Can the Texas Public Utility Commission lower the assessment utilities pay without the Legislature?

Plain-English summary

The Comptroller of Public Accounts asked the Attorney General who has the power to change the assessment that electric, telephone, and other utilities pay to fund the Public Utility Commission. Under section 78 of the Public Utility Regulatory Act, every public utility within the PUC's jurisdiction pays an assessment equal to one-sixth of one percent of its gross receipts from rates charged to Texas consumers. That money funds the PUC and the Office of Public Utility Counsel. The statute says the commission "shall, subject to the approval of the Legislature, adjust this assessment" to fund those two offices. The comptroller collects the assessment and deposits it in the state's general revenue fund.

For a long time the rate never moved. From 1975, when the Legislature first set it at one-sixth of one percent, until February 1992, neither the Legislature nor the PUC adjusted it. Then in February 1992 the PUC did two things. It adopted a rule, 16 Tex. Admin. Code § 21.182, creating a process for the PUC to adjust the assessment after each legislative session once the PUC's and the Office of Public Utility Counsel's budgets were set, and to adjust it after any legislative or gubernatorial action that changed those budgets in the aggregate by more than 25 percent. The rule did not require the PUC to tell the Legislature about a proposed adjustment before making it; it only required notice to the comptroller. The PUC also issued an order lowering the assessment from one-sixth to one-sixteenth of one percent, set to take effect August 17, 1992. The PUC did this without seeking or getting legislative approval, at a time when the Legislature was not in session and would not meet in regular session until January 1993.

The comptroller asked whether the PUC's order was invalid for lack of legislative approval, and whether the section 21.182 procedure was invalid because it did not require the Legislature's approval of an adjustment before it took effect. The Attorney General concluded that both were invalid. The key was the phrase "subject to the approval of the Legislature" in section 78. The opinion explained that if section 78 were read to make the Legislature's authority to adjust the assessment depend on first getting a recommendation from the PUC, the statute would be unconstitutional, because the Texas Constitution vests legislative power solely in the Senate and the House of Representatives. A statute is presumed constitutional and should be construed to harmonize with the constitution. Read that way, section 78 means the PUC effectively cannot adjust the assessment on its own; legislative action is necessary. The statute therefore delegated no power to the PUC to change the assessment level. Any PUC attempt to adjust the level on its own accord was ultra vires, beyond its authority. As a result, the section 21.182 procedure, which let the PUC adjust the assessment by itself, was invalid, and the PUC order cutting the rate from one-sixth to one-sixteenth of one percent was likewise invalid. Because the order and rule failed under section 78, the opinion did not reach the comptroller's third question, whether section 316.045 of the Government Code (the procedure an agency must follow when it proposes to reduce the fees it collects) applied.

Currency note

This opinion was issued in 1992. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. The Public Utility Regulatory Act was later recodified out of V.T.C.S. art. 1446c into the Texas Utilities Code, and the assessment provisions and PUC rules have been amended since 1992, so confirm the current statute and rules before relying on anything described here.

Background and statutory framework

Article XII of the PURA established a method by which the PUC must raise revenues sufficient to cover the expenses of the PUC and the Office of Public Utility Counsel. Section 78 required each public utility within the PUC's jurisdiction to pay an assessment calculated as a percentage of gross receipts, providing in pertinent part: "An assessment is hereby imposed upon each public utility within the [PUC's] jurisdiction . . . serving the ultimate consumer equal to one-sixth of one percent of its gross receipts from rates charged the ultimate consumers in Texas for the purpose of defraying the costs and expenses incurred in the administration of this Act. Thereafter the commission shall, subject to the approval of the Legislature, adjust this assessment to provide a level of income sufficient to fund the commission and the office of public utility counsel. . . ." V.T.C.S. art. 1446c, § 78. The comptroller must collect the assessments and deposit them into the state's general revenue fund. V.T.C.S. art. 1446c, § 80.

The Legislature adopted the PURA in 1975, imposing an assessment of one-sixth of one percent of gross receipts. Acts 1975, 64th Leg., ch. 721. From 1975 until February 1992, neither the Legislature nor the PUC adjusted the rate. In February 1992 the PUC adopted two rules relating to adjustments to the assessment. See Public Utility Comm'n, 17 Tex. Reg. 1539-42 (1992); 16 Tex. Reg. 5941 (1991). The rules would become effective August 17, 1992. Only one, codified at 16 Tex. Admin. Code § 21.182, was germane. Section 21.182 is a procedural rule establishing the process by which the PUC would adjust the assessment following each legislative session in which the PUC's and the OPUC's budgets are set: under section 21.182(a), after the Legislature sets those budgets, the PUC issues an order adjusting the assessment so the amount collected covers, as closely as possible, the two offices' administrative costs and certain employee fringe benefits; and under section 21.182(b), the PUC may adjust the assessment after any legislative or gubernatorial action that changes the budgets in the aggregate by more than 25 percent. Section 21.182 did not require the PUC to inform the Legislature of a proposed adjustment before ordering it; it required notice only to the comptroller. The other rule, to be codified at 16 Tex. Admin. Code § 23.5, was a substantive rule addressing how utilities' rates would be adjusted to reflect changes in the assessment; the opinion noted some questions existed about its validity but found the comptroller's questions did not require considering it.

In addition to promulgating section 21.182, the PUC adopted an order lowering the assessment from one-sixth of one percent to one-sixteenth of one percent, also effective August 17, 1992. The PUC enacted that order without previously seeking or obtaining legislative approval, and at a time when the Legislature was not in session and was not scheduled to meet in regular session until January 1993.

The opinion framed the comptroller's questions as: (1) whether the PUC's order lowering the assessment was invalid because the PUC failed to seek legislative approval before issuing it; (2) whether the section 21.182 procedure was invalid because it did not require legislative approval of a proposed adjustment before it took effect; and (3) whether Government Code section 316.045, which establishes a procedure a state agency must follow when it proposes to reduce the fees it collects, applies. Because the office determined the order and section 21.182 were invalid under section 78, it did not reach the third question.

Section 78 requires the PUC to adjust the assessment "subject to the approval of the Legislature." The opinion reasoned that if section 78 were read to make the Legislature's authority to adjust the assessment contingent on receiving a recommendation from the PUC, it would be constitutionally invalid, because the state constitution vests legislative power solely in the Senate and House of Representatives. See Tex. Const. art. III, § 1. A statute must be presumed constitutional and construed in a way that harmonizes with the constitution. Attorney General Opinion M-240 (1968) at 3; Sutherland, Statutory Construction § 45.11, at 48-50 (1992). On its face, the opinion concluded, section 78 provides that the PUC effectively cannot adjust the assessment, and legislative action is necessary to do so. Section 78 therefore does not delegate to the PUC any authority to adjust the level of the assessment, and any PUC attempt to adjust it of its own accord is ultra vires. Consequently, 16 Tex. Admin. Code § 21.182, because it establishes a procedure whereby the PUC acting on its own can adjust the assessment, is invalid, and the PUC order attempting to reduce the assessment from one-sixth to one-sixteenth of one percent is likewise invalid.

Common questions

Who sets the assessment that funds the Texas Public Utility Commission?
The Legislature, under this opinion. The Attorney General concluded that section 78 of the PURA leaves the power to adjust the gross-receipts assessment with the Legislature and delegates none of it to the PUC.

What does "subject to the approval of the Legislature" mean in the statute?
The opinion read it to mean the PUC cannot change the assessment on its own and that legislative action is necessary. Reading it to let the Legislature act only on a PUC recommendation would have been unconstitutional, so the AG avoided that reading.

Why was the PUC's rate cut from one-sixth to one-sixteenth of a percent invalid?
Because the PUC made the cut by its own order without legislative action. Since section 78 gives the PUC no power to adjust the assessment, the order was ultra vires and therefore invalid.

Did the opinion decide whether the fee-reduction procedure in Government Code section 316.045 applied?
No. Having found the PUC's order and rule invalid under section 78, the opinion expressly declined to reach the section 316.045 question.

Citations

• V.T.C.S. art. 1446c, §§ 3(c), 3(d), 78, 80 (Public Utility Regulatory Act)
• Acts 1975, 64th Leg., ch. 721
• 16 Tex. Admin. Code §§ 21.182, 23.5
• 34 Tex. Admin. Code § 3.323
• Tex. Const. art. III, § 1
• Gov't Code § 316.045
• 17 Tex. Reg. 1539-42 (1992); 16 Tex. Reg. 5941 (1991)
• Attorney General Opinion M-240 (1968)
• Sutherland, Statutory Construction § 45.11 (1992)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0141
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1992/dm0141.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, and several footnotes (including the footnote that quoted the full text of 16 Tex. Admin. Code § 21.182) were too degraded in the scan to reproduce reliably; they are summarized in brackets. The linked PDF is authoritative.

Office of the Attorney General
State of Texas

DAN MORALES
ATTORNEY GENERAL

July 13, 1992

Honorable John Sharp
Comptroller of Public Accounts
L. B. J. State Office Building
Austin, Texas 78774

Opinion No. DM-141

Re: Whether the procedure for adjusting the rate of assessment the Public Utility Commission specified in title 16 of the Texas Administrative Code sections 21.182 and 23.5 satisfies V.T.C.S. art. 1446c, section 78, which requires the commission to adjust the rate of assessment "subject to the approval of the Legislature," and related questions (RQ-329)

Dear Mr. Sharp:

You have requested our opinion on the issue of adjustments to the rate of assessment imposed under the Public Utility Regulatory Act (the PURA), V.T.C.S. art. 1446c. Article XII of the PURA establishes a method by which the Public Utility Commission (the PUC or the commission) must raise revenues sufficient to cover the expenses of the PUC and the Office of Public Utility Counsel (the OPUC). Section 78 of the PURA requires each public utility[1] within the PUC's jurisdiction to pay an assessment calculated as a percentage of the public utility's gross receipts. Section 78 reads, in pertinent part, as follows:

  An assessment is hereby imposed upon each public utility within the [PUC's] jurisdiction . . . serving the ultimate consumer equal to one-sixth of one percent of its gross receipts[2] from rates[3] charged the ultimate consumers in Texas for the purpose of defraying the costs and expenses incurred in the administration of this Act.[4] Thereafter the commission shall, subject to the approval of the Legislature, adjust this assessment to provide a level of income sufficient to fund the commission and the office of public utility counsel. . . . Recovery of costs under this section by the office of Public Utility Counsel shall not exceed $175,000 per annum. Nothing in this Act or any other provision of law shall prohibit interexchange telecommunications carriers who do not provide local exchange telephone service from collecting the fee imposed under this Act as an additional item separately stated on the customer bill as "Utility Gross Receipts Assessment."

V.T.C.S. 1446c, § 78 (footnotes added). The comptroller of public accounts must collect the assessments and deposit them into the state's general revenue fund. V.T.C.S. art. 1446c, § 80; see 34 Tex. Admin. Code subch. U (stating procedures for paying public utilities gross receipts "tax"); 16 Tex. Admin. Code § 23.11(i) (same).

[Footnote 1: See V.T.C.S. art. 1446c, § 3(c) (defining "public utility"); 16 Tex. Admin. Code § 23.3 (same).]

[Footnote 2: See 34 Tex. Admin. Code § 3.323(a)(1) (defining "gross receipts").]

[Footnote 3: See V.T.C.S. art. 1446c, § 3(d) (defining "rate"); 34 Tex. Admin. Code § 3.323(a)(2) (same); 16 Tex. Admin. Code §§ 21.2, 23.3 (same).]

[Footnote 4: See also 34 Tex. Admin. Code § 3.323(b) (assessing each public utility within the PUC's jurisdiction an amount equal to one-sixth of one percent of its gross receipts from rates charged to ultimate consumers).]

Your questions focus on the procedure by which the commission must adjust the level of assessment. As we explain, we conclude that section 78 of the PURA does not delegate power to the PUC; thus, only the legislature can change the level of the assessment.

The legislature adopted the PURA in 1975, imposing at that time an assessment of one-sixth of one percent of gross receipts of utility companies. See Acts 1975, 64th Leg., ch. 721. From the time the legislature enacted the PURA in 1975 until February 1992, neither the legislature nor the PUC adjusted the rate of assessment. However, in February 1992 the PUC adopted two rules relating to adjustments to the rate of assessments the state collects pursuant to section 78 of the PURA. See Public Utility Comm'n, 17 Tex. Reg. 1539-42 (1992); 16 Tex. Reg. 5941 (1991). The rules will become effective August 17, 1992. 17 Tex. Reg. at 1540, 1542. Only one of the rules, which will be codified as title 16 of the Texas Administrative Code section 21.182, is germane to your questions.[5]

[Footnote 5: The other rule not germane to your questions will be codified [at] title 16 of the Texas Administrative Code section 23.5. Section 23.5 is a substantive rule that addresses how the public utilities' rates will be adjusted to reflect the adjustments in the assessment. See 17 Tex. Reg. 1540-42 (1992). We understand that some questions exist concerning the validity of section 23.5. The questions you pose, however, do not require that we consider section 23.5.]

Title 16 of the Texas Administrative Code section 21.182 is a procedural rule that establishes the process by which the PUC shall adjust the assessment following each legislative session in which the PUC's and OPUC's budgets are set.[6] See 17 Tex. Reg. 1539-40 (1992); 16 Tex. Reg. 5941 (1991). Under section 21.182(a), after the legislature has set the PUC's and the OPUC's budgets, the PUC shall issue an order which adjusts the level of assessment collected pursuant to section 78 of the PURA so that the amount collected will cover, as closely as possible, the PUC's and OPUC's administrative costs, as well as employee fringe benefits for which the PUC and the OPUC do not directly pay. In addition, section 21.182(b) permits the PUC to adjust the level of assessment after any legislative or gubernatorial action that changes the PUC's and the OPUC's budgets in the aggregate by an amount greater than twenty-five percent. Section 21.182 does not require the PUC to inform the legislature of the proposed adjustment before ordering the adjustment.[7]

[Footnote 6: Section 21.182 of title 16 of the Texas Administrative Code reads as follows: [the full text of the rule quoted here was too degraded in the scanned source to reproduce reliably]. 16 Tex. Admin. Code § 21.182.]

[Footnote 7: Under title 16 of the Texas Administrative Code section 21.182 the PUC need not inform the legislature that it has adjusted the level of assessment. Section 21.182 requires the PUC to inform only the comptroller that the PUC has adjusted the level of assessment. 16 Tex. Admin. Code § 21.182(c); see V.T.C.S. art. 1446c, § 80 (requiring the PUC to notify the comptroller of public accounts of any adjustment that the PUC makes to the level of assessment).]

In addition to promulgating section 21.182, the PUC adopted an order lowering the level of assessment from one-sixth of one percent, as specified in section 78, to one-sixteenth of one percent. This order, like section 21.182 of title 16 of the Texas Administrative Code, will become effective on August 17, 1992. Notably, the PUC enacted this order without previously seeking or obtaining legislative approval of the proposed adjustment. Indeed, at the time the PUC adopted the order, the legislature was not in session and was not scheduled to meet in regular session until January 1993.

We understand you to ask, first, whether the PUC's order lowering the level of assessment is invalid because the PUC failed to seek legislative approval before issuing the order; and second, whether the procedure the PUC establishes for adjusting the level of assessments in title 16 of the Texas Administrative Code section 21.182 is invalid because the rule does not require that the PUC obtain the legislature's approval on the proposed adjustment before it becomes effective. Third, you ask whether section 316.045 of the Government Code, which establishes a procedure a state agency must follow when it proposes to reduce the fees it collects, applies to the PUC in this situation. As we determine that the PUC's order and title 16 of the Texas Administrative Code section 21.182 are invalid under section 78, we do not consider your third question.

Section 78 of the PURA requires the PUC to adjust the assessment "subject to the approval of the Legislature." If section 78 provides that the legislature's authority to adjust the assessment is contingent upon receiving a recommendation from the PUC, it is constitutionally invalid because the state constitution vests legislative power solely in the Senate and House of Representatives. See Tex. Const. art. III, § 1. We must presume that this statute is constitutional, however, and construe the statute in a way that harmonizes with the constitution. Attorney General Opinion M-240 (1968) at 3; Sutherland, Statutory Construction § 45.11, at 48-50 (1992).

On its face, section 78 provides that the PUC effectively cannot adjust the assessment; legislative action is necessary to adjust the assessment. In our opinion, therefore, section 78 does not delegate to the PUC any authority to adjust the level of the assessment. Clearly, any PUC attempts to adjust the level of the assessment of its own accord are ultra vires. Consequently, title 16 of the Texas Administrative Code section 21.182, because it establishes a procedure whereby the PUC acting on its own can adjust the level of the assessment, is invalid. Likewise, the PUC order that attempts to reduce the level of the assessment from one-sixth of one percent to one-sixteenth of one percent is invalid.

                               SUMMARY

      Section 78 of the Public Utility Regulatory Act does not delegate any authority to the Public Utility Commission to adjust the level of assessment. Thus, only the legislature is authorized to adjust the level of assessment. An order the PUC has adopted, to be effective August 17, 1992, reducing the level of assessment, is without authority and therefore invalid. Likewise, title 16 of the Texas Administrative Code section 21.182, setting forth the procedure the PUC must use to adjust the level of assessment, is invalid.

                                            DAN MORALES
                                            Attorney General of Texas

WILL PRYOR
First Assistant Attorney General

MARY KELLER
Deputy Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

MADELEINE B. JOHNSON
Chair, Opinion Committee

Prepared by Kymberly K. Oltrogge
Assistant Attorney General