                                 The Attorney             General of Texas

MARK WHITE                                          April 15, 1982
Attorney General


                               Mr. George M. Cowden                    Opinion No. M-462
Supreme Court Building
                               Chairman
P. 0. BOX 12546
Austin. TX. 76711. 2546
                               Public Utility Commission of Texas      Re:   Ratemaking standards to
512/475.2501                   7800 Shoal Creek Boulevard              be applied by Public Utility
Telex 9101674.1367             Suite 400N                              Commission in hearing appeals
Telecopier   512/475-0266      Austin, Texas   78757                   and fixing rates pursuant to
                                                                       section   26(e)   of   article
                                                                       1446~. V.T.C.S.
16iI7 Main St., Suite 1400
DalIa?. TX. 75201-4764
21417428944                    Dear Mr.   Cowden:

                                    You have requested an opinion concerning the standards to be
4624 Alberta Ave.. Suite 166
                               applied by the Public Utility Commission in hearing appeals from
El Paso. TX. 79905.2793
9151533.3464                   ratepayers of municipally owned utilities who reside outside the
                               municipality's limits pursuant to section 26(e) of the Public Utility
                               Regulatory Act, article 1446~. V.T.C.S. [hereinafter "the act"].
,220 Dallas Ave., Suite 202    Specifically, your question is:
Houston. TX. 770026966
713l6530686
                                          What standards or ratemaking provisions does the
                                          commission apply in hearing appeals de nova and
605 Broadway. Suite 312                   fixing rates pursuant to section 26(e) of the act?
CubWck. TX. 79401.3479
9061747.5236
                                    In Attorney General Opinion ~~-406 (1981) we held that the
                               ratemaking standards of article VI of the act do not apply to appeals
4309 N. Tenth. Suite B         pursuant to section 26(e), since all provisions of that article refer
McAtten. TX. 76501.1665        to "public utilities" or "utility," from which municipal utilities are
5121662-4547                   expressly excluded pursuant to the definition of such in section 3(c)
                               of the act. However, subsequent to the issuance of Attorney General
200 Main Plaza. Suite 400      Opinion MW-406 (1981), the Austin Court of Appeals in Public Utility
San Antonio, TX. 78205.2797    Commission of Texas v. City of Sherman. Docket No. 13,453. Tex. Civ.
512/225-4191                   APP. - Austin, December 23. 1981 (unreported), held that in certain
                               circumstances the terms "public utility" and "utility" as used in the
An Equal Opportunityl
                               act do include municipally owned utilities, notwithstanding their
Attivmtive Action EmplOyer     definitional exclusion in section 3(c). Specifically, the court held
                               that the term "utility" in section 17(e) and the term "public utility"
                               in section 60 must be construed to include municipalities in order to
                               effectuate the intent of the act to establish a comprehensive
                               regulatory system. Similarly, the Supreme Court of Texas in City of
                               Coahoma v. Public Utility Commission. 626 S.W.2d 488 (Tex. 1981), held
                               that the term "public utility" in section 53 of the act must be
                               construed to include municipally owned utilities, despite section


                                                          P. 1608
Mr. George M. Cowden - Page 2      W-462)




3(c). In San Antonio Independent School District v. City of San
Antonio, 614 S.W.2d 917 (Tax. Civ. App. - Eastland 1981, writ ref'd
n.r.e.), the court held that the term "public utility" as used in
section 48 of the act is not dependent upon section 3(c) for its
definition and must include municipally owned utilities. It should be
noted that section 48 is within article VI of the act.

     The above three cases make it clear that where exclusion of
municipally owned utilities from the terms "public utility" or
"utility" would result in a contradictlon in the act or in a
regulatory system of less than a comprehensive uature, then the terms
must include such municipalities. It is equally clear, as set forth
in Attorney General Opinion MW-406 (1981), that the legislature
intended the commission 'to have jurisdiction over appeals from
ratepayers of a municipally owned utility who reside outside the
municipality's boundaries, pursuant to section 26(e) of the act.
Accordingly, it must be inferred that the legislature also intended
that there be ratemaking standards for such appeals, in order that the
commission's jurisdiction in this regard be complete. Since the only
ratemaking standards of the act are set forth in article VI, we
believe it logically follows that these standards were intended to
apply to section 26(e) appeals, and that the terms "public utility"
and "utility",in article VI were intended to include municipally owned
utilities, where the commission properly has jurisdiction over such
utilities. The only qualification to this concerns section 43 of
article VI, which establishes the procedure for public utilities to
file rate applications with the regulatory authority and certain
procedures the regulatory authority must follow in hearing such
applications. Clearly this section does not apply to appeals from
municipally owned utilities, which are instead governed by section 26.

                            SUMMARY

            In hearing appeals pursuant to section 26 of
         article 1446~. V.T.C.S., from ratepayers who
         reside outside the municipal limits, the Public
         Utility Commission of Texas should apply the
         ratemaking standards contained in article VI, with
         the exception of section 43.




                                            M A Rx    W,H I T E
                                            Attorney General of ~Texas

JORN W. FAINTER, JR.
First Assistant Attorney General


                                p. 1609
Mr. George M. Cowden - Page 3   (W-462)




RICHARD E. GRAY III
Executive Assistant Attorney General

Prepared by Phil Rickette
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

Susan L. Garrison, Chairman
Jon Bible
Phil Rickette
Rick Gllpin
Patricia Hinojosa
Jim Moellinger




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