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Texas Panel Advises Switching Gas Rate Cases from Railroad Commission to PUCT

May 17, 2016 By Cheryl Kaften

The Texas Railroad Commission would surrender its authority over gas utility rate cases to the Public Utility Commission of Texas (PUCT) under new recommendations to state lawmakers, the Texas Coalition for Affordable Power (TCAP) reported on its blog on May 12.

 The Railroad Commission of Texas was established in 1891 under a constitutional and legislative mandate to prevent discrimination in railroad charges and establish reasonable tariffs. It is the oldest regulatory agency in the state and one of the oldest of its kind in the nation. Over the years, the commission’s jurisdiction grew to encompass many activities: oil and gas production, and transportation (1919); gas utilities (1920); buses and trucks (1931); liquefied petroleum gas (1939); surface mining and reclamation (1976); and alternate fuels research (1991). Economic regulation was joined by health, safety, and environmental regulation.

The last decades have brought regulatory changes. The commission no longer regulates buses and trucks, and railroads. Now, its oversight of gas utilities is about to be retired

An April 29 report by the professional staff of the Sunset Advisory Commission, a 12-member legislative panel that oversees the re-authorization of Texas agencies, has recommended strongly that the state transfer gas utility regulation from the Railroad Commission to the Public Utility Commission.

Although state agencies typically undergo a sunset review only once every 11 years, this is the third for the Railroad Commission since 2010. Two previous Railroad Commission re-authorization bills failed in 2011 and 2013 — largely stymied by industry opposition to recommendations pertaining to the agency’s governance and its use of internal hearing examiners. The 77-page report marks an initial step in a months-long process that also includes legislative hearings and the filing of a Railroad Commission re-authorization bill during the 2017 legislative session.

With regards to gas utility issues, the staff report found that “the Railroad Commission’s current name does not reflect its responsibilities, misleads the public and impedes transparency.” It recommended instead Texas Energy Resources Commission as a name that better reflects the agency’s modern-day mission.

The PUC “provides state-level regulation of all utilities other than gas utilities, which are currently regulated by the Railroad Commission,” the reviewers found, adding, “PUC focuses on utility ratemaking and has developed an organizational structure and systems to ensure fair and transparent ratemaking. PUC’s expertise has grown even more in recent years since the Legislature transferred regulation of water and wastewater utilities to PUC beginning in 2014. Transferring gas utility regulation from the Railroad Commission to PUC offers significant benefits from aligning all state utility regulation within a single agency.”

Sunset staff further found that contested hearings and gas utility oversight are not core functions of the Railroad Commission; and, therefore, should be transferred to other agencies. Sunset staff said this would promote efficiency, transparency and fairness.

Specifically, it recommended that hearing examiners from the independent State Office of Administrative Hearings replace the Railroad Commission’s internal hearing examiners and that the Public Utility Commission take over gas utility rate cases.

The PUC already handles electric utility cases and has a structure that has evolved over time to promote fairness in decision making, according to Sunset staff.

Separately, TCAP reported, Sunset staff was extremely critical of the Railroad Commission’s oil and natural gas enforcement program and said the agency struggles to maintain and report basic data pertaining to that program — despite having previously been made aware of deficiencies.

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