail electric provider demonstrates that the existing fuel factor(s) do not adequately reflect significant changes in the market price of natural gas and purchased energy used to serve retail customers_The methodology for calculating the adjustment to the fuel factor(s) shall be the following:
(A) For each business day of the ten-day period ending no more than ten business days before the filing of a fuel factor adjustment application, an average of the closing forward 12-month NYMEX Henry Hub natural gas prices, as reported in the Wall Street Journal, is calculated.
(B) The average forward price for each business day calculated in subpara-graph (A) of this paragraph will then be averaged to determine a ten-day rolling price.
(C) The percentage difference between the averaged ten-day rolling price calculated under subparagraphs (A) and (B) of this paragraph and the averaged ten-day rolling price used to cal-cúlate the current fuel factor(s) is calculated. If the current fuel factor was calculated through an adjustment under subparagraph (E) of this paragraph, then the averaged ten-day rolling price calculated concurrent with that adjustment shall be used. If the percentage difference is 4.0% or more, the current fuel factor(s) may be adjusted.
(D)To adjust the current fuel factor(s), the percentage difference is added to one and then multiplied by the current factor(s). The results are the adjusted fuel factor(s) that will be implemented according to the procedural schedule in clause (i) and (ii) of this subparagraph:
(i) if no hearing is requested within 15 days after the petition has been filed, a final order shall be issued within 20 days after the petition is filed;
(ii) if a hearing is requested within 15 days after the petition is filed, a final order shall be issued within 45 days after the petition is filed.
26 Tex. Reg. 2680, 2707 (2001) (“Rule 25.41(g)(1)”). When adopting rule 25.41, the Commission recognized “the undeniable fact that REPs [retail electric providers], affiliated or not, will not incur costs after 2002 based on a historic fuel mix; rather, all REPs will be purchasing power in the market.” 26 Tex. Reg. at 2692.
This Court upheld rule 25.41 against a challenge that the Commission failed to establish a sufficient headroom — the difference between the price-to-beat and the sum of non-bypassable charges approved by the Commission. See Reliant Energy, Inc. v. Public Util. Comm’n, 62 S.W.3d 833, 838 (Tex.App.-Austin 2001, no pet.). Although no party in the original rulemak-ing process directly appealed the use of the NYMEX index to assess and correct inadequacies in the fuel factor, this Court later upheld amended rule 25.41 against challenges to the use of the NYMEX index, among other issues. See 2003 Rulemaking Case, 131 S.W.3d. at 322-25.
On May 9, 2002, First Choice applied to the Commission to increase its fuel factor under rule 25.41. The Commission found that First Choice’s fuel factor was originally set based on a natural gas price of $3.111/MMBtu, and the relevant average natural gas price on the NYMEX index for ten business days from April 24, 2002 through May 7, 2002 was $3.817/MMBtu— an increase of 22.69%. The Commission found that it had previously concluded that the NYMEX gas index was representative of the price of natural gas and purchased energy, and that a 4% change in that price would satisfy minimally the requirement in utility code section 39.202 for “significant” change. The Commission determined that, because rule 25.41 was defined as the exclusive means of showing changes in the price of natural gas for this purpose, evidence of First Choice’s actual costs and revenues was irrelevant; the only change First Choice had to show was the change in the NYMEX index. The Commission also concluded that the rate ceiling for the price-to-beat contained in PURA section 39.202(p) is not applicable to fuel factor adjustments under PURA section 39.202(l). Based on this demonstrated “significant” increase of greater than 4% in the price of natural gas and purchased energy used to serve retail customers, the Commission raised First Choice’s fuel factor by 22.69%; the Commission found that First Choice’s fuel factor would rise from 2.18