Few Texans are familiar with the state’s Public Utility Commission. They are, however, well-acquainted with the regular sting of their electric bills and understand the importance of minimizing service disruptions.
The PUC’s three commissioners, appointed by the governor, regulate many utilities that are virtual monopolies for electric and water services.
To keep utilities from raising rates whenever they desire, the Texas Legislature established a rate case process that typically involves a utility versus its customers.
While customer groups are often represented by attorneys, the process is tilted toward the utility companies because they have greater resources and political influence.
The PUC is considering a proposed rule that would severely limit the written discovery process in which customer groups can ask questions and request evidence that justifies the rate increases utilities are seeking.
Representatives of all major customer groups in Texas oppose this rule, including residential customers, low-income families, small businesses and industrial and commercial users.
If the PUC adopts this rule, interested customer groups will be deprived of the very information that makes effective public oversight possible.
According to its own website, the PUC’s mission is to “protect customers, foster competition, and promote high-quality infrastructure.” The proposed order before the commission does none of the above, and indeed, it may accomplish precisely the opposite.
The proposal is a case study in the unintended consequences of a one-size-fits-all approach to very different situations.
The rule, which imposes sharp limits on written discovery, is roughly modeled on the rules that govern Texas civil trials. But the PUC’s proposed rule ignores the differences between most civil trials and PUC rate cases.
In civil trials, oral depositions are the primary discovery tool, and written discovery generally plays a secondary role. Conversely, in rate proceedings before the PUC, written discovery is the central means of gathering evidence, and depositions are rare because they are time-consuming and expensive.
In support of rate increases, utilities file volumes of documentary evidence on purported costs, revenue and required profit.
As would be expected, these filings are obviously slanted to support the requested increase.
Only through pointed requests for information can other parties in rate cases — representing residential customers, small businesses and large industrial users — ferret out from utilities the supporting evidence for these filings to assess their accuracy.
In the name of agency efficiency, the proposed PUC rule limits a cost-effective means of discovery in rate cases and hobbles representatives of ratepayers in their efforts to challenge the one-sided filings of utilities.
Unlike most civil litigation, most of the witnesses presented by utilities in rate proceedings are experts who develop complex reports on myriad issues in the case, ranging from the utilities’ revenue requirements to the allocation of rate increases to different classes of customers.
Without extensive discovery directed at these expert reports, effective cross-examination of these experts in the rate hearings will be significantly thwarted.
As Conservative British statesman Lord Robert Salisbury observed, “No lesson seems to be so deeply inculcated by the experience of life as that you never should trust experts.”
That adage is especially apt in rate proceedings in which utility executives and high-priced experts retained by utilities present reports which purport to be based on objective analysis but which in fact are slanted to support the utilities’ positions.
In one case in which I represented residential ratepayers in an electricity rate case in Chicago, the utility spent $10,000 on preparing a chart to support a New York investor bankers’ report on the need for emergency rate relief.
The judge was very impressed with this flashy exhibit until we showed, based on our extensive discovery, that the expert ignored relevant information to present a skewed version of the actual data.
The PUC should not take away the right of residential, small business and industrial utility customers to fully assess the merits of utility claims for rate increases.
Stefan H. Krieger, professor of law at Maurice A. Deane School of Law at Hofstra University, is the former director of the Civil Clinic at Southern Methodist University Law School.