Low Income Consumers, Mary Wilson and Hipolita Lutz v. Public Utility Commission of Texas

• Court: Court of Appeals of Texas
• Decided: April 30, 2020
• Docket: 03-18-00364-CV
• Status: Published

Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-18-00364-CV

Low Income Consumers, Mary Wilson and Hipolita Lutz, Appellants

v.

Public Utility Commission of Texas, Appellee

DIRECT APPEAL FROM THE PUBLIC UTILITY COMMISSION OF TEXAS RULEMAKING PROCEEDING NO. 47343

CONCURRING AND DISSENTING OPINION

I respectfully dissent from the Court’s determination that the Public Utility

Commission complied with the Administrative Procedures Act’s notice requirements as to the

proposed rule regarding the split-deposit provision in former Rule 25.478(e)(3). See 16 Tex.

Admin. Code § 25.478 (Pub. Util. Comm’n, Credit Requirements and Deposits); see also Tex.

Gov’t Code § 2001.023 (Notice of Proposed Rule). The Texas Supreme Court has described two

standards that courts have applied to determine whether an agency’s notice complies with the

APA. Texas Workers’ Comp. Comm’n v. Patient Advocates, 136 S.W.3d 643, 649-50 (Tex.

2004). First, the Supreme Court explained this Court’s standard in State Board of Insurance v.

Deffebach that “if a proposed rule is changed to incorporate public comments and no new

subjects of regulation or persons besides those previously given notice are affected, then no

further purpose would be served by requiring republication of the proposed rule.” Patient

Advocates, 136 S.W.3d at 650 (citing Deffebach, 631 S.W.2d 794, 801 (Tex. App.—Austin 1982, writ ref’d n.r.e.)). Deffebach premised its standard on the undisputed understanding that

the “basic purposes” of the notice requirements “are to inform the public of the contents of the

proposed rule and to give persons sufficient advance notice of the rule’s content to permit them

to ascertain whether protection of their interests requires them to request a hearing and

participate therein.” 631 S.W.2d at 800. Second, the Supreme Court analyzed federal court

precedents construing the federal Administrative Procedure Act, which contains notice

requirements similar to those in Texas’s APA. Patient Advocates, 136 S.W.3d at 650. The

“majority of federal courts of appeals have held that under the federal APA the original notice is

adequate if the modified final rule is a ‘logical outgrowth’ of the published provisions.” Id. The

Supreme Court concluded, “The relevant inquiry under both standards is whether the agency’s

notice fairly apprises affected parties of the pertinent issues to allow them to comment and

participate in the rulemaking process in a meaningful and informed manner.” Id. Ultimately,

because the rule change at issue in Patient Advocates “did not materially alter the issues raised in

the proposed rule or affect persons other than those previously on notice,” it “was a logical

outgrowth of the published provisions.” Id. at 651.

The PUC provided notice of its change to the split-deposit provision by

publishing the following proposed change to former Rule 25.478(e):

(e) Amount of deposit.

(1)-(2) (No change.)

(3) A[If a customer or applicant qualifies for the rate reduction program under

§25.454 of this title (relating to Rate Reduction Program), then such] customer or

2 applicant shall be eligible to pay any deposit that exceeds $50 in two equal

installments. Notice of this option [for customers eligible for the rate reduction

program]shall be included in any written notice to a customer from

whom[requesting] a deposit is requested.[ The customer shall have the obligation

of providing sufficient information to the REP to demonstrate that the customer is

eligible for the rate reduction program.] The first installment shall be due no

sooner than ten days, and the second installment no sooner than 40 days, after the

issuance of written notification to the applicant of the deposit requirement.

42 Tex. Reg. 7495, 7506 (Dec. 2017). The PUC’s notice thus proposed expanding the class of

customers eligible to split deposits from those “eligible for the rate reduction program” to all

customers paying “any deposit that exceeds $50.” The persons affected by the proposed change

were customers not previously eligible for the rate reduction program. However, by repealing

the entirety of Rule 25.478(e)(3), the PUC provided for removal of the split-deposit option—a

significantly different issue than the expansion of customers eligible to split deposits—thereby

affecting customers who were previously eligible for the rate reduction program. Because the

adopted rule “affect[ed] persons other than those previously on notice,” it was not a logical

outgrowth of the proposed rule. See Patient Advocates, 136 S.W.3d at 651. Nothing in the

proposed rule suggested the possibility of subsection (e)(3) being deleted in its entirety. To the

contrary, the PUC provided notice of its intent to repeal some sections entirely, but expressly

provided notice of an intent to merely “amend 16 TAC . . . § 25.478, relating to Credit

Requirements and Deposits,” by making it applicable to all customers. 42 Tex. Reg. 7495.

Under the PUC’s theory that notice of expanding a rule’s applicability to other customers

3 constitutes notice that the entire rule might disappear, the PUC could also justify expanding a

rule to apply to any number of people after proposing that the rule be repealed in its entirety.

While APA notice requirements should not be construed to automatically afford “a new

opportunity for comment simply because the rule, as promulgated by the agency, differs from the

rule the agency proposed,” Deffenbach, 631 S.W.2d at 801, the PUC’s concept of notice renders

the APA’s notice requirements all but meaningless, see Tex. Gov’t Code § 2001.024 (requiring,

inter alia, “a brief explanation of the proposed rule” and “the text of the proposed rule, except

any portion omitted under Section 2002.014, prepared in a manner to indicate any words to be

added or deleted from the current text”).

The Court asserts that the statutory expiration of the SBF and the corresponding

notice proposing repeal of the rate reduction program notified customers eligible for that

program that they would not be entitled to split deposits “based on their previous enrollment in

the rate reduction program,” and the Court goes a step further, inferring that those customers

were therefore “necessarily on notice that they . . . might or might not be entitled to the split

deposit option going forward.” But being ineligible to split deposits on a particular basis is not

the same as being ineligible to split deposits at all, and the effect of the proposed amendment

misled customers previously eligible for the rate reduction program to believe that the split-

deposit option under § 25.478(e)(3) would remain available to them. Under the circumstances,

customers previously eligible for the rate reduction program were not given “sufficient advance

notice of the rule’s content to permit them to ascertain whether protection of their interests

require[d] them to request a hearing and participate therein.” Deffenbach, 631 S.W.2d at 800.

The PUC therefore failed to comply with the APA’s notice requirements. As a result, I would

conclude that the PUC had to republish notice of the proposed deletion of section 17.004(e)(3).

4 Although I concur in the Court’s determination that the PUC had a reasoned

justification for adopting changes to Rule 25.478(e), I do not agree that section 17.007(c)

prohibits a split-deposit option for all customers. Generally, I agree that removing provisions

relating to the expired SBF was a reasoned justification for the PUC’s rule changes. However,

removing the split-deposit option entirely was not required in order to align the rule with the

expiration of the SBF, as evidenced by the PUC’s proposed rule language that removes reference

to the rate reduction program while leaving intact the split-deposit option, albeit for an expanded

class of customers. In fact, section 17.004 of the Utilities Code expressly allows the PUC to

provide for a split-deposit option by allowing the PUC to adopt and enforce rules “relating to

customer deposits.” Tex. Util. Code § 17.004(b). The bills creating section 17.004 and the SBF

were enacted during the same legislature; section 17.004 provided general customer protection

standards, while the SBF aimed to assist low-income customers, to provide customer education,

and to fund schools through a funding loss mechanism. See Act of May 30, 1999, 76th Leg.,

R.S., ch. 1579, § 3, 1999 Tex. Gen. Laws 5421, 5423 (S.B. 86, codified at Tex. Util. Code

§ 17.004); Act of May 27, 1999, 76th Leg., R.S., ch. 405, § 39, 1999 Tex. Gen. Laws 2543, 2597

(S.B. 7, codified at Tex. Util. Code § 39.903). The expiration of the SBF did not impact the

PUC’s unrelated authority under section 17.004 to provide for split deposits. Nor would the

split-deposit option have run afoul of section 17.007(c). Section 17.007(c) prohibits requiring

retail electric providers to offer customer service benefits “for which the provider or utility is not

reimbursed.” Tex. Util. Code § 17.007(c). Despite asserting that “there would be costs that

would not be reimbursed,” the PUC did not identify what those costs were. In the absence of

costs that would not be reimbursed, section 17.007(c) does not apply.

5 I also concur with the Court’s conclusion that the PUC was not statutorily

obligated to retain the customer protections at issue in this case because the PUC has discretion

over whether to offer these protections. However, I do not read section 17.004’s protections as

inconsistent with section 17.007’s treatment of customer service benefits. In the bill that created

section 17.004, the legislature expressly identified an “increased [] need for minimum standards

of service quality, customer service, and fair business practices to ensure high-quality service to

customers and a healthy marketplace where competition is permitted by law.” Tex. Util. Code

§ 11.002(c). The legislature further provided, “It is the purpose of [chapters 11-17 of the Utility

Code] to grant the Public Utility Commission of Texas authority to make and enforce rules

necessary to protect customers of telecommunications and electric services consistent with the

public interest.” Id. The protections enacted in section 17.004 authorized the PUC to provide

“minimum standards of service quality,” including rules relating to customer deposits. These

protections are not inconsistent with section 17.007’s directive that any benefits required by the

PUC must be reimbursed, even if we were to assume that “benefits” were synonymous with

“protections” and that the protections at issue were shown to have had some additional cost.

For the foregoing reasons, I respectfully dissent from the Court’s determination

that the PUC complied with the notice provisions of the APA and, although I concur with the

Court’s other conclusions, I do not join the Court’s reasoning related to section 17.007(c).

__________________________________________ Gisela D. Triana, Justice

Before Justices Goodwin, Baker, and Triana

Filed: April 30, 2020