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Supreme Court Rules Against Texas Consumers

The Texas Supreme Court recently ruled against Texas consumers of electricity. The case was Texas Industrial Energy Consumers v. CenterPoint Energy Houston Electric, LLC, ___ S.W.3d ___, (Tex. 2010), and the opinion was handed down on October 22, 2010.
During the deregulation of electricity, Reliant Energy was divided into an electrical generation company, a retail provider, and CenterPoint, a transmission and distribution company. Electrical providers were allowed to recovery certain “stranded” costs including interest, as well as the costs of a “valuation panel” incurred when presenting the claim. Here, over the objection of consumers’ groups, the Supreme Court affirmed a ruling for CenterPoint by the Public Utility Commission. That ruling allows CenterPoint to recover – and pass along to consumers – an imputed interest rate in excess of 11%. In addition, it will also be allowed to pass to consumers the costs of the experts it hired for its valuation panel, which exceed $5,000,000.
“The consumer groups argue that interest . . . is not allowed because we invalidated Rule 25.263(l)(3) in its entirety in [an earlier opinion]. The PUC and CenterPoint argue that we only invalidated the timing portion of the Rule – the date that interest begins to accrue. We agree with the PUC and CenterPoint.”
The Court approved the costs of the valuation panel, approved by the PUC. “[T]he PUC, whose reasonable construction of PURA merits ‘serious consideration,’ [has] the better argument: ‘[B]y providing that the transferee corporations ‘shall pay’ valuation panel expenses, the legislature did not intend to preclude those expenses ultimately being recovered through rates under PURA 36.061(b)(2). [Section 39.262(h)(3)]. . . . It is true, as TIEC contends, that state-agency powers are limited, and agencies may not ‘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 expedient for administrative purposes.’ But that admonition is inapposite here.

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