Public Utility Commission of Texas Chairman Rebecca Klein Commissioners Brett A. Perlman and Julie Parsley And AT&T Communication of Texas, L.P. v. Southwestern Bell Telephone Company and Southwestern Bell Communication Services, Inc., D/B/A Southwestern Bell Long Distance

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-02-00602-CV

Public Utility Commission of Texas; Chairman Rebecca Klein; Commissioners Brett A.
Perlman and Julie Parsley; and AT&T Communications of Texas, L.P., Appellants

v.

Southwestern Bell Telephone Company and Southwestern Bell Communications Services,
Inc., d/b/a Southwestern Bell Long Distance, Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 261ST JUDICIAL DISTRICT
NO. GN100469, HONORABLE SUZANNE COVINGTON, JUDGE PRESIDING

OPINION

This is an appeal from a final judgment granting appellees Southwestern Bell

Telephone Company (“SWBT”)1 and Southwestern Bell Communications Services, Inc. d/b/a

Southwestern Bell Long Distance (“SBCS”) (collectively, the “SWB Companies”) declaratory,

injunctive and mandamus relief prohibiting the Public Utility Commission of Texas (the

“Commission”) and AT&T Communications of Texas, L.P. (“AT&T”) from conducting or

participating in certain hearings and taking certain administrative actions pursuant to a complaint

1
Southwestern Bell Telephone Company has changed its name to Southwestern Bell
Telephone, L.P., d/b/a SBC Texas. However, because all the proceedings and documents in this case
refer to SWBT, we will continue to use SWBT for purposes of this opinion.
filed by AT&T against the SWB Companies. The Commission and AT&T appeal by three issues.

We will affirm the judgment of the district court.

PROCEDURAL HISTORY

This dispute arose when AT&T, a competitor of the SWB Companies, filed a

complaint with the Commission alleging that SWBT, a local exchange carrier, and SBCS, a SWBT

affiliate offering long-distance service in Texas, were engaging in anti-competitive and

discriminatory conduct in violation of the Public Utility Regulatory Act. Tex. Util. Code Ann.

§§ 11.001-64.158 (West 1998 & Supp. 2003) [hereinafter PURA]. AT&T’s complaint alleged that

SBCS is offering intrastate long distance telephone service at prices too low for AT&T to compete

and claimed that the remedy was for the Commission to reduce the level of SWBT’s switched-access

rates. The Commission initiated a hearing to consider AT&T’s complaint. SWBT sought

declaratory, mandamus and injunctive relief against the Commission on the ground that the

Commission was acting beyond its statutory authority in conducting a hearing on AT&T’s complaint.

SWBT contended that the level of its switched-access rates had been specifically authorized by the

legislature in PURA sections 58.301 and 58.302 and that an electing company under chapter 58 is

not subject to a complaint or hearing regarding the reasonableness of its rates under any

circumstances. See id. §§ 58.025(a), .301, .302 (West 1998 & Supp. 2003). SBCS intervened in

support of SWBT and AT&T intervened in opposition.

The district court denied SWBT’s request for a temporary injunction, but this Court

held that the Commission should be temporarily enjoined from conducting a hearing pending trial

on the merits. Southwestern Bell Tel. Co. v. Public Util. Comm’n, 72 S.W.3d 23 (Tex. App.—Austin

2
2001, pet. dism’d w.o.j.). No temporary injunction was issued on remand because the Commission’s

proceedings were abated pending a decision by the district court on the merits of SWBT’s claims.

In cross motions for summary judgment, AT&T sought denial of all of SWBT’s claims; SWBT

sought a declaratory judgment that the Commission was acting without authority, together with

ancillary mandamus and permanent injunctive relief; and SBCS sought declaratory judgment that

the Commission had no jurisdiction over it. The Commission supported AT&T. The district court

granted summary judgment in favor of SWBT and SBCS. The Commission and AT&T appeal by

three issues, claiming that (1) the Commission has jurisdiction to consider AT&T’s allegations

against SWBT because it was given an oversight role to ensure the development of a competitive

telecommunications market in Texas when the legislature adopted chapters 58 and 60 of PURA; (2)

the Commission has jurisdiction over SBCS under section 52.108; and (3) in exercising its oversight

authority, the Commission may reduce switched-access rates if necessary to remedy anti-competitive

or discriminatory conduct.

THE CONTROVERSY

SWBT is a local-exchange company which provides telecommunications services in

a specified “local access and transport area” (“LATA”). Because it is a local-exchange company,

it may not provide long-distance service between a point within the area and a point outside the area.

This long distance service is provided by AT&T and SBCS, who are competitors. SBCS is an

affiliate of SWBT but is a separate legal entity, as required. See 47 U.S.C.A. §§ 271, 272 (West

2001). In order to connect an intrastate long-distance call to SWBT’s local network, long-distance

carriers such as AT&T and SBCS must pay SWBT a “switched-access charge.”

3
 AT&T complained to the Commission that SWBT and SBCS were engaging in anti-

competitive and discriminatory conduct by virtue of their affiliation. Specifically, AT&T

complained that the SWB Companies had set the prices of their long-distance telephone service at

levels designed to force competitors out of the Texas market for intrastate long-distance telephone

calls. AT&T claims that SWBT and SBCS engaged in intra-corporate cross-subsidization to

facilitate a price squeeze that was anti-competitive, predatory, discriminatory, and unreasonably

preferential.

According to AT&T, the SWB Companies could take the money made by collecting

above-cost switched-access rates from AT&T and use it to subsidize the long-distance service

offered by SBCS. This permitted SBCS to sell long-distance at a rate so low it would cause a stand-

alone company to lose money, but in combination with the access charges would permit the SWB

Companies as a whole to make money. AT&T requested that the Commission order SWBT to

reduce the amount of its current switched-access charges to equal SWBT’s costs for providing the

service.

The Commission docketed AT&T’s complaint and referred the matter to the State

Office of Administrative Hearings (“SOAH”) to conduct a contested-case proceeding. The

Commission bifurcated the proceedings into two phases. The first phase was to determine if there

had been a violation of PURA. If a violation were found, the Commission would determine an

appropriate remedy in the second phase. The Commission’s preliminary order specified the

following five issues to be addressed in phase one:

4
 (1) Are SWBT and [SBCS] engaging in intra-corporate cross-subsidization, which
facilitates a price squeeze for interLATA and or intraLATA telecommunications
services that is unreasonably preferential, prejudicial, and/or discriminatory as
applied?

(2) Is [SBCS] engaging in predatory pricing in violation of PURA § 52.107?

(3) Has either SWBT or [SBCS] priced intrastate long distance services in an anti-
competitive manner?

(a) What are the costs incurred by [SBCS] to provide intrastate long- distance?

(b) What is the long-run incremental cost to SWBT to provide intra-state
switched access service?

(4) Has either SWBT or [SBCS] priced intrastate long distance services in a manner
that has resulted in the subsidization of competitive services with revenue from
monopoly services in violation of P.U.C. Subst. R. 26.226?

(5) Are SWBT and [SBCS] engaged in conduct regarding the pricing of intraLATA
and interLATA telecommunications services or switched access rates that is in
violation of the imputation requirements of PURA §§ 60.061, 60.063 and P.U.C.
Subst. R. 26.274?

Both SWBT and SBCS filed motions to dismiss AT&T’s complaint, which the

Commission denied. SWBT then filed suit in district court seeking to enjoin the proceedings at

SOAH. SBCS intervened in support of SWBT, and AT&T intervened in support of the

Commission. After a hearing, the district court denied SWBT’s request for temporary injunction,

which this Court reversed. See Southwestern Bell, 72 S.W.3d at 29. On remand, the district court

granted SWBT’s and SBCS’s motions for summary judgment, construed the provisions of PURA,

and entered the following declaratory judgments as to SWBT:2

2
See Tex. Civ. Prac. & Rem. Code Ann. § 37.004 (West 1997)

5
 (1) The commission is acting beyond its statutory authority in conducting a hearing
related to the validity of SWBT’s current switched-access rates . . . .

(2) Because SWBT is charging the switched-access rates set by the Legislature in
PURA §§ 58.301 and 58.302, the Commission has no statutory authority or
jurisdiction to review for any regulatory purpose the validity or amount of
SWBT’s current switched-access rates.

(3) Because SWBT is an electing company under Chapter 58 of PURA, a hearing
on AT&T’s complaint . . . is an unlawful inquiry regarding the reasonableness
of SWBT’s rates; overall revenues; return on invested capital; or net income that
is prohibited under any circumstances by PURA § 58.025(a).

(4) Neither PURA § 58.025(b) nor any other provision of PURA allows the
Commission to adjust SWBT’s current switched-access rates set by the
Legislature through the implementation and enforcement of competitive
safeguards under Chapter 60 of PURA, or by determining that the legislatively
authorized switched-access rates violate PURA § 60.001 in any respect, or by
any other means.

Based on these declaratory rulings, the district court permanently enjoined the

Commission’s hearings regarding any matter related to the validity of SWBT’s switched-access

rates, including “allegations of intra-corporate cross-subsidization or a price squeeze or other

allegations related to the implementation and enforcement of competitive safeguards under Chapter

60 of PURA.” However, the permanent injunction explicitly does not prohibit a “hearing or

determination on allegations of anti-competitive conduct and/or the implementation and enforcement

of competitive safeguards under Chapter 60 of PURA involving matters other than the

reasonableness of SWBT’s rates . . . .” (Emphasis added.)

As to SBCS, the court held: (1) Pursuant to sections 52.002(b), 52.102(a), and

52.107(b), the Commission lacked statutory authority to authorize or direct a hearing or investigation

of SBCS; (2) PURA section 52.107 does not constitute authority to conduct the proceeding in the

6
absence of a predatory pricing complaint by an interexchange carrier;3 (3) PURA section 52.108 does

not constitute authority to conduct the proceeding because, as to SBCS, the proceeding is an inquiry

into competition in provisioning long-distance service and section 52.107 is the sole statutory

authority the Commission has to consider such matters; and (4) PURA sections 60.062 and 60.063

and Commission substantive rules 26.226 and 26.274 are applicable only to incumbent local

exchange companies and, therefore, do not apply to SBCS.

DISCUSSION

Standard of Review

When both sides move for summary judgment and the trial court grants one motion

and denies the other, we will review both sides’ summary judgment evidence and determine all

questions presented. Bradley v. State ex rel. White, 990 S.W.2d 245, 247 (Tex. 1999);

Commissioners Court v. Agan, 940 S.W.2d 77, 81 (Tex. 1997). If there is error, we will render the

judgment that the trial court should have rendered. Bradley, 990 S.W.2d at 247; Agan, 940 S.W.2d

at 81.

The primary issues before this Court are (1) whether the Commission has the

authority to consider AT&T’s complaint against SWBT and SBCS, and (2) whether the Commission

3
Before trial, AT&T amended its complaint to eliminate its section 52.107 predatory pricing
allegations against SBCS; therefore, section 52.107 is no longer a basis for Commission jurisdiction
over SBCS. See Tex. Util. Code Ann. § 52.107 (West 1998) [hereinafter PURA]. SBCS’s motions
for summary judgment claimed that the Commission lacked statutory authority to assert jurisdiction
over SBCS because by eliminating its claims under section 52.107, AT&T removed any
jurisdictional basis for retaining SBCS as a party. In response, the Commission asserted that PURA
section 52.108(3) gave it authority to consider AT&T’s complaint as to SBCS.

7
has authority to reduce SWBT’s switched-access rates to remedy a violation under chapter 60 of

PURA. Because these issues involve statutory construction, we begin by looking at the plain and

common meaning of the statutes’ words. Liberty Mut. Ins. Co. v. Garrison Contractors, Inc., 966

S.W.2d 482, 484 (Tex. 1998); Grammercy Ins. Co. v. Arcadia Fin. Ltd., 96 S.W.3d 320, 323 (Tex.

App.—Austin 2001, pet. denied). If the disputed statute is clear and unambiguous, we give the

words their common meaning. Cail v. Service Motors, Inc., 660 S.W.2d 814, 815 (Tex. 1983);

Grammercy, 96 S.W.3d at 323. Our objective when we construe a statute is to determine and give

effect to the legislature’s intent. Liberty Mut. Ins. Co., 966 S.W.2d at 484. When ascertaining

legislative intent, we look to the statute as a whole, not to its isolated provisions. Morrison v. Chan,

699 S.W.2d 205, 208 (Tex. 1985); Grammercy, 96 S.W.3d at 323.

As a state administrative agency, the Commission only has those powers the

legislature expressly confers on it. Cities of Austin v. Southwestern Bell, 92 S.W.3d 434, 441 (Tex.

2002); Public Util. Comm’n v. City Pub. Serv. Bd., 53 S.W.3d 310, 315 (Tex. 2001). The

Commission may also have implied powers necessary to accomplish any express duties the

legislature has given it. Cities of Austin, 92 S.W.3d at 441. However, the Commission may not

exercise what is effectively a new power, or a power contrary to a statute, on the theory that the

power is expedient for administrative purposes. Id. We will give weight to how the Commission

interprets its own powers, but only if the interpretation is reasonable and consistent with the statute.

Id. It is within the judicial power to say with final authority what a statute means. Southwestern

Bell, 72 S.W.3d at 31.

8
Statutory Provisions Relating to Switched-Access Rates

In 1995, the legislature responded to the national trend toward deregulation and

amended PURA by adding provisions for “incentive regulation.” This gave telecommunications

companies the option of becoming deregulated through a statutory transition process designed to

enable an orderly transition from traditional rate-of-return regulation for local-exchange companies

that elected to be governed by the new form of regulation—referred to as electing companies. PURA

§ 58.001(1) (West 1998). SWBT elected to be governed by the new incentive-regulation statutes.

See id. §§ 58.001-.267 (West 1998 & Supp. 2003). In 1997, the legislature added to the incentive-

regulation as follows:

Section 58.025. Complaint of Hearing

(a) An electing company is not, under any circumstances, subject to a complaint,
hearing, or determination regarding the reasonableness of the company’s:

(1) rates; (2) overall revenues; (3) return on invested capital; or (4) net income.

(b) This section does not prohibit a complaint, hearing, or determination on an
electing company’s implementation and enforcement of a competitive safeguard
required by Chapter 60.

Id. § 58.025 (West 1998) (emphasis added).

In 1999, the legislature added further to the incentive-regulation provisions, including

the following amendments:

Section 58.301. Switched Access Rate Reduction

9
 An electing company with greater than five million access lines in this state [which
includes SWBT] shall reduce its switched access rates on a combined originating and
terminating basis as follows:

(1) the electing company shall reduce switched access rates on a combined
originating and terminating basis in effect on September 1, 1999, by one cent a
minute; and

(2) the electing company shall reduce switched access rates on a combined
originating and terminating basis by an additional two cents a minute on the
earlier of:

(a) July 1, 2000; or

(b) the date the electing company, or its affiliate formed in compliance with 47
U.S.C. Section 272, as amended, actually begins providing interLATA
services in this state in accordance with the authorization required by 47
U.S.C. Section 271, as amended.

Section 58.302. Switched Access Rate

(a) An electing company may not increase the per minute rates for switched-access
service on a combined originating and terminating basis above the lesser of:

(1) the rates for switched access services charged by that electing company on
September 1, 1999, as may be further reduced on implementation of the
universal service fund under Chapter 56; or

(2) the applicable rate described by Section 58.301 as may be further reduced
on the implementation of the universal service fund under Chapter 56.

(b) Notwithstanding Subchapter F, Chapter 60, but subject to Section 60.001, an
electing company may, on its own initiative, decrease a rate charged for
switched access service to any amount above the long run incremental cost of
the service.

Id. §§ 58.301, .302 (West Supp. 2003).

After SWBT elected to be governed by incentive regulation, the amount of its fixed-

access charges was suspended for a time at the pre-1995 amount, as provided in PURA sections

10
58.054 to 58.267. They were then reduced according to the one-cent and two-cent incremental

reductions mandated by PURA sections 58.301 and 58.302, producing SWBT’s current switched-

access charges.

The Statutory Dispute Involving SWBT

In its first and third issues, the Commission argues that it has authority to consider

AT&T’s complaint against SWBT under chapters 58 and 60 of PURA, as well as the authority to

reduce SWBT’s switched-access rates to remedy a violation under chapter 60. It argues that when

the legislature adopted chapters 58 and 60 it created a new role for the Commission—an oversight

role—designed to ensure the development of a competitive marketplace. Specifically, the

Commission points to PURA sections 60.001 and 60.002 as the centerpiece of their regulatory

oversight scheme. Section 60.001 provides:

Section 60.001. Fair Competition.

To the extent necessary to ensure that competition in telecommunications is fair to
each participant and to accelerate the improvement of telecommunications in this
state, the commission shall ensure that the rates and rules of an incumbent local
exchange company:

(1) are not unreasonably preferential, prejudicial, or discriminatory; and

(2) are applied equitably and consistently.

Section 60.002 provides:

Section 60.002. Exclusive Jurisdiction: Enforcement.

(a) The commission has exclusive jurisdiction to implement competitive safeguards.

11
 (b) Section 58.025 does not prevent the commission from enforcing this chapter.

Id. §§ 60.001, .002 (West 1998).

SWBT counters that the Commission’s approach would effectively nullify incentive

regulation under chapter 58 and allow rate regulation at the behest of competitors through the

provisions of section 60.001. Further, SWBT contends that the Commission cannot conduct a

hearing on AT&T’s complaint because it lacks the authority to grant the principal relief sought by

AT&T—a reduction in SWBT’s switched-access rates.

The current amount of SWBT’s switched-access rates is the result of the company’s

unquestioned compliance with PURA sections 58.054,4 58.301, and 58.302. Although SWBT’s rates

are the result of compliance with the legislative mandates set out in PURA, the Commission

contends that it has jurisdiction to hold a hearing questioning that amount for the purpose of reducing

it further to cure SWBT’s allegedly anti-competitive, discriminatory, prejudicial, or unreasonably

preferential effects. SWBT argues that it has a statutory right to charge the current amount and

enjoys statutory immunity from the Commission’s inquiry or attempts to reduce that amount, citing

PURA section 58.025(a).

By adopting chapter 58, the legislature signaled a sea change in how

telecommunications utilities that elect incentive regulation are to be governed. Southwestern Bell

Tel. Co. v. Public Util. Comm’n, 31 S.W.3d 631, 636 (Tex. App.—Austin 2000), aff’d, 92 S.W.3d

4
PURA section 58.054 deals with rate caps for electing companies.

12
434 (Tex. 2002). In contrast to the prior practice,5 section 58.025 states that a company electing

incentive regulation “is not, under any circumstances, subject to a complaint, hearing, or

determination regarding the reasonableness of the company’s: (1) rates . . . .” PURA § 58.025(a).

Before the 1995 and 1999 amendments to PURA, regulation by the Commission was intended to act

as a substitute for normal market competition. Southwestern Bell Tel. Co. v. Public Util. Comm’n,

79 S.W.3d 226, 228 (Tex. App.—Austin 2002, no pet.). When the legislature enacted the

amendments, it significantly changed the way electing companies are supervised. Id. (citing

Southwestern Bell, 31 S.W.3d at 636). Electing companies are not subject to complaints, hearings,

or determinations concerning their rates. Id. Market forces, not regulation by the Commission, now

determine rates. Id. As this Court stated in an earlier opinion involving these parties, “[w]e 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.” Id. at 229.

The crux of this dispute involves how to properly harmonize the statutory provisions

at issue. SWBT argues that section 58.025(a), in conjunction with sections 58.301 and 58.302,

prohibits any hearing inquiring into the reasonableness of switched-access rates. The Commission

5
Before the 1995 “incentive regulation,” the Commission fixed the amount of SWBT’s
switched-access charges under the rate-of-return regulation. The Commission purposely fixed the
amount above SWBT’s related costs to compensate for the costs SWBT incurred in providing basic
telephone service to all its customers as required by the statutory and agency policy of “universal
service.” Southwestern Bell Tel. Co. v. Public Util. Comm’n, 72 S.W.3d 23, 27 (Tex. App.—Austin
2001, pet. dism’d w.o.j.).

13
claims that this prohibition is tempered by section 58.025(b), in conjunction with sections 60.001

and 60.002, which together grant it the express authority to ensure that the rates and rules of an

incumbent local exchange company, like SWBT, are not unreasonably preferential, prejudicial, or

discriminatory.

In order to determine what powers the legislature conferred on the Commission, we

first look to the pertinent statutes. Cities of Austin, 92 S.W.3d at 442. We begin with the words used

but may also consider the object to be attained by the statutes, the circumstances surrounding the

enactment of the statute, and the consequences of a particular construction. Id. We will generally

accept the words used according to their ordinary meaning and will not give them an exaggerated,

forced, or constrained meaning. Id. We will presume that the legislature used every word of a

statute for a purpose. Id. Additionally, we will try to avoid construing a statutory provision in

isolation from the rest of the statute; rather, we will look at the act as a whole and not just single

phrases, clauses or sentences. Id.

Section 58.025(a) expressly forbids the Commission to entertain a complaint, conduct

a hearing, or make any “determination regarding the reasonableness of the company’s . . . rates.”

PURA § 58.025(a). Both AT&T and the Commission agree that what they are seeking is a reduction

in SWBT’s switched-access rates. However, the language in section 58.025(a) could not be more

clear. It unequivocally states that a complaint, hearing, or determination on the reasonableness of

an electing company’s rates may not be conducted “under any circumstances.” Id. We believe that

when the legislature used the language “under any circumstances,” it meant just that. There are no

circumstances contemplated in which the Commission may inquire into SWBT’s rates once it

14
became an electing company. By requiring that the hearing be conducted by an Administrative Law

Judge supplied by SOAH and an attendant proposal for decision, the Commission clearly indicated

its intention to conduct a contested-case hearing aimed at determining SWBT’s legal rights with

respect to the current amount of its switched-access charges. The Commission’s attempt to hold a

hearing to determine possible reductions in SWBT’s switched-access rates is in clear violation of

this statutory provision.

The Commission argues that section 58.025(b) specifically contemplates that an

electing company can be subject to a complaint, hearing, or determination under chapter 60.

Specifically, sections 60.001 and 60.002 grant the Commission authority to ensure that the rates and

rules of an incumbent local exchange company are not unreasonably preferential, prejudicial, or

discriminatory, and are applied equitably and consistently. The Commission claims that section

60.002 makes clear that section 58.025 does not prevent the Commission from exercising its

oversight authority under chapter 60. We disagree.

In chapter 58, the legislature has determined the reduced level of switched-access

rates. See id. §§ 58.301, .302. While the Commission can ensure that SWBT applies these rates

consistently under section 60.001, nothing in the language of 60.001 gives the Commission the

power to reduce the rates that the legislature has authorized, or to find them preferential, prejudicial,

or discriminatory. By charging switched-access rates set by the legislature, SWBT cannot be acting

in a prejudicial or discriminatory manner. It is simply doing what the legislature authorized it to

do—charging switched-access rates at the reduced levels. To hold otherwise would allow the

15
Commission to dismantle the incentive plan the legislature set by reducing the switched-access rates

SWBT is authorized to charge under sections 58.301 and 58.302.

We believe the legislature contemplated that section 60.001 would apply if an electing

company voluntarily reduces its switched-access rates. As provided in section 58.302(b) “. . . subject

to section 60.001, an electing company may, on its own initiative, decrease a rate charged for

switched access service to any amount above the long run incremental cost of the service.” Id.

§ 58.302(b). The reference to section 60.001 ensures that a decrease in switched-access rates

initiated by SWBT is applied consistently and not in a discriminatory manner, consistent with the

purpose of section 60.001. However, the legislature did not provide that its own specification of the

level of reduced switched-access rates in section 58.301 was subject to section 60.001. The

legislature made section 58.302 subject to section 60.001, but did not attach that same condition to

section 58.301, refuting the Commission’s arguments that the legislature intended the rates

authorized by section 58.301 to be subject to its oversight authority in section 60.001.

Accepting the Commission’s construction would lead to the absurd result that the

Commission could rely on a “competitive safeguard” under chapter 60 to overturn switched-access

rates authorized by the legislature in chapter 58. To interpret chapter 60 so broadly would, in effect,

nullify section 58.025‘s promise that under no circumstances would electing companies be subject

to a hearing regarding the reasonableness of their rates. In essence, it would grant the Commission

the authority to trump the incentive regulation provisions of chapter 58, specifically the rates set by

the legislature for switched-access services. Therefore, we hold that the Commission does not have

the authority to consider AT&T’s complaint against SWBT and overrule its first issue.

16
 As part of the Commission’s argument that it has the authority to remedy a violation,

it argues in its third issue that because the legislature repealed PURA section 58.062,6 this

necessarily confers on the Commission the authority to review and adjust the rates of an incumbent

local exchange company, including its switched-access rates, to ensure that competition is fair to

each participant. This argument is without merit.

As we mentioned above, an administrative agency has only the powers conferred

upon it in clear and unmistakable language. Cities of Austin, 92 S.W.3d at 441. An agency may not

exercise what is effectively a new power or a power contradictory to the statute on the theory that

such an exercise will be expedient for the agency’s purposes. Id. Because Commission authority

can only be conferred by clear and unmistakable language, the repeal of a statute, here section

58.062, does not confer authority, especially in light of our decision today rejecting the

Commission’s claim of authority under chapters 58 and 60. The Commission’s third issue is

overruled.

The Statutory Dispute involving SBCS

In its second issue, the Commission claims it has authority to consider AT&T’s

complaint against SBCS under PURA section 52.108. See PURA § 52.108 (West Supp. 2003). In

its final judgment, the district court concluded that section 52.108 does not give the Commission

6
Section 58.062 prohibited the Commission from reducing an electing company’s rates for
switched-access services before the expiration of the cap on basic network services. Act of May 21,
1997, 75th Leg., R.S., ch. 166, 1997 Tex. Gen. Laws 868, repealed by Act of June 19, 1999, 76th
Leg., C.S., ch. 1212, § 57(1), 1999 Tex. Gen. Laws 4241.

17
jurisdiction or authority to conduct proceedings against SBCS because “that proceeding inquires into

competition in the provisioning of long distance services and section 52.107 is the sole statutory

authority that the Commission has to investigate allegations of impairment of competition by an

interexchange carrier in the long distance industry.” Id. §§ 52.107, .108 (West 1998 & Supp. 2003).7

Section 52.108 of PURA provides, in relevant part:

Section 52.108. Other Prohibited Practices

The commission may enter any order necessary to protect the public interest if the
commission finds after notice and hearing that a telecommunications utility has:

(3) engaged in a pattern of preferential or discriminatory activities prohibited by
Section 53.003, 55.005, or 55.006.

Id. § 52.108(3).

The Commission argues that the district court ignored its authority to inquire whether

SBCS has “engaged in a pattern of preferential or discriminatory activities prohibited by sections

53.003, 55.005, and 55.006,” specifically, the preferential and discriminatory practices prohibited

by section 53.003. Section 53.003(b) and (c) provides:

(b) A rate may not be unreasonably preferential, prejudicial, or discriminatory but
must be sufficient, equitable, and consistent in application to each class of
consumer.

(c) A public utility may not:

7
In its second amended complaint, AT&T withdrew its predatory pricing claim available
under PURA section 52.107(a).

18
 (1) grant an unreasonable preference or advantage concerning rates to a person
in a classification;

(2) subject a person in a classification to an unreasonable prejudice or
disadvantage concerning rates; or

(3) establish or maintain an unreasonable difference concerning rates between
localities or between classes of service.

Id. § 53.003(b), (c) (West 1998).

The Commission claims that because AT&T’s allegation is that SBCS is offering long

distance service only to those customers who also subscribe to local telephone service from SWBT,

it raises a question of preferential or discriminatory activities that the Commission has authority to

consider under section 52.108. Further, the Commission asserts that AT&T’s complaint is not about

competition but, instead, about the “preferential and discriminatory conduct” prohibited by section

52.108(3). We disagree.

The language of AT&T’s complaint makes clear that the true nature of its complaint

against SBCS is about competition. It does not want the Commission to deny Texas consumers the

ability to realize lower rates for long distance, rather it wants the Commission to lower SWBT’s

switched-access rates in order for AT&T to compete with SBCS’s prices for long distance.

Section 52.108(3), by its plain language, prohibits preferential and discriminatory

activities that have to do with rate and service classifications for consumers. What section 52.108

does is protect customers of an interexchange telecommunications utility from being subjected to

unreasonable discrimination or preferences concerning the establishment of different rates for

different classes of customers. AT&T does not allege SBCS’s prices are prejudicial or

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discriminatory against customers and even recognizes that SBCS’s prices benefit customers. While

the Commission claims that AT&T’s complaint is not about competition, the sole allegation it points

to in support of this is AT&T’s assertion in its complaint that SBCS has limited its offering of

interLATA long-distance service to SWBT customers. However, AT&T acknowledges in its brief

to this Court that this is no longer correct. What AT&T asserts is that SBCS’s prices discriminate

against and are preferential as to AT&T, not as to customers, because those prices impact AT&T’s

ability to compete. This is not the type of discrimination or preferential treatment addressed by

sections 53.003, 55.005, or 55.006.

This is not to say AT&T does not have a remedy for its complaints. Section 52.107

provides in relevant part:

Section 52.107. Predatory Pricing

(a) The commission may enter an order necessary to protect the public interest if the
commission finds by a preponderance of the evidence after notice and hearing
that an interexchange telecommunications utility has:

(1) engaged in predatory pricing; or

(2) attempted to engage in predatory pricing.

(b) A hearing held by the commission under Subsection (a) must be based on a
complaint from another interexchange telecommunications utility.
....

PURA § 52.107 (emphasis added).

AT&T chose to withdraw its predatory pricing complaint, instead relying on PURA

section 52.108. Because we agree with the district court that section 52.107 is the sole statutory

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authority for the Commission to investigate allegations of impairment of competition by an

interexchange carrier in the long-distance industry, we overrule issue two.

AT&T’s Complaint

AT&T raises an additional issue not joined by the Commission. AT&T argues that

the district court erred in granting injunctive relief because the permanent injunction grants relief in

excess of that requested. First, AT&T argues that the excessive character of the injunction begins

with the parties enjoined. AT&T claims that SWBT only sought injunctive relief against the

Commission and the Commissioners, yet the order enjoins AT&T as well. AT&T argues that

because it is not one of the “officers, agents, servants, employees, and attorneys” of the Commission,

which are legally included in an injunction against the Commission pursuant to rule 683 of the Texas

Rules of Civil Procedure, it cannot be an enjoined party. Tex. R. Civ. P. 683. AT&T misreads rule

683. The language of rule 683 specifically includes, in addition to those persons mentioned by

AT&T, any parties to the action. AT&T is a party to this action and the district court properly

named it in the injunction.

In addition, AT&T claims that the injunction exceeds SWBT’s request to enjoin any

Commission activity as to the “reasonableness” of SWBT’s switched-access rates. The language of

the injunction enjoins the Commission from any activity “regarding any matter related to the validity

of SWBT’s current switched-access rates.” (Emphasis added.) AT&T argues by using “validity”

rather than “reasonableness,” the injunction is broader in scope than the relief requested. However,

in reviewing the temporary injunction, this Court cautioned that an injunction should be drawn “with

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such specificity so as to remedy only the particular harm complained of,” stating: “By this, we mean

the contested case may proceed in the PUC for purposes unrelated to the validity of SWBT’s current

switched-access charges.” Southwestern Bell, 72 S.W.3d at 34-35 (emphasis added). The district

court was obviously tracking the language employed in this Court’s opinion. We used the term

“validity” because it is appropriate under these facts.

Something is “valid” if it has “legal efficacy or force,” or is “well-grounded or

justifiable,” “logically correct,” or “appropriate to the end in view.” Webster’s Collegiate

Dictionary, at 1304 (10th ed. 1993). When the legislature set the switched-access rates and SWBT

became an electing company, the rates authorized under the legislative scheme are not only

reasonable, but also valid. In crafting the permanent injunction, the district court was mindful of the

need to draw it with specificity so as not to be overly broad. To accomplish this, it first tracked the

language this Court used and then went further to explain to the parties what was not prohibited. The

permanent injunction states:

This injunction does not prohibit a hearing or determination on allegations of anti-
competitive conduct and/or the implementation and enforcement of competitive
safeguards under Chapter 60 of PURA involving matters other than the
reasonableness of SWBT’s rates . . . (Emphasis added.)

A permanent injunction must not be more comprehensive or restrictive than justified by the

pleadings, the evidence, and the usages of equity. Gonzales v. Zamora, 791 S.W.2d 258, 267 (Tex.

App.—Corpus Christi 1990, no writ) (citing Morgan v. Morgan, 657 S.W.2d 484, 494 (Tex.

App.—Houston [1st Dist.] 1983, writ dism’d)). While the permanent injunction does not track the

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pleadings exactly, the injunction is narrow and specific, and we cannot say the district court abused

its discretion in drafting the injunction. AT&T’s third issue is overruled.

CONCLUSION

Having overruled all the Commission’s issues as well as AT&T’s additional issue,

we affirm the judgment of the district court.

David Puryear, Justice

Before Chief Justice Law, Justices B. A. Smith and Puryear

Affirmed

Filed: July 11, 2003

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