## THEA'H~'ORNEYGENEEAL

OF-WAS

Mr. Wm. J. Burke Executive Director State Board of Control Austin, Texas

Dear Mr. Burke: OpinionNo. W-1044

Re: Whether the State of Texas
now has a valid contract with the City of Austin for supplyingof electrical power to the state buildings in the Capitol complex at the rates set forth In the contractdated March 15, 1935, and related questions.

Your request for an opinion reads as follows:

"OnMarch 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 furnishelectrical power to the institutionsat that time under the controland supervisionof the Board of Control. InMarch, 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 'StateCapitoland buildings' would be Included in the contractdated March 15, 1935.

"FromMarch 17, 1935, through and including November, 1959, the State of Texas has paid for the supply of electricityused in connection with the Capitol complexat the rate prescribed in the contractwith the City of Austin, dated March 15, 1935. The City of Austin has acceptedMr. Wm. J. Burke,page 2. (WW-1044)

suchpayments. The budgetproposals 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 existenceduring the biennium ending August 31, 1959,would continue In existence through the biennium ending August 31, 1961,and based on those figures, the Legislatureappropriated Item

## 65to the State Board of Control.

"Onor 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 (themonths of Septemberand October, 1959), the City of Austin submitted its bill under rates set forth In the contract dated March 15, 1935, and suchbills 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 electricpower 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 Controland returned to the City of Austin. The City of Austin then billed the State of Texas under the rate set forth In the contractdated March 15, 1935, and the State of Texas made payment of this bill and suchpayment
was acceptedby the City of Austin. SinceNovember 

## 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 Texasunder rates set out in the contract dated March 15, 1935. No electricalbill 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 sufficientmonies appropriated to the State Board of Control to pay for the electrical supply estimated to be needed for the biennium endingAusust 31, 1961.Mr. Wm. J. Burke, page 

### 3 (ww-1044)

'Inview 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 supplyingof electricalpower to the Capitol complexat the rates Identifiedand set forth in the contractdated March 

### 15, 1935?

"2

. Ifyour answer to QuestionNo. 1 is in the affirmative,does the City of Austin have the power to cancel the contractwithout the approval of the State of Texas through its duly authorized agents?



### "3

. If your answer to QuestionNo. 1 is in the negative, does the State of Texas have any valid contractwith the City of Austin for the supplyingof electricalpower to the Capitol complex? Ifyour answer to this question is in the affirmative,what are the rates to be paid for the supplyingof such electric power?



### "4. If your answer to QuestionNo. 

### 3 is in the affirmative,and the rates to be paid the City of AUBtiII exceed the amount of the appropriationmade for suchpurpose, is the State Board of Control subject to the penalties provided for in Section 

### 3 of ArticleV, House Bill 4, Acts of the 

### 56thLegislature, Third Called Session, 

### 442? 1959,Chapter23, page



### "5. If the State of Texas does not now have an existingvalid contract,may the State of Texas enter into a contractwith the City of Austin calling for rates in excess of the amount appropriated for suchpurpose?"
Subsequentto 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 contractdated March 

### 15, 1935,with the understanding and stipulationthat suchbills 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 suchbills have been paid by the State of Texas to the City of Austin with the understanding that suchbills and paymentMr. 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 contractdated March 15, 1935 and the electricalrates 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.
QuestionNo. 1.

"Doesthe State of Texas,under the facts submitted,now have a valid contractwith the City of Austin for the supplyingof electricalpower to the Capitol complex at the rates identifiedand set forth in the contractdated March 

### 15, 1935?"

Under the terms of the contractattached to your request, the contractwas automaticallyrenewed for a one-year period beginning March 

### 17of 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 contractuntil one of the parties, by written notice, terminated the contractat the end of a one-yearperiod beginningMarch 17.

In Attorney General'sOpinionV-941 (lg@), itwas held:

"Apublic utility is usually a monopoly operatingunder a franchisewith the type of servicedefined and rates controlled. These factorsmake purchase of public utility services on the basis of competitivebids Impracticable. The courts have recognized these conditionsand have held thatpurchases of utility servicesdo not comewithin 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 thepower to enter into the contractattached 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 contractuated March 15, 1935, it Is our opinionMr. Wm. J. Burke,page 

### 5, (ww-1044)

that the State of Texas had a valid contractwith the City of Austin for the supplyingof electricalpower to the Capitol complex at rates identifiedand set forth in the contract dated March 

### 15, 1935.

Whether the State of Texas has a valid contractafter March 

### 16, 1959, depends on whether the City of Austin cancelled the contractpursuant to itsprovisions.
Question No. 2.

"Ifyour answer to QuestionNo. 1 is in the affirmative,does the City of Austin have the power to cancel the contractwithout the approval of the State of Texas through its duly authorizedagents?"

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 eitherparty hereto to the otherparty 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 suchwritten notice servednot less than thirty days before the expiration of any one suchyearlyperiod."
Therefore,under the terms of the contract, the City of Austin had thepower to cancel the contract on March 

### 16, 1961,provided it had givenwritten notice to the State Board of Control of such cancellationat least thirty days prior to March 

### 1.6,

1961. If the City of Austin has not cancelled the contractpursuant to the above quotedprovisions, it is our opinion that the City of Austin does not have the power to now cancel the contractprior to March 

### 16, 1962,without the approval of the State of Texas through its duly authorizedagents.
QuestionNo. 

### 3.

"Ifyour answer to QuestionNo. 1 is in the negative, does the State of Texas have any valid contractwith the City of Austin for the supplyingof electricalpower to theMr. 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 supplyingof such electricpower?'

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 contractas 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 contractwith the City of Austin, and the rates to be paid in any new contract entered intowould, of course,be subjectto negotiationsbetween the State of Texas and the City of Austin.
QuestionsNos. 4 and 

### 5.

"Ifyour answer to QuestionNo. 

### 3 is in the affirmative, and the rates to be paid the City of Austin exceed the amount of the appropriation made for suchpurpose, is the State Board of Control subject to thepenalties provided for in Section 

### 3 of ArticleV, 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 contractwith the City of Austin calling for rates in excess of the amount appropriated for suchpurpose?"

Section 

### 3 of Article V, House Bill 4, Acts of the 56th Legislature, Third Called Session, 1959, Chapter 23, page 

### 442, (GeneralAppropriation Act), provides:

"EXCESSOBLIGATIONS 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 StateAuditor 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 compensationdue the responsible disbursing or requisitioning officer or employee. Thisprovislon is specifiedpur-Mr. Wm. J. Burke,page 

### 7. (WW-1044)

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

Section 

### 3 of ArticleV specificallyprohibits any department from incurringany 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. Nicholsv. State, 32 S.W. 452 (1 95); ii 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); Statev. Raldeman, 

### 163 S.W. 1020 (Civ.App. 1913); Statev. 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 contractwith the City of Austin calling for rates in excess of the amount appropriated for suchpurposes.

In answer to your fourth question, if the Board of Controlentered into a contract calling for an obligation In
excess of the amount appropriated to it, itwould be subject to the penaltiesprovided for in Section 

### 3 of ArticleV, 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 supplyingof electricalpower to statebuildings In the Capitol complex,and the State Board of Control is not authorized to enter Into any agreementwith the City of.Austln calling for an expenditure in excess of the amount appropriated for suchpurpose.

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