The City of College Station v. Public Utility Commission of Texas

ACCEPTED

15-25-00096-CV

FIFTEENTH COURT OF APPEALS
AUSTIN, TEXAS

10/6/2025 3:06 PM

NO. 15-25-00096-CV CHRISTOPHER A. PRINE
CLERK
IN THE FIFTEENTH COURT OF APPEALS FILED IN
AT AUSTIN, TEXAS 15th COURT OF APPEALS

AST
CITY OF COLLEGE STATION, 10/6/2025 3:06:40 PM
Appellant, CHRISTOPHER A. PRINE

Vv Clerk

PUBLIC UTILITY COMMISSION OF TEXAS,
Appellee.

On Appeal from the 200th Judicial Court,
Travis County, Texas
Cause No. D-1-GN-24-005680

REPLY BRIEF FOR APPELLANT

THOMAS L. BROCATO

State Bar No. 03039030
ROSLYN M. WARNER

State Bar No. 24117520
LLOYD GOSSELINK
ROCHELLE & TOWNSEND, P.C.
816 Congress Ave., Suite 1900
Austin, Texas 78701

(512) 322-5800

(512) 472-0532 (fax)
tbrocato@lglawfirm.com
rwarner@lglawfirm.com

ADAM C. FALCO

State Bar No. 24055464
College Station

City Attorney’s Office
P.O. Box 9960

College Station, Texas 77842
(979) 764-3746

(979) 764-3481 (fax)
afalco@cstx.gov

ATTORNEYS FOR APPELLANT, CITY OF COLLEGE STATION
ORAL ARGUMENT REQUESTED
TABLE OF CONTENTS

Page
TABLE OF CONTENTS ..00... ccc ccecccccceeeccceeeeeeeeeeeceeeeeeeeesaeeceesaeeenanens 2
INDEX OF AUTHORITIES... cece ccc eeccceceeeceeeeeeeeeaneeeeeeaeeeeanees 4
GLOSSARY OF TERMS 1.0.0... ccceccce ce eececeeeeeeeseeeceseeeeeeesaeeeeeeaneeeeaas 5
STATEMENT REGARDING CITATION FORM.........0.0 cece eee 6
SUMMARY OF REPLY ARGUMENT ...0.... cece cccceccceceeeeeeeeeeeeeens 7
ARGUMENT & AUTHORITIES 0.0... ceccccceeeceseaeeeeeseeeeeeaneeees 9

A. The Commission disclaimed its own longstanding
application of the TCOS Rule. 00... eeeccceecseeeeeeeeees 9

1. The Commission’s decision invalidates an

entire expense category expressly permitted

under the TCOS Rule and consistently
approved by the ComMiSSION. .............cccccceececeeecseeeeeeeeees 9

2. The Commission’s decision relies on

retroactive application of an unprecedented
SCANCALA. 00... .c cece cceccccsecee ee cecseeceaeceeeeecesueceeeeecsseeeeaeeeaees 12

B. The Commission’s decision entirely ignores key
QVIGENICE, ... 0... cecccceecccsecceeeeeeeeeceseeeeeeeceseeeeeueeeeseeeeuaeceseecesaesenaeees 14

1. Absent Commission Staffs intervening
actions and three Commission orders,
College Station would have maintained a 0%

2. This case is not the Commission’s first
opportunity to review and invalidate College

Station’s GET. oo... ce ccecccceecseecsceessseeseseeseeanseeenes 18
C. The Commission's failure to find good cause is an
Abuse Of CISCKETION. «0.0.0... cccc cece cceccceccceeceesseeeseesseeneeesceeeceuseeaes 21

1. Despite the statutory requirement to do so,
the Commission provided no explanation for
YEJECtING FOO CAUSE. 00... ..c cece ceccceccceeeceeeeeeeseeeseeeseeeseeeees 22
2. The Commission’s decision is unnecessarily

punitive and inequitable. ......... cee ceccceeceeceeseeeeeeues 24
CONCLUSION AND PRAYER ...... 0... cceecc cece ce eeecceceee sees eeeeeesanaeeeeeeeeaes 26
CERTIFICATE OF COMPLIANCE ........ ccc ccccccccccceseeeeecceesseeeeeeeenees 29
INDEX OF APPENDICES 200.0... cceccccccce ee eecccceesseeeeeceesseeeeeeeeseaaenees 30
INDEX

OF AUTHORITIES

Statutes
Tex. Govt Code § 2003.049(h)

Rules and Regulations

16 Tex. Admin. Code § 25.192(h)(1)
16 Tex. Admin.Code § 25.192(h)(2)
GLOSSARY OF TERMS

ALJs

APA
AR

College Station

Commission or PUC
CR

ERCOT
Final Order
FOF

GFT

MOU

PFD

ROI

RR

TCOS
TCOS Rule
TSP

Administrative Law Judges Cassandra
Quinn and Daniel Wiseman

Administrative Procedure Act
Administrative Record

City of College Station, a Municipally-Owned
Utility

Public Utility Commission of Texas
Clerk’s Record

Electric Reliability Council of Texas
Order on Rehearing issued July 11, 2024
Finding of Fact

General Fund Transfer
Municipally-Owned Utility

Proposal for Decision

Return on Investment

Reporter’s Record

Transmission Cost of Service

16 Texas Administrative Code § 25.192

Transmission Service Provider
STATEMENT REGARDING CITATION FORM

Citations to the Clerk’s Record, if any, are stated in the following
form: CR at [page number]. The Administrative Record is part of the
Reporter's Record and, accordingly, citations to the Administrative
Record are stated in the following form: RR, AR [item number] at [page
number]. All citations to CR, RR, and AR will cite to Bates number pages
when Bates number pages are available. Otherwise, citations refer to the

document’s original page numbers.
SUMMARY OF REPLY ARGUMENT

To reach its conclusion in this case, the Commission necessarily had
to reverse its own longstanding application of the TCOS Rule and
unlawfully revoke an entire expense category it has never prohibited, or
even limited, in any prior TCOS case. In addition, the Commission used
this case to formulate a new standard under the TCOS Rule and then
applied it to College Station retroactively under the guise that the
standard has always been the Commission’s approach to GFTs in
transmission rates. This claim has no grounding in the evidence and, in
fact, the evidence clearly showed that no such standard existed when
College Station filed its interim applications. If the standard applied
here had legitimately existed as Commission policy prior to this case,
PUC Staff would not have advised College Station to include a GFT and
the Commission would not have approved College Station’s interim
TCOS applications.

Despite the Commission’s argument that this proceeding is the first
opportunity to evaluate College Station’s GFT inclusion, College
Station’s request to increase its GFT in transmission rates from the 0%

approved in PUC Docket No. 15762 was plainly before PUC Staff and the
Commission in three separate prior proceedings. PUC Staff instructed
College Station to include a GFT in the first place and ultimately
recommended approval of the GFT with no indication that it intended the
expense to be subject to reconciliation nearly two decades later. On three
occasions, the Commission approved the GFT with the knowledge that it
was an increase from the previously approved 0%.

The Commission baselessly ignored the key facts in evidence and
failed to provide an explanation for doing so. The Commission similarly
rejected the overwhelming evidence of good cause weighing against a
refund even though the Commission has a statutory obligation to explain
the factual and legal bases for rejecting an administrative law judge's
recommendations.

In a final order that defies logic, the Commission recognized that
College Station acted in good faith, among numerous other findings
supporting a mitigated or zero sum refund, and then ordered the most
punitive outcome possible. The Commission abused its discretion to
impose a harmful and arbitrary punishment on College Station. The
Final Order should be reversed and remanded to correct this inequitable

result.
ARGUMENT & AUTHORITIES

A. The Commission disclaimed its own longstanding application
of the TCOS Rule.

The Commission, without exception, has long treated GFTs as a
permissible expense within a specific category enumerated in its rules.
Instead of acknowledging this longstanding approach and properly
implementing new policy prospectively, the Commission disclaimed its
prior rule interpretation, created a new standard for evaluating GFT
inclusions, and retroactively applied the standard to College Station
nearly twenty years after College Station first transparently identified
that it was including a GFT in an interim filing. The result is a
categorical disallowance of an entire expense category available to all
other MOUs except for College Station. The Commission’s failure to
recognize and apply its own historical application of the TCOS Rule
should not be conflated with reconciliation under the TCOS Rule.

1. The Commission’s decision invalidates an entire expense

category expressly permitted under the TCOS Rule and
consistently approved by the Commission.

The record is clear—even though a GFT is not a tax, it may be
classified as “other associated taxes’ for purposes of a MOU’s

transmission rates. (RR, AR 200 at 7:19-21.) “Other associated taxes’ is
an expense category expressly allowed in interim updates under the
TCOS Rule. 16 Tex. Admin. Code (TAC) § 25.192(h)(1). Irrespective of
whether a GFT was first included in a comprehensive TCOS filing, the
Commission’s practice since the current transmission framework was put
in place over 30 years ago has been to allow MOUs to recover a GFT
within this category. Commission Staffs expert witness, Ruth Stark,
confirmed that GFTs are commonly known as “other associated taxes”
and that a GFT often appears in the TCOS schedule corresponding to this
category. (AR 173 at 39:13-40:2.) Ms. Stark also confirmed the
Commission’s history of issuing orders authorizing MOUs to include a
GFT as “other associated taxes”. (RR, AR 173 at 62.) There is no evidence
in the record contrary to Ms. Stark’s testimony. Despite arbitrarily
reaching a conflicting conclusion, the Commission affirmed this
longstanding application of its rules in the Final Order. (RR, AR 167 at
11, FOF 47, which states, “[g]eneral fund transfers have been .. . included
in the revenue requirement as a separate expense item, most often
appearing in the “other taxes” line item.”)

Based on this established practice, the Commission’s decision to

impose a full refund goes beyond the bounds of reconciliation

10
contemplated under the TCOS Rule. By suddenly changing its
interpretation of the TCOS Rule to revoke inclusions College Station
began requesting nearly twenty years ago, the Commission effectively
deleted an entire expense category from the rule and applied this
modification to a single party. Asa parallel, the TCOS Rule provides that
in an interim filing a TSP should update for values reflecting
transmission facility additions. 16 TAC § 25.192(h)(1). In a subsequent
comprehensive TCOS proceeding, the Commission will review the
prudence of these plant costs and evaluate whether certain plant
expenditures were necessary. But the Commission could not outright
invalidate the entire category of “transmission facility additions” as doing
so would inappropriately modify the plain language of the TCOS Rule.
The Commission entirely denied College Station’s recovery of an
expense category the Commission has never prohibited before. Contested
cases may be used as a mechanism for interpreting and applying agency
rules, but the Commission cannot suddenly retract its own longstanding
interpretation of the TCOS Rule and _ retroactively impose the

consequences of that change on one party.

11
2. The Commission’s decision’ relies on_ retroactive
application of an unprecedented standard.

The Commission claims the TCOS Rule does not permit inclusion
of a GFT in an interim TCOS filing if the GFT was not first included in a
comprehensive TCOS filing. (Appellee’s Br. at 21.) This standard is not
stated in the TCOS Rule or in any other governing rule or law or case.
(RR, AR 188 at 9.) Rather, it is an interpretation of the TCOS Rule the
Commission developed and applied for the first and only time in this
proceeding. The Commission has only two options for lawfully applying
this new standard — it could have applied its interpretation when College
Station first sought inclusion of a GFT (after receiving instructions from
PUC Staff to do so); or it can implement the new standard prospectively
in future TCOS cases.

Prior to the Commission’s decision in this case, College Station had
only the following guidance for including a GFT in its interim TCOS
applications: (1) PUC Staff's specific instructions to include a GFT; (2)
the Commission’s repeated assent to the inclusion in three separate
orders; and (3) the Commission’s undisputed pattern and practice of
approving all requested GFTs as either “other associated taxes” or as a

return component. (RR, AR 173 at 40:10-23.) The claim that College

12
Station’s GFT had to first be approved in a comprehensive TCOS
proceeding is at odds with the fact that no such approach was applied, or
ever mentioned, when College Station first requested inclusion of a GFT
in 2007, in any of the two interim proceedings thereafter, or in any prior
case. There is additionally no logical reason justifying this approach.
The Commission argues that PUC Staff treats “other associated
taxes” the same as depreciation expenses and rate of return, and that any
update to these values in an interim TCOS proceeding should correspond
to the percentage approved in the last comprehensive case. (Appellee’s
Br. at 20.) Notably, however, PUC Staff did not take this approach when
it instructed College Station to request its GFT and it did not enforce this
approach in either of College Station’s subsequent interim filings.
Moreover, this premise fails to consider that under the facts of this case
the “other associated taxes” category could not have ever been treated the
same as depreciation and rate of return because it would have always
been 0%. PUC Staff was aware of this through the correspondence
leading up to College Station’s interim filings. And the Commission was
aware of this when it was clearly stated in the interim testimony and

schedules. The record made clear that College Station would have filed

13
a comprehensive to include a GFT if the policy retroactively enforced in
this proceeding had been in place when it first filed an interim
application. (RR, AR 184 at 14:8-14.) But no such standard existed.

B. The Commission’s decision entirely ignores key evidence.

In its response brief, the Commission explains how courts applying
the arbitrary-and-capricious standard look to, among other things,
whether an agency has “taken a hard look at the salient problems.”
(Appellee’s Br. at 16.) Here, the facts surrounding College Station’s first
request for inclusion of a GFT in 2007 are crucial for evaluating whether
the Commission undertook appropriate, evidence-based analysis. Rather
than giving these key facts any weight, the Commission rejected the
evidence as a whole and did so without explanation or justification.

I. Absent Commission Staff's intervening actions and three

Commission orders, College Station would have
maintained a 0% GFT.

Many of the most essential facts presented in this case relate to the
origin of why College Station began including a GFT in its transmission
rates in the first place. The Commission asserts that College Station
sought guidance on how to proceed regarding its GFT. (Appellee’s Br. at

40.) But the GFT inclusions at issue in this case did not spur from College

14
Station’s actions. To the contrary, Commission Staff, sua sponte, directed
College Station to include a GFT in its TCOS.

The evidence established that College Station had no intention of
including a GFT in its 2007 interim TCOS application and only began
requesting a GFT in its TCOS at the behest of Commission Staff.
Specifically, when College Station sought clarification regarding the
depreciation schedule, longtime PUC expert Glenda Spence
independently instructed College Station to remember to include its
GFT. (RR, AR 184 at 16.) College Station questioned this because no
such amount was included in the original filing. (RR, AR 184 at 16.)
Despite this, Ms. Spence told College Station to include the amount even
if it was not in the original filing and to explain it. (RR, AR 184 at 16,
22.) College Station did just that. (See RR, AR 184 at 46-47, 64, 73.)

College Station acknowledged numerous times in correspondence
with PUC Staff, draft schedules, and written testimony that the
proportion of GFT allocated to transmission in its original comprehensive
TCOS application was zero. In rebuttal testimony, College Station’s
notes for the 2007 interim filing explained that it would “use[] current

numbers for distribution and transmission net plant instead of the

15
percentages in the original filing . . . because this amount was more
current and the ROI was not included tn the original filing, therefore the
percentage was not calculated in 1996.” (RR, AR 184 at 17 (emphasis
added).) College Station consulted with Ms. Spence on this approach,
and she confirmed the use of current numbers, instead of the numbers
from PUC Docket No. 15762, was the best, most conservative approach.
(RR, AR 184 at 29.) The Commission’s Director of Rate Regulation
similarly agreed with the use of current numbers instead of the numbers
from PUC Docket No. 15762. (RR, AR 184 at 58.) The Commission and
its staff had unequivocal notice of the impact of College Station’s GFT
inclusion and yet, encouraged and approved the change.

The deviation from 0% GFT was plainly in front of the Commission
during all three of College Station’s interim proceedings. In addition to
College Station’s transparency in testimony and schedules, Ms. Spence
reached out to College Station during the review of the 2008 application
asking about the GFT. (RR, AR 184 at 65.) After she had indicated that
the GFT was specifically under review, Ms. Spence’s subsequent memo
recommending approval of the 2008 application stated that a future

accounting determination would assess “the appropriateness of new

16
transmission facilities” and that only “transmission facilities additions”
would be subject to a more comprehensive analysis and reconciliation.
(RR, AR 184 at 78.) After instructing College Station to begin including
a GFT, indicating that the inclusion was under specific review, and filing
the recommendation memo, there was zero indication in the record that
PUC Staff had any intent of subjecting College Station’s GFT inclusions
to future review and _ reconciliation. Consistent with this, the
Commission issued orders approving the applications. (RR, AR 184 at
53-57, 68-72, 74-77.)

None of the Commission’s interim orders acknowledged the unique
GFT question at issue. The Commission did not comment on the fact
(stated plainly in College Station’s testimony) that no GFT was included
in the original comprehensive filing. If the Commission had truly held
an intent to invalidate the GFT inclusions on the basis described in the
Final Order, it is inconceivable that the GFTs would have been approved
as inclusions in three interim TCOS filings. Multiple seasoned PUC
subject matter experts gave instruction contrary to the Commission’s
“standard” used in this proceeding. Moreover, it would have to be the

case that not a single commissioner with decision-making power

17
conducted a review of the interim testimony or schedules. The
Commission’s decision to order a full refund in this case is not supported
by any reference to or analysis of the key facts in the record. The
Commission erroneously opted to disregard the salient history giving rise
to College Station’s GFT inclusions.

2. This case is not the Commission’s first opportunity to
review and invalidate College Station’s GFT.

The Commission continually makes the disingenuous assertion
that this application is the first time the Commission has confronted the
issue of College Station's GFT inclusions. (Appellee’s Br. at 31-32.)
However, the first time a MOU included a GFT in an interim TCOS
application that was not included in a previous comprehensive TCOS
application was in College Station’s 2007 interim proceeding. In that
case, College Station followed the instructions it received from PUC Staff
and made every effort to present the GFT inclusion clearly in its interim
filings so that the Commission could evaluate the increase from a 0%
GFT. Without any acknowledgement of this or the three interim orders
where it knowingly allowed a GFT higher than zero, the Final Order
relieves the Commission of any regulatory accountability and shifts all

responsibility for the unique history of this case to College Station.

18
As discussed above, the key facts leading to College Station’s
request to include a GFT in its transmission rates transpired decades
ago. The issue of whether College Station’s GFT inclusion was
appropriate in an interim TCOS application was before the Commission
three times prior to this case, in three intertm TCOS proceedings. The
Commission points to Ms. Stark’s expert witness analysis as the only
evidentiary basis for its decision, but Ms. Stark’s’ ultimate
recommendation properly acknowledged that the key facts were readily
available beginning in 2007. (See RR, AR 201, wherein Ms. Stark revised
her recommendation for a full refund after reviewing the evidence in
College Station's rebuttal testimony.) The expert the Commission relies
on modified her recommendation for College Station to issue a full refund
and knew that, given the facts in the record, ordering College Station to
refund more than six times its annual revenue requirement would be
unjust.

The Commission argues that the fault lies with College Station for
waiting too long to file a second comprehensive TCOS application.
(Appellee’s Br. at 40.) Per the Commission’s own findings in this case,

however, College Station acted in good faith and the Commission cannot

19
point to any evidence to show that College Station took efforts to
“forestall the Commission’s review and interpretation of the application
of the TCOS Rule.” (Appellee’s Br. at 38.) It is simply false to claim the
Commission did not have the opportunity to apply the TCOS Rule in the
2007, 2008, and 2017 interim filings. Further, by the Commission's logic,
College Station should be punished for failing to follow rules and
timelines that did not exist. At the time of College Station’s interim
filings, there was no requirement that it had to first request a GFT ina
comprehensive filing and there was no requirement for College Station
to file comprehensive cases on a set frequency (nor is there any
requirement today). The Commission knew College Station was
requesting a GFT in transmission rates for the first time in 2007 and the
Commission consciously and repeatedly allowed it.

The Commission claims that PUC Staffs statements to College
Station regarding the GFT in the interim filings “pointed towards a
future determination by the Commission.” (Appellee’s Br. at 38.) In
other words, a utility receiving specific instructions from agency staff was
supposed to ignore those instructions and instead rely on unclear implied

meanings. The purpose of identifying the GFT increase in testimony

20
beginning in 2007, as directed by PUC Staff, was so that the Commission
could review the inclusion in that proceeding. The Commission also
speculates on the import of College Station’s involvement in another
utility's rate proceeding around the time of PUC Docket No. 15762. (See
Appellee’s Br. at 28.) This fact is irrelevant and provides no conclusive
evidence of any material fact. The Final Order itself specifically found
that College Station acted in good faith and the evidence clearly
supported this. (RR, AR 167 at 13, FOF 61.)

The Commission’s new standard that a GFT must first be requested
in acomprehensive TCOS filing was not in place when PUC Staff directed
College Station to include a GFT. If the “proper method” at the time was
for College Station to file a comprehensive case, then PUC Staff would
have instructed this before the 2007 filing or the Commission would have
rejected College Station’s interim update and ordered College Station to
file a comprehensive application.

C. The Commission’s failure to find good cause is an abuse of
discretion.

The weight of the evidence in this case favored a good cause
exception to requiring a refund. The Commission ignored this evidence

and provided no explanation for its unwillingness to support good cause.

21
This means the Commission provided no basis for rejecting an
uncontested settlement agreement, PUC Staff's recommendation, the
ALJs’ recommendation, and a clear presentation of the facts surrounding
College Station’s decision to request a GFT. Under Texas law, the
Commission is required to explain when it diverges from the findings and
conclusions made by an administrative law judge. The Commission
failed to meet its statutory obligation and made no effort to weigh the
interests at stake.

I. Despite the statutory requirement to do _ so, _ the

Commission provided no explanation for rejecting good
cause.

In briefing, the Commission notes that, unlike other state agencies,
it has the authority to assume an original fact-finding role. (Appellee’s
Br. at 44.) Regardless of how the Commission’s authority to modify an
administrative law judge’s findings compares to other state agencies’
authority to do so under the APA, the Commission has a statutory
obligation to provide the “specific reason and legal basis” for changing an
administrative law judge’s findings or conclusions or vacating or
modifying an administrative law judge’s decision. Tex. Govt Code §

2003.049(h).

22
In the Final Order, the Commission made only three conclusory

statements addressing whether good cause existed for a mitigated

refund:

“The Commission rejects the PFD’s recommendation that
Commission Staffs communications or College Station’s good
faith are circumstances that constitute good cause to grant an
exception to the full refund required by the rule.” (RR, AR
167 at 4.)

“Finding of fact 68 is modified because the Commission does
not find that good cause exists.” (RR, AR 167 at 5.)
“Conclusion of law 12 and 18 are deleted as inapplicable
because the Commission is not exercising discretion to order

a mitigated refund and carrying charges.” (RR, AR 167 at 6.)

As illustrated by these limited statements, the Commission did not

provide an explanation or “specific reason” for why it rejected the PFD’s

recommendation to find good cause, nor did it provide a legal basis.

The Commission’s error is particularly confounding because it

specifically incorporated aspects of the evidence supporting good cause

into the Final Order when it found that “College Station acted in good

23
faith and did not willfully or intentionally violate the Commission's rules
or policies.” (RR, AR 167 at 13.) The Final Order additionally confirmed
that GFT inclusions originated based on the instruction of PUC Staff
with their knowledge that no GFT was included in PUC Docket No. 15762
(RR, AR 167 at 11) and that a full refund would have a significant impact
on College Station (RR, AR 167 at 13.) The Commission’s claimed legal
basis before this Court is that College Station failed to meet its burden
to establish a good cause exception to the refund requirement.
(Appellee’s Br. at 45-46.) This is yet another explanation with no
meaning and, even if it were a sufficient legal basis, it was not included
in the Final Order. After evaluating the evidentiary record, PUC Staff
and the ALJs both supported a finding of good cause. (RR, AR 134 at 2;
AR 201 at 2.) The Commission departed from these evidence-based
recommendations without any explanation or basis, thus failing to
uphold its duty under Tex. Gov't Code § 2003.049(h).

2. The Commission’s decision is unnecessarily punitive and
inequitable.

One of the clearest markers of an abuse of discretion in this
proceeding is the Commission’s unyielding, all-or-nothing approach,

resulting in an overtly punitive refund. The Commission did not engage

24
in any meaningful weighing of the evidence and instead started with its
chosen conclusion—to punish College Station by revoking its GFT
inclusions—and then worked backwards to create reasoning for that
conclusion.

While the Commission’s conclusion is not sufficiently grounded in
the evidence, the evidence did support a number of more reasonable and
equitable conclusions than the result in the Final Order. For example,
in recognition of the compelling good cause circumstances, Commission
Staffs expert witness recommended a $6.6 million refund (RR, AR 201 at
2) and the uncontested settlement provided for a $3.9 million refund (RR,
AR 192 at 2.) The ALJs, after conducting a hearing and examining
multiple rounds of briefing, concluded that a $900,000 refund was
appropriate. (RR, AR 134 at 2, 46.) Moreover, under the TCOS Rule, the
only item the Commission is required to review for reasonableness and
necessity under the reconciliation subsection of the TCOS Rule is interim
plant additions. 16 TAC § 25.192(h)(2). Even though good cause was
illustrated in numerous ways throughout the record, the Commission
chose to turn a blind eye to the evidence and exceed the minimum

required scope of a comprehensive TCOS proceeding to impose a penalty

25
on College Station for including an expense the Commission had full
knowledge of in three proceedings before this one.

The Commission paints an inaccurate picture of the interests
impacted by its decision in this case. The impact of College Station’s GFT
inclusions on ERCOT ratepayers is nominal, whereas the full refund
requirement has a severe financial impact on College Station. (See RR,
AR 87 at 20-21.) At a minimum, the Commission’s own precedent shows
that College Station would have received approval to include some GFT
in its transmission rates if, under the Commission’s rationale, it had first
requested it in PUC Docket No. 15762.

This decision goes far beyond a need to deter utilities from “adding
inappropriate items to interim transmission rates.” (See Appellee’s Br.
at 43.) The crucial precedential opportunity in this case is to deter the
Commission from punishing one party as a remedy for the consequences

of the Commission’s own past actions.

CONCLUSION AND PRAYER

The Commission used this case to make up a new standard for
evaluating the inclusion of a GFT in TCOS rates and then retroactively

applied it to the GFT College Station began lawfully including in its

26
transmission rates nearly two decades ago. This decision is inconsistent
with the Commission’s historic interpretation of its own rules and in
inexplicable conflict with the key facts surrounding College Station’s
inclusion of a GFT in its transmission rates. Furthermore, the
Commission’s failure to find good cause for a mitigated refund constitutes
an abuse of discretion. Accordingly, College Station respectfully asks this
Court to reverse and remand the Commission’s decision ordering College
Station to issue a refund for its inclusion of a GFT. College Station further

requests any other relief to which it is entitled.

27
Respectfully submitted,

LLOYD GOSSELINK
ROCHELLE & TOWNSEND, P.C.
816 Congress Avenue, Suite 1900
Austin, Texas 78701

(512) 322-5800 Phone

(512) 472-0532 Facsimile
7 aud

THOMAS L. BROCATO
State Bar No. 03039030
tbrocato@lglawfirm.com
ROSLYN M. WARNER

State Bar No. 24117520
rwarner@lglawfirm.com

and

ADAM C. FALCO

State Bar No. 24055464
afalco@cstx.gov

City Attorney

College Station City Attorney’s
Office

P.O. Box 9960

College Station, Texas 77842
(979) 764-3746 Phone

(979) 764-3481 Facsimile

ATTORNEYS FOR APPELLANT

28
CERTIFICATE OF COMPLIANCE

I, Thomas Brocato, attorney for Appellant, certify that this document
was generated by a computer using Microsoft Word, which indicates that
the word count of this document is 4,406 per Tex. R. App. P. 9.4(i).

THOMAS L. BROCATO

29
INDEX OF APPENDICES

Appendix A ‘Texas Government Code § 2003.049

30
APPENDIX A
Appendix A
Page 1 of 3

Tex. Gov’t Code § 2003.049

*** This document is current through the 2025 Regular Session, the 1st C.S. and the 2nd
C.S. of the 89th Legislature with the exception of 3 bills. ***

Texas Statutes & Codes Annotated by LexisNexis® > Government Code > Title 10
General Government (Subts. A — Z) > Subtitle A Administrative Procedure and Practice (Chs. 2001
— 2050) > Chapter 2003 State Office of Administrative Hearings (Subchs. A — Z) >

Subchapter C Staff and Administration (§§ 2003.041 — 2003.057)

Sec. 2003.049. Utility Hearings.

(a) The office shall perform contested case hearings for the Public Utility
Commission of Texas as prescribed by the Public Utility Regulatory Act of 1995
and other applicable law.

(b) The office shall conduct hearings relating to contested cases before the
commission, other than a hearing conducted by one or more commissioners. The
commission by rule may delegate the responsibility to hear any other matter before
the commission if consistent with the duties and responsibilities of the office.

(c) The office may contract with qualified individuals to serve as temporary
administrative law judges as necessary.

(d) To be eligible to preside at a hearing, an administrative law judge, regardless of
temporary or permanent status, must be licensed to practice law in this state and
have not less than five years of general experience or three years of experience in
utility regulatory law.

(e) At the time the office receives jurisdiction of a proceeding, the commission shall
provide to the administrative law judge a list of issues or areas that must be
addressed. In addition, the commission may identify and provide to the
administrative law judge at any time additional issues or areas that must be
addressed.

(f) The office and the commission shall jointly adopt rules providing for
certification to the commission of an issue that involves an ultimate finding of
compliance with or satisfaction of a statutory standard the determination of which is
committed to the discretion or judgment of the commission by law. The rules must
address, at a minimum, the issues that are appropriate for certification and the
procedure to be used in certifying the issue. Each agency shall publish the jointly
adopted rules.
Appendix A
Page 2 of 3
Tex. Gov’t Code § 2003.049

(g) Notwithstanding Section 2001.058, the commission may change a finding of
fact or conclusion of law made by the administrative law judge or vacate or modify
an order issued by the administrative law judge only if the commission:

(1) determines that the administrative law judge:

(A) did not properly apply or interpret applicable law, commission rules or
policies, or prior administrative decisions; or

(B) issued a finding of fact that is not supported by a preponderance of the
evidence; or

(2) determines that a commission policy or a prior administrative decision on
which the administrative law judge relied is incorrect or should be changed.

(h) The commission shall state in writing the specific reason and legal basis for its
determination under Subsection (g).

(i) An administrative law judge, on the judge’s own motion or on motion of a party
and after notice and an opportunity for a hearing, may impose appropriate sanctions
as provided by Subsection (j) against a party or its representative for:

(1) filing a motion or pleading that is groundless and brought:
(A) in bad faith;
(B) for the purpose of harassment; or

(C) for any other improper purpose, such as to cause unnecessary delay or
needless increase in the cost of the proceeding;

(2) abuse of the discovery process in seeking, making, or resisting discovery; or
(3) failure to obey an order of the administrative law judge or the commission.

(j) A sanction imposed under Subsection (i) may include, as appropriate and
justified, issuance of an order:

(1) disallowing further discovery of any kind or of a particular kind by the
offending party;

(2) charging all or any part of the expenses of discovery against the offending
party or its representative;

(3) holding that designated facts be deemed admitted for purposes of the
proceeding;

(4) refusing to allow the offending party to support or oppose a designated claim
or defense or prohibiting the party from introducing designated matters in
evidence;
Appendix A
Page 3 of 3
Tex. Gov’t Code § 2003.049

(5) disallowing in whole or in part requests for relief by the offending party and
excluding evidence in support of such requests;

(6) punishing the offending party or its representative for contempt to the same
extent as a district court;

(7) requiring the offending party or its representative to pay, at the time ordered
by the administrative law judge, the reasonable expenses, including attorney’s
fees, incurred by other parties because of the sanctionable behavior; and

(8) striking pleadings or testimony, or both, in whole or in part, or staying
further proceedings until the order is obeyed.

(k), (1) [Repealed by Acts 2015, 84th Leg., ch. 228 (HB. 2154), § 26(1), effective
September 1, 2015.]

History

Enacted by Acts 1995, 74th Leg., ch. 765 (S.B. 373), § 1.35, effective September 1, 1995;
am. Acts 1997, 75th Leg., ch. 165 (S.B. 898), § 31.01(49), effective September 1, 1997
(renumbered from Sec. 2003.047); am. Acts 1999, 76th Leg., ch. 85 (S.B. 757), § 10,
effective September 1, 2000; Acts 2015, 84th Leg., ch. 228 (HB. 2154), $$ 9, 10, 26(1),
effective September 1, 2015.

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