Court Says Texas Commissioners' USF Inaction Was Unlawful
The Texas Public Utility Commission violated the state’s constitution and utility and administrative procedure laws when it chose not to fully fund Texas USF (TUSF), a state appeals court ruled Thursday. The 3rd District Texas Court of Appeals in Austin partly reversed the Travis County District Court in Austin dismissal of rural telcos’ complaint against the PUC. The trial court must issue a writ of mandamus ordering Texas commissioners “to take immediate action to fulfill their duties imposed by law to fully fund all TUSF programs and to make all disbursements required by” the Texas Public Utility Regulatory Act (PURA) and the PUC’s “existing TUSF orders and commitments,” wrote Justice Gisela Triana in Thursday’s opinion with Chief Justice Darlene Byrne and Justice Chari Kelly (case 03-21-00294-CV).
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The panel disagreed with the trial court dismissing a lawsuit by the Texas Telephone Association (TTA), Texas Statewide Telephone Cooperative, Inc. (TSTCI), Lumen and Windstream. The rural telcos challenged the PUC for choosing not to vote on an increase to the TUSF surcharge in June 2020, which led to a December 2020 contract change explaining how to prioritize support from the insufficiently funded program (see 2112150042).
“While the Commission has discretion to decide how to fund TUSF, it lacks the discretion to underfund TUSF and to fail to make payments owed to the Rural Providers under its own orders,” wrote Triana. “Commissioners acted in conflict with their legal constraints when they decided to allow TUSF to be funded in an amount insufficient to comply with the Commission’s own orders, effectively reducing the Rural Providers’ ordered support amounts.”
“We are reviewing the court’s opinion,” a Texas PUC spokesperson said Friday. All three commissioners are no longer with the PUC, having resigned in 2020 amid fallout over the commission’s response to outages caused by a winter storm.
“We look forward to working with the new commissioners to quickly follow the court’s directions, recoup the money owed these companies, and move on with the business of providing reliable and affordable telecommunications to all of Rural Texas,” TTA Board President Rusty Moore said Friday.
The appeals court enjoined Texas commissioners “from not fully funding TUSF as required by statute and from failing to fully pay all disbursements required by PURA and the Commission’s existing TUSF orders and commitments." The court reversed the trial court's dismissal of RLECs’ claim the PUC violated the Texas Administrative Procedure Act, granted summary judgment voiding the PUC's June 2020 decision and December 2020 contract amendment, and granted a permanent injunction prohibiting the commission from enforcing the contract amendment.
The PUC's actions were an unconstitutional taking, said the judges, remanding to the lower court for a determination on actual damages resulting from the taking. The PUC "took affirmative regulatory action that has had a negative economic impact on the Rural Providers and has interfered with their investment-backed expectations,” Triana said.
The court remanded rural telcos' claim for attorneys' fees to the trial court. The court said it lacks authority to grant retrospective monetary relief but noted the legislature could do it.
If commissioners had concerns about raising the revenue-based surcharge, they could have implemented other options like shifting to a connections-based mechanism and expanding the contribution base to include VoIP providers, Triana said. "Refusing to approve the assessment rate at the amount required to cover the cost of TUSF programs (including the Commission-ordered monthly support amounts) was not an option within the Commissioners’ discretion.”
Commissioners "exceeded their legal authority and the statutory constraints of PURA" when they directed staff and third-party administrator Solix to create a prioritization system for distributing support rather than increase the TUSF surcharge, the court said. "By choosing to fully fund certain TUSF programs and allowing other programs to go underfunded, those telecommunications providers who participate in the underfunded programs are subject to the very disadvantage that the Legislature established TUSF to remedy.” PURA precludes commissioners from revising monthly support amounts without notice and a hearing, the court added.
“This decision is huge,” TSTCI Board President Kelly Allison said Friday. “Over the past 18 months, TSTCI members and other rural providers have persevered financial hardship created by the PUC” and continued to provide service, he said. “We are not sure how long our members could have kept providing services without the PUC meeting its full obligations with regard to TUSF.”
The PUC could appeal, but to meet the court’s ruling the agency will need to start talks “on how to fully fund and disburse current TUSF obligations as soon as possible,” Allison said. “There will also need to be action taken to ensure the stability of the fund moving forward.”
The decision could have implications for a similar challenge against the PUC by AMA TechTel Communications. A different 3rd District panel that includes one of the same justices, Triana, is weighing the PUC’s appeal of AMA’s lower court win. While a final decision remains pending, the court Thursday required the PUC to pay AMA TechTel Communications the full amount of state USF support it was owed since Dec. 1 (see 2206300045).