Entex v. Railroad Comm'n Texas

• Decision Date: 11 May 2000
• Citation: 18 S.W.3d 858
• Parties: (Tex.App.-Austin 2000) Entex, a Division of Reliant Energy Resources Corp., formerly known as Entex, a Division of Noram Energy Corp., Appellant v. Railroad Commission of Texas, Appellee NO. 03-99-00746-CV
• Court: Texas Court of Appeals

Page 858

18 S.W.3d 858 (Tex.App.-Austin 2000)

Entex, a Division of Reliant Energy Resources Corp., formerly known as Entex, a Division of Noram Energy Corp., Appellant v. Railroad Commission of Texas, Appellee

NO. 03-99-00746-CV

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

May 11, 2000

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 98TH JUDICIAL DISTRICT, NO. 99-09265, HONORABLE MARGARET COOPER, JUDGE PRESIDING

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

Before Chief Justice Aboussie, Justices Kidd and Smith

Bea Ann Smith, Justice

Appellant Entex, a division of Reliant Energy Resources Corp.,¹ appeals a trial court judgment affirming an order by appellee, the Railroad Commission of Texas (Commission). The issue presented is what rates a utility must charge when it purchases a gas distribution facility from another utility. The Commission ordered Entex, the acquiring utility, to continue charging the rates of the utility from which it acquired a new facility. The district court affirmed the Commission's order. Because we determine the Utilities Code only requires Entex to charge its own authorized rates and precludes it from charging any other rates, we will reverse the judgment and the order and remand to the Commission.

FACTS AND PROCEDURAL BACKGROUND

Entex operates natural gas distribution systems in East Texas. In October 1993, Entex purchased a small distribution facility from East Texas Industrial Gas Company (ETIG) serving sixty-nine residential customers and two commercial customers in an unincorporated area of Harrison County; these customers were geographically interspersed among Entex's other customers.

Prior to the sale, ETIG charged its customers rates set by a 1983 order of the Commission (Docket No. 4001). See Tex. R.R. Comm'n, Statement of Intent Filed by East Texas Industrial Gas Company to Change Rates in the Unincorporated Area in Harrison County, Texas, Docket No. 4001 (Gas Utils. Div. Aug. 29, 1983). Entex charges its customers rates set by a 1993 order of the Commission applicable to the environs of forty-two cities in East Texas, including Marshall in Harrison County.² See Tex. R.R. Comm'n, Statements of Intent Filed by Entex, Inc. to Change Residential and Commercial Rates, Docket Nos. 8163-8204 (Legal Div. Feb. 1, 1993) (Docket No. 8187). When Entex purchased the ETIG facility, it charged the seventy-one new customers the rates established for Entex in Docket No. 8187. Entex's rates were considerably higher than those charged by ETIG.

Following a 1995 audit, the Commission concluded that Entex was overcharging the former ETIG customers. The Commission ordered Entex to charge the seventy-one customers the rates authorized for ETIG in Docket No. 4001 and to refund the overcharges from October 1993 forward, plus accrued interest. See Tex. R.R. Comm'n, Application of Entex, a Division of Noram Energy, for a Stipulation and Request for a Declaratory Order With Regard to the Rates in the Environs of Marshall, Harrison County, Texas, Docket No. 8646 (Legal Div. June 22, 1999) (Docket No. 8646). The Commission made twenty-nine findings of fact and entered thirteen conclusions of law. Entex sought judicial review of the order, and the trial court affirmed.

DISCUSSION

Entex raises one point of error, arguing that it properly charged the seventy-one customers the only rates it was authorized to charge in the area. Thus, Entex asserts that the Commission's order is erroneous as a matter of law. The Commission argues the conclusions of law support its order on several bases. First, the "filed rate doctrine," codified at section 104.005(a) in the Texas Utilities Code, prohibits Entex from charging rates other than those established for ETIG's customers by Docket No. 4001. See Tex. Util. Code Ann. 104.005(a) (West 1998). Second, Entex increased the rates of the former ETIG customers without following the procedures for a rate increase required by the Texas Utilities Code and the Texas Administrative Code. See id. 104.102-.103 (West 1998); 16 Tex. Admin. Code 7.7 (1999). Third, ETIG customers had an implied contract with ETIG to be charged the lower rates; in purchasing the facility, Entex assumed the obligation to continue charging these rates when it purchased the facility and breached this obligation by charging its own higher rates.³

We review the Commission's order under the substantial evidence standard of review. See Tex. Util. Code Ann. 105.001 (West 1998). According to the substantial evidence rule, an order that is erroneous as a matter of law must be reversed and remanded for further proceedings if it prejudices substantial rights of the appellant. See Tex. Gov't Code Ann. 2001.174(2)(D) (West 2000). Under the substantial evidence standard of review, administrative determination of a question of law is not entitled to a presumption of validity. See Teacher Retirement Sys. v. Cottrell, 583 S.W.2d 928, 930 (Tex. Civ. App.-Austin 1979, writ ref'd n.r.e.). Questions of statutory interpretation are questions of law; therefore, we are not bound by the Commission's construction of a statute. See id. However, the Commission's interpretation is entitled to serious consideration if it is reasonable and does not contradict the plain language of the statute. See Dodd v. Meno, 870 S.W.2d 4, 7 (Tex. 1994).

I. The Filed Rate Doctrine

The United States Supreme Court established the filed rate doctrine to address the unique situation in which a utility files tariffs with a regulatory agency. See Keogh v. Chicago & Northwestern Ry., 260 U.S. 156, 163 (1922). The doctrine prohibits regulated utilities from "charging rates for their services other than those properly filed with the appropriate regulatory authority." Southwestern Bell Tel. Co. v Metro-Link Telecom, Inc., 919 S.W.2d 687, 692 (Tex. App.-Houston [14th Dist.] 1996, writ denied). The filed tariff has the effect of law governing the relationship between the utility and its customers. See id. The doctrine operates "across the spectrum of regulated utilities" and applies "where state law creates a state agency and a statutory scheme pursuant to which the state agency determines reasonable rates." Id. at 692-93 (citing Arkansas La. Gas Co. v. Hall, 453 U.S. 571, 579 (1981)).

The Texas Legislature codified the filed rate doctrine in the Texas Utilities Code at section 104.005(a). See Tex. Util. Code Ann. 104.005(a). That section states: "A gas utility may not directly or indirectly charge . . . a person a greater or lesser compensation for a service provided . . . by the utility than the compensation prescribed by the applicable schedule of rates filed under Section 102.151." Id. (emphasis added).

The parties agree the filed rate doctrine is applicable, but reach opposite conclusions as to how the doctrine applies to these facts. The Commission argues the filed rate doctrine requires Entex to charge its acquired customers the rates filed by ETIG. If so, Entex violated section 104.005(a) by charging its own higher rates. The Commission's fourth conclusion of law states that the filed rate doctrine "prohibits Entex from charging the customers of the former ETIG system any rates other than those established in [Docket] No. 4001." Entex argues the applicable filed rate is the tariff filed by the utility providing the service. Entex understands the filed rate doctrine to require Entex to charge all its customers the same rates. Based on this belief, when Entex began providing the former ETIG customers with natural-gas service in October 1993, it charged them the rates authorized in its Docket No. 8187. To determine the effect of the filed rate doctrine in this situation, we must decide if the governing tariff referenced in section 104.005(a) is the rate applicable to the customers or the rate applicable to the utility.

The Commission admits the Utilities Code is ambiguous as to which schedule of rates is referenced in section 104.005(a). But it argues that the Code is intended to protect ratepayers from rate increases by requiring a utility to file a statement of intent with the Commission, give notice in the appropriate county, and allow customers an opportunity to object to the increase before raising rates. See Tex. Util. Code Ann. 104.102, .103, .105. The Commission contends these procedural protections against rate increases afford ratepayers a "legally cognizable and protected interest" in their tariffed rates, and this interest should compel this Court to hold that the customers' rates are found in the applicable schedule of rates referenced in section 104.005(a).⁴ But we note that the Code's purpose is "to assure rates, operations, and services that are just and reasonable to the consumers and to the utilities." Id. 101.002(a) (West 1998) (emphasis added). This policy does not dictate favoring the consumer over the utility as urged by the Commission. The fundamental rule controlling our construction of the section is to ascertain the intention of the legislature as expressed in the language of the statute. See State v. Terrell, 588 S.W.2d 784, 786 (Tex. 1979). In ascertaining this intent, courts must examine the entire statute and not merely an isolated portion. See id.

Section 104.005(a) refers to the "applicable schedules of rates filed under section 102.151." Tex. Util. Code Ann. 104.005(a). Section 102.151 gives us some guidance in discerning which rates are applicable in this situation. In plain language, the section tells us the applicable schedule of rates is the one "in effect for a . . . service . . . offered by the gas utility." Id. 101.151(a)(2) (West 1998). It does not say the applicable rate is the one offered to specific customers. Reading sections 102.151 and 104.005(a) together, as we must, we hold that the Legislature intended that a utility must charge the rates prescribed by the schedule applicable to services offered by that utility and may not charge the rates of another utility that...