Cities for Fair Utility Rates v. Public Utility Commission

In Cities for Fair Utility Rates v. Public Utility Commission, 924 S.W.2d 933 (Tex. 1996), existing consumers complained that there would be an unfair and unlawful allocation of costs as between them and future ratepayers if a utility were allowed to recover costs incurred in connection with facilities that were not planned to go online for several years. The Court held that expenditures for "plant held for future use, or PHFU" could be included in a utility's rate base before the plant went into service. The Court recognized that a regulated utility must make long-term plans and investments to meet the future needs of those in its service area. The Court said that in balancing the differing interests between present and future ratepayers, it was permissible for the Commission to require existing customers to pay costs associated with plans for future service: While it is not fair to charge present ratepayers with the cost of future service, neither is it fair to burden future ratepayers with unnecessarily high acquisition costs because a utility was discouraged from making prudent long-term plans. PHFU expenses are used and useful because they are a necessary part of planned investments. Most states include PHFU in rate base in some circumstances. Id. at 937. The Court accordingly held that a utility could include approximately $ 93 million of costs incurred in connection with a generating plant that it planned to build in ten years. Even though the utility ultimately cancelled completion of the plant, there was evidence that the utility had plans to bring the plant online at some point in the future when it included costs associated with the plant in its rate base.