Legislation could help consumers by sending gas utility cases to State Office Of Administrative Hearings

Money in the Electricity MarketIf you pay for utility service in Texas, you might want to stay focused on two major pieces of legislation at the state Capitol. They are Senate Bills 655 and 661 — the so-called “Sunset” bills that reauthorize the Texas Railroad Commission and the Texas Public Utility Commission. The Railroad Commission and PUC set base rates for gas and electric utility service in Texas. Their decisions impact millions.

With regards to Senate Bill 655: one important reform that may end up in the final version would improve the deliberative process at the Texas Railroad Commission.  Under this possible change,  the agency would make use of the independent State Office of Administrative Hearings to adjudicate gas utility rate cases. Currently, the agency employs internal hearing examiners for this purpose.

This change is extremely important. The internal hearing examiners that currently consider testimony and evidence in gas rate cases are also employed by the commissioners. This raises a perception problem. That is, as agency employees are the internal hearing examiners in a position to provide completely independent recommendations to their bosses? What about those instances in which hearing examiners make recommendations on an issue in one case, and then serve as an expert witness on the same issue in another case? Isn’t this a conflict?

By shifting their responsibilities to independent SOAH judges, the legislation avoids all these problems. The use of SOAH judges creates a firewall between the commissioners who make the final decision in a rate case, and the examiners who consider testimony and evidence in it. That’s why consumer advocates support the change. Consumer groups note that SOAH has the expertise to handle these cases and that the use of SOAH judges should be no more expensive than the use of internal hearing examiners because their duties will be the same.

The SOAH provision is included in a version of SB 655 adopted by the Senate, but is not included in the House version. Those differences must be ironed out before the bill can be sent to the governor. Senate Bill 655 also makes the agency more accountable to the public by changing its misleading name from the Texas Railroad Commission to the Texas Oil and Gas Commission. One version of SB 655 also reduces the number of commissioners from three to one.

Senate Bill 661, meanwhile, would give the Texas Public Utility Commission more budgetary oversight of ERCOT, which is the organization that manages the state power grid. ERCOT has suffered a long history of mismanagement and broken budgets. Depending on its final form, SB 661 may also give the PUC authority to order restitution from electric companies that abuse the wholesale electricity market.

An unresolved question in Senate Bill 661 relates to the final composition of the ERCOT board of directors. Even though consumers pay 100 percent of the costs within the ERCOT market and indirectly pay all the costs of managing the ERCOT organization, consumer representatives are outnumbered by electric industry representatives on the board. The final version of Senate Bill 661 may help bring it more into balance.

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