SUNSET COMMISSION MEMBER QUESTIONS MUNICIPAL PARTICIPATION IN ELECTRIC RATE CASES

The Texas Sunset Advisory Commission (Commission), which is made up of legislators and public members, periodically evaluates state agencies to determine if an agency is still needed and what improvements are needed to ensure that state funds are well spent. Based on the recommendations of the Commission, the Texas Legislature ultimately decides whether and how an agency continues to operate into the future.

The Public Utility Commission (PUC) is up for “sunset review” in 2011. At a July 6 hearing, the Commission discussed various issues related to the PUC. About an hour into the meeting, a member of the Commission began questioning why the time to complete electric rate cases sometimes exceeds the statutory deadline of 185 days. The discussion seemed relatively low key, but it is one of great importance to many cities. As is often the case with legislative hearings, the discussion quickly turns to cities. Specifically, the chairman of the PUC explained that the reason many rate cases exceed the statutory deadline is because of “intervenors” who lengthen the process.

Who are the intervenors that the chairman was talking about? They are cities that participate in electric rate cases to protect their citizens by ensuring that rate increases are justified. The costs of attorneys and others who represent cities are usually paid by the electric company as part of the ratemaking process. In his own words, the PUC chairman suggests that the Commission can reduce costs “by not allowing municipal intervenors to recover their legal expenses.”

In response, another member of the Commission cautioned against further attempts at “streamlined ratemaking” (a more simple way to increase rates, presumably without municipal intervention), and suggested that all the parties should be invited to a hearing to get all the information relating to how municipal intervention (and surpassing the 185-day deadline, in some cases) may ultimately benefit customers.

The result of the hearing was tacit approval of the Commission for the PUC to return to the legislature in February 2010 and make recommendations on how to “streamline” the ratemaking process in terms of time and cost-effectiveness.

To view the relevant portion of the hearing, which lasts about thirty minutes, please CLICK HERE.

In some cases, cities are the only entities that stand between electric companies and higher rates for customers. Many cases in which cities intervene result in lower rate increases for customers. Cities that participate in electric rate cases should follow this development closely. It is likely that legislation eroding municipal participation will be filed in 2011.

TML member cities may use the material herein for any purpose.
No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the
Texas Municipal League.

Back to Legislative Update Index