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Click here for the full text of this decision FACTS:This is a direct appeal challenging the validity of an amendment to the Public Utility Commission’s rule governing the recovery of stranded costs in a true-up proceeding. Gulf Coast Coalition of Cities, Houston Council for Health and Education, and the state of Texas (the ratepayers) challenge the commission’s removal of an express conflict-of-interest provision in the section of the rule that defines who qualifies as an independent financial expert to determine the value of certain affiliated power generation company assets. The ratepayers contend that, by eliminating the conflict-of-interest provision, the commission has compromised the independence of the financial experts who perform this important role in the true-up proceeding. They assert that the removal of the conflict-of-interest provision is 1. facially invalid because it contravenes the plain language of the statute calling for independent financial experts to serve on the valuation panel; and 2. void because the commission did not substantially comply with the reasoned justification requirements of the Administrative Procedure Act in adopting the amendment. HOLDING:Affirmed. The ratepayers contend that the amended true-up proceeding rule is facially invalid because it eliminates the statutory requirement that panelists be independent. They claim this contravenes the plain language of Public Utilities Regulatory Act 39.262(h)(3). In this facial challenge, the court does not consider the merits of the commission’s new policy of determining the independence of prospective panelists on a case-by-case basis. State Office of Public Utility Counsel v. Public Utility Commission, 131 S.W.3d 314 (Tex. App. Austin 2004, pet. denied). The court decides whether the deletion of an express conflict-of-interest provision contravenes the specific statutory language of PURA 39.262(h)(3). Although the amended rule lacks an explicit test for determining panelists’ independence, it does not eliminate the statutory requirement that the panelists be independent. Because the court construes a rule in relationship to the statute which it implements, Envoy Med. Sys., LLC v. State of Texas, 108 S.W.3d 333 (Tex. App. – Austin 2003, no pet.), the requirement that panelists be independent survives the amended rule. The court holds that the amended true-up proceeding rule is not facially invalid. In their second issue on appeal, the ratepayers challenge the commission’s reasoned justification for the amended rule. The ratepayers claim that the commission’s final order lacks a reasoned justification because 1. it lacks a summary of the factual basis for the rule; and 2. it fails to state the reasons why the commission disagreed with the written comments submitted by the ratepayers. The court concludes that the commission’s final order adequately explained how and why it reached its conclusion regarding the repeal of the express conflict-of-interest provision from the true-up proceeding rule. OPINION:Bea Ann Smith, J.; Smith, Puryear and Pemberton, JJ.

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