Case Information
*1 The Attorney General of Texas April 19, 1984 JIM MATTOX
Attorney General
Supreme Court Building Opinion No. JM-147 P. 0. BOX 12548 Chairman Austin. TX. 79711. 2549 Railroad Commission of Texas Re: Construction section 512,4752501 P. 0. Drawer 12967 of article 1446e. Telex 910/874-13S7 Austin, Texas 78711 V.T.C.S., the Public Utility Telecopier 5121475-0206
Regulatory Act 714 Jackson, Suite 700 Dear Mr. Wallace: Dallas, TX. 75202.4506 2141742-8944
You have asked whether article 1446e, V.T.C.S., the Gas Utility Regulatory Act [hereinafter GKJRAI. precludes 4824 Alberta Ave., Suite 100 the Railroad Commission from investigating the reasonableness El Paso. TX. 79905.2793 change in rates between pipelines instances in which the change 9151533.3494 will directly or indirectly affect a city gate rate. We conclude that
you are not so precluded. We conclude commission may 1001 Texas. Suite 700 investigatehe reasonableness of the rate charged in 3 pipeline-to- f- wslo”, TX. 77002-3111 in 2 instance in which the gas so transferred a 1312255886 will ultimately be sold at a city gate for resale to a gas distribu-
tion utility. 606 Broadway, Suite 312 Lubbock, TX. 794013479 Section 5.02 of GDRA was enacted by Acts 1983, Sixty-eighth 8061747-5238 Legislature, chapter 263, 20, p. 1203, to provide
following: 4302 N. Tenth. Suite B Sec. 5.02. JUST AND REASONABLE RATES (a) It McAllen, TX. 78501~16R5 5121882.4547 shall be the duty of the regulatory
ensure that every rate made, demanded, or received by any gas utility, or by any two or more gas 200 Main Plaza, Suite 400 utilities jointly, just and reasonable. Rates San Antonio. TX. 79205.2797 may not be unreasonably 512/225-4191 discriminatory, but must sufficient, to each An Equal OpportunItyI class of consumers. For ratemaking purposes, Affirmative Action Employw railroad commission may treat two or more
municipalities served by a gas utility as a single class the railroad considers treatment to be appropriate.
(b) Rates charged or offered to be charged by a gas utility trans- actions transportation, industrial, and *2 other similar large volume contract customers, but gate sales-for-resale excluding city gas distribution util,ities, are considered to be just and reasonable and otherwise to comply with and shall be approved by the regulatory section, authority, if:
(1) neither the gas utility nor the customer had an unfair advantage during the negotiations; (2) the rates are substantial~ly the same as rates between the gas utility and two or more of those customers under same or similar conditions of service; ‘r competition does or did exist either with (3)
another gas utility, another supplier of natural gas, or with a supplier of an alternative form of energy.
(c) If a complaint filed with the railroad commission by a transmission purchaser sold transported such under w any or transportation rate, then the provisions of Subsection (b) shall not apply. (Emphasis added).
Section 5.02 of GUPA was originally contained in section 38 of 1446c, V.T.C.S., Public lJtili,ty Regulatory Act [herei~naf ter PURA] . Section 5.02 of GURA is virtual1.y identical the now repealed 38(b) of PURA. Section 38(b) of PURA was amended by Acts 1981, Sixty-seventh Legislature, chapter 751, section 1, p. 2749.
Prior to the passage of the 1981 amendment, section 38 read 8s follows:
Sec. 38. It shall be duty regulatory insure every made, demanded, or received by any public utility, or by any two or more public utilities jointly, shall be just and reasonable. Rates shall not be unreasonably
discriminatory, but shall sufficient, to each class of consumers. For ratemaking purposes, commission or railroad commission may treat two or more municipalities served by a public utility as a single class wherever the commission or railroad *3 commission deems such treatment to be aoorooriate.
Rates charged by a gas utility to an'industrial customer for supplying gas under a contract and other similar large volume contract customers are just and reasonable and shall be approved by the regulatory authority if the regulatory authority finds that:
(1) neither the gas utility nor the industrial customer had an unfair advantage during contract negotiations;
(2) rates in contract are substantially same as rates contained contracts between the gas utility and two or more industrial customers contracting under same or similar conditions of service; competition exists either with another gas (3) utility, another supplier of natural gas, or with a supplier of an alternative form of energy.
The above underscored language was amended and, its amended version, became subsection (b). A subsection (c) was also added. We P should first note the effect the 1981 amendment and the 1983
enactment.
The above underscored language of pre-1981 38 created a presumption that rates charged by a gas utility to an industrial customer and to other similar large volume contract customers supplying gas under contract were deemed to be just and reasonable and had to be approved by the appropriate regulatory authority found the existence of only one of three specified facts. The class of consumers affected by thispresumption was comparatively small. It affected only industrial customers or other similar large volume contract customers. With respect to all other natural gas consumers, the appropriate regulatory agency, in this instance Railroad Commission, was still to "insure that every required made, demanded, or by any public utility . . . be just and received reasonable . . . they1 unreasonably [and shall not or discriminatory, but shall be sufficient, to each class of consumers."
As a result the 1981 amendment and the 1983 enactment, class of consumers directly and indirectly affected by the presumption is greatly expanded. Now the presumption reaches all pipeline-to- transactions transportation large volume contract customers, as well as industrial and other similar large volume customers, while purportedly expressly excluding transactions contract P *4 involving city gate sales to gas distribution utilities for resale to individual residential and commercial consumers.
An example will illustrate the dilemma in which the 1981 amend- ment and the 1983 enactment places the commission. By virtue of the recently-amended presumption, rates charged by a gas utility in 9 pipeline-to-pipeline transaction, excluding a city gate sale-for- resale to a gas distribution utility, are deemed to be just reasonable and the commission must approve them if the commission finds the existence of only one of three specified facts. At the same the commission is rexred to regulate city gate sales and, time, again, to "insure that every rate made, demanded, or received by any gas utility . . . is just and reasonable . . . . [They] may not be unreasonably or discriminatory, but must be sufficient, to each class of Accordingly you ask consumers. " V.T.C.S. art. 1446e. %5.02(a).
whether precluded from investigating commission is reasonableness of a rate charged between pipelines instances which the change in rate will directly or indirectly affect a city gate rate.
It is suggested the section 5.02(b) presumption should properly be interpreted as limiting the authority of the railroad commission in any pipeline-to-pipeline or other large volume contract - customer transaction, than one involving a city gate sale-for- resale to a gas distributing utility, to an investigation as to the finding one three specified Under facts. any interpretation, the commission finds the existence of any one of three specified facts in such a transaction, it shall deem that so charged is just and reasonable and shall approve such rate. The commission ful_ly investigate reasonableness of a rate charged in a pipeline-to-pipeline large volume contract customer is limited to only one kind of large volume transfer -- the pipeline-to-pipeline large volume contract sale of gas at the city gate for resale to a gas distribution utility.
On the other hand, is suggested the section presumption should properly interpreted reach & those or other large volume contract customer trans- actions in which s city gate sale-for-resale to a gas distribution utility will occur later in the chain of transactions. Under this interpretation, is authorized investigate reasonableness of any rate charged in a city gate sale, as well as the rate charged for such gas in any large volume transfer prior to the gas reaching the city gate. This second interpretation the one which comports both with the act as a whole and with the evident intent of the legislature when it amended section 38 of PUPA in 1981 and subsequently codified the amendment as section of GURA.
An examination of relevant provisions of GURA support our conclusion.
Section 1.02 of GURA sets forth the legislative policy and purpose of the Gas Utility Regulatory Act: This Act is enacted to protect the
Sec. 1.02. public interest inherent in the rates and services The legislature finds that gas of gas utilities.
utilities are by definition monopolies in the areas they serve; that therefore the normal forces of competition which operate to regulate prices in a free enterprise society do not operate; and that therefore utility rates, operations, and services are regulated by public agencies, with
objective the regulation shall operate as a substitute competition. The purpose of this Act is to establish a comprehensive regulatory system that is adequate to the task of regulating gas utilities as defined by this Act, and to assure rates, operations, and services which are just and reasonable to the consumers and to the utilities. (Emphasis added).
See also Tex. Const. art. I, 26 (forbidding monopolies in Texas). Section 5.01 of GURA sets forth the authority commission to ensure that the purposes of the act are achieved:
Subject the provisions this Act,
railroad is hereby vested with a authority and power of the State of Texas
ensure compliance with the obligations of gas utilities this Act. For purpose
regulatory empowered fix
regulate rates of gas utilities, including rules and regulations for determining the classification
of customers and services and for determining
applicability of rates. A rule or order of
regulatory authority may not conflict with
rulings of any federal regulatory body. And, as we already noted, 5.02(a) of GURA reposes a duty the commission "to ensure that every rate made. demanded, or received by any gas utility company is just and reasonable."
Finally, is clear from transcripts legislative committee hearings on this amendment that the members of the legislature did not intend to circumscribe the authority of the commission in regulating city gate rates. The author of the bill testified
Honorable Flack Wallace
[t]his bill does not affect the city gate sales. As a matter of fact, it states in the substitute specifically that it doesn't.
We further note the author of what is now section 5.20(b) The submitted to us a letter in connection with this opinion request.
writer specifically declared what he intended to be the effect of on the commission's over city gate rates:
[Section 5.02(b)] simply restates the traditional exclusion for sales of gas between a transmission It has and a distribution company. always been deemed necessary for the protection of consumers this to be subject to [Section thorough scrutiny by a regulatory body. 5.02(b)] leaves this consumer protection . As already stated, [the Railroad place.. .
Conmission] practice and state laws over the years have dictated of event must be sort review order subject comprehensive protect the public interest. It was never purpose [section 5.02(b)] to change, in any [commission's] well-established way, well-conceived regulation of either city gate or transactions. (Emphasis added).
We are reouired to construe an amendment in harmonv with the act it amends or to which it is added. American Surety Co. v. Axtell Co., 36 S.W.2d 715 (Tex. 1931); Shipley v. Floydada Independent School District, 250 S.W. 159 (Tex. 1923). Our interpretation must express only the will of the makers of the law, not forced or strained, but simply such as the words of law-in their plain sense fairly sanction and will clearly sustain. Railroad Coomission of Texas v.
Miller, 434 S.W.2d 670 (Tex. 1968). We may not construe the statute so as to ascribe to the legislature an unjust or unreasonable thing, reasonably susceptible of a construction that will not accomplish such a result. Anderson v. Penix, 161 S.W.2d 455 (Tex.
1942). A statute must be construed as a whole, Texas Turnpike Authority v. Shepperd, 279 S.W.2d 302 (Tex. 1955), and all its parts harmonized if possible. Stark v. Chaison, 50 S.W.Zd 776 (Tex.
1932). We must give effect to the entire act, Martin v. Sheppard, 102 S.W.2d 1036 (Tex. 1937), according to the evident intention legislature. State v. Jackson, 376 S.W.2d 341 (Tex. 1964). Therefore, we must interpret in such a way as harmonize it with the remaining parts of GURA and so as not to ascribe to the legislature an unreasonable result. *7 - Page 7 (~~-147) section 5.02(b) require the
Accordingly, we interpret to hold a rate just and reasonable and approve such rate certain transactions after it has found the existence of one of three specified facts, but only if a city gate sale-for-resale to a gas distribution utility is not involved as the final consumer in the In other words, Gas Utility A can by contract chain of transactions. gas to Gas Utility B, such transaction being governed by the
transfer presumption created by section 5.02(b). Gas Utility B can, in turn.
transfer that gas by contract to a large volume contract industrial customer, again with this second transaction governed by the section On hand, had Gas Utility B 5.02(b) presumption. subsequently sold the gas received from Gas Utility A to a gas distribution city gate, 5.02(b) facility at presumption would be inapplicable and the commission could inquire into the reasonableness of the rate charged in the transaction between Gas Utility A and Gas Utility B. If we were to read the statute any other way, our interpretation would effectively vitiate of the commission to regulate city gate transactions. This to do, since such a result is clearly not the intent we are unwilling of the legislature.
Accordingly, the Railroad Commission is not precluded by section of GURA from fully investigating the reasonableness rate charged in any pipeline-to-pipeline or other similar large volume contract customer when such a rate will directly indirectly affect a city gate sale-for-resale to a gas distribution utility.
SUMMARY The Railroad Commission is not precluded by of article 1446e. V.T.C.S., (Gas Utility Regulatory Act) from fully investigating reasonableness charged in any or other similar large volume contract customer transaction when such rate will directly indirectly affect a city gate sale- for-resale to a gas distribution utility.
JIM MATTOX Attorney General of Texas TOM GREEN
First Assistant Attorney General
DAVID R. RICHARL'S
Executive Assistant Attorney General
Prepared by Jim Moellinger
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Rick Gilpin, Chairman
Colin Carl
Susan Garrison
Jim Moellinger
Nancy Sutton