Southwestern Bell Telephone Company v. Public Utility Commission of Texas ( 2002 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-01-00548-CV
Southwestern Bell Telephone Company, Appellant
v.
Public Utility Commission of Texas, Appellee
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 250TH JUDICIAL DISTRICT
NO. GN100804, HONORABLE F. SCOTT MCCOWN, JUDGE PRESIDING
Appellant Southwestern Bell Telephone Company (ASWBT@) appeals from a district-
court judgment affirming a final order of appellee the Public Utility Commission of Texas (the
ACommission@). Pursuant to the incentive-regulation provisions of the Public Utility Regulatory Act
(APURA@),1 SWBT applied for a rate increase for Anonpublished exchange@ service by means of an
informational notice filing. See PURA '' 58.003(d), .152 (West Supp. 2002). The Commission,
finding that nonpublished exchange service is a basic service, and therefore subject to a rate cap,
rejected SWBT=s filing. See id. ' 58.054. The district court affirmed the Commission=s final order.
SWBT appeals by one issue. We will reverse and remand.
BACKGROUND
1
The Public Utility Regulatory Act is codified as Title 2 of the Texas Utility Code. Tex. Util. Code
Ann. '' 11.001-64.168 (West 1998 & Supp. 2002). The incentive-regulation provisions appear in
sections 58.001-.302. Id. '' 58.001-.302.
 This dispute arises from SWBT=s attempt to exercise pricing flexibility under the
incentive-regulation scheme of PURA. See id. '' 58.001-.302 (West 1998 & Supp. 2002). Before
1995, public utilities in Texas were dominated by heavily regulated monopolies. See City of Plano v.
Public Util. Comm=n, 953 S.W.2d 416, 419 (Tex. App.CAustin 1997, no writ). Companies like
SWBT were regulated according to traditional rate-of-return principles, which involved a complicated
and speculative process of regulating costs and estimating a fair rate of return on investment.
Southwestern Bell Tel. Co. v. Public Util. Comm=n, 31 S.W.3d 631, 633-34 (Tex. App.CAustin 2000,
pet. granted) (citing PURA ' 53.051 (West 1998)). However, in 1995, the legislature responded to
the national trend toward deregulation and amended PURA to provide telecommunications
companies with the option of becoming deregulated through a statutory transition process. 2 A
telephone utility may choose to be regulated under the incentive scheme in chapter 58 of PURA by
notifying the Commission in writing of its election and fulfilling corresponding infrastructure
commitments. PURA ' 58.021 (West Supp. 2002). Companies choosing incentive regulation are
commonly referred to as Aelecting companies.@ Under the 1995 legislation, services were divided into
three categories: (1) basic network services, (2) discretionary services, and (3) competitive services. 3
This allowed electing companies the freedom to competitively price certain services in the market,
while remaining subject to the Commission=s authority over the regulation of other services. In 1999
2
The policy of the incentive-regulation scheme is to Aprovide a framework for an orderly transition from
the traditional regulation of return on invested capital to a fully competitive telecommunications marketplace
in which all telecommunications providers compete on fair terms.@ Id. ' 58.001(1) (West 1998).
3
See Act of May 8, 1997, 75th Leg., R.S., ch. 166, '1, 1997 Tex. Gen. Laws 713, 864 (amended
1999) (current version at Tex. Util. Code Ann. ' 58.023 (West Supp. 2002)).
2
the legislature again amended PURA, continuing its efforts to reduce the authority of the Commission
to regulate electing companies. The three categories of services were collapsed into two categories,
which PURA now designates as basic and nonbasic services. See PURA ' 58.023 (West Supp. 2002).
Basic services remain subject to a rate cap through September 1, 2005; nonbasic services may be
priced competitively.
SWBT became an electing company on September 1, 1995, thereby committing to a
rate cap on basic services until September 1, 2005. On November 13, 2000, SWBT filed an
informational notice with the Commission expressing its intent to increase the monthly rate charged
for nonpublished exchange service from $1.10 to $2.50.4 Ordinarily, telephone utilities publish
customer names, addresses, and telephone numbers in a directory, which is then distributed free of
charge to all telephone subscribers. However, customers, who for various reasons wish their
information to remain private, may pay an additional fee for the nonpublished exchange service,
which removes their information from the directory and from directory assistance. In common
parlance, such customers have Aunlisted numbers.@ The Commission rejected SWBT=s filing, basing
its decision on its finding that nonpublished exchange service is included within Aprimary directory
listings@ and is thus a basic service. See id. ' 58.051(a)(1).
4
SWBT has not increased the rate charged for this service since 1985.
3
DISCUSSION
In cases involving agency decision-making, we apply a deferential standard of review.
Nabisco v. Rylander, 992 S.W.2d 678, 681 (Tex. App.CAustin 1999, pet. denied) (citing Stanford v.
Butler, 181 S.W.2d 269, 273 (Tex. 1944); ADP Credit Corp. v. Sharp, 921 S.W.2d 490, 493 (Tex.
App.CAustin 1996, writ denied)). When an agency is charged with enforcement of a statute, we
give serious consideration to the agency=s construction, as long as the interpretation is reasonable and
does not contradict the statute=s plain language. Nabisco, 992 S.W.2d at 681 (citing Stanford, 181
S.W.2d at 273; Texas Citrus Exch. v. Sharp, 955 S.W.2d 164, 168 (Tex. App.CAustin 1997, no pet.)).
By its sole issue on appeal, SWBT contends that the Commission=s classification of
nonpublished exchange service as a basic network service contradicts the plain meaning and express
terms of PURA. See PURA '' 58.051, .151. Section 58.051 specifies eleven services as basic
network services, which are subject to SWBT=s rate cap. Id. ' 58.051(a). The first service listed is
Aflat rate residential local exchange telephone service, including primary directory listings and the
receipt of a directory and any applicable mileage or zone charges.@ Id. ' 58.051(a)(1) (emphasis
added). The Commission found that nonpublished exchange service fits within primary directory
listings and argues that it is a subset or attribute of primary directory listings.
Before the 1995 and 1999 amendments to PURA, regulation by the Commission was
intended to act as a substitute for normal market competition. City of Plano, 953 S.W.2d at 419. By
enacting the amendments, the legislature significantly changed the way telecommunications
companies that elect incentive regulation are supervised. Southwestern Bell, 31 S.W.3d at 636 (ABy
adopting chapter 58, the legislature signaled a sea change in how telecommunications utilities that
4
have elected incentive regulation are to be governed.@). Electing companies are not subject to
complaints, hearings, or determinations concerning their rates, revenues, or net income. Id. Rates are
now determined by market forces rather than regulation by the Commission. Therefore, we no longer
begin our analysis with the presumption that a particular service is subject to regulation by the
Commission. Instead, when dealing with electing companies, we look to the enumerated services
which are classified as basic and subject to the rate cap; if the service in question is not listed in
section 58.051, we presume the service is nonbasic. PURA ' 58.151(23) (stating that services which
are classified as nonbasic include Aall other services subject to the commission=s jurisdiction that are
not specifically classified as basic network services in Section 58.051@) (emphasis added).
Because nonpublished exchange service does not appear in section 58.051=s list, such
service is presumed to be a nonbasic service. The Commission=s argument that nonpublished
exchange service is a subset or attribute of primary directory listings does not persuade us. The
Commission=s interpretation would broaden section 58.051(a)(1) to include services that Arelate to@
primary directory listings. Such interpretation would have us read words into PURA that simply are
not there, rendering section 58.151(23) meaningless and undermining the legislature=s clear
deregulatory intent. A[E]very word excluded from a statute must . . . be presumed to have been
excluded for a purpose.@ Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 540 (Tex. 1981).
Although Athe law permits the interpolation of words into a . . . statutory provision when necessary to
achieve clear intent, . . . interpolation should not be resorted to when to permit it will defeat
overriding intent.@ Mauzy v. Legislative Redistricting Bd., 471 S.W.2d 570, 573 (Tex. 1971).
5
Conversely, we presume that the legislature intended each word to have a purpose.
Cameron, 618 S.W.2d at 540 (citing Eddins-Walcher Butane Co. v. Calvert, 298 S.W.2d 93, 96 (Tex.
1957)). Every word, sentence, clause, and phrase of a statute should be given effect. University of
Texas v. Joki, 735 S.W.2d 505, 508 (Tex. App.CAustin 1987, writ denied) (citing Ex parte Pruitt, 551
S.W.2d 706, 709 (Tex. 1977)). Construction of a statute that would make a provision a useless
appendage is not favored by law. Carson v. Hudson, 398 S.W.2d 321, 323 (Tex. Civ. App.CAustin
1966, no writ). Although we may defer to an agency=s statutory interpretation, we do not do so when
that interpretation is unreasonable. Nabisco, 992 S.W.2d at 681. We determine the legislature=s
intent from the plain and common meaning of the words used. St. Luke=s Episcopal Hosp. v. Agbor,
952 S.W.2d 503, 505 (Tex.1997) (citing Monsanto Co. v. Cornerstones Mun. Util. Dist., 865 S.W.2d
937, 939 (Tex. 1993); Moreno v. Sterling Drug, Inc., 787 S.W.2d 348, 352 (Tex. 1990)). The
legislature has written clearly: basic services are only those specifically classified as such. The
legislature=s requirement of specific classification leaves no room for the Commission or this Court to
infer subsets or attributes not apparent from the basic-network-services description found in section
58.051(a). ACourts must take statutes as they find them. More than that, they should be willing to
take them as they find them.@ Simmons v. Arnim, 220 S.W. 66, 70 (Tex. 1920) (quoted in Agbor, 952
S.W.2d at 505). The same is true of the Commission. We are convinced that the overriding intent
of the legislature in enacting the amendments to PURA was to permit an electing company great
latitude in its operations and rates, except as proscribed by the amendments themselves. Those
amendments place only Aflat rate residential local exchange telephone service@ under SWBT=s rate
cap. PURA ' 58.051(a)(1) (emphasis added). An electing company must provide primary directory
6
listings as part of its residential local exchange service. Id. SWBT has charged its customers an
additional fee for nonpublished exchange service both before and after becoming an electing
company. Thus, there has historically been a difference between published primary directory listings
and nonpublished exchange service. We find nothing in PURA to indicate that the legislature
intended an electing company to cease charging an additional fee for nonpublished service.
Finally, the Commission asserts that because section 58.051(a)(1) refers to primary
directory listings in the plural, the term must include published as well as nonpublished exchange services.
SWBT responds that the legislature was merely recognizing that an SWBT customer could be entitled to
more than one published listing per family within the flat rate. We agree with SWBT.
A plain reading of PURA leads to the conclusion that Aflat rate residential local
telephone exchange service@ provides a customer of SWBT with a bundle of telephone utility services
for which the customer pays a flat rate. One such service is a published listing in SWBT=s directory.
If the customer wishes to change the bundle, such as having his listing nonpublished, the change is
not under SWBT=s rate cap, and SWBT may charge separately for the service. We hold that the
Commission=s interpretation is unreasonable and contrary to the plain language of the statute.
SWBT further argues that the Commission=s decision should have been guided by
SWBT=s tariff which lists nonpublished exchange service as a service separate from primary directory
listing. As is relevant here, a tariff is a document prepared by a public utility and filed with the
Commission that lists the utility=s services and the rates the utility charges its customers for those
services. See Southwestern Bell Tel. Co. v. Metro-Link Telecom, Inc., 919 S.W.2d 687, 691 (Tex.
App.CHouston [14th Dist.] 1996, writ denied). SWBT contends that its tariff and the tariffs of other
7
utilities have the binding force and effect of law. The Commission disagrees, arguing that the
legislature did not intend for utilities to bind the Commission with their tariffs. We acknowledge that
tariffs may have some evidentiary value if they were relied upon by the legislature in determining
which services were to be basic and which were to be nonbasic. However, because we have held that
the Commission=s interpretation of nonpublished exchange service as a basic service is contrary to the
plain meaning of PURA, we do not rely on the tariff in reaching our decision.
CONCLUSION
We sustain SWBT=s issue, reverse the judgment of the district court, and remand this
cause to the district court with instructions to remand to the Commission for further proceedings not
inconsistent with this opinion.
Lee Yeakel, Justice
Before Chief Justice Aboussie, Justices B. A. Smith and Yeakel
Reversed and Remanded
Filed: June 6, 2002
Publish
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