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Texas Appeals Court Rules on Whether City Can Operate as Retail Electric Provider

January 13, 2014

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Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

The Texas Third Court of Appeals has affirmed a Public Utility Commission of Texas decision which had ruled that municipalities are not authorized to be certificated as a retail electric provider under PURA.

The PUCT's ruling, in response to the City of Dallas' application for an Option 2 REP certificate, had been first reported by EnergyChoiceMatters.com back in 2010

PURA provides that the PUCT shall issue a REP certificate to a "person" meeting various financial and technical criteria, and the Commission ruled that the term "person" excludes municipalities.

While the City argued various provisions of PURA define "person" to include municipalities, the Appeals Court noted by reading the definition of corporation in conjunction with the provision setting out what entities qualify as a person, "the Utilities Code can be construed as stating that the term 'person' includes corporations other than municipal corporations."

"Accordingly, the certification provision is subject to more than one reasonable interpretation," the Court said.

The Court noted that in a rulemaking regarding REP certification, the Commission excluded municipal corporations as persons.

"We recognize that the Commission's interpretation is not the only permissible one. In fact, the Commission's interpretation is not necessarily the construction of the certification provision that we would adopt in the absence of the ambiguity discussed above. But there is an ambiguity in the governing framework, and 'we will generally uphold an agency's interpretation of' an ambiguous statute that it is charged with enforcing provided that the construction is reasonable and 'in accord with the plain language of the statute,'" the Court reiterated.

"The Commission's construction of the governing statutes is reasonable and not inconsistent with the governing statutes, particularly in light of the legislature's decision to exclude municipal corporations from the definition of corporation," the Court said.

The Appeals court thus concluded that, "the district court did not err when it upheld the Commission's determination that the City was not eligible to be certified as a retail electric provider and the Commission's decision to dismiss the City's application for certification. For the reasons previously given, we must also disagree with the City's contention that the Commission's rule either did not apply to this case or was incorrectly applied to deny the City's certification request."

While not a question directly before the Court, the City cited a prior court ruling regarding municipalities' ability to operate as aggregators, leading the Appeals court to opine generally on cities' ability to purchase electricity for their own needs.

"Although there is language in the prior opinion that might suggest that municipalities may purchase electricity for their own needs, that was not the central dispute in the case. On the contrary, the dispute in [that prior] case centered on the propriety of a rule by the Commission prohibiting municipalities that are aggregators from purchasing electricity to resell to their citizens. Accordingly, any comment on the ability of a municipality to purchase electricity for its own needs would simply be dicta ... Moreover, although we need not decide the matter here, we note that it is not entirely clear that the statutes at issue in Steering Committees actually do authorize a municipality to directly purchase electricity for its own use. By their terms, the provisions allow political subdivisions, including municipalities, to join and 'form a political subdivision corporation' that will act as an agent for the political subdivisions, and it is the agent that has the authority to negotiate the terms for purchasing electricity and to purchase electricity 'for use in the public facilities of the political subdivision.'"

Case No. 03-11-00635-CV

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