CITY OF COLLEGE STATION, TX v. CITY OF BRYAN, TX

• Decision Date: 10 January 1996
• Docket Number: Civil Action No. H-95-5627.
• Citation: CITY OF COLLEGE STATION, TX v. CITY OF BRYAN, TX, 932 F.Supp. 877 (S.D. Tex. 1996)
• Parties: CITY OF COLLEGE STATION, TEXAS, Plaintiff, v. CITY OF BRYAN, TEXAS, Texas Municipal Power Agency, Texas Municipal Power Pool, Inc., Brazos Electric Power Cooperative, Inc., Michael Conduff, Gailord White, and Dan Wilkerson, Defendants.
• Court: U.S. District Court — Southern District of Texas

932 F. Supp. 877

CITY OF COLLEGE STATION, TEXAS, Plaintiff, v.CITY OF BRYAN, TEXAS, Texas Municipal Power Agency, Texas Municipal Power Pool, Inc., Brazos Electric Power Cooperative, Inc., Michael Conduff, Gailord White, and Dan Wilkerson, Defendants.

Civil Action No. H-95-5627.

United States District Court, S.D. Texas, Houston Division.

January 10, 1996.

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John C. Eichman, T. Richard Handler, Jenkens & Gilchrist, Dallas, TX, for City of College Station, Texas.

Lin Hughes, McGinnis Lochridge & Kilgore, Austin, TX, for The City of Bryan Texas, Michael Conduff, Dan Wilkerson.

Tom Alan Cunningham, Fulbright & Jaworski, Houston, TX, for Texas Municipal Power Agency, Gailord White.

Richard L. Adams, Robert P. Oliver, Worsham Forsythe & Wooldridge, Dallas, TX, for Texas Utilities Elect.

AMENDED MEMORANDUM AND ORDER DENYING PRELIMINARY INJUNCTION

ATLAS, District Judge.

INTRODUCTION

This case involves the sale and transmission of wholesale electric power and energy in the College Station, Brazos County, Texas service area.Plaintiff, the City of College Station, Texas ("College Station" or "Plaintiff"), has applied to this Court for preliminary and permanent injunctive relief.College Station alleges that Defendants City of Bryan, Texas ("Bryan") and the Texas Municipal Power Agency("TMPA")¹ constructively have denied College Station access to these Defendants' electric power transmission lines, which are the only lines over which College Station currently can receive electric power from its new electric energy supplier.College Station contends that Bryan and TMPA, by refusing to "wheel," or transfer, across their transmission lines are violating Sections 1and2 of the Sherman Act,15 U.S.C. §§ 1 & 2, andSection 16 of the Clayton Act,15 U.S.C. § 26.

College Station filed its complaint on December 14, 1995, and immediately sought a setting on its prayer for preliminary injunctive relief, which College Station insisted needed to be issued before midnight on December 31, 1995.The Court set the matter for argument and hearing on December 15, 1995.

The Court overruled Defendants' various objections to proceeding and heard testimony for two full days, December 15 and December 19.Final oral argument was held on December 20, 1995.The parties, while under severe time pressures dictated by the circumstances, all cooperated with the Court and each other in exchanging documents, submitting legal authorities to the Court,² and introducing evidence.³

The Court has federal question jurisdiction under 28 U.S.C. §§ 1331and1337 to reach the questions now before it.⁴

Plaintiff requests that the Court issue a broad, multi-part injunction (1) that essentially prohibits Defendants from interfering in any way with the flow of electric power from TU's electric power generating plant to College Station, (2) that prohibits Defendants from "engaging in any and all acts, omissions and/or other conduct that in any way deprives, is intended to deprive, or attempts to deprive College Station of access to electric power and energy from TU commencing on or after midnight on December 31, 1995,"(3) that prescribes a wheeling rate to govern the parties' relationship until an appropriate regulatory agency hears and determines the rate issue, and/or the PUCT issues new binding regulations that govern the permissible wheeling rates, and/or (4) that sets a bond in an amount sufficient to protect the Defendants in the event the Court-imposed rate is found by the regulators to be too low.

College Station's request for a preliminary injunction is denied.The Court concludes that College Station cannot meet the requirements for the extraordinary relief it seeks because it cannot establish that it has a substantial likelihood of success on the merits of the claims it asserts.The Court also questions the legal viability of the claimed irreparable harm and whether the public interest is served by a federal court granting injunctive relief in what is essentially an aborted contract negotiation between public entities engaging in state-authorized commercial activities.

FACTUAL BACKGROUND

Defendants TMPA and Bryan own and control the only transmission facilities currently capable of "wheeling" electric power to College Station.Bryan and TMPA also own and operate electric power and generating plants.College Station does not.From January 1, 1992 to date, College Station has purchased (and continued to purchase through December 31, 1995) power and energy from TMPA, and occasionally supplemental power from one or more TMPA cities, such as Bryan, pursuant to an Agreement for Wholesale Electric Service ("TMPA Agreement"), entered into effective January 1, 1990.Under the TMPA Agreement, Defendants TMPA and Bryan have supplied College Station with uninterrupted power and transmission services, and TMPP has assisted in the implementation of this contract.

In 1994, College Station realized that its contract might be causing its residents to pay above-market prices for power and energy.Plaintiff's Exhibit # 25 (Affidavit of Linda Piwonka)(hereinafter "Piwonka Affidavit"), at 1-2.Seeking to reduce its citizens' electricity costs, College Station issued a request for bids in the fourth quarter of 1994 seeking proposals from potential suppliers of wholesale electric power and energy, for a contract to commence at the expiration of the TMPA Agreement, January 1, 1996.

Seventeen bids were submitted, including bids from TMPA and Bryan.On September 14, 1995, after negotiations with several bidders and protracted negotiations with Bryan, seeid. at 3, College Station entered into a wholesale energy and power supply contract with Texas Electric Utilities Company("TU"), which is not a party to this action.That contract provides that TU will begin supplying power to College Station immediately after expiration of the current contract at midnight on December 31, 1995.

In order for the TU-College Station contract to be implemented, TU needs to deliver the electric power to College Station through transmission lines owned by others.Plaintiff's Exhibit # 26 (Affidavit of Whitfield A. Russell)(hereinafter "Russell Affidavit"), ¶ 7;Piwonka Aff., at 3.College Station needs transmission, or "wheeling," services and typically there is a written contract between the energy supplier (here, TU) and the owners of the transmission lines (here, TMPA and Bryan) to establish the terms under which the power will be delivered.See, e.g.,RussellAff., ¶¶ 9, 10;Plaintiff's Exhibits 13, 17; Defendants' Exhibit 1 (Transcript of December 11, 1995 meeting among parties).TMPP in the ordinary course would enter into a Remote Control Area Load Agreement ("RCAL Agreement") to implement the transmission services on behalf of the other parties, although it appears that a written agreement may not be absolutely necessary.RussellAff., ¶¶ 9, 10; Townsend Testimony.⁵

The dispute in this case centers on this service and College Station's negotiations with Bryan and TMPA on a transmission service (wheeling) agreement.To date there is no such contract.

College Station has argued for the relief it seeks based largely on the circumstances that existed before the hearings on its motion for preliminary injunctive relief.At that time, TMPA and Bryan took the position that they would not wheel the TU power to College Station without a formal agreement.SeePlaintiff's Exhibits 13, 15, 17; Defendants' Exhibit 1.Since the filing of the lawsuit and commencement of the hearing, however, the circumstances have changed to some degree.Subsequent to the close of the hearing, for instance, the RCAL Agreement negotiated by College Station and TU has been signed by TMPP and the other necessary Defendantparties.⁶

Before this lawsuit was filed, the parties engaged in what can only be described as stilted negotiations in an attempt to reach an agreement.These negotiations were never more than posturing by the parties to assert their starting positions.The wheeling price and length of the contract, as well as details about the parties' positions to be taken before regulatory agencies, are still in dispute.The Court summarizes below the history and contentions of the parties to provide context for the rulings that follow.

The parties previously had a wholesale electric service contract governing the combined services of power generation and transmission from the Defendants' generating facilities, as needed, to College Station.The evidence indicates that neither College Station, nor TMPA, nor Bryan previously had negotiated very large contracts governing wheeling services only.The witnesses' testimony indicates that both sides lacked accurate historical cost data on which to base or anticipate the rates Defendants would seek to charge for the "unbundled" transmission contract.Pohl Testimony; White Testimony.See also Hadaway Testimony.

College Station complains that Defendants in reality are seeking to eliminate the financial benefits of the TU contract through high wheeling charges, and thus make TMPA's or Bryan's bids to supply the power more attractive.College Station specifically alleges that

Defendants have refused to make their transmission lines and facilities available to College Station on fair, reasonable, nondiscriminatory terms, and thereby have denied College Station access to and use of such transmission lines and facilities by, among other things, negotiating in bad faith to delay access, pricing same significantly above comparable competitive market rates and charges, and imposing unreasonable terms and conditions, including without limitation denial of the right to challenge such rates, charges, terms and conditions before the appropriate regulatory authorities.

Complaint, ¶ 42(c).College Station contends that Defendants' proposed transmission contracts provide for rates exceeding the rates Defendants...