               I’




                                    The Attorney         General of Texas
                                                    Smeptember10, 1985
JIM MATTOX
Attorney General


Supreme Court Building
                                   Mr. Philip F. Riclcetts                Opinion No. JM-353
P. 0. Box 12548                    Chairman of the C~xmnission
APSE. TX. 7a71+ 2548               Public Utility Colmoissionof Texas     Re: Authority of the Public
51214752501                        7800 Shoal Creek :3oulevard            Utility Commission of Texas to
Telex 9101874.1367
Telecopier  512/475-0266
                                   Suite 400N                             certificate facilities of co-
                                   Austin, Texas   7:x157                 generators making retail sales
                                                                          of electricity
714 Jackson, Suite 700
Dallas, TX. 75202.4506
                                   Dear Mr. Ricketts:
214i742.8944

                                           You ask whether the Public Utility Commission of Texas [PUC] has
4824 Alberta   Ave., Suite   160   authority under section 49(a) of the Public Utility Regulatory Act,
El Paso, TX. 79905-2793            article     1446c. V.T.C.S., to certificate facilities of cogenerators
91515333484                        making retail sale:;of electricity.

IOOt Texas. Suite 7W
                                         We will proTide some background about cogenerators and relevant
Houston. TX. 77002-3111            federal law before addressing your specific question. A cogenerator
71312235886                        produces both elfictricenergy and steam, heat, or some other form of
                                   useful energy that it uses for its own industrial purposes. 16 U.S.C.
                                   1796(18)(A)    (19i32); Federal   Energy  Regulatory   Commission   V.
aceBroadway,  Suite 312
                                   Mississippi, 456 U.S. 742, 750 n. 11 (1982); Attorney General Opinion
Lubbock. TX. 79401-3479
aw747.5238                         uw-45  (1979). Cogenerators may produce excess electricity, which they
                                   traditionally hax.e been unable to market because electric utilities
                                   have been relucl.a.utto purchase from them. Id. Some intrastate
4309 N. Tenth, Suite S
                                   utilities have refused to connect with other syzms      to avoid being
McAllen. TX. 78501.1665
512/682-4547
                                   subject to the full range of federal regulation. American Paper
                                   Institute V. American Electric Power, 461 U.S. 402, 422 n. 12 (1983).

 200 Main Plaza, Suite 400              As part of 1978 legislation designed to conserve energy, Congress
 San Antonio. TX. 78205-2797
                                   enacted provisions encouraging increased use of excess electricitv
 51212254191
                                   produced by a ccgenerator. Federal Energy Regulatory Commission v:
                                   Mississippi, 9~;    Public Utility Regulatory Policies Act of 1978, 16
 An Equal OppOrtunitYI             U.S.C. 1824a-3 (1982).     The statute directs the Federal Energy
 Affirmative Action Employer       Regulatory Commission [FFRC] to promulgate rules setting rates for
                                   purchases and sales of electric energy between "qualifying"
                                   cogenerators. FISRC is to establish the size, fuel use, and fuel
                                   efficiency requixments of a "qualifying cogeneration facility." 16
                                   U.S.C. 5796(18)(D) (1982). Its rules are to require that electric
                                   utilities offer to buy electricity from and sell it to cogenerators;
                                   state regulatory agencies are required to implement these rules. 16
                                   U.S.C.   §824a-3(,a:~
                                                      , (0,     (h)   (1982).   Qualifying cogeneration
                                   facilities may be exempted by FERC rule from




                                                              p. 1612
Mr. Philip F.   Ricketts - P#lge2   0X-353)




          State laws and ::ogulations respecting the rates,
          or respecting .:Ilefinancial or organizstional
          regulation, of electric utilities . . . if the
          Commission determines such exemption is necessary
          to encourage cogmleration. . . .

16 U.S.C. 3824a-3(c) (1982).

     In light of 16 U.S.C:. section 824a-3, the Texas Legislature
amended the Public Utilit:iesRegulatory Act [PURA]. Senate Bill No.
605 amended the definitions of "public utility" in subsection 3(c) of
article 1446~. V.T.C.S., as follows:

              (12) The tern 'public utility' or 'utility,'
           when used in this Act, includes any person,
           corporation, rive,cauthority, cooperative corpora-
           tion, or any csnnbination thereof, other than a
           municipal corporation or a water supply or sewer
           service corporatfon. or their lessees, trustees,
           and receivers, now or hereafter owning or opera-
           ting for compenf,ationin this state equipment or
           facilities for:

              (1) producing, generating, transmitting, dis-
           tributing, sell.ing, or furnishing electricity
           ('electric utilj.ties'hereinafter) provided. how-
           ever, that this E:efinitionshall not be construed
           to apply to or -include a qualifying small power
           producer or qual:.fyingcogenerator, as defined in
           Sections 3(17)(D) and 3(18)(C) of the Federal
           Power Act, as- amended (16 U.S.C. Sections
           796(17)(D) and 726(18)(C)). . . .        (Emphasis
           added).

Acts 1981, 67th Leg., ch. 31. at 70; codified at V.T.C.S. art. 1446c,
03, subsection (c) (added l.anguageemphasized). The Bill Analysis to
Senate Bill No. 605 states in part

           The [CogeneratiNx1]Task Force determined that a
           need exists to modify Texas law to comply with the
           federal mandate that the states act in such a way
           that cogenerato.:swill not be treated as 'public
           utilities.' Potential cogenerators have not fully
           pursued production of electric power by co-
           generation due to the PUC designation as 'public
           utility.' Give~l the opportunity to sell surplus
           power back to t,h,eutility companies, industrials
           and private individuals would have the incentive
           to actively develop cogeneration plants, sources
           of valuable energy.



                               p. 1613
Mr.   Philip F. Ricketts - Pa8e 3   (JM-353)




Bill Analysis to Senate B:J.lNo. 605 prepared for House Committee on
State Affairs, filed in Bj.llFile to Senate Bill No. 605. 67th Leg.,
Legislative Reference Libr,s:cy
                              (1981).

     The 1981 amendment to subsection 3(c) removed cogenerators from
the definition of "public utility," and therefore rendered many PUPA
provisions inapplicable to :wch entities.

     The question you present is whether the 1981 amendment to section
3(c) rendered article VII: of PURA (sections 49 through 62). which
governs certificates of ~:onvenience and necessity, inapplicable to
qualifying cogenerators. At the time the legislature added the
language regarding cogeneretors to section 3(c), article VII of PURA
contained the following language:

                 Sec. 49. For the purposes of this article only:

               (a) 'Retail public utility' means any person,
            corporation, [water supply or sewer service
            corporation,] m~~n.icipality,
                                        political subdivision
            or agency, or cooperative corporation, now or
            hereafter operaMng. maintaining, or controlling
            in Texas facilit:Les for providing retail utility
            service.

                 (b)'Public utility' does not include any
            person, corporat?on, municipality, political sub-
            division or ag&cy,    or cooperative corporation
            under the jurisd;ction of the Railroad Commission.
            [For the purpos& of this article only. 'public
            utility' includ~:sa water supply or se&r service
            corporation]. (Emphasis and brackets added).

 Art. 1446c, §49 (language Ln brackets added by Acts 1979, 66th Leg.,
 ch. 57, 54, at 95; unde:r:.inedlanguage deleted by Acts 1983, 68th
 Leg., ch. 263, 524 at 1222,).

      The point of content:tonin the briefs submitted to us is whether
 the exemption of cogenera’rors from the definition of "public utility"
 in section 3(c) automatically exempted cogenerators from the defini-
 tion of "retail public utility" in section 49. Those who take the
 position that a cogenerator can no longer be a "retail public utility"
 argue that "retail publfc utility" in section 49 is a subset of
 "public utility- in section 3(c) and that "retail public utilityW can,
 therefore, be no broader than "public utility" except insofar as
 section 49 explicitly broafdens the section 3(c) definition of "public
 utility." Since section 49 does not list cogenerators as "retail
 public utilities," they e,rgue, cogenerators cannot be "retail public
 utilities." Those on the other side of the issue argue that "retail
 public utility" in secticn 49 is to be read without reference to the




                                  p. 1615
Mr. Philip F. Ricketts - Page 4      (JM-353)




definition of "public utility" in section 3(c). Thus, because the
legislature did not amend section 49 to exclude cogenerstors. they
argue, cogenerators can sl:illbe "retail public utilities." Neither
interpretation is fatuous; nor    is either interpretation wholly
satisfactory.

     Logic and good draf'ting would dictate that, having already
defined "public utility," the authors of PURA would define "retail
public utility" as a "public utility" with the characteristic
"retail." The language of section 49, however, suggests that they did
not do so. If the authors of the act had intended to define "retail
public utility" as a subset of "public utility" in section 3(c), they
could have simply written,

          A 'retail public utility' is a public utility that
          provides retail :;ervices. . . . For the purposes
          of this Act only, municipalities . . . are public
          utilities.

Instead, the definition of "retail public utility" consists of a
seemingly comprehensive list of included entities, as if it were
written from scratch. Aloo, the language in section 49 is not con-
sistent with the language in section 3(c). For example, section 49
uses "municipality," while section 3(c) uses "municipal corporation."
Thus, both the structure and wording of section 49 suggest that
section 49 was originally ,tiritten
                                  without reference to section 3(c).

     Another reason for assuming that article VII was written without
reference to section 3(c) is that the term "public utility" appears
repeatedly in article VI:: -- "retail public utility" appears only
twice -- in provisions that logically apply to all entities that must
obtain a certificate of convenience and necessity under article VII.
Applying the section 3(c:s definition of "public utility" to those
provisions would exclude "retail public utilities" from the scope of
those provisions. We think such a reading would be nonsensical. The
supreme court came to the s.nmeconclusion&   City of Coahoma v. Public
Utility Commission, 626 S.W.2d 488 (Tex. 1981). In Coahoma the court
considered whether "pub1.i.cutility" in section 53 included a
municipality, which is- not a "public utility" as defined in section
3(c) but is a "retail pu>:Lic utility" under section 49. The court
held that "public utility" in section 53 included a "retail public
utility," because, given the obvious purpose of article VII, it would
be unreasonable to conclude that the legislature meant "public
utility" as defined in s'ection 3(c) when it used the term "public
utility" in section 53. Thus,, Coahoma supports the argument that
article VII was written without reference to section 3(c).

      Given the wording of article VII and the sensical construction of
 the article, we think it is reasonable to conclude that the legisla-
 ture did not Intend "rel:ail public utility" in section 49 to be




                                  p. 1615
Mr. Philip F. Ricketts - PiIge5    (JM-353)




limited by the definiticln.of "public utility" in section 3(c).
Further, we think that when the legislature exempted cogenerators from
the definition of "public Iutility" in section 3(c), it assumed that
the amendment would not wempt cogenerators     from the definition of
"retail public utility" jn section 49. The bill analysis of that
amendment indicates that the legislature's intent was to give co-
generators "the opportunity to sell surplus power back to the utility
companies." Bill Analysi:; to Senate Bill No. 605, supra, (emphasis
added). Nothing in the 1c:gislativehistory indicates that the legis-
lature intended to encourage cogenerators to make retail sales of
electricity. Also, the bil:L analysis states that the amendment was to
bring Texas law into complL.ancewith the federal mandate. The mandate
of the federal law on it:; face is that state regulation should not
discourage cogenerators fwm selling electricity to and buying elec-
tricity from utility companies
                          --*    See also 16 U.S.C. §824a-3(a) (1982).

     Although the question is a difficult one, we conclude that the
Public Utility Commissior~ of Texas has jurisdiction to require a
qualifying cogenerator making or planning to make retail sales to
obtain a certificate of cowenience and necessity.

                              SUMKARY

             The Public ‘Jtility Commission of Texas has
          jurisdiction under the Public Utilities Regulatory
          Act, article 1446c, V.T.C.S., to promulgate a rule
          requiring qualiEying     cogenerators making    or
          planning to make retail sales to obtain a cer-
          tificate of convenience and necessity.




                                            JIM     MATTOX
                                            Attorney General of Texas

TOM GREEN
First Assistant Attorney C:eneral

DAVID R. RICBARDS
Executive Assistant Attorney General

ROBERT GRAY
Special Assistant Attorney General

 RICK GILPIN
 Chairman, Opinion Ccmmittw




                                  p. 1616
Mr. Philip F. Ricketts - Page 6    (JM-353)


                                              .


Prepared by Sarah Woelk
Assistant Attorney General

APPROVRD:
OPINION COMMITTEE

Rick Gilpin, Chairman
Steve Davis
Tony Guillory
Mary Keller
Jennifeq Riggs
Sarah Woelk




                                  p. 1617
