Untitled Texas Attorney General Opinion

OFFICE ofthe ATTORNEY GENERAL

GREG ABBOTT

January lo,2003

The Honorable Steven D. Wolens Opinion No. GA-001 0

Chair, Committee on State Affairs

Texas House of Representatives Re: Whether the divestiture provision in section

P. 0. Box 2910 12.152(b) of the Utilities Code applies to an

Austin, Texas 78768-2910 interest under section 12.053(b)(l)(B)

(RQ-0575-JC)

Dear Representative Wolens:

You ask about the relationship between section 12.053 and section 12.152 of the Utilities

Code, both of which provide that a person with certain pecuniary interests is not eligible for

appointment as commissioner of the Public Utility Commission (the “PUC” or “Commission”).’

Unlike section 12.053, section 12.152 provides that a person who discloses and divests certain types

of interests is not ineligible. You ask in essence whether the divestiture provision in section

12.152(b) applies to an interest under section 12.053(b)(l)(B). We conclude that the section

12.152(b) divestiture provision cures a disqualification due to an interest under section 12.053(b)( 1)

that also falls within section 12.152(a)(2)(B). It does not cure a disqualification due to an interest

that falls under section 12.053(b)(l) but that is not within the scope of section 12.152(a)(2)(B).

Section 12.053(b)(l)(B) and section 12.152(a)(2)(B) contain similar but not identical

restrictions on a person’s eligibility for appointment as commissioner of the PUC. Section

12.053(b) p rovides in pertinent part as follows:

(b) A person is not eligible for appointment as a commissioner ifthe

person:

(1) at any time during the two years preceding appointment:

‘See Letter from Honorable Steven D. Wolens, Chair, Committee on State Affairs, Texas House of

Representatives, to Honorable John Cornyn, Texas Attorney General (July 9,2002) (on file with Opinion Committee)

[hereinafter Request Letter].

An Equal Employment Opportunity Employer . Printed on Recycled Paper

The Honorable Steven D. Wolens - Page 2 (GA-0010)

(B) owned or controlled, directly or indirectly, stocks or

bonds of any class with a value of $10,000 or more in a public utility,

affiliate, or direct competitor of a public utility; or

(2) is not qualified to serve under Section 12.15 1, 12.152, or

12.153.

TEX. UTIL. CODE ANN. $12.053 (Vernon 1998) (emphasis added); see aZso id. @11.003(2) (Vernon

Supp. 2003) (defining “affiliate”), 11.004 (Vernon 1998) (defining “utility”), 11.006 (defining

“affiliate”).

Similarly, section 12.152 provides in pertinent part:

(a) A person is not eligible for appointment as a commissioner or

executive director of the commission if:

(2) the person or the person’s spouse:

(B) directly or indirectly owns or controls more than a 10

percent interest or a pecuniary interest with a value exceeding

$10,000 in:

(i) a business entity or other organization that is

regulated by or receives funds from the commission; or

(ii) a utility competitor, utility supplier, or other

entity affected by a commission decision in a manner other than by

the setting of rates for that class of customer.

Id. $ 12.152(a) (Vernon Supp. 2003) (emphasis added); see also id. 5s 11.003( 1) (defining “affected

person”), 11.005 (Vernon 1998) (“In this title, an entity, including a utility competitor or utility

supplier, is considered to be aflected in a manner other than by the setting of rates for that class of

customer if during a relevant calendar year the entity provides fuel, utility-related goods,

utility-related products, or utility-related services to a regulated or unregulated provider of

telecommunications or electric services or to an affiliate in an amount equal to the greater of $10,000

or 10 percent of the person’s business.“) (emphasis added). Section 12.152, in speaking in terms of

ownership or control of a “pecuniary interest” rather than “stocks or bonds” and including within the

list of prohibited interests ownership or control in a business that “receives funds from the

commission” or in another “entity affected by a commission decision in a manner other than by the

setting of rates for that class of customer,” applies to a broader universe of interests than section

12.053(b)(l). See id. @ 12.053(b)(l) (V ernon 1998), 12.152(a)(2)(B) (Vernon Supp. 2003).

Furthermore, section 12.053 applies only to interests owned by the potential PUC member, whereas

The Honorable Steven D. Wolens - Page 3 (GA-0010)

section 12.152 applies to interests owned both by the potential PUC member and his or her spouse.

See id. $5 12.053(b)(l)(B), 12.152(a)(2). On the other hand, section 12.053 applies to interests

owned at any time during the two years preceding appointment, whereas section 12.152 applies to

interests owned at the time of appointment. See id. $5 12.053(b)(l), 12.152(a)(2)(B).

Unlike section 12.053, section 12.152 contains an exception that provides that a person who

has a pecuniary interest described by section 12.152(a)(2)(B) may be appointed commissioner if he

or she discloses and divests the interest:

(b) A person otherwise ineligible because of Subsection

(a)(2)(B) may be appointed to the commission and serve as a

commissioner or may be employed as executive director if the person:

(1) notifies the attorney general and commission that the

person is ineligible because of Subsection (a)(2)(B); and

(2) divests the person or the person’s spouse of the

ownership or control:

(A) before beginning service or employment; or

(B) if the person is already serving or employed,

within a reasonable time.

Id. $ 12.152(b) (Vernon Supp. 2003).

Certain pecuniary interests, such as the ownership of stock with a value exceeding $10,000

in a public utility or a direct competitor of a public utility, fall under both section 12.053(b)(l)(B)

and section 12.152(a)(2)(B). See id. $8 12.053(b)(l)(B) (V ernon 1998) (a person is ineligible for

appointment if he or she at any time during the preceding two years “owned or controlled, directly

or indirectly, stocks or bonds of any class with a value of $10,000 or more in a public utility,

affiliate, or direct competitor of a public utility”), 12.152(a)(2)(B) (Vernon Supp. 2003) (a person

is ineligible for appointment if the person “directly or indirectly owns or controls more than a 10

percent interest or a pecuniary interest with a value exceeding $10,000 in . . . a business entity or

other organization that is regulated by. . . the commission” or “a utility competitor”). In light of this

overlap, you ask whether the divestiture provision in section 12.152(b) cures a conflict under section

12.053(b)(l)(B):

Can an appointee to the Public Utility Commission of Texas who

owns or controls, directly or indirectly, stocks or bonds with the value

of $10,000 or more [in a public utility, affiliate, or direct competitor

of a public utility], at any time during the two years preceding

appointment, cure that conflict and therefore be eligible for service if

that person notifies the attorney general and commission that the

person is ineligible because of this conflict, and divests him/herself

The Honorable Steven D. Wolens - Page 4 (GA-0010)

of the ownership or control of the stock either before the beginning

of service or employment or within a reasonable period of time?

Request Letter, supra note 1, at 2. Or you ask, “Put a different way, does the cure provision on

eligibility in Sec. 12.152(b) apply to the conflict provision of Sec. 12.053(b)(l)?” Id. at 3. Based on

the legislative history, we conclude that the section 12.152(b) divestiture provision “cures a conflict”

due to an interest under section 12.053(b)( 1) that also falls within section 12.152(a)(2)(B). It does

not “cure a conflict” due to an interest that falls under section 12.053(b)( 1) but that is not within the

scope of section 12.152(a)(2)(B).

In construing these provisions, we must attempt to give effect to the legislature’s intent. See

TEX. GOV’T CODE ANN. $ $ 3 11.02 1, 3 11.023 (Vernon 1998); Mitchell Energy Corp. v. Ashworth,

943 S.W.2d 436,438 (Tex. 1997). To do so, we construe statutes according to their plain language.

See RepublicBank Dallas, N.A. v. Interkal, Inc., 691 S.W.2d 605, 607-08 (Tex. 1985); Bouldin v.

Bexar County SherifS’s Civil Serv. Comm’n, 12 S.W.3d 527,529 (Tex. App.-San Antonio 1999, no

pet.); see also Fleming Foods of Tex., Inc. v. Rylander, 6 S.W.3d 278, 284 (Tex. 1999) (where

codified statute is unambiguous, plain-meaning rule applies even if codification is inconsistent with

its statutory predecessor). When a statute is ambiguous, we may consider, among other things, the

object sought to be attained, the circumstances under which a statute was enacted, legislative history,

and the consequences of a particular construction. See TEX. GOV’T CODE ANN. 5 3 11.023 (Vernon

1998); see also id. 8 3 11.021 (“In enacting a statute, it is presumed that . . . the entire statute is

intended to be effective[ ,] a just and reasonable result is intended[, and] a result feasible of execution

is intended . . . .“).

Sections 12.053 and 12.152 conflict, creating an ambiguity that cannot be resolved on the

basis of the statutes’ plain language. Both provisions address eligibility for appointment as

commissioner of the PUC and describe overlapping disqualifying interests, such as ownership of

stock in a public utility or a public utility competitor. See TEX.UTIL. CODEANN. 8s 12.053(b)(l)(B)

(Vernon 1998), 12.152(a)(2)(B) (Vernon Supp. 2003). Importantly, however, section 12.152

contains a divestiture provision, whereas section 12.053 does not. See id. $8 12.053, 12.152(b).

Section 12.152 permits the divestiture of interests that pose an absolute bar to appointment under

section 12.053. Although subsection (b)(2) of section 12.053 mentions section 12.152, that reference

does not indicate how the two provisions should be reconciled. See id. 5 12.053(b)(2) (Vernon 1998)

(“A person is not eligible for appointment . . . if the person . . . is not qualified to serve under Section

12.151, 12.152, or 12.153.“).

Because of this ambiguity, we turn to the legislative history for guidance. The language in

section 12.053 predates the language in section 12.152 by twenty years. When the Public Utility

Regulatory Act was first enacted in 1975, as article 1446c, it contained a provision, section 6(a), that

made a person ineligible for appointment to the PUC “if at any time during the two year period

immediately preceding his appointment . . . he owned or controlled, directly or indirectly, stocks or

bonds of any class with a value of $10,000, or more in a public utility or any affiliated interest.” Act

The Honorable Steven D. Wolens - Page 5 (GA-0010)

of June 2, 1975,64th Leg., R.S., ch. 721, art. II, § 6(a), 1975 Tex. Gen. Laws 2327,233 1 (codified

as article 1446c, 8 6(a) of the Revised Civil Statutes).2

In 1995, the Seventy-fourth Legislature adopted Senate Bill 3 19, a nonsubstantive

recodification of the Public Utility Regulatory Act, that repealed article 1446~ and enacted article

1446c-0, titled the “Public Utility Regulatory Act of 1995.“3 In Senate Bill 3 19, section 6(a) of

article 1446~ became section 1.023(c) of article 1446~-0.~

Later in the same session, the legislature adopted Senate Bill 373, which substantively

amended the Public Utility Regulatory Act of 1995 and continued the PUC following sunset review .’

In Senate Bill 373, the legislature substantively amended section 1.023(~)~ and added subsections

(e> and (0 t o section 1.023.7 Those two subsections are the genesis of what is now section 12.152.

Because the legislature amended section 1.023(c), the legislature clearly did not intend the addition

of section 1.023(e) and (f) to repeal section 1.023(c). The divestiture provision, section 1.023(f),

very clearly applied only to an interest under section 1.023(e)(2)(B), but it applied

“[nlotwithstanding any other provision of this Act.” Act of May 27, 1995,74th Leg., R.S., ch. 765,

9 1.06, sec. 1.023(f), 1995 Tex. Gen. Laws 3972,3973 (“Notwithstanding any otherprovision of this

Act, a person otherwise ineligible because of the application of Subsection (e)(2)(B) of this section

may be appointed . . . if the person . . . .“) (emphasis added).

*A separate provision, section 6(b), prohibited a commissioner from having certain interests “during his period

of service,” and section 6(f) provided for divestiture by a commissioner “upon becoming the owner of any stocks or

bonds or other pecuniary interest in a public utility or other affiliated interest. . . otherwise than voluntarily.” Act of June

2, 1975, 64th Leg., R.S., ch. 721, art. II, 0 6(b), (f), 1975 Tex. Gen. Laws 2327, 2331-32. The substance of these two

provisions now appears in section 12.154(f) of the Utilities Code, which applies to a commissioner “[dluring the period

of service with the commission.” TEX. UTIL.CODEANN. $ 12.154(a), (f) (Vernon 1998). As section 12.154 applies to

interests acquired by a commissioner while serving on the PUC, it is not relevant here.

3See Act of Mar. 29, 1995,74th Leg., R.S., ch. 9, 1995 Tex. Gen. Laws 3 1.

%ee id. at 34.

‘See Act of May 27, 1995,74th Leg., R.S., ch. 765, 1995 Tex. Gen. Laws 3972; SENATECOMM. ON STATE

AFFAIRS,BILL ANALYSIS,Tex. S.B. 373, 74th Leg., R.S. (Apr. 24, 1995) (bill continues and revises functions of the

PUC).

“See Act of May 27,1995,74th Leg., R.S., ch. 765,1995 Tex. Gen. Laws 3972,3973 (adding interest in “direct

competitor of a public utility” to list of disqualifying interests).

7See id. New subsection (e) of section 1.023 began with the language - “[a] person is not eligible for

appointment as a public member of the commission” - even though the 1995 amendments did not provide for a special

category of “public” member of the PUC. See id. (emphasis added). Rather, Senate Bill 373 amended the provision

establishing qualifications for commissioners to provide that to be eligible for appointment as a commissioner a person

must be “a representative of the general public,” so all members were “public members.” See id. (amending section

1.023(a)). A bill analysis indicates that both amendments were based on standard Sunset Commission language. See

HOUSECOMM. REPORT,BILLANALYSIS,Tex. S.B. 373 (May 20, 1995). In 1997, the legislature deleted the reference

to a “public” member when it codified section 1.023(e) in section 12.152 of the Utilities Code. See TEX. UTLL.CODE

ANN. 9 12.152 revisor’s note (Vernon 1998) (“Because, under the law as amended [in 19951, each member of the

commission must be a ‘public’ member, the reference to ‘public’ is omitted from the revised law as unnecessary.“).

The Honorable Steven D. Wolens - Page 6 (GA-0010)

The legislative history indicates that the purpose of this legislation was to prevent conflicts

of interest on the part of commissioners. A bill analysis states that the amendment to section

1.023(c) “[slpecifies that conflict of interest provisions apply to direct competitors of utilities” and

that section 1.023(e) applies standard Sunset Commission language to “prohibit[] conflicts of interest

for commission members.” HOUSECOMM. REPORT,BILLANALYSIS,Tex. S.B. 373,74th Leg., R.S.

(May 20, 1995). In addition, an interim report to the Seventy-fourth Legislature that appears to be

the genesis of the bill recommended that the conflict of interest provisions for PUC commissioners

be tightened. See TEXAS ALTERNATIVES: COMPETITIVE AND REGULATORY OPTIONS IN

TELECOMMUNICATIONSAND ELECTRICPOWER, A REPORT TO THE 74~~ LEGISLATURE,JOINT

INTERIMCOMM. ON TELECOMMUNICATIONS, JOINTINTERIMCOMM. ON THEPUC, AND THETEXAS

SUNSETADVISORY COMM’N, at 16- 17 (Jan. 10, 1995) (“Recommendation 7: Tighten the conflict

of interest provisions for PUC commissioners and apply them to the executive director, the general

counsel, and the public counsel.“); see also TEXAS SUNSET COMM'N REPORT TO THE 74~~

LEGISLATURE, at 3 (1995) (explaining that Sunset Commission made no independent

recommendations on the PUC but rather joined with interim committees in publication of a final

report and recommendations).

In 1997, the legislature codified the Public Utility Regulatory Act of 1995 in Title 2 of the

Utilities Code as part of the state’s continuing statutory revision program. See TEX. UTIL. CODE

ANN. $5 1.001, 11.001 (Vernon 1998). The legislature intended the codification to be

nonsubstantive. See id. 5 1.001(a). Interestingly, the legislature separated section 1.023(c), the

eligibility provision dating from 1975, and section 1.023(e) and (f), the eligibility and divestiture

provisions dating from 1995, into separate statutes in separate subchapters. Section 1.023(c) became

Utilities Code section 12.053 in Subchapter B, entitled “Commission Appointment and Functions”;

section 1.023(e) and (f) became Utilities Code section 12.152 in Subchapter D, entitled “Prohibited

Relationships and Activities.” A cross-reference to section 12.152 was added to section 12.053 as

subsection (b)(2). See id. 3 12.053 revisor’s note (“The revised law adds a cross-reference to

Sections 12.15 1, 12.152, and 12.153, which also specify eligibility for appointment as a

commissioner.“). Section 12.152(b), the codification of the divestiture provision, omitted the

language “notwithstanding any other provision of this Act” that had been included in section

1.023(f). See id. 5 12.152 (Vernon Supp. 2003). The Revisor’s Note to section 12.152 does not

mention this omission. See id. revisor’s note. Significantly, the 1997 codification of the Public

Utility Regulatory Act of 1995 did not clarify the relationship between the two provisions. See

Fleming Foods of Tex., Inc. v. Rylander, 6 S.W.3d 278,286 (Tex. 1999) (when “specific provisions

of a ‘nonsubstantive’ codification and the code as a whole are direct, unambiguous, and cannot be

reconciled with prior law, the codification rather than the prior, repealed statute must be given

effect”).

Based on this legislative history, we conclude that sections 12.053 and 12.152 must be

harmonized to the extent possible and that meaning must be given to both. The critical legislative

history dates from 1995, when the legislature inserted the new eligibility provision, now section

12.152, into the Public Utility Regulatory Act of 1995 as standard sunset language, while amending

the older eligibility provision, now section 12.053, that dated from 1975. From these two actions,

it is clear that the legislature did not intend to repeal the older provision. It is also evident from the

express language of the former statute, however, that the legislature intended the divestiture

The Honorable Steven D. Wolens - Page 7 (GA-0010)

provision to apply “[nlotwithstanding any other provision of this Act.” Act of May 27, 1995,74th

Leg., R.S., ch. 765, $ 1.06, sec. 1.023(f), 1995 Tex. Gen. Laws 3972,3973 (“Notwithstanding any

other provision of this Act, a person otherwise ineligible because of the application of Subsection

(e)(2)(B) of this section may be appointed . . . if the person . . . .“). Thus, while the legislature did

not intend to repeal the older provision, it appears to have intended the new divestiture provision to

apply to interests that would fall under both provisions. Moreover, under the rules of statutory

construction, to the extent section 12.053 and the section 12.152 divestiture provision conflict,

section 12.152 prevails as the more recently enacted provision. See TEX. GOV’T CODE ANN. 5

3 11.025(a) (Vernon 1998) (“if statutes enacted at the same or different sessions of the legislature are

irreconcilable, the statute latest in date of enactment prevails”) (Code Construction Act). This

construction gives meaning to both provisions and, because it requires the divestiture of interests that

may pose a conflict, effectuates the legislature’s intent to prevent conflicts of interest on the part of

Commission members.

Accordingly, we conclude that the section 12.152(b) divestiture provision cures a

disqualification due to an interest under section 12.053(b)(l)(B) that also falls within section

12.152(a)(2)(B). By its plain language, section 12.152(b) does not cure disqualification due to an

interest that falls under section 12.053(b)(l) but that is not within the scope of section

12.152(a)(2)(B). See TEX.UTIL. CODEANN. $ 12.152(b) (Vernon Supp. 2003) (“A person otherwise

ineligible because of Subsection (a)(2)(B) may be appointed to the commission and serve as a

commissioner . . . if the person . . . .“) (emphasis added).

Finally, we note that the two statutes conflict in yet another respect, which we do not resolve

here. Section 12.053 ineligibility is triggered by interests owned at any time during the two years

preceding appointment, whereas section 12.152 ineligibility is triggered by interests owned at the

time of appointment. See id. $5 12.053(b)(l)(B) (Vernon 1998), 12.152(a)(2)(B) (Vernon Supp.

2003). It may be the case that a person who is a candidate for appointment to the Commission had

an interest under section 12.053(b)(l)(B) within the preceding two years but does not presently have

the interest. If that interest was of a type covered by section 12.152(a)(2)(B), it would make sense,

as a practical matter, that the prospective appointee could satisfy the divestiture provision by

disclosing the interest under section 12.152(b)( 1). See id. 5 12.152(b)( 1) (“A person otherwise

ineligible . . . may be appointed to the commission and serve as a commissioner . . . if the person .

. . notifies the attorney general and commission . . . .“). However, section 12.152(b) permits the

divestiture of only those interests that fall within section 12.152(a)(2)(B), which does not appear to

contemplate interests owned or controlled prior to the time of appointment. See id. 9

12.152(a)(2)(B) (“A person is not eligible for appointment as a commissioner . . . if . . . the person

or the person’s spouse . . . owns or controls. . . . “), (b) (“A person otherwise ineligible because of

Subsection (a)(2)(B) may be appointed to the commission and serve as a commissioner . . . if the

person . . . .“) (emphasis added).

The Honorable Steven D. Wolens - Page 8 (GA-0010)

SUMMARY

Utilities Code section 12.053 and section 12.152 provide that a

person with certain pecuniary interests is not eligible for appointment

as commissioner of the Public Utility Commission. Unlike section

12.053, section 12.152 provides that a person who discloses and

divests certain types of interests is not disqualified. The section

12.152(b) divestiture provision cures a disqualification due to an

interest under section 12.053(b)( 1) that also falls within section

12.152(a)(2)(B). It does not cure a disqualification due to an interest

that falls under section 12.053(b)( 1) but that is not within the scope

of section 12.152(a)(2)(B).

BARRY R. MCBEE

First Assistant Attorney General

NANCY FULLER

Deputy Attorney General - General Counsel

RICK GILPIN

Deputy Chair, Opinion Committee

Mary R. Crouter

Assistant Attorney General, Opinion Committee