concurring.
We are not, in this case, required to give controlling effect to the prior decision of the Eastland Court as the law of the case if such decision is clearly erroneous. See Barrows v. Ezer, 624 S.W.2d 613 (Tex.Civ. App.—Houston [14th Dist.] 1981, no writ), Connecticut General Life Insurance Co. v. Bryson, 148 Tex. 86, 219 S.W.2d 799 (1949).
Article 1446c, section 48 provides only that “payments in lieu of taxes” shall not be considered “an expense of operation” of a city owned utility in determining the rates to be charged for the provision of service to a school district or hospital district. If the Eastland Court held that “payments in Lieu of taxes” as that term is used in section 48, to include any payments other than those payments representing the amount of taxes paid by the previous private owners of the system, such holding is clearly erroneous and lacks support in the law and in the facts of this case.
Before discussing the egregious nature of the error, it should be pointed out that we are dealing with a decision of another intermediate appellate court, and not with a decision of the Texas Supreme Court.1
*71Prior to 1949 article 1113 prescribed the only financial benefits enjoyable by a city which owned its own utility system as the result of such ownership. The statute provided for free service to the city. This provision for free service was followed by a provision requiring that the rates charged for service be sufficient to pay (1) operation, maintenance, depreciation, replacement, betterment and interest charges; (2) interest and principal on outstanding bonds; and (3) outstanding indebtedness of the system. The statute then proscribed the use of revenue from the system for any other debt, expense or obligation of the city, except payments in lieu of ad valorem taxes paid by the private owners of the system. In brief, the statute provided, in three separate sentences for:
1. Free service to the city.
2. Payment of principal and interest on outstanding bonds.
3. Payment of certain debts enumerated in the statute.
4. Payments in lieu of ad valorem taxes.
■ Even the most casual reading of the statute compels the conclusion that the provision for free services is separate and distinct from the provision for payments in lieu of ad valorem taxes. The statute authorized free service and payments in lieu of taxes.
Article 1113a, enacted in 1949, authorizes the transfer to the city from the revenues of the utility system in any amount authorized by the indenture securing the payment of revenue bonds. The emergency section of the 1949 enactment recites that the increased costs of labor and material required for the rendition of municipal services “requires that all sources of municipal revenues be immediately availed of by” cities which own utility systems.2
It is manifest that article 1113a was enacted for the purpose of permitting cities which owned utility systems to provide, by indenture, for payment to the general funds of such cities from the revenues of the utility, in addition to payments in lieu of taxes already authorized by article 1113. It must be concluded that not all payments made to a city from revenues of utilities owned by such city constitute “payments in lieu of ad valorem taxes.” If the provision for payments in lieu of ad valorem taxes which is found in article 1113 includes payments of the amount of ad valorem taxes which would be paid if the utility were privately owned as well as all other payments which might be made to the city from the utility’s revenues, then the Legislature, in enacting article 1113a in 1949, was doing a useless thing.
The indenture between the City of San Antonio and the holders of gas and electric revenue bonds contains a “flow of funds” provision which assigns priorities to the purposes for which the utility’s revenues may be applied. The revenues are to be used according to the following priority:
1. Payment of operating expenses.
2. Payment of principal and interest on outstanding bonds.
*723. Reimbursement to the city for loss of taxes which the city would have received if the utility were privately owned.
4. Payment of an amount equal to 12V2 % of gross revenues into an Improvements and Contingencies Fund.
5. After the payment of 12½% of gross revenues to the Improvement and Contingency Fund, the following payments are to be made to the city’s fund, to the extent available from the remaining revenues:
a. A ■ sum sufficient to reimburse the city for all amounts paid to the utility by the city during the year for gas and electric services used by the city for municipal purposes.
b. A sum in cash which when added to (1) the payment in lieu of taxes (2) the amount of reimbursements for electric and gas services during the year, and (3) the amount expended during the year for additions to the street and traffic lighting systems, will total an amount equal to 14% of the gross revenues of the system.
It is significant that the “flow of funds” provisions of the indenture establish five priorities. The provision for payment in lieu of taxes has a number 3 priority, with only the provision for payment of operating expenses and payment of principal and interest on bonds having a higher priority. The provisions for free service (reimbursement for amounts paid for service and additions to the street and traffic lighting systems) and for the payment of additional sums in cash which, when added to the payment in lieu of taxes and the costs of free service, will total 14% of the gross revenues of the city are assigned the lowest priority, number 5. The payments into the general fund under priority number 5 are expressly conditioned to be made until the payment required by priority number 4 (payment into Improvement and Contingencies Fund) has been made. Thus, the payment in lieu of taxes has a higher priority than the payment into the Improvement and Contingencies Fund, while the other payments into the general fund have a lower priority. The indenture, like article 1113, makes a clear distinction between payments in lieu of taxes and other payments into the city’s general fund.
The phrase “payment in lieu of ad valo-rem taxes paid by private owners” is free from ambiguity. It refers to payment for taxes, based on the value of the thing taxes, imposed by a governmental agency in the exercise of the taxing power. While it is conceivable that a privately owned utility, in addition to paying ad valorem taxes imposed by the city, might agree to, in effect, make an additional payment of 14% of the utility’s gross revenues to the city, such additional payment would not be a payment of ad valorem taxes. A payment in addition to taxes is not a payment in lieu of taxes. The payment in addition to taxes would necessarily result from the civic mindedness and generosity of the private owner, or from a contract, but it would not arise from the exercise by the city of its power to levy ad valorem taxes. In the case before us, the city receives the additional payments because of the provisions in the indenture, authorized by article 1113a, and not as revenues derived from the exercise of the taxing power. If the indenture did not provide for such additional payments, the city could not, by exercising its taxing power, require that the payments be made.
In San Antonio Independent School District v. City of San Antonio, 550 S.W.2d 262, 264 (Tex.1977), our Supreme Court held that the benefits received by the City of San Antonio, in addition to payments in lieu of taxes and free services, represented, under articles 1113 and 1113a constitute a profit realized by the city as a result of its ownership of the gas and electric systems. The decision of the Eastland Court cannot be reconciled with this holding, unless we are prepared to accept the indefensible theory that making a profit constitutes a payment in lieu of ad valorem taxes. The benefit results, as the Supreme Court pointed out, from the fact that the city owns the utility. If the utility were privately owned, the city could not exact such payment by exercising its taxing power.
*73The school district argues that the payments in dispute must be classified as payments in lieu of taxes because, in the absence of such payments, the city would have to impose taxes in order to raise an equivalent amount of revenue. This argument is completely unpersuasive. The notion, if accepted, would compel the conclusion that all revenue received by a city, including such things as fines levied by municipal courts and revenues realized from the sale of surplus city property, represents a payment in lieu of taxes.
Article 1113 makes a clear distinction between the receipt of free services and payments in lieu of taxes. The indenture entered into by the City of San Antonio and holders of gas and electric bonds issued by the city clearly recognize the distinction. Since, as the Supreme Court has held, the city is entitled to make a profit from its ownership of the gas and electric systems, payment of such a profit to the city from the revenues of the utility system cannot be classified as a payment in lieu of taxes, since the city would not receive such revenues as taxes if the system was privately owned.
It is true that section 48 of article 1446c uses the term “payments in lieu of taxes” rather than “payments in lieu of ad valo-rem taxes,” the phrase used in article 1113. Rendition of free services and the payment of a profit to the owner of a utility cannot be classified as payments in lieu of taxes, ad valorem or otherwise. A city could not compel, by exercise of the taxing power, a privately owned utility to render free service to the city. A city could not, by exercise of its taxing power, compel such private owner to forego a right to make a profit and, instead, pay such profit to a non-owner. Since a city lacks the power to exact such benefits from a private owner as part of his obligation to pay taxes, its receipt of such benefits from a utility owned by it cannot be classified as payments in lieu of taxes. Need we ask the question: In lieu of which taxes are such benefits received?
There is nothing in the language of section 48 of article 1446c which suggests that “payments in lieu of taxes” was intended to include all benefits received by a city because of its ownership of a utility system. “Payments in lieu of taxes” must be taken to refer to those taxes which the city would receive if the utility system were privately owned. To interpret the phrase as referring to all benefits received by a city because of its ownership of a utility would be to impute to the legislature a complete unfamiliarity with the English language. It can be conceded that “taxes” is a broad term, but under no conceivable theory can it be expanded to include benefits and revenues which the city would be powerless to exact from a utility which is privately owned.
If the Eastland Court held that “payments in lieu of taxes” includes free services and the realization of a profit from the owner of a utility, the decision is “clearly erroneous” and should not be applied to this case as “the law of the case.”
. The Supreme Court's refusal of a writ of error does not make the judgment of the intermediate court the judgment of the Supreme Court. When an application for writ of error is refused, the judgment of the intermediate appellate court remains the operative judgment in the case. Merchandise Mart, Inc. v. Marcus, 515 S.W.2d 663 (Tex.1974).
The opinion of the Eastland Court of Appeals on which the school district relies reflects only *71one holding by the Eastland Court. The only question discussed in the opinion is whether the term "public utility" found in article 1446c, § 48, applies to a municipally-owned utility. The only holding reflected in the opinion is that § 48 applies to a municipally-owned utility. The only meaning of a term discussed in the opinion is the meaning of the term "utility.” Nowhere in the opinion did the Eastland Court make any statement which indicates that it was concerned with the meaning of the term "payments made in lieu of taxes.” San Antonio Independent School District v. City of San Antonio, 614 S.W.2d 917 (Tex.Civ.App. — Eastland 1981, writ refd n.r.e.). It has been held that the only issues settled by the Supreme Court’s refusal of an application for writ of error are those “which are found in the opinions [sic] of the” intermediate court. Sierra Club v. Austin Independent School District, 489 S.W.2d 325, 330 (Tex.Civ.App. — Austin 1973), rev’d, other grounds, 495 S.W.2d 878 (Tex. 1973).
. Acts 1949, 51st Leg., p. 940, ch. 513, § 2. As enacted in 1949, article 1113a applied only to cities having a population of 200,000 or more. It was amended in 1953 to make the provisions applicable to cities having a population of 10,-000 or more. Acts 1953, 53rd Leg., p. 422, ch. 122, § 1.