Low Income Consumers, Mary Wilson and Hipolita Lutz v. Public Utility Commission of Texas ( 2020 )

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
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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
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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).
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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.
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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
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