THEA'H~'ORNEYGENEEAL 

OF-WAS 

Mr. Wm. J. Burke 

Executive Director 

State Board of Control 

Austin, Texas 

Dear Mr. Burke: 

Opinion No. W-1044 

Re: Whether the State of Texas 

now has a valid contract 

with the City of Austin 

for supplying of electrical 

power to the state buildings in the Capitol complex 

at the rates set forth In 

the contract dated March 

15, 1935, and related questions. 

Your request for an opinion reads as follows: 

"On March 15, 1935, the State of Texas, 

acting by and through the State Board of Control, and the City of Austin, acting by and 

through Its City Manager, entered into a contract, a copy of which is attached, whereby 

the City of Austin was to furnish electrical 

power to the institutions at that time under 

the control and supervision of the Board of 

Control. In March, 1936, a purported contract 

between the City of Austin, executed only by 

the City Manager of the City of Austin, a 

copy of which is attached, purportedly extended 

the terms of the contract entered into March 

15, 1935. In November, 1943, the Chairman of 

the Board of Control received a letter from 

the acting City Manager of the City of Austin, 

a copy of which Is attached, wherein it was 

stated that the 'State Capitol and buildings' 

would be Included in the contract dated March 

15, 1935. 

"From March 17, 1935, through and including November, 1959, the State of Texas has paid 

for the supply of electricity used in connection 

with the Capitol complex at the rate prescribed 

in the contract with the City of Austin, dated 

March 15, 1935. The City of Austin has accepted 
Mr. Wm. J. Burke, page 2. (WW-1044) 

such payments. The budget proposals for the 

State Board of Control for appropriation for 

the payment to the City of Austin for electric 

power were presented to the Legislature on the 

assumption that the rates in existence during 

the biennium ending August 31, 1959, would continue In existence through the biennium ending 

August 31, 1961, and based on those figures, 

the Legislature appropriated Item 65 to the 

State Board of Control. 

"On or about August 31, 1959, the City of 

Austin adopted new electric rate schedules. 

For the first two months of the biennium ending 

August 31, 1961 (the months of September and 

October, 1959), the City of Austin submitted 

its bill under rates set forth In the contract 

dated March 15, 1935, and such bills have been 

paid by the State of Texas and accepted by the 

City of Austin. The City of Austin billed the 

State of Texas for electric power during the 

month of November, 1959, at the new electrical 

rates adopted by the City of Austin on or about 

August 31, 1959. This bill was rejected by the 

State Board of Control and returned to the City 

of Austin. The City of Austin then billed the 

State of Texas under the rate set forth In the 

contract dated March 15, 1935, and the State of 

Texas made payment of this bill and such payment 

was accepted by the City of Austin. Since November 30, 1959, until the present date, the City 

of Austin has billed the State of Texas under 

the new electrical rates adopted by the City of 

Austin on or about August 31, 1959, and such 

bills have been rejected by the State of Texas, 

and the City of Austin has refused to bill the 

State of Texas under rates set out in the contract dated March 15, 1935. No electrical bill 

has been paid by the State of Texas to the City 

of Austin for the months of December, 1959, January, 1960, and February, 1960. If the rates 

adopted by the City of Austin on or about August 

31, 1959, are payable by the State of Texas, 

there are not now sufficient monies appropriated 

to the State Board of Control to pay for the 

electrical supply estimated to be needed for the 

biennium ending Ausust 31, 1961. 
Mr. Wm. J. Burke, page 3 (ww-1044) 

'In view of the foregoing, your opinion 

is requested on the following questions: 

"1. Does the State of Texas, under the 

facts submitted, now have a valid contract 

with the City of Austin for the supplying of 

electrical power to the Capitol complex at 

the rates Identified and set forth in the 

contract dated March 15, 1935? 

"2 . If your answer to Question No. 1 

is in the affirmative, does the City of Austin 

have the power to cancel the contract without 

the approval of the State of Texas through its 

duly authorized agents? 

"3 . If your answer to Question No. 1 

is in the negative, does the State of Texas 

have any valid contract with the City of Austin 

for the supplying of electrical power to the 

Capitol complex? If your answer to this question is in the affirmative, what are the rates 

to be paid for the supplying of such electric 

power? 

"4. If your answer to Question No. 3 

is in the affirmative, and the rates to be 

paid the City of AUBtiII exceed the amount of 

the appropriation made for such purpose, is 

the State Board of Control subject to the penalties provided for in Section 3 of Article V, 

House Bill 4, Acts of the 56th Legislature, 

Third Called Session, 

442? 

1959, Chapter 23, page 

"5. If the State of Texas does not now 

have an existing valid contract, may the State 

of Texas enter into a contract with the City of 

Austin calling for rates in excess of the amount 

appropriated for such purpose?" 

Subsequent to your request, the following information 

has been furnished our office. The City of Austin billed the 

State of Texas under rates set out In the contract dated March 

15, 1935, with the understanding and stipulation that such bills 

would not affect its claim for adjustment to the e!ectrical 

rates adopted by the City of Austin on or about August 31, 1959, 

and such bills have been paid by the State of Texas to the City 

of Austin with the understanding that such bills and payment 
Mr. Wm. J. Burke, page 4. (WW-1044) 

would not affect the claim, if any, of the City of Austin for the 

difference in the rates under the contract dated March 15, 1935 

and the electrical rates adopted by the City of Austin on or about 

AW?Wt 31, 1959. 

We will answer your questions In the order they are presented in your request. 

Question No. 1. 

"Does the State of Texas, under the facts 

submitted, now have a valid contract with 

the City of Austin for the supplying of 

electrical power to the Capitol complex 

at the rates identified and set forth in 

the contract dated March 15, 1935?" 

Under the terms of the contract attached to your request, the contract was automatically renewed for a one-year 

period beginning March 17 of each year. Therefore, assuming 

that the State of Texas and the City of Austin had the power 

to enter into the contract dated March 15, 1935, and had the 

power to call for automatic renewals, the State of Texas and 

the City of Austin would have a valid contract until one of 

the parties, by written notice, terminated the contract at 

the end of a one-year period beginning March 17. 

In Attorney General's Opinion V-941 (lg@), it was 

held: 

"A public utility is usually a monopoly operating under a franchise with the 

type of service defined and rates controlled. 

These factors make purchase of public utility services on the basis of competitive bids 

Impracticable. The courts have recognized these 

conditions and have held that purchases of 

utility services do not come within the statutes 

which require 'supplies' to be purchased by competitive bidding." 

Therefore, you are advised that the City of Austin and 

the State of Texas had the power to enter into the contract attached to your request and such contract is a valid contract. 

Since the C!ty of Austin accepted the payments for the 

months of March, lg58,through November, 1959, on rates called 

for in the contract uated March 15, 1935, it Is our opinion 
Mr. Wm. J. Burke, page 5, (ww-1044) 

that the State of Texas had a valid contract with the City of 

Austin for the supplying of electrical power to the Capitol 

complex at rates identified and set forth in the contract dated 

March 15, 1935. 

Whether the State of Texas has a valid contract after 

March 16, 1959, depends on whether the City of Austin cancelled 

the contract pursuant to its provisions. 

Question No. 2. 

"If your answer to Question No. 1 is in 

the affirmative, does the City of Austin 

have the power to cancel the contract without the approval of the State of Texas 

through its duly authorized agents?" 

The provisions of the contract state: 

II . . . and the same is hereby renewed and 

extended in all of its terms and particulars 

for the period ending March 16, 1937; provided, that unless written notice is given 

by either party hereto to the other party 

not less than thirty days before the expiration of this agreement, the said contract 

shall be continued for another year, and 

thereafter from year to year until terminated by such written notice served not less 

than thirty days before the expiration of 

any one such yearly period." 

Therefore, under the terms of the contract, the City 

of Austin had the power to cancel the contract on March 16, 

1961, provided it had given written notice to the State Board 

of Control of such cancellation at least thirty days prior to 

March 1.6, 1961. If the City of Austin has not cancelled the 

contract pursuant to the above quoted provisions, it is our 

opinion that the City of Austin does not have the power to now 

cancel the contract prior to March 16, 1962, without the approval of the State of Texas through its duly authorized agents. 

Question No. 3. 

"If your answer to Question No. 1 is in the 

negative, does the State of Texas have any 

valid contract with the City of Austin for 

the supplying of electrical power to the 
Mr. Wm. J. Burke, page 6. (WW-1044) 

Capitol complex? If your answer to this 

question is in the affirmative, what are 

the rates to be paid for the supplying of 

such electric power?' 

In the event the City of Austin has cancelled the 

contract by giving written notice to the State Board of Control of its desire to terminate the contract as of March 16, 

1961, and assuming that the State of Texas and the City of 

Austin have not entered into another agreement, the State of 

Texas in that event would not have a valid contract with the 

City of Austin, and the rates to be paid in any new contract 

entered into would, of course, be subject to negotiations between the State of Texas and the City of Austin. 

Questions Nos. 4 and 5. 

"If your answer to Question No. 3 is in the 

affirmative, and the rates to be paid the 

City of Austin exceed the amount of the appropriation made for such purpose, is the State 

Board of Control subject to the penalties provided for in Section 3 of Article V, House Bill 

4, Acts of the 56th Legislature, Third Called 

Session, 1959, Chapter 23, page 442? 

"If the State of Texas does not now have an 

existing valid contract, may the State of Texas 

enter into a contract with the City of Austin 

calling for rates in excess of the amount appropriated for such purpose?" 

Section 3 of Article V, House Bill 4, Acts of the 56th 

Legislature, Third Called Session, 1959, Chapter 23, page 442, 

(General Appropriation Act), provides: 

"EXCESS OBLIGATIONS PROHIBITED. No 

department or agency specified in this Act 

shall incur an obligation in excess of the 

amounts appropriated to it for the respective objects or purposes named. In the event 

this provision is violated, the State Auditor 

shall certify the fact and the amount of the 

over-obligation to the Comptroller, and the 

Comptroller shall deduct an amount or amounts 

equivalent to such over-obligation from the 

salary or other compensation due the responsible disbursing or requisitioning officer or 

employee. This provislon is specified pur- 
Mr. Wm. J. Burke, page 7. (WW-1044) 

suant to Section 10, Article XVI, of the Constlt&Ion of Texas." 

Section 3 of Article V specifically prohibits any 

department from incurring any obligation in excess of the 

amounts appropriated to the department for the respective 

objects and purposes made in the appropriation. The State of 

Texas cannot enter into a valid contract calling for an expenditure in excess of the amount appro riated for that purpose. Nichols v. State, 32 S.W. 452 (1 ii 95); Fort Worth Cavalry 

Club v. Sheppard, 125 Tex. 339, 83 S.W.2d 660 (1935); Austin 

National Bank v. Sheppard, 123 Tex. 272, 71 S.W.2d 242(143-4); 

State v. Raldeman, 163 S.W. 1020 (Civ.App. 1913); State v. Steck 

Company, 23b S.W.2d 866 (Civ.App. 1951, error ref.). 

You are, therefore, advised that the State of Texas 

does not have the authority to enter into a contract with 

the City of Austin calling for rates in excess of the amount 

appropriated for such purposes. 

In answer to your fourth question, if the Board of 

Control entered into a contract calling for an obligation In 

excess of the amount appropriated to it, it would be subject 

to the penalties provided for in Section 3 of Article V, House 

Bill 4, Acts of the 56th Legislature, Third Called Session, 

1959, Chapter 23. 

JR:zt 

SUMMARY 

Under the facts submitted, the State of 

Texas and the City of Austin now have a 

valid contract for the supplying of electrical power to state buildings In the 

Capitol complex, and the State Board of 

Control is not authorized to enter Into 

any agreement with the City of.Austln 

calling for an expenditure in excess of 

the amount appropriated for such purpose. 

Yours very truly, 

WILL WILSON 

Attorney General of Texas 
._ . 

Mr. Wm. J. Burke, page 8. (WW-1044) 

APPROVED: 

OPINION COMMITTEE 

W. V. Geppert, Chairman 

J. Milton Richardson 

William T. Blackburn 

John C. Steinberger 

REVIEWED FORTHEATTORNEY GENERAL 

BY: Morgan Nesbitt