Brazos Electric Power Cooperative, Inc. v. Public Utility Commission of Texas And Charles and Janie Pederson

BRAZOS ELECTRIC IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS, AT AUSTIN NO. 3-94-015-CV BRAZOS ELECTRIC POWER COOPERATIVE, INC., APPELLANT vs. PUBLIC UTILITY COMMISSION OF TEXAS; AND CHARLES AND JANIE PEDERSON, APPELLEES FROM THE DISTRICT COURT OF TRAVIS COUNTY, 250TH JUDICIAL DISTRICT NO. 93-00973, HONORABLE PETER M. LOWRY, JUDGE PRESIDING Appellant, Brazos Electric Power Cooperative, Inc. ("Brazos"), appeals from a district-court judgment affirming the Public Utility Commission's (the "Commission") denial of Brazos's application for amendment of its certificate of public convenience and necessity to construct an electric transmission line. The Commission found that Brazos failed to adequately prove need for the line as required by section 54(b) of the Public Utility Regulatory Act. See Tex. Rev. Civ. Stat. Ann. art. 1446c, § 54(b) (West Supp. 1994) ("PURA"). We will affirm the district court's judgment. BACKGROUND Brazos is a wholesale generator and distributor of electricity. In November 1991, Brazos filed an application with the Commission to amend its certificate of convenience and necessity to authorize construction of a transmission line and related substation in Ellis County. In its application Brazos cited three reasons for the proposed construction: (1) to upgrade Brazos's system and prevent power outages in one of its service areas; (2) to improve reliability of service to an existing substation by providing "loop" rather than "radial" transmission; and (3) to provide more reliable power for construction of the Super Conducting Supercollider (1) project. Brazos identified three alternate routes for the proposed transmission line in its application. The most direct and preferred route ran 2.86 miles from an existing Brazos substation to the new substation; however, this route also traversed property of several landowners. Two longer routes, 3.39 and 4.3 miles respectively, avoided crossing much property by following road frontages and property lines. In accordance with Commission rules, Brazos notified all landowners affected by the proposed facilities and published notice of the application in newspapers of general circulation. See 16 Tex. Admin. Code § 22.52 (1994). Various landowners intervened or voiced their opinions supporting or opposing the application. Appellees Charles and Janie Pederson (the "Pedersons") intervened in opposition, contending inter alia that Brazos had failed to prove need for a new transmission line. After a hearing, the Commission issued an order denying the application because Brazos failed to establish that the proposed transmission facilities were necessary for the service, accommodation, convenience, or safety of the public as required by section 54(b) of PURA. See PURA § 54(b). The district court affirmed. In eleven of its twelve points of error, Brazos challenges the trial court's judgment on two basic grounds: (1) there is a lack of substantial evidence to support the Commission's decision that Brazos did not establish a need for the proposed line; and (2) the Commission's decision was arbitrary, capricious, and an abuse of discretion because it was based on criteria not defined by statute or Commission rule. In its first point of error, Brazos complains of the trial court's failure to file conclusions of law. DISCUSSION A. Failure to File Conclusions of Law In its first point of error, Brazos argues that the trial court's failure to file conclusions of law prevents Brazos from determining the basis on which the trial court affirmed the Commission's decision and necessitates appellate review of every ground for the affirmance. Generally, "even if requested, the trial court need not file findings of fact and conclusions of law following rendition of judgment in a suit for judicial review under [the Administrative Procedure Act (2)]." State v. Public Util. Comm'n, 840 S.W.2d 650, 656 (Tex. App.--Austin 1992, writ granted). Findings of fact by the trial court are not required in administrative review cases when the question to be determined by the trial court is one of law: usually, whether the agency's decision is reasonably supported by substantial evidence or whether the agency acted arbitrarily. (3) See Wylie Indep. Sch. Dist. v. Central Educ. Agency, 488 S.W.2d 166, 168 (Tex. Civ. App.--Austin 1972, writ ref'd n.r.e.). Moreover, conclusions of law are superfluous if the district court affirms an agency order, because the court impliedly rejects all arguments raised by the party seeking review. Brazos claimed below that the Commission's decision was not based on substantial evidence and was arbitrary and capricious. By affirming the Commission's decision, the trial court impliedly rejected both of Brazos's contentions. Consequently, if Brazos believes further review is warranted under both a "substantial evidence" and "arbitrary and capricious" standard, it must challenge the trial court's judgment on both grounds, as it has done. The absence of conclusions of law has not harmed or prejudiced Brazos in any way. See Cherne Indus., Inc. v. Magallanes, 763 S.W.2d 768, 772 (Tex. 1989). We overrule Brazos's first point of error. B. Substantial Evidence In its eleventh point of error, Brazos claims the record does not contain substantial evidence reasonably supporting the Commission's conclusion of law and underlying findings that Brazos failed to demonstrate a need for the proposed transmission facilities as required by PURA section 54(b). (4) Brazos argues that four of the Commission's findings of fact specifically negate its conclusion that there was no need and thereby establish need as a matter of law. When reviewing an agency decision for substantial evidence, we presume that the order is valid. Imperial Am. Resources Fund, Inc. v. Railroad Comm'n of Tex., 557 S.W.2d 280, 284 (Tex. 1977); Pedernales Elec. Coop., Inc. v. Public Util. Comm'n, 809 S.W.2d 332, 341 (Tex. App.--Austin 1991, no writ). Considering the record as a whole, we determine whether reasonable minds could have reached the same decision as the agency. Texas Health Facilities Comm'n v. Charter Medical-Dallas, Inc., 665 S.W.2d 446, 453 (Tex. 1984); Lone Star Salt Water Disposal Co. v. Railroad Comm'n, 800 S.W.2d 924, 928 (Tex. App.--Austin 1990, no writ). The test is not whether the agency reached the correct conclusion, but whether some reasonable basis exists in the record for the agency's action. Charter Medical, 665 S.W.2d at 452. Substantial evidence may exist even if evidence in the record preponderates against the agency's decision. Id. In short, we may not substitute our judgment for that of the agency. Lone Star, 800 S.W.2d at 928. As the applicant, Brazos bore the burden of establishing that the certificate was necessary for the service, accommodation, convenience or safety of the public, considering not only the need for additional service, but also the effect of the proposed transmission line on existing utilities, community values, recreational areas, historical and aesthetic values, environmental integrity, and the improvement of service or lowering of cost to consumers. See PURA §§ 54(b), 54(c). The Commission concluded that Brazos failed to demonstrate that the proposed facilities were necessary taking into account these factors. An agency's negative finding will be sustained unless the evidence conclusively requires an affirmative finding. Gerst v. Goldberg, 434 S.W.2d 665, 667 (Tex. 1968). In four of its findings of underlying fact, the Commission recognized: (1) that the subject area has a potential for increased electricity needs due to its proximity to the Dallas/Ft. Worth metroplex; and (2) that due to the configuration of Brazos's system, an outage on one line could result in low voltage or outage problems on other lines. Brazos contends that these findings conclusively establish need as a matter of law. We disagree, considering other findings of the Commission, which include: (1) Brazos is currently providing adequate service to the area; (2) no low voltage conditions occurred during the 1992 peak-load period; (3) Brazos used only historical data rather than forward-looking indices to predict future need; (4) Brazos failed to consider alternatives to construction of additional facilities, such as load management, conservation, efficiency, or use of additional existing right-of-way owned by Texas Utilities Electric Company; and (5) Brazos offered no evidence indicating construction power requirements for the Super Conducting Supercollider project, one of Brazos's three stated purposes for amendment of its certificate. The underlying record evidence further supports the Commission's decision. According to Brazos's own historical data, demand at the substation Brazos planned to bolster by constructing the new line had actually decreased since 1989. A survey introduced by intervenors Pedersons reflected population growth of only .3% from 1990 to 1991 in Ellis County. The record also demonstrates that Brazos failed to account for a proposed zoning plan of the Ellis County Planning and Zoning Commission that would limit development in the area. If there is evidence to support either an affirmative or a negative finding, we must uphold the agency decision. Charter Medical, 665 S.W.2d at 453. It is immaterial that some findings or portions of the record weigh against an agency's decision if other findings and record evidence support that decision. Even though some of the Commission's findings support the position that, in the absence of other considerations, an additional line may be desirable, the findings do not establish a need for the line as a matter of law. On the contrary, such diverse findings merely confirm that the agency engaged in "a process of discussion [and] careful consideration" in reaching its decision. See Pedernales Elec., 809 S.W.2d at 341; see also Goeke v. Houston Lighting & Power Co., 797 S.W.2d 12, 15 (Tex. 1990). The Commission's careful deliberation is documented in the Commission's order and in the concurring opinion of Commissioner Karl Rabago. Commissioner Rabago criticized the Hearing Examiner for recommending that a certificate be granted despite Brazos' insufficient proof of need and inadequate consideration of the statutory factors: [T]here is 1) an insufficient effort to address and work with the interests of affected landowners, and 2) an inadequate, in fact nearly absent, effort to consider alternatives to the construction of the line. On this issue, I specifically point to alternatives such as load management, conservation, and efficiency; as well as the installation of photovoltaic, or other renewable energy reliability enhancements. I will not vote to allow transmission lines to crisscross this state if potentially more cost-effective and publicly acceptable alternatives are not given meaningful consideration. The failure to consider alternatives in this case is highlighted by the speculative nature of the company's reliability shortfall predictions. The findings and the record as a whole support the Commission's conclusion that Brazos failed to establish a need for its proposed transmission line. Appellant's eleventh point of error is overruled. C. Arbitrary and Capricious Action Although agency action unsupported by substantial evidence is frequently deemed arbitrary and capricious, "substantial evidence" and "arbitrary and capricious action" comprise two independent grounds of review under the APA. See Starr County v. Starr Indus. Servs., Inc., 584 S.W.2d 352, 355 (Tex. Civ. App.--Austin 1979, writ ref'd n.r.e.). Hence, an agency decision may be arbitrary and capricious, even though supported by substantial evidence, if the agency improperly bases its decision on non-statutory or legally irrelevant criteria. Lone Star, 800 S.W.2d at 929. Brazos contends in the remainder of its points of error that the Commission's decision was arbitrary and capricious and in excess of its statutory authority because the Commission improperly considered non-statutory criteria, of which Brazos had no notice, in evaluating the need for Brazos's proposed transmission line. Brazos also charges that the Commission improperly equated the private interests of landowners who would have been affected by the proposed line with "community values." We will overrule the remainder of Brazos's points of error. In points of error six, seven, and nine, Brazos attacks the following findings of fact: (1) Brazos failed to consider the use of additional existing right-of-way owned by another utility; (2) Brazos failed to consider alternatives to the proposed facility, such as load management, conservation, and efficiency; and (3) Brazos used only historical data to predict future growth, and did not review forward-looking indices of population growth or consult with the local planning and zoning commission regarding future zoning plans for the area. Brazos complains that these are not the statutory factors set out in PURA section 54(c). As we have stated, the factors set out in PURA sections 54(b) and 54(c) are merely legislative guidelines expressed in the broadest possible terms. Public Util. Comm'n v. Texland Elec. Co., 701 S.W.2d 261, 266 (Tex. App.--Austin 1985, writ ref'd n.r.e.). The Commission is free to consider more specific criteria, as long as the specific criteria are reasonably related to the broad legislative guidelines of PURA. See id. at 267-68. We will reverse the Commission's decision as arbitrary and capricious only if the criteria applied are not reasonably related to these guidelines. The supreme court has specifically noted that, although evidence of alternate routes is not statutorily required, consideration of alternate routes using existing right-of-way relates to the statutory criterion of need, particularly when the Commission attempts to balance need with other statutory factors such as community values, environmental integrity, and aesthetic values. Goeke, 797 S.W.2d at 15 & n.3. Similarly, we have held that the Commission may properly consider evidence, or lack thereof, regarding alternative solutions when balancing PURA criteria. Sam Houston Elec. Coop. v. Public Util. Comm'n, 733 S.W.2d 905, 911 (Tex. App.--Austin 1987, writ denied). The Commission's findings that Brazos failed to consider the use of existing right-of-way or alternatives to construction were therefore proper. Moreover, the Commission did not improperly consider the fact that Brazos used only historical data in projecting future growth. The Pedersons introduced evidence that Brazos's estimated load projections ignored population growth statistics and a local zoning commission plan to zone the county as an "agricultural conservation" area, which would inhibit future growth and demand for electrical power. This dialectic cast doubt on the reliability of Brazos's forecasts; the Commission did not err in articulating this concern in the findings supporting its decision. See id. at 914. Brazos's sixth, seventh, and ninth points of error are overruled. The Commission also noted in its findings that Brazos's environmental analyst provided Brazos with an environmental report only on its preferred route. In its eighth point of error, Brazos asserts this finding implies that alternate routes and environmental reports thereon are required by the Commission for certificate applications. Brazos significantly overstates the import of this finding. As we noted in Sam Houston Electric, an applicant is not required to present evidence of alternate routes to meet its burden of proof under PURA section 54; however, if a proposed route is challenged for failing to adequately consider section 54(c) criteria, the applicant may need to consider alternatives to avoid denial of its application. 733 S.W.2d at 911. The Commission concluded that Brazos failed to demonstrate the need for any new transmission facilities, including its preferred route on which an environmental report was provided. The logical implication of the Commission's finding is not that a variety of alternate routes and environmental reports are now required of applicants, but rather that the Commission would be unable to fully evaluate the alternate routes proposed by Brazos in this case absent evidence regarding the environmental integrity of those routes. This finding was directly related to the statutory criterion of "environmental integrity" under PURA section 54(c). We have held that the Commission is not prohibited from making findings regarding alternate routes if the findings relate to section 54(c) factors. See id. We overrule Brazos's eighth point of error. In its tenth point of error, Brazos contends that the Commission's decision indicates a preference for longer routes in order to avoid complaining landowners. The Commission concluded that Brazos failed to demonstrate a need for any transmission facility; it did not indicate that a longer route would be approved. Brazos's tenth point of error is without merit and is overruled. In points of error two through five, Brazos complains that the Commission improperly considered as "community values" the opposition and concerns of individual landowners affected by the proposed line. Specifically, Brazos complains of findings of fact 35 and 36, which read: 35. Brazos did not consult with the community affected by the proposed facilities prior to filing its CCN application. 36. The preferred route bisects cultivated land. Brazos asserts that these findings, together with a criticism in the final order that Brazos made "an insufficient effort to address and work with the interests of affected landowners," demonstrate that the Commission based its decision to deny Brazos's application on the private interests of individual landowners. Section 54(c) of PURA instructs the Commission to balance, among other things, the need for additional service to the area with the effect of additional transmission lines on community values, recreational and park areas, historical and aesthetic values, and environmental integrity. The factors of section 54(c) compete inter se, requiring the Commission to accommodate different policies and interests. Texland Elec. Co., 701 S.W.2d at 266. PURA contemplates the input or intervention of affected landowners as one method of sounding these interests. See PURA § 54(a) (West 1994). Brazos, however, seems to argue that the opinions or concerns of these landowners are irrelevant to the Commission's consideration of "community values." While we agree that private interests must not become the basis for the Commission's denial of an application, we do not see how the Commission can effectively gauge community values without considering, in the aggregate, the comments of parties affected by the transmission lines. The supreme court has recognized the value of community input to the Commission's decision-making. In Goeke, the Commission made a finding that "[w]ith regard to community values . . . there is a general attitude supporting the preservation of the rural landscape and lifestyle . . . ." 797 S.W.2d at 15. The court found that this language adequately articulated the Commission's consideration of a circumstance with detrimental impact on the community under section 54(c). Because the section 54 factors are broadly stated, the Commission must decide what they mean in the circumstances of a particular case. Id. Brazos proposed transmission lines bisecting agricultural property. The Pedersons testified that bisecting a tract of land, rather than following tract boundaries, limits its uses and development. This point, however, was only part of the Pedersons' broader argument that an unnecessary web of electrical lines in rural areas is detrimental to the public as a whole. The Commission reiterated this concern in its order. Without more, the finding that the proposed line bisects cultivated land does not demonstrate an improper focus on private economic interests; it merely shows that the Commission was sensitive to one factor of importance in an agricultural community. The evidence also supports the Commission's finding that Brazos failed to consult with the community or address the interests of affected landowners. Although Brazos asserts that this finding represents an attempt by the Commission to conceal an improper focus on damage to property values by imposing a vague non-statutory standard, the record demonstrates otherwise. (5) The Pedersons' testimony revealed that Brazos's environmental report failed to include a hydrology study and only addressed the environmental impact of the preferred route in a limited area, not on landowners' property along the length of the line. Their testimony also highlighted other safety and accessibility problems that could arise from transmission lines bisecting property rather than following road frontages. In fact, in four pages of pre-filed testimony, the Pedersons spend only four lines discussing damage to property; the overwhelming bulk of their testimony challenges the need for and safety of the proposed facilities. The Commission's finding simply underscores Brazos's failure to adequately address these legitimate landowner concerns. Brazos directs our attention to Starr County v. Starr Industrial Services, Inc., 584 S.W.2d 352 (Tex. Civ. App.--Austin 1979, writ ref'd n.r.e), and Public Utility Commission v. South Plains Electric Cooperative, 635 S.W.2d 954 (Tex. App.--Austin 1985, writ ref'd n.r.e.), in support of its position that the Commission improperly considered non-statutory criteria. Both cases are distinguishable. In Starr County, the Water Quality Board denied an applicant's permit to operate a commercial industrial solid waste management site. The Board's technical staff worked with the applicant to draft a proposed permit that complied with all applicable regulations. However, several influential people at the public hearing, including the county judge and a state senator, voiced general objections to the location of any toxic waste dump in the county. Id. at 354. The permit was denied. The Board's findings of fact cited "adamant local opposition" as one ground for denial of the permit. The Board's executive director also wrote in a letter that the application could be denied based on the opposition, even though the site would comply with technical requirements. Id. Based on this evidence, this Court held that the Board's denial of the permit was arbitrary and capricious because the statute governing award of the permit did not mention local opposition as a criterion for awarding the permits, and therefore such opposition could not be considered standing alone. Id. at 356. In South Plains, the Commission granted a certificate of convenience and necessity to Lubbock Power & Light, a municipally-owned utility, after the City of Lubbock annexed three new areas to the city. 635 S.W.2d at 955-56. Another utility, South Plains Electric Cooperative, was serving the annexed areas and opposed dual certification. Although the underlying findings of fact overwhelmingly supported South Plains's contention that it rendered and could continue to render adequate service to the area, the Commission granted Lubbock Power & Light's application. The Commission concluded that the public interest and community values are promoted by allowing a municipally-owned utility to serve its citizens. Id. at 956. This Court found that Lubbock Power & Light was given a preference not sanctioned by PURA. Id. at 957. We held that municipally-owned status is not a relevant statutory factor supporting an ultimate finding of convenience and necessity and remanded the cause to the agency. Id. In both Starr County and South Plains the evidence revealed that the agency in question took action based exclusively or primarily on a non-statutory criterion. The record in the present cause reveals the opposite: Brazos failed to carry its burden to demonstrate need for the transmission line, and proof of this need was the focus of the testimony and evidence. Even if the Commission considered a non-statutory criterion, we may not reverse its order unless we conclude that but for its findings on that criterion it would have issued the certificate of convenience and necessity. See Tex. Gov't Code Ann. § 2001.174(2) (West 1994) (substantial rights of appellant must be prejudiced before court may reverse based on improper agency action). The Commission's findings were reasonably related to the statutory criteria it is bound to consider, and the record reveals that Brazos failed to meet its burden of proof under these criteria. Accordingly, we overrule Brazos's points of error two through five. Because Brazos's twelfth point of error merely summarizes the arguments in its points of error two through eleven, we overrule it as well. CONCLUSION Having overruled all Brazos's points of error, we affirm the judgment of the trial court upholding the Commission's denial of Brazos's application for an amended certificate of convenience and necessity. Bea Ann Smith, Justice Before Justices Powers, Aboussie and B. A. Smith Affirmed Filed: November 9, 1994 Do Not Publish 1. The Super Conducting Supercollider in Waxahachie was to be the world's largest particle accelerator to support nuclear fusion research. Congress aborted the project in October 1993. 2. Tex. Gov't Code Ann. § 2001.174 (West 1994). All citations in this opinion are to the current Administrative Procedure Act ("APA") rather than the former Administrative Procedure and Texas Register Act because the recent recodification did not substantively change the law. 3. The APA also authorizes judicial reversal of an agency's decision if substantial rights of the appellant have been prejudiced because the agency's decision is: (1) in violation of a statute or constitutional provision; (2) in excess of the agency's statutory authority; (3) made through unlawful procedure; or (4) affected by other error of law. Tex. Gov't Code Ann. § 2001.174(2)(A)-(D) (West 1994). 4. The relevant provisions of PURA sections 54(b) and 54(c) read: Sec. 54(b) Except for certificates for prior operations granted under Section 53, the commission may grant applications and issue certificates only if the commission finds that the certificate is necessary for the service, accommodation, convenience, or safety of the public. . . . (c) Certificates of convenience and necessity shall be granted on a nondiscriminatory basis after consideration by the commission of the adequacy of existing service, the need for additional service, the effect of the granting of a certificate on the recipient of the certificate and on any public utility of the same kind already serving the proximate area, and on such factors as community values, recreational and park areas, historical and aesthetic values, environmental integrity, and the probable improvement of service or lowering of cost to consumers in such area resulting from the granting of such certificate. 5. Interestingly, Brazos bases much of its argument on statements made by the Commission's staff witness, who actually recommended approval of Brazos's application.