Ratemaking has been likened to a legislative activity, even though it is carried out by an administrative agency. See City of Alvin v. Public Util. Comm'n, 876 S.W.2d 346, 362 (Tex.App.-Austin 1993), judgm't vacated w.r.m. sub nom. Public Util. Comm'n v. Texas-New Mex. Elec. Co., 893 S.W.2d 450 (Tex. 1994).
These principles derive in part from the view that ratemaking is in the nature of a legislative act, having only prospective effect, as opposed to being an adjudication of rights in a controversy that has previously arisen. SeeRailroad Comm'n v. Houston Natural Gas Corp., 155 Tex. 502, 289 S.W.2d 559, 562–63 (1956) ; see alsoCentral Power & Light Co. v. Public Util. Comm'n, 36 S.W.3d 547, 554 (Tex.App.–Austin 2000, pet. denied) (citing City of Alvin v. Public Util. Comm'n, 876 S.W.2d 346, 362 (Tex.App.–Austin 1993), judgment vacated w.r.m. sub nom.Public Util. Comm'n v. Texas–N.M. Elec. Co., 893 S.W.2d 450 (Tex.1994) ).See former art. 5.142, § 2(b) (defining an “excessive” rate as one “likely to produce a long-term profit that is unreasonably high” and an “inadequate” rate as one “insufficient to sustain projected losses and expenses”); accord former art. 5.13–2, § 3(b)(a)–(b) (same).
Industrial Utilities contends that the Commission had no authority to disallow the recovery of expenses the utility had not requested in its surcharge application, arguing that an agency lacks authority to decide an issue not presented for its consideration. See City of Alvin v. Public Util. Comm'n of Texas, 876 S.W.2d 346 (Tex.App. — Austin 1993), writ dism'd, 893 S.W.2d 450 (Tex. 1994). In City of Alvin, this Court held that the Public Utility Commission lacked the authority to decide the prudence of construction of the appellant's generating facility when that issue was not included in the utility's petition and evidence concerning that facility was introduced only to bolster evidence on an issue properly before the agency.
This Court presumes that the Board's order is supported by substantial evidence, and Meier has the burden to overcome this presumption. See Meador-Brady Management Corp. v. Texas Motor Vehicle Com'n, 833 S.W.2d 683, 688 (Tex.App.-Austin 1992), rev'd on other grounds, 866 S.W.2d 593 (Tex. 1993); City of Alvin v. Public Util. Comm'n of Texas, 876 S.W.2d 346, 355 (Tex.App. — Austin 1993), writ dism'd, 893 S.W.2d 450 (Tex. 1994). The Administrative Procedure Act ("APA") authorizes a reviewing court to test an agency's findings, inferences, conclusions, and decisions to determine whether they are reasonably supported by substantial evidence considering the reliable and probative evidence in the record as a whole.
Ratemaking is a legislative activity, even when delegated to an administrative agency. See City of Alvin v. Public Util. Comm'n, 876 S.W.2d 346, 362 (Tex.App. — Austin 1993), writ granted w.r.m., 893 S.W.2d 450 (Tex. 1994); see also Railroad Comm'n v. Houston Natural Gas Corp., 155 Tex. 502, 289 S.W.2d 559, 562 (1956). As with any other statute or legislative enactment, a court must construe an agency action in a manner that renders it constitutional if possible to do so by a reasonable interpretation of the Order's language.
See Texas Utils. Elec. Co. v. Public Util. Comm'n,, 881 S.W.2d 387, 398 (Tex.App. — Austin 1994, writ requested); City of Alvin v. Public Util. Comm'n, 876 S.W.2d 346, 359-60 (Tex.App. — Austin 1993, writ granted w.r.m.). In the instant case, the Commission found that "[t]o incorporate those deductions for disallowed or below-the-line expenses into the calculation of the utility's income tax expense would be unfair to [the utility's] shareholders.
This Court has repeatedly affirmed that statement by consistently requiring the Commission to employ the actual-taxes-paid doctrine. See City of Alvin v. Public Util. Comm'n, 876 S.W.2d 346, 359-60 (Tex.App. — Austin 1994, no writ h.); Cities of Abilene v. Public Util. Comm'n, 854 S.W.2d 932, 944 (Tex.App. — Austin 1993, writ requested); Public Util. Comm'n v. GTE-SW, 833 S.W.2d 153, 159 (Tex.App. — Austin 1992, writ granted). Furthermore, under the actual-taxes-paid test, " any utility tax savings must benefit ratepayers."