Southwestern Bell Telephone Company v. Public Utility Commission of Texas

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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