The Honorable Garrett Morris      Opinion No. H- 912
Chairman
Public Utility Commission of      Re: Applicationof   the
     Texas                        Public Utilities Act to
P. 0. Box 12577                   retail public utilities
Austin, Texas   78711             and municipally owned
                                  utilities.
Dear Mr. Morris:
     You have requested our opinion on five questions relating
to the Public Utilities Act,. article 1446c, V.T.C.S. After
receiving your question, we received numerous requests from
interested parties to delay answering the question until
they had an opportunity to submit briefs for our considera-
tion. We have received many comprehensive-briefs from cities,
special districts, private utility companies, consumer groups
and most recently from the Public Utility Commission itself.
     Your questions primarily involve sections 50 and 51 of
the Act, which provide:
          Sec. 50. Beginning one year after the
          effective date of this Act, unless other-
          wise specified:
             (1) No public utility may in any way
          render service directly or indirectly to
          the public under any franchise or permit
          without first having obtained from the
          commission a certificate that th,epresent
          or future public convenience and necessity
          require orewill require such installation,
          operation, or extension.




                       p-3423
The Honorable Garrett Morris - page 2   (H-812)


            (2) Except as otherwise provided in
         this article no retail public utility may
         furnish, make available, render, or extend
         retail public utility service to any area to
         which retail utility service is being law-
         fully furnished by another retail public
         utility.on or after the effective date of
         this Act, without first having obtained
         a certificate of public convenience and
         necessity that includes the area in which
         the consuming facility is located.

         Sec. 51. (a) A public utility is not
         required to secure a certificate of public
         convenience and necessity for:
             (1) an extension into territory con-
         tiguous to that already served by it and
         not receiving similar service from another
         public utility and not within the area of
         'public convenience and necessity of another
         utility .of the same kind;
             (2) an extension within or to territory
         already served by it or to be served by it
         under a certificate of public convenience
         and necessity; or
          . (3) operation, extension, or service
          in progress on the effective date of this
         Act.

               (b) Any extensions allowed Subsection
          (a) of this section shall be limited to
          devices for interconnection of existing
          facilities or devices used solely for trans-
          mitting public utility services from existing
          facilities to customers of retail utility
          service.
Your first question is:

          Does 'public utility' as used in Sub-Division
          1, Section 50, of the Act, include 'Retail
          Public Utility', as-defined in Section 49
          of the Act.




                          p.3424
The Honorab,leGarrett Morris - page 3 (H-912)


    Section 49 provides:
         Sec. 49. For the purposes of this article
         onlv: (a) 'Retail public utility' means
         any person, corporation, municipaiity,
         political subdivision or agency, or cooper-
         ative.corooration. now'-di:
                                   hereafter operating,
         maintaining, or controlling in Texas facilities
         for providing retail utility service.
               (b) 'Pubiic utility' does not include
         any person, corporation, municipality, political
         subdivision or agency, or cooperative corporation
         under the jurisdiction of the Railroad Commission.
          (Emphasis added).

     Thus, if the phrase, "retail public utility" is included
within the term "public utility" as used in section 50 of the
Act, municipally owned utilities will be required to obtain
certificates of convenience and necessity under section SO(l),
which relates to "public utilities" as well as under section
50(2), which relates only to "retail public utilities." However,
"public utility" is defined in great detail in section 3(c)
of the Act. That section provides in part:
             (c) The term 'public utility' or
          'utility,' when used in this Act, includes
          any person, corporation, river authority,
          cooperative corporation. or any combina-
          tion thereof, other --
                              than a munkpal    corpo-
          ration, or their lessees, trustees, and
          receivers. now or hereafter ownina or
          operatingVfor.compensation in this state
          equipment or facilities for:
             (1) producing, generating, transmitting,
          distributing, selling, or furnishing elec-
          tricity ('electric utilities' hereinafter);
          . . .
             (4) the transmitting, storing, distributing,
          selling, or furnishing of potable water to the
          public or for resale to the public for any use,




                           p.3425
The Honorable Garrett Morris - page 4 (H-812)


         or the collection, transportation, treatment'
         or disposal of sewage, or other operation of
         a sewage disposal service for the public, other
         than equipment or facilities owned and operated
         for either purpose by a city, town or ;;Eer
         pn~itihb subdivision of .this state, -.=
         term 'public utility' or 'utility' incluces
         any municipally owned Fs or electric utility,
         whether owned separately or in Conjunction
         with other municipalities operated by a board
         of trustees which as of May 1, 1975, was not
         directly appointed by the governing body of
         the municipality, and does not include any
         other municipally ownedutility_ unless other-
         wise provided ---
                       in this Act. (Emphasis added).

     While the Legislature might have chosen more descriptive
terms to express these two concepts, after examining the
language of the definitions and the general thrust of the.Act,
we do not feel at.liberty to ignore the clear language used
by the Legislature in excluding "any other municipally owned
utility unless otherwise provided in this Act" from the    .
term "public utility.' It is accordingly our opinion that
the term "public utility" in section 50 must be read in
light of the section 3(c) definition of that term, which
excludes certain municipalities. The term does not include
the more broadly defined "retail public utility" found in
section 49.

     Your second question is:

          Is a municipally owned utility required
          to obtain a 'Certificate of Convenience
          and Necessity' for operations within
          its own city limits.
     Subject to the exceptions contained in section 51,
section 50(2) would require retail public utilities, including
those municipally owned, to secure a certificate before
serving an area which is being served by another retail
public utility. Of course, this section is limited to new
services, operations, or extensions. Sec. 51(a)(3).




                          p.3426
The Honorable Garrett Morris - page 5 (H-812)


     Section 50(l), however, w'nich requires certificates of
convenience and necessity before rendering any service,
is not generally applicable to municipally owned utilities.
Conoare sec. 3(c)(4). Accordingly, with the exception con-
tainedin section 3(c) (41, a municipally owned utility need
obtain a certificate of convenienceand necessity for opera-
tions within its own city limits only when the 02erations
are a facet of retail utility service and take place in an
area being served by another retail public utility,
    your   third question is:

           Does Sub-Section 1, Section 50 of the Act
           prohibit any public utility, including a
           retail public utility from rendering
           services to a new area after September 1,
           1976, without first acquiring a 'Certificate
           of Convenience and Necessity.'

     Since we   have already discussed the application of
section 50 to   municipally owned utilities, we will limit our
discussion of   this question to privately owned public utilities,
which include   privately.owned retail public utilities.
     Section 50(l) clearly.requires such public utilities to
obtain a certificate prior to extending services to a new
area unless the new services come within the exceptions of
section 51. 'Section 51(a)(l) excepts extensions into "territory
contiguous to that already served by it" and not being
served by or within the certificated area of another utility
of the same kind. Section 51(a)(2) excepts "extensions
within or to territory already served by it or to be served
by it under a certificate." Section 51(a) (3) excepts exten-
sions in progress on September 1, 1975. Of course, all of
these excepted extensions are limited by section 51(b),
which allows only "devices for interconnection of existing
facilities or devices used solely for transmitting" services
from existing facilities to retail customers. Only the
second part of section 51(b) would allow extensions to new
areas, and such extensions would in our view be limited to
"drop-off" lines from existing facilities directly to retail
customers. For example, a water main could not be extended
under section 51, but pipes could be run from such a main to




                            p.3427
Tie Honorable Garrett Morris - page 6    (~~-812)


retail customers in its service area. Unless an extension
of service to a new area,is within the exceptions contained.
in section 51, section 50(l) would require private utilities
to obtain a certificate prior to such an extension.
     Your fourth question is:
          Does Section 51, Sub-Section (a), of the
          Act permit a public utility to continue
          servicing an area without a 'Certificate
          of Convenience and Necessity' as long as
          no addition is made to'the distribution
          ortransmission system.

      Section 51(a)(3) provides that a certificate need not
be obtained for operation, extension, or service in progress
one September 1, 1975. As previously noted and discussed,
extensions are limited ~by section 51(b). However, if no
extensions are involved, a public utility may continue to
operate in and serve an area in which it was operating on
September 1, 1975 without a certificate of convenience and
necessity.       :

     Your final question is:

          Does Section 26(b) of the Act authorize
          the citizens of a municipality to appeal
          to the Commission rates established by
          a municipally owned utility?

Section'26 provides in part:
          Sec. 26.  (a) Any party to a rate pro-
          ceeding before the governing body of a
          municipality may appeal the decision of
          the governing body to the commission or
          railroad commission.
             (b) Citizens of a municipality may
          appeal the decision of the governing
          body in any rate proceeding to the com-
          mission or railroad commission through the
          filing of a petition for review signed by
          the lesser of 20,000 or 10 percent of the
          number of qualified voters of such munici-
          pality.


                                p.3428
The Honorable Garrett Morris - page 7   (H-812)


             (c) Ratcpayers of a municipally owned
         gas or electric utility outside the munici-
          pal limits may appeal any action of the
          governing body affecting the rates of the
         municipally owned gas or electric utility
          through filing with the commission or rail- .
         .road commission, as appropriate, petition
          for review signed by the lesser of 10,000
          or S percent of the ratePayers served by
          such utility outside the municipal limits.
          For purposes of this subsection each person
          receiving a separate bill shall be considered
          as a ratepayer. But no person shall be
          considered as being more than one ratepayer
          notwithstanding the number of bills received.
          Such petition' for review shall be considered
          properly signed if signed by any person, or
          spouse of any such person, in whose name
          residential utility service is carried.

     Section 26 .provides for appeals in thrco types of sit-
uations involving municipally owned and municipally rcgulatad
utilities. Subsection (a) applies primarily to proceedings
in which municipalities,regulate rates of privately owned
utilities. Subsection (c) clearly applies to appeals'by
persons who live outside a city but who are served by that
city's municipally owned utility. It is apparent that sub-.
section (b) permits appeals by city residents from rate
decisions made by the municipality relating to utilities.
which are privately owned but regulated by the city. Your
question requires us to determine whether subsection (b)
also applies to appeals of rates of municipally owned
utilities.

     The appellate procedure established in subsection (b)
applies to rate proceedings. Section 3(d) defines "rate" as
being chargny    a "public utility." Since section 3(c)(4)
provides that a municipally owned utility is not a "public
utility" unless otherwise provided, the term "rate proceeding'
contained in section 26(b) does not include a proceeding to
establish rates of municipally owned utilities. See also
sec. 27(f). In the absence of any language indicxn=.




                             p.3429
The Bonorable Garrett Morris - page 8 (H-812)


intent to make an exception to the definitions established
by the Legislature, it is not our prerogative to infer such
an intent. Accordingly, we feel we have no choice but to
state that under the present wording of the statute, rate-
payers outside the municipality can appeal a decision in a
proceeding to fix rates of municipally owned utilities, but
a resident.of the municipality may not. If a different
result was intended, it must await further legislative
clarification. --
                But see section 3(c)(4), which provides that
any municipally owned utility which is governed by a board
of trustees not directly appointed by the city council is
essentially treated as if it'were privately owned.

                      SUMMARY
         The Public Utility Regulatory Act requires
         thatmunicipally owned public utilities
         obtain a certificate of convenience and
         necessity for new retail service only when
         the area to be served is being served by
         another retail 'public utility.. The
         present:wording of the Act does not
         provide for an appeal by residents of a
         city from charges established by that
         city's municipally owned utility.-

                                Very truly yours,




                                                    Texas




WLd
DA~$..~~~sistan,t


C. ROBERT HEATH, Chairman
Opinion Committee
jwb



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