For Approval of a Statewide Base Public Utility Commission

DOCKET NO. 20851

GENERAL COUNSEL’S APPLICATION § FOR APPROVAL OF A STATEWIDE BASE § PUBLIC UTILITY COMMISSION CHARGE AND A STATEWIDE BASE § CHARGE ADDER FOR FULL RETAIL § OF TEXAS ELECTRIC SERVICE SWITCHOVERS AT § OR BELOW 480 VOLTS §

CAP ROCK ELECTRIC COOPERATIVE, INC.’S REPLY TO INITIAL BRIEFS OF CERTAIN SOUTH TEXAS ELECTRIC DISTRIBUTION COOPERATIVES AND GENERAL COUNSEL

TO THE HONORABLE PUBLIC UTILITY COMMISSION:

Cap Rock Electric Cooperative, Inc., (“Cap Rock Electric”) files this Reply to the Initial

Briefs of Certain South Texas Electric Distribution Cooperatives (“STEC”) and General Counsel, and in support hereof would show the following:

Reply to STEC

STEC has urged the Commission to act quickly in establishing switchover rates because of the likelihood that Senate Bill 7 (“S.B. 7”) will become effective on September 1, 1999. STEC correctly surmises that after September 1, 1999, the Commission “may no longer have jurisdiction to set new switchover rates.” Cap Rock Electric agrees with STEC’s analysis that a statewide base charge and base charge adder are “rates,” and that the ability of the Commission to establish new or different rates for those utilities and cooperatives over which the Commission presently has rate jurisdiction may be negatively affected by the enactment of S.B. 7.

STEC also argues that even though it is likely that electric cooperatives will no longer be subject to the Commission’s jurisdiction after September 1, it still makes sense to set a rate for cooperatives because some manner of political inertia will then take effect and it will be unlikely that the cooperatives will thereafter have the “political will” to change such a rate. This argument is based on STEC’s assumption as to how the boards of directors of cooperatives might behave after

September 1 rather than on the legal authority of the Commission to control cooperatives’ rates after

September 1.

STEC’s argument bolsters Cap Rock Electric’s position that the Commission’s rush to establish rates for cooperatives is ill-advised and can quickly be rendered moot as soon as all cooperatives become rate-deregulated. Therefore, the Commission should exclude cooperatives from the scope of this proceeding. Cap Rock Electric is presently rate deregulated, and the

Commission presently has no jurisdiction over its rates. Therefore, in the alternative, Cap Rock

Electric should be specifically excluded from the scope of this proceeding, along with all other cooperatives that are rate-deregulated.

STEC further asserts that a base charge of $160 and a base charge adder of $60 are just and reasonable because they will have a de minimus impact on “any utility’s revenue or expense,” and if the charges are not sufficient to cover all of the utility’s switchover costs, the excess cost could

“easily be included in the utility’s ongoing expense without causing any party to be harmed.” Cap

Rock Electric does not agree that the recommended charges are just and reasonable because these rates will not fully compensate Cap Rock Electric for its switchover costs. Further, STEC’s suggestion that any excess costs could be included in the utility’s on-going expenses would have the unjust and unreasonable result of all of the utility’s ratepayers subsidizing the cost of switching over one customer. Cap Rock Electric does not agree with these assumptions or with the conclusion that its rate structure will not be adversely affected.

Reply to General Counsel

0985\08\20851 pld990610gnc 2 General Counsel argues that because S.B. 7 will allow the Commission to continue to regulate “switchover practices” of cooperatives, then S.B. 7 also allows the Commission to establish and regulate the rates charged by cooperatives for switching customers. However, “practices” and

“rates” are not the same things, as amply illustrated by the provisions of S.B. 7, § 41.004:

Sec. 41.004. JURISDICTION OF COMMISSION. Except as specifically provided otherwise in this chapter, the commission has jurisdiction over electric cooperatives only as follows:

(1) to regulate wholesale transmission rates and service, including terms of access, to the extent provided in Subchapter A, Chapter 35;

(2) to regulate certification to the extent provided in Chapter 37;

(3) to establish a code of conduct as provided in Section 39.157(e) subject to Section 41.054;

(4) to establish terms and conditions, but not rates, for open access to distribution facilities for electric cooperatives provided customer choice, as provided in Section 39.203; and

(5) to require reports of electric cooperative operations . . .

[emphasis added]

It is clear from the emphasized provisions quoted above that the Legislature intended to strictly limit the jurisdiction of the Commission over electric cooperatives. Other than the specifically itemized authority given in § 41.004, the Commission may look only to other provisions of Chapter 41 for specific grants of authority over cooperatives. Additionally, § 41.001 of S.B. 7 states that “[r]egarding the regulation of electric cooperatives, this chapter shall control over any other provision of this title, except for sections in which the term ‘electric cooperative’ is specifically used.” Therefore, as of September 1, the Commission will have no implied authority whatsoever over electric cooperatives.

The regulation of certification in Chapter 37, as contemplated by § 41.004(2) of S.B. 7, is a regulation of the practices of utilities. Section 37.152 authorizes the Commission to regulate the

0985\08\20851 pld990610gnc 3 circumstances under which a certificate holder may discontinue, reduce, or impair service to any part of the holder’s certificated service area. The practice of discontinuance, reduction, or impairment of service is authorized only for nonpayment of charges, nonuse, or another similar reason that occurs in the usual course of business. Section 37.152 is not authorization for the

Commission to regulate the rates imposed by an electric cooperative when the cooperative’s customers seek to switch electric providers. General Counsel’s suggestion that § 41.004(2) impliedly allows the Commission to expand its authority from “regulation of practice” to

“regulation of rates” is not supported by the language of either Chapter 37 or Chapter 41, and such an implication is clearly foreclosed by § 41.001.1

WHEREFORE, Cap Rock Electric respectfully requests that the Commission refrain from establishing statewide switchover fees at this time in light of the enactment of Senate Bill 7.

Alternatively, Cap Rock Electric requests the Commission to enter an order acknowledging that

Cap Rock Electric is exempt from the application of statewide switchover fees, excluding electric cooperatives from the scope of this docket, and granting Cap Rock Electric such other and further relief to which it may be entitled.

Respectfully submitted,

LLOYD, GOSSELINK, BLEVINS, ROCHELLE, BALDWIN & TOWNSEND, P.C. 111 Congress Avenue, Suite 1800 Austin, Texas 78701 (512) 322-5800 FAX (512) 472-0532

LAMBETH TOWNSEND State Bar No. 20167500

______1 The further emphasis in § 41.004(4) that the Commission may establish terms and conditions, but not rates, for open access to cooperatives’ distribution facilities is additional proof that the Legislature has intended that the Commission retain no vestige of implied authority over the rates of electric cooperatives. 0985\08\20851 pld990610gnc 4 GEORGIA N. CRUMP State Bar No. 05185500

RICHARD L. HAMALA State Bar No. 08810750

ATTORNEYS FOR CAP ROCK ELECTRIC COOPERATIVE, INC.

CERTIFICATE OF SERVICE

I, Georgia N. Crump, attorney, certify that a copy of this document was served on all parties of record in this proceeding on this the 10th day of June, 1999, in the following manner: hand delivered, sent via facsimile, or mailed by First Class Mail.

______GEORGIA N. CRUMP

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