Texas Nat. Res. Cons. v. Lakeshore Utility

• Decision Date: 24 June 2005
• Docket Number: No. 02-0988.,02-0988.
• Citation: 164 S.W.3d 368
• Parties: TEXAS NATURAL RESOURCE CONSERVATION COMMISSION, Petitioner, v. LAKESHORE UTILITY COMPANY, INC., Sentry Title Company, Inc., Alan D. Whatley, and Thelma J. Whatley, Respondents.
• Court: Texas Supreme Court

Page 368

164 S.W.3d 368

TEXAS NATURAL RESOURCE CONSERVATION COMMISSION, Petitioner, v. LAKESHORE UTILITY COMPANY, INC., Sentry Title Company, Inc., Alan D. Whatley, and Thelma J. Whatley, Respondents.

No. 02-0988.

Supreme Court of Texas.

Argued November 19, 2003.

Decided April 8, 2005.

Rehearing Denied June 24, 2005.

Philip Dale Mockford, Leonard H. Dougal, George Breck Harrison, Jackson & Walker, L.L.P., J. Stephen Dillawn, Atwood & Associates, Austin, J. Albert Kroemer, Prager Metzger & Kroemer, Dallas, for Petitioner.

Greg Abbott, Jane Elizabeth Atwood, Office of Atty. Gen., Howard G. Baldwin, First Asst. Atty. Gen., Jeffrey S. Boyd, Thompson & Knight, Karen Watson Kornell, Office of Atty. Gen., Barry Ross McBee, Office of Atty. Gen., and Linda B. Secord, Office of Atty. Gen., Natural Resource Div., Austin, for Respondent.

Justice O'NEILL delivered the opinion of the Court.

In this case arising from a Texas Natural Resource Conservation Commission¹ enforcement action, we must decide whether the evidence is legally sufficient to support the trial court's determination that a utility company knowingly violated the Water Code by charging its customers unauthorized fees, and whether the Water Code authorizes the Attorney General, at the Commission's request, to seek customer refunds in district court to compel compliance with the Water Code's statutory provisions. Answering both questions in the affirmative, we affirm in part and reverse in part the court of appeals' judgment.

I. Facts

Lakeshore Utility Company, Inc.,² is a water and sewer public utility providing service to customers in two residential subdivisions, Point La Vista and Esquire Estates II, adjacent to Cedar Creek Lake in Henderson County, Texas. Because Lakeshore's customers reside on property just above the lake, a typical gravity- or gradient-flow sewer system cannot be used in the subdivisions. Instead, a more complex and expensive "pressure-effluent system"³ is used.

As a public utility, Lakeshore is subject to the jurisdiction of the Commission, which is charged with exercising regulatory authority over public utilities and fixing and regulating utility rates. See Tex. Water Code §§ 13.041(a) (providing that the Commission "may regulate and supervise the business of every water and sewer utility"), 13.181(b) (authorizing the Commission to fix and regulate utility rates), 13.190(a) (mandating that utilities cannot "charge, demand, collect, or receive" a rate for service that is not authorized). Lakeshore's monthly utility rates and tap fees — the fees charged to install water and sewer utility services — must be listed on its approved tariff schedule, or schedule of rates, that is filed with the Commission. Id. § 13.136.

In 1977, the Commission accepted a tariff application from Lakeshore and approved monthly rates for both subdivisions as well as tap fees at a flat rate of $200 for water "Tap and Meter Installation" and $600 for sewer "Tap & Installation" at locations requiring "heavy-duty pump[ing] or excessive lift [ing]."

Between 1981 and 1989, Lakeshore submitted numerous tariff applications to the Commission requesting various changes to the Commission's 1977 approved rates and tap fees. Relevant to this case are the tariff applications Lakeshore made in 1981 and 1989 to increase the amounts approved by the Commission in its original 1977 tariff. These applications requested that the Commission approve monthly rate and tap-fee increases at each subdivision. In each instance, while awaiting the Commission's decision, Lakeshore charged its customers the increased amounts that it was requesting the Commission approve. In response to each application, the Commission signed an order dismissing Lakeshore's request and directing Lakeshore to refund the increased fees collected from its customers while the application was pending. Because of the importance of the 1981 and 1989 tariff applications — particularly the resulting Commission orders that required Lakeshore to refund its customers — we detail the events surrounding each application below.

A. The 1981 Tariff Application and Resulting 1983 Orders

In 1981, Lakeshore sought the Commission's authorization to increase its monthly utility rates and to increase its tap fees to $375 for water and $1,150 for sewer services. Lakeshore's request noted parenthetically that the new sewer rate would include "pump[s], tanks, valves, fittings, & controls." Lakeshore charged its customers the increased amounts pending the Commission's decision. In January 1983, the Commission issued an order denying the requested rate and fee increase and directing Lakeshore to charge tap fees no higher than "actual cost, not to exceed $200.00" for water and "actual cost, not to exceed $600.00" for sewer installation services. Accordingly, Lakeshore was not to charge amounts exceeding those formerly approved on its 1977 tariff. The Commission also ordered Lakeshore "to refund to its customers all monies collected in excess of the rates set forth [in its 1977 tariff]," and to provide the Commission with the name of each customer refunded and the amount within the next two months. Lakeshore was told its failure to comply would result in referral to the Attorney General's office for prosecution. As will be seen, however, Lakeshore continued to charge customers the disapproved amounts.

Just two months after the Commission's January 1983 Order denying Lakeshore's requested increase, Lakeshore was involved in a dispute concerning the Commission's certification of another public utility called the St. Paul Industrial Training School. As part of the certification process, the Commission undertook an examination and inquiry into Lakeshore's tap fee charges and issued an order in March 1983 called the St. Paul Order. In the St. Paul examiner's report, which was adopted by the Commission in its order, the examiner found that Lakeshore had been charging its customers sewer tap fees of $1,150 when the Commission had refused to approve this amount. The examiner noted that Lakeshore's overcharges constituted a violation of the statutory provision providing that "[n]o public utility may, directly or indirectly by any device whatsoever or in any manner; [sic] charge, demand, collect, or receive from any person" any amount other "than that prescribed in the schedule of rates of the public utility." See Tex. Water Code § 13.190(a). The examiner concluded that the Commission should monitor Lakeshore's tap fee charges and "request the Attorney General to bring an action in District Court, in the Commission's behalf" to require Lakeshore's compliance with the provision if the Commission's monitoring revealed that rates other than tariffed rates were charged. It is unclear, though, whether the Commission took any further action to ensure Lakeshore's compliance with either the Commission's January 1983 Order or the St. Paul Order.

B. The 1989 Rate Application and Resulting Order

In January 1989, Lakeshore filed another request for authorization from the Commission to increase its monthly rates and to increase tap fees for both residential subdivisions to $375 for water and $1,350 for sewer services. While the request was pending, Lakeshore again charged its customers the proposed fees. On December 21, 1989, the Commission denied Lakeshore's application and ordered Lakeshore to refund approximately $29,000 in overcharges collected during the pendency of Lakeshore's request by crediting customers' future bills. The refund was ordered pursuant to Texas Water Code section 13.187, which provides: "[A] utility shall refund or credit against future bills all sums collected during the pendency of [a] rate proceeding in excess of the rate finally ordered plus interest as determined by the regulatory authority." Id. § 13.187(c). The Commission additionally ordered Lakeshore to provide an accounting to the Commission of all tap fees that Lakeshore customers paid from December 8, 1981, through December 14, 1989. Because the Commission denied Lakeshore's requested increase, Lakeshore's approved tap fee amounts remained the same as those approved in 1977.

C. The Lawsuit

Both Lakeshore and the Commission brought suit in district court concerning the 1989 Order. Believing the Commission's continued refusal to increase rates and tap fee amounts was unfair, Lakeshore sought judicial review of the Commission's decision denying its 1989 application. The Commission, concerned that Lakeshore was refusing to comply with the 1989 Order, sought to enforce the order under sections 13.411 and 13.414 of the Water Code. The Commission specifically alleged that Lakeshore was actively violating the 1989 Order by failing to refund customers for overcharges and by continuing to charge fees in excess of those approved by the Commission. The Commission sought civil penalties "for each day Lakeshore ... has been in violation of the Water Code and the Commission's order since December 21, 1989," and to enjoin Lakeshore from future violations. The court consolidated the cases and, in a single judgment, found in favor of Lakeshore, reversed the Commission's 1989 Order, and dismissed the Commission's enforcement action.

D. First Appeal and Remand

The court of appeals reversed the district court's judgment and reinstated the Commission's 1989 order, which required Lakeshore to charge no more then $600 for sewer and $200 for water installation services, and to refund its customers approximately $29,000 in overcharges made during the pendency of Lakeshore's 1989 tariff application. The Commission's reinstated enforcement action was remanded to the district court for further proceedings. Tex. Water Comm'n v. Lakeshore Util. Co., 877 S.W.2d 814 (Tex.App.-Austin 1994, writ denied).

On remand, the Commission amended its original pleadings in the district court to seek customer refunds for overcharges dating back to 1981, when Lakeshore began to charge its...