Th e State of Tex as, s e pa rate ly fr om t he Com mis sio n, int e rv e ne d in thi s c a se and

is 1 repr esente d by

the consumer

protec tion and publi c h ealth division of the Off ice of the Attorney Ge ne ra l. Ho n. El iza

be th Ame s J on e s is su c c e sso r in of fi c e to H on . Ch arl e s R. Matth e ws , o ri g ina lly a par ty to this sui t in his official ca pacity as a c ommissi oner of the railroad commission. W e have substitut ed Jones for Matthews a s a par ty to this sui t. See Tex. R. App. P . 7.2(a)
. 

### TEXA S C OU R T OF A PPEAL S, THIR D DIST R ICT , AT AU STIN

444 444 444 444 444 444 444 444 444 ON MOTION F OR REHEARING

444 444 444 444 444 444 444 444 444 NO. 03-04-00731- CV

Cente rP oint En ergy Entex, A ppellan t

v. Ra ilr oa d Co m m iss ion of Te xa s, Vi c to r Ca r r ill o, Eliz abe th A. Jo ne s, Michael William s, City of Tyl er and State of Texas, Appellees 1

F ROM THE DISTRICT CO URT OF TRAVIS COUNTY , 353RD JUDICI AL DISTRICT NO. GN402169 , HO NORAB LE DARLENE B Y RNE, JUDGE P RESIDING

O P I N I O N
We w ith dr aw o ur

op ini on and jud g me nt i ssu e d o n F e br

ua ry 24 , 2 00 6, and

su bs tit ute this one in its pl ace . We overrule the motions for rehea ring filed by

CenterPoint Energ y

Entex and by the City of Tyler. This appea l presents a

question of fi rs t i m pression: whethe r the Te x as Railroad Com mi s s io n( th e Co mm is s io n ) ma y c o n d u c t a r e tr o a c ti v e p r

u d e n c e r e v ie w o f

c h ar g e s f

low edWe r e fe r t o th is e nti ty a s E nte x, a s it

wa s k no wn duri ngthe re le va

nt e ve nts fr om wh ic h th is 2 appea l arose. Citi es have ex cl u s ive orig inal jurisdiction over natura l ga s rates in a rea s within the 3 municipality

while the C ommissi on has t he same over rates in areas outside of municipalities. See Tex. Util . Code Ann. §§ 102.001(a )(1) (A) & 10 3
. 0 0 1 (W est Supp. 2005). A municipality can surre nder its authority

to the Commi ssion. Id . §§ 102.001(a) (1)( B) , 103.001, 103.003. We h a ve re pr od

uc e d a n e xamp le of on e of the City -a pp ro ve d r a te sc he du le s at App e nd ix A. 2 throug h a purc hased g as adjustment clause (PGA cla use) a nd order re fu n ds of cha

rg es that the Commi ssion f

inds the utilit y imprudently incurre d. We must also consider whether such a r eview is a “ rate makin g pr oc e e din g ” in w hic h a pa rt ic ipat in g m un icip a lity

is e nti tle d to e xpe ns e reimburse ment. See Tex. Util . Code Ann. § 103.022 (West 1998). The Commission and the district court a nswere d both questions in the affirmative. Be cause we f ind that the Commi ssion has authority to conduct t h e re view and or der r efunds but that such a revie w is not a “ratemaking proce eding ,” we aff

irm the order

of the district cour

t in part but reve rse a

nd rende r in part.
BACK GR OUND Ap pe lla nt C e nte rP oin t E ne rg y

En te x is a

g a s u ti li ty su bj e c t to the Ga s U til ity 2 Reg ulatory

Act. See Te x. Ut il. Cod e Ann. § 1 01.0 03 (7) (W est Sup p. 20 05 ); se e ge ne ra lly id
. §§ 101.001-105.051 (West 1998 & Supp. 2005) (GURA)
. For more than twenty -five y ear s, Entex purcha sed g as on behalf of customers serve d by the Tyler I nteg rate d Distribution S y stem (TI DS) and char g ed customers under tariffs approved by the C ity of Ty ler (the City ), t erme d “rate sche dules.” 3 Since 1985, ea ch of Ente x ’s appr oved rate sche dules incl u d ed a “Purc hased G as Adjustment Pr ov isi on ” (P GAc la

us e ), an a uto ma tic e sc a la tor

me c ha nis m de vis e d b y

ut i l i t y r e g u l a t o r s to d e a l w ith rapid fluc tuations in the cost of natur al g as. See R ailroad Comm’n of Tex. v. High Plains NaturalWe w il l d is c u s s th e n a tu r e o f PG A c la u s e s in mo r e d e ta il w h e nw e c o n s id e r E n te x ’s 4 a pp e llate iss ue s. 3 Gas Co. , 613 S.W .2d 46, 48 (Tex. Civ. App.—Austin 1981), writ r ef’d n.r.e. , 6 2 8 S. W. 2 d 7 5 3 ( T e x. 1981) (pe r cur iam). Such a c lause ope rate s to incre ase or decr ease the revenue of the g as compa ny by e xac tly the a mount

of its inc re a se d o r d e c re a se d c os ts o f g a s c ha rg e d th e g a s c omp any

by its suppliers. Id . (cit i n g C i t

y o f Norfolk v. Virginia Elec. & Power Co. , 90 S.E.2d 140 (Va. 1955) ). Although T exas has never expressly addre ssed the use of PGA clause s in a statute, our c ourts have long approve d of their use by regulators. Se e Sa n Ant on io In de p. Sc h. Di

st. v . Ci ty of S an An ton io , 55 0 S.W.2 d 262 , 266 -6 7 & n .2 (T e x. 19 76 ); High Plains Nat ural Gas Co. , 613 S.W .2d at 48 (c iting City of Chicago v. Illinois Commerce Comm’n , 150 N.E.2d 776 (I ll. 1958)); Railroad Comm’n of Te x . v . Ci ty of F or t W or th , 576 S.W .2d 899, 902 (Tex. Civ. App.—Austin 1979, writ ref’d n.r .e.);

se e als o Tex. Util . Code Ann. §§ 101.001-105.051 ( no express rec og nition of PGAs). 4

Since at lea st November 1992, E ntex not ified the City on a monthly basis reg arding
any g a s c os t c ha

ng e s th a t it

wo uld fl owto its c us tom e rs thr ou g h th e PGAc la us e . In s ome mon ths , Entex reported no c hang es. In others, it informed the C i t y of a c hang e, either

an incr ease or a decr ease , and generally

provided supporting information in the form of two Entex-ge nerated do c ume nts statin g the c os t of g a s p ur c ha se d fr om se ve ra l g a s d ist ri bu tor s and

the e ff e c t th os e c os ts would have on the amounts char g ed to customers.

I n 2 00 2, the City be g an re vie wi ng En te x’s pa st c us tom e r g a s c ha rg e s, a ft e r whic h it inf or me d En te x o f “ c on c e rn s” it ha d a bo ut t he mann e r b y

wh ic h E nte x pur c ha se d g a s f or re sa le to its c us tom e rs . In p art ic ula r, En te x ha d b e e n a c quir ingits g a s th ro ug h tw o g a s c on tr a c ts, on e wi th Texas GasMar

k, I nc. (TG M co n trac t) and one with TXO Ga s Marke ting Corpor ation (TXOOn J anuar y 8, 2003, the City , by

ordinanc e, surr ender ed to the Commissi on its claimed 5 jurisdiction over the matter
. See Tex. Util . Code Ann. § 103.003 (West Supp. 2005). 4 c on tr a c t) . B oth

of the g a s su

pp lie s p ur c ha se d under each con tr a c t w e re “ fi rm ” (a s o pp os e d to i n t e r r u p t i b l e ) , b u tt h e T G M c o n t r a c tp r i c e w a s s i g n i f i c an t l y l o w e r t h ant h e T X O c o n t r a c tp r i c e . It
wa s a lle g e d th a t E nte x a c te d wr on g fu lly by c ha rg ing the hig he r pr ic e d g a s to re sid e nti a l and sma ll
commerc ial customers while r eser ving the lower- price d g as for larg e commer cial customer s. The City believed that this proce dure resulted i n “over char g es” of about $39,000,000 to residential a nd
sma ll c omm e rc ial cus to mers b e c a us e En te x ha d p a sse d th e hig he r- pr ic e d g a s c ha rg e s to tho se customers throug h the PGA clause s in Entex ’s filed rates. The City made f urther c harg es alleg ing that E nte x ha d fi le d mis le a din g tari ff s, fa ile d to re qu e st annua l pr ic e re de te rm inatio ns , a nd fa ile d to char g e non-Ty

ler c ustomers for their proportionate share of Entex’s c apital costs. The City set the matter for considera

tion at a city

council mee ting. En te x fil e d s uit

in T ra vis Co un ty

dis tr ic t c ourt

se e kin g a

de c lara tio n th a t th e City la c ke d a uth or ity to or de r re fu

nd s and an injunc tio n to pr e ve nt c on sid e ra tio n o f t he iss ue a t th e c ity council mee ting. Entex asser ted t hat ordering ref

unds for g as distribution was within the exclusi ve jurisdiction of the Commis sion. See Tex. Util
. Code Ann. § 104.005(c) (West 1998) . Entex and the City ag ree d that Entex would di smiss i ts district court proc eeding s and that the pa rties would instead submit t he issues direc tly to the Commi ssion. I n their “Joi nt Petition for Revie w of Char g es for Gas Sa le s, ” the pa

rt ie s r e qu e ste d th a t 5
the Commi ssion init iate a pr ocee ding to de termine whe ther Entex has proper ly and lawfully char g ed and c ollected f

or g as sales to re sidential and commerc ial customers serve d from the TI DS during the period from Novembe r 1, 1992 to Octobe r 31, 2002,T h e C o mm i s s i o n ’ s h e a r i n g e x a m i n e r s c h ar a c t e r i z e d t h e p art i e s ’ p o s i t i o n s t h u s : “ G e n e r a l l y, 6 the City of Tyle r, on the on e ha

nd , a rgue s th a t th e pr oc e e din g inc lud e s a ‘p ru de nc e re vie w’ of

pa st purc ha se s. On

the oth e r h and , E nte x ar g ue s th a t th e Com mis sio n la c ks the a ut hori ty to c on du c t a retroa ctive prude nce r eview and t hat t his case is limit ed to an audit of its g as costs flow throug h.” (F ootnotes omitt ed.). 5 to c on sid e r a

ny a pp ro pr ia te re me die s, inc ludin g b ut no t li mit e d to , r e fu nd s, wi th interest, and to e nter such or ders a s may be appr opriate. But the pa

rties disputed what the Commission’s review should entail. Entex urg ed that the Commiss ion had power only to determine w hether

Entex “properly

and lawf ully char g ed and collecte d for ga s sales to re sidential and commer cial customer s in Ty ler a s authorized under its tariff s and rate sche du l es ” b u t t h at the Commissi on could not consider the prudenc e of Ente x ’s g as purcha ses be ca u s e that would constitute re troac tive rate making
. Se e id . § 10 4. 15 1. En te x als o maintained that the Commissi o n s h o uld first consider the scope of its review a

uthority befor e
rea ching the merits of the City ’s alleg ations. The City argued that the Commission could conduct
a re tr oa c tiv e pr

ud e nc e re vie w o f E nte x’s g a s p ur c ha se s and that the Com mis sio n sho uld a dd re ss i n 6 a sing le proc eedingboth the scope of its authority

to reviewEntex’s charg es and t o o rd er r efunds and the mer its of the C ity ’s allegations. The City also reque sted that the Commissi on order Entex to reimburse the City

for its expenses bec ause it consider ed the p ro ce eding to be a “ rate case ” as define d in the utilit ies code. Se e id
. § 103.022 (West 1998). Entex responded that the c ase w as not a “r atemakingproce eding ” and, thus, the City was not entitled to rec over its expenses. Se e id
. § 103.022. The Commission s et the matter befor e two hea

ring exam i n er s , who dec ided that “issues related to a considera tion of the rea sonablene ss a nd nece ssity of Entex’s ga s costs and g asCommi ssioner Michae l Wi lliams diss ented. 7 After filing its peti t i o n in district court, Entex filed a petition for writ of ma ndamus 8 reque sting that this Court stay the Commiss ion from enga g ing in its prudenc e re view of Ente x ’s g as purcha ses during the pende ncy of this appea l. W e denie d the petition. The par ties repor t that the Commi ssion has conducte d i t s re v i ew, f ound that no ref

und was due , and seve red f rom that proce eding the issue of the City ’s claim for rate case expense reimburse ment. The Commission l ater denied the City reimburse ment in the sever ed ca use. B eca

use this appea l continues to prese nt live issues aff ectingmatters still pending be fore the Commiss ion, we proc eed to c onsider them. 6 purcha se pra ctices will be considere d in this proceeding .” The Commi ssion denied Entex’s appea l of this de cision. After a hea ring on the merits, the hea ring examiners reje cted the City ’s ar g ument that any proce eding that aff

ects the c ompensation of a utility is a rate making proce eding . I nstead, they decide d that “ratemaking proce eding s” are only those that are exclusively devoted to rates such that they may result in chang ed rates. Thus, the examiners found that the City could not be entitled to reimburseme nt for its expenses. On appea l, the Commi ssion r ever sed that holding a nd awa rded the City 90 pe rc e nt o f i ts e xpe ns e s. 7 Entex t hen filed suit in Travis County district court see king a

decla ratio n t hat the Commi ssion lacks authority to conduct a retroa ctive prude nce r eview of g as purc hases a

nd, alternatively , that such an a ction by the Commiss ion is not a “ratemaking proce eding ” in which the City could obtain expense reimbursement. I t also asked the district court to enjoin enfor ceme nt of the Commiss ion’s order

requiringEntex t o re i m b u rs e t h e C ity 90 perc ent of its expenses. The district court re ndere d judgme nt de c la r in g that the Commiss ion has authority to conduct a r etroa ctive prudenc e re view of ga s purcha ses and that such a proce eding is a ratemaking proce eding in which the City could re cover

expenses. This appea l followed. 87 DI SCU SSIO N Entex bri n gs two issues on appea l that mirror its issues before the district court—whe ther the Commissio n h as authority to conduct a r etroa ctive prude nce r eview of g as purcha ses that Entex flowed throug h the PGA clause s and whether such a proce eding is a rate making pr oc e e din g fo r w hic h th e City c an s e e k e xpe ns e re imb ur se me nt.
Stand ard of review

Our c onsideration of Ente x ’s appe llate issues ultimat ely turns upon statutory construction. Statutory

construction is a matter

of law, w hich we r eview d e n o vo . City of San Antonio v. City of Boerne , 1 11 S.W. 3d 22 , 2 5 ( Te x. 20 03 ). Th e g oa l of statut or y c on str uc tio n is to g ive ef fec t to the intent of the leg islature. Fleming Foods of Tex., Inc. v. Ry lander , 6 S.W .3d 278, 28 4 ( Te x. 19 99 ); Union Banke rs Ins. Co. v. Shelton , 889 S. W. 2 d 2 7 8 , 2 8 0 ( T e x. 1 9 9 4 )
. We consider, among other fac tors, the lang uag e of the statute, leg islative history , the nature and objec t the leg islature intended to be obtained, and the conseque nces that would fol l o w f ro m alternative constructions, eve n when a statute is not ambiguous on its fa ce. Tex. Gov’ t Code Ann. § 311.023 (West 1998); Helena Che m. Co. v. W ilkins , 4 7 S. W.3 d 4 86 , 4 93 (T e x. 20 01 ); United Serv s. Auto. As s’ n v . S

tra y ho rn , 124 S.W .3d 722, 728 (Tex. App.—Austin 2003, p et
. d enied). We consider disputed provisions in contex t, not in isolation. Te x as W or k e rs’ Com p. Com m’n v . Co nti ne nta l Ca s. C o. , 8 3 S. W.3 d 9 01 , 9 05 (T e x. Ap p. —A us tin 20 02 , n o p e t.) ; s e e F

it z g e r a ld v . A d

v a n c e d Spine Fi x ati on Sy s. , 996 S.W .2d 864, 866 (Tex. 1999). Th e le g isl a tur e ha s ins tr

uc te d us that G UR

A i s to “ be c on str

ue d li be ra lly

to p ro mot e the e ff e c tiv e ne ss a

nd e ff ic ie nc y of re g ulatio n of g a s utili tie s. ” Te x. Ut il. Cod e Ann. § 1 01 .0 07 (We st8

1998). Howe ver, as an a dminist rative a g ency , the Commiss ion may exercise only

those power s that the leg islature conf

ers upon it i n cl ea r and ex press lang uag e and c annot cr eate and exerc ise what
r e a l l y a m o u n t s t o a

n e w o r a d d i t i o n a l p o w e r

f o r t h e p u r p o s e o f a d m i n i s t r a t i v e e x p e d i e n c y. Te xas Natural Res. Cons er va t i o n Comm’n v. Lake shore Util. Co. , 164 S.W .3d 368, 377 (Tex. 2005); Pu bli c Ut il. Com m’n v . Ci ty Pu b. Se rv . B d. of S

an An ton io , 53 S.W.3 d 3 10 , 3 16 (T e x. 20 01 ). Th is is b e c a u s e a s an a d mi n is tr a ti v e a g e n c y th e Co mm is s io n is a c r e a tu r e o f th e le g is latu

r e with no inhere nt authority

of its own. La k

es h o r e Util. Co. , 1 6 4 S.W .3d at 377. “When the L eg islature expressly confe rs a powe r on an a g ency , it also impl iedly intends that the ag ency have w hateve r p o we rs are rea sonably

nece ssary

to fulfill its express functions or duties.” Id . at 378. And, an ag ency cre ated to ce ntralize expertise in a ce rtain re gulatory are a is ordinar ily

“g iven a lar g e deg ree of latitude in the methods it uses to acc omplish i ts reg ulatory function.” Texas Mun. Power Age ncy v. Public Util. Comm’n , 150 S.W .3d 579, 586 (Tex. A pp.—Austin 2004, pe t. gr anted) . Howeve r, an ag ency m ay

not, in the guise of implied powers, e x erc ise what is ef fec tively a new power , or a power contra

ry to a statute, on the theory that such exercise is ex pedient for the ag ency ’s purpose, City of Austin v. Southw estern Bell T el. Co. , 92 S.W .3d 434, 441 (Tex. 2002), nor may it contrave ne specific statutory lang uag e, run counter to the g ener al objectives of the statute, or impose additional burd e ns , c on dit ion s, or

re str ic tio ns in e xce ss of or inc on sis te nt w iththe re le va nt s ta tut or y pr ov isi on s. State v. Public Util. Comm’n of Tex. , 131 S.W .3d 314, 321 (Tex. App.—Austin 2004, pet. denied).
Ret roact ive prudence re view of gas pu rchases I n its first issue, Entex argues that the Co m m i ssion lacks authority to conduct retroa ctive prude nce r eviews of g as purc hase c harg es flowe d throug h a PGA cla use or to orde r9

re fu nd s. I t als o ass e rt s tha t su c h a re vie w that mi g ht r e su lt i n a re fu nd or de r v iol a te s th e fi le d r a te d o ct ri n e a n d

i s a f o rm o f p ro h i b i t edre t ro ac t i v e r at em ak i n g. Regulatory and pol

icy c ontext We b egi n b y rec og nizi ng that the leg islature to date ha s continued to impose a
c omp re he ns ive re g ime of tr a dit ion a l r a te re g ulatio n o n g a s u til iti e s. Ga s u til iti e s are mon op oli e s in the ar eas the y

serve . Tex. Util . Code Ann. § 101.002(b) (West 1998). As a res ult, “the normal forc es of competition that regulate pric es in a fr ee e nterprise society do not operate.” Id . I nstead, the leg islature soug ht throug h GURA “to e stablish a compre hensive a nd adequate re g ulatory

sy stem for ga s utilit ies to assure rate s, operations, and service s that are just and rea sonable to the c onsumers and to the utilit ies,” with the overa rching g oal of protec ting “ the public intere st inherent in the rates and service s of g as utiliti es.” Id . § 101.002(a) . To this end, the leg islature cha rg ed the Commission with the t ask of ensuring “complianc e with the obl iga tions of ga s utili ties” in GURA and g rante d the C o m m i s s i o nb r o a d

p o w e r s t o r e g u l a t e “ u t i l i t y r a t e s , o p e r a t i o n s , an d

se rv ic e s a s a substitut e for compe tition .” Id
. § 104.001 (empha sis added). The leg islature empha siz ed that the Commission “shall ensure that eac h rate a g as utilit y or two or more g as utiliti es jointly make, de mand, or re ceive is just and r e a s o n a

b le ” in a ma

n n e r th a t w il l “ p e r

mi t th e u ti li ty a r e a s o n a

b le o p p o rtu

n it y to e arn a
re a so na ble re tur n on the uti lity ’s inv e ste d ca pit a l use d a

nd us e fu l in pr ov idi ngse rv ic e to t

he pu bli c in excess of its reasona

ble and ne cessa

ry operating e x penses.” Id . § 10 4. 00 3. Th ese po lic y g oa ls inform our a

naly sis o f t h e C o m m i ssion’s powers he re. Se e id . § 10 1. 00 7; compare with T XU Gene ration Co., L .P. v. Public Util. Comm’n of Tex. , 1 65 S.W. 3d 82 1, 85 1- 52 (T e x. Ap p. —A us tin 2005, pet. filed) ( Pemberton, J., di ssenting) (ar g uing that PURA’s competition statutory objectivesWe do so while mindful of the admoniti o n t hat a “ lawy er w ho attempts to chop his way 9 aro un d in the jun g le of

le g a l op ini on

on the su bj ect of th e se [PGA ] cl a

us e s is a pt t o f ind him se lf wa nd e ri ngin c ir c le s wi th his int e lle c tua l ma c he te so du lle d he is so on br ou g ht t o a sta nd sti ll. ” Phi lip P. Ardery , Sh ou ld T

he re BeRu le

s a bo ut E sc ala tor Cla us es? , 53:1 Pub. Util . For t. 35, 39 (1954). 10 should inform our view of the Commiss ion’s g ener al p o we rs to ensure both “ safe , reliable , and
re a so na bly pr ic e d e le c tr ic ity” in re ta il mark e t and that anc ill ary se rv ic e s are a va ila ble a t “ re a so na

ble price s”).
PGA clauses

We next note the natur e and f unction of PGA cla

uses. Fue l adjustment clauses for 9 uti lit ie s, su c h a s th e PGA c la us e s a t is su e in t

his c a se , o ri g inate d a s p art of uti lity rate sc he du le s in response to the rapid c hang es in coa l prices dur ing World War I . Richard J. P ierc e, Rec onsidering theRo le s o f R e gula ti on an d Com

pe tit ion in t

he Natural G as In du str

y , 97 Har v. L . Rev. 345, 373 (1 98 3) . T he y

a llo w a uti lity to a dju st c ha

rg e s a uto ma tic a lly , e ith e r u

p o r d ow n, on

an o ng oin g ba sis in re sp on se to f

luc tuatin g fu e l c os ts. De nn is Sc hif fe l, Electric Utility Regulation: An Ov ervie w of Fuel Adjustment Clauses , 9 5 : 1 3 P u b
. Ut i l
. Fo rt
. 2 3 , 2 3 -2 4 (1 9 7 5 ); R
. S
. T ri gg, Es c ala tor Cla us es in Public Utility Rate Schedule s , 106 U. P a. L
. Rev. 964, 964 (1958). I n other words, an automatic f uel adjustment clause is “ a fixed rule under which future rate s to be char g ed the public are deter mined. I t is sim ply

an addition of a

mathematica l formula to the filed sc hedules of the Company under which the rate s and cha

rg es fluctuate as the w holesale c ost of g as to the Company fluctuate s.” City of N or fol k , 9 0 S. E. 2d

a t 14 8; se e als o Lo uis ian a P ub . S e rv . Co mm ’n v . F

e de ra l E ne rg yRe gu lator y Comm’n , 688 F.2d 357, 360- 61 (5th Cir. 1982).I n th e sampl e rate sc he du le re pr od uc e d a s App e nd ix A, fi xed -c os t and vari able- c os t 10 po rt ion s o f t

he sc he du le are re po rt e d to g e the r u nd e r the he a din g “ Ne t Monthly Ra te .” Som e c ourt s have te rm e d th e se numbe rs a s th e “ ba se rate ,” wh ic h f luc tuate s b a se d o n c ha

ng e s in the g a s- cost varia ble as descr ibed i n the PGA clause
. See , e.g. , Southern Cal. Edison Co. v

. Public Util. Comm’n , 576 P.2d 945, 954-55 (Cal. 1978). Pierce has asse rted that e scalator clause s, such as the PGA c lauses in this case, “ are 11 essential to the fina

ncial viability

of many p i p el i n es and othe r utiliti es.” Richa rd J. P ierc e, Re c on sid e rin g th e Ro le

s o f R e gu lat ion an d Co mp e tit ion in t heNatural G as In du str

y , 9 7 H ar v . L. Rev. 345, 373 (1983). N onetheless, c riticism has been voic ed ag ainst the use of suc h clause s beca use of their automatic natur e. See G. Will iam Fowle r, Purchased G as Adjustment Clauses: An Adjuster’s Viewpoint , 6 St. Mar y ’s L .J
. 567, 578-81 (1974) (re viewing major ar eas of criticism of fuel a djustment cl auses, includingincentive issues a nd pare nt-subsidiary

self-de aling considerations). “ Re g ulator

y la g ” is the los s o f e arn ing s b e tw e e n th e tim e a uti lity fi le s a pe tit ion fo r a rate 12 inc re a se and

wh e n th e rate re lie f a c tua lly be c om es effect ive . Pi e rc e , 9 7 H arv . L . Re v. a t 36 0; see R
. S
. T ri gg, Escalator Clauses in Public Utility Rate Schedule s , 106 U. Pa. L . Rev. 964, 964 (1958); see also Eliza

beth Warre n, Regulated Industries’ A utomatic Cost of Service Adjustment Clauses: Do The yIn c re as e or

De c re as e Cos t to theCon su me r? , 5 5 Notre D ame L . Rev. 333, 348 (1980) (“Regulatory

lag simply

operates as a sque eze on the utility .”).

11 Other c ost components of rate sche dules are g ener ated f rom h i s torically

based p ro j ec t i o n s of future costs and so ar e re flec ted in fix ed compone nts of the rate sche dule. See 10 Pierce , 97 Har

v. L . Rev. at 373. Althoug h sometimes criticized, this bifurcated regulatory treatment is g e ne ra lly de e me d sat isf a c tor y be c a us e mos t cos ts te nd

to i nc re a se g ra du a lly

and pr e dic ta bly wh ile f u e l c o s t s ar e p art i c u l ar l y s u b j e c t t o dr a m a t i c an d u n f

o r e s e e a b l e c ha ng e s. Id
. a t3 7 3 n . 1 5 2
. In

11 addition, fuel costs constitute such a larg e propor t ion of a utility ’s total costs that any substantial regulatory

lag in approving rate incre ases to re flec t fuel cost incr ease s can c ause the rapid fina ncial 12F our p ra g ma tic jus tif ic a tio ns have g e ne ra lly

be e n id e nti fi e d f

or us ingsu c h c la

us e s: 13 (1) to re duce the number of rate proce eding s and the e x penses attended ther eon, (2) a series o f s m al l er inc rea ses to the consumer , (3) improve d financ ial stability for the utility

by reduc ing the variations in e arnings ca used by such incre ase in e x p en s es , and as a result (4) a

somewhat re duced c ost of capital which ultimately

would acc rue to the be nefit of the c onsumer. Patricia Ga

bel, et al., Utility Rates, Consumers, and the New York State Public Servic e Commission , 39 Al b. L . Rev . 707 , 7 54 (1 97 5) ; see Daily Adve rtiser v
. Trans-La, Div. of A tmos Energy Corp. , 612 So. 2d 7, 22 n. 23 (L a . 1 99 3) ; se e als o Ra ilr oa d Co mm ’n of T e x . v . Ci ty of F or t W or th , 576 S.W .2d 8 9 9 , 9 0 2 (T ex . C i v . Ap p . — Au s t i n1 9 7 9 , wr i t

re f’ d n . r. e. ) ( ci t i n g Montana Consu me r C o unsel v. Public Serv. Comm ’n , 541 P.2d 770 (Mont. 1975)); Fowle r, 6 St. Mary ’s L .J . at 578. 12 r u i no f ano t h e r w i s e h e a l t h y u t i l i t y. Id . PG A c la us e s p e rm it f

luc tuatio ns in the uti lity ’s c os ts t o 13 be pa sse d thr ou g h dir e c tly to its c us tom e rs a s c os t a dju stm e nts in s ub se qu e nt util ity bil ls. El iza

be th Warren, Regulated Industries’ Automatic Cost of Servic e Adjust ment C lauses: Do They Incre ase or De c re as e Cos t to theCon su me r? , 55 Notre D ame L
. Rev. 333, 336 (1980). Thr oug h a PGA cla use, then, a utilit y can track its customer c harg es more c losely to its current c ost of fuel without
c on tin ua lly havin g to f

ile fo r r a te inc re a se s ( or

de c re a se s) and

a me lio ra te the re g ulator

y la g pr ob le m. See P ublic Serv. Co. of N. H. v. Fe deral Energy Regulatory Comm’n , 600 F.2d 944, 947 ( D.C. Cir. 1979); Gulf Power Co. v. Florida Public Serv. Comm’n , 487 So. 2d 1036, 1037 (Fla. 1986)
.

Gene rally , implementation of PGA clause s is an exercise by a reg ulatory commission of its r a te ma

k in g , a s o p p o s e d to r

u le ma k in g , p o w e r , an d PG A c la u s e s a r e g e n e r a ll y a d o p te d in a rate making proce eding as an integ ral pa rt of a utility ’s over all rate structure
. See P ublic Serv. Co. of N. H. , 600 F.2d at 947 (desc ribing such cla uses as pa rt of “utility ’s filed rate”) ; Scates v . Arizona13

Corp. Comm’n , 578 P.2d 612, 616 (Ariz. 1978); In re P et i tion of All ied Power &Light Co. , 321 A. 2 d 7 , 1 0

- 1 1 ( V t. 1 9 7 4 ) ; T r ig g , 1 0 6 U
. Pa
. L
. Re v . a t 9 9 6
. I n s o me ju r is d ic ti o n s , reg ulatory commis sions are statutorily authorized to implement such clause s; in others, the regulatory commission im plements such cla uses pursuant to its plenary ra t em aking authority
. Se e Da ily Adve rtiser v . Trans-La, Div. of Atmos Energy Corp. , 612 So. 2d 7, 23 (L a. 1993). A s alrea dy noted, such cla uses have been judicia lly

rec og nized and approve d in Texas, and we have also described the adoption of a P GA as beingpart of a rate making proce eding
. Sa n A nto nio In de p. Sc h. Di

st. , 550 S.W .2d at 266-67 & n.2; High Plains Nat ural Gas Co. , 613 S.W .2d at 48; City of F or t W or th , 576 S.W .2d at 902.
Ente x’ s a pp ro v e d rate

and its PG A c lau se We nex tco n s i d er

t h e r el at i o n s h i p b et we en t h e P GA cl au s e h er e an d Entex’s approved
rate . G UR

A d e fi ne s a

“ rate ” a s (A ) any c omp e ns a tio n, tari ff

, c ha rg e , f are , to ll, re nta l, o r c l a s s if

ic a tio n th a t is dir e c tly or indirec tly

demande d, observe d, char g ed, or co l lected by a g as utility

for a se rv ic e , p ro du c t, o r c omm od ity de sc ri be d in the de fi nit ion of g a s utili ty in t his section; and (B ) a rule , regulation, prac tice, or c ontrac t af f ectingthe compensation, tariff, c harg e, far e, toll, rental, or c lassification.
Tex. Util. Code Ann. § 101.003(12) ( West S upp. 2005). Throug h this langua g e, the leg islature has
re c og nize d th a t a

rate may c on sis t no t me re ly

of a fi x ed doll ar a

mou nt b ut m ay

ins te a d b e a

ru le “af fec ting” the cha

rg e, a te rm contemplating the use of va riables. Se e id . § 101.003(12)( B)
.F or the sake of

sim pli c ity , w e re fe r o nly

to t he te rm s and

numbe rs us e d in th e sampl e rate 14 schedule repr oduced a

t Appendix A. The pric e of g as is divided into four bra ckets: for the first 400 cubic fee t of g as, the 15 c us tom e r i s c ha

rg e d a se t pr ic e of

$9 .1 9 ( the min imu

m mo nth ly

bil l) ; th e ne xt 2,6 00 c ub ic fe e t c os t $.6536 per 100 c ubic fe et; the next 7,000 cubic feet cost $.5412 per 100 cubic feet; and, finally , any a mou nt o f g a s mo re tha

n the ini tia l 10 ,0 00 c ub ic fe e t w ill c os t th e c us tom e r $ .5 20 8 p e r 1 00 c ub ic fee t. Th e PGAc la

us e a lso inc lud e s a

pr ov isi on

fo r t he a mou nt c ha rg e d to va

ry a c c ordingto 16 c ha ng e s in g ro ss re c e ipt s ta xes, a pr a c tic e that ha s b e e n c omm on in j ur isd ic tio ns that pe rm it the us e of PGA cla

uses. See Trig g , 106 U. Pa. L . Rev. at 982-87. 14 The ap p ro v ed ra t e sche dules in this case amount to a rule providing a thre e-step proce ss for computing a customer ’s monthly g as cha rg e. Se e id .; see also Appendix A. Fir st, the 14 rate schedule sets eac h customer a minimum monthly

bill, $9.19. Second, the r ate sc hedule de fines the price of g as per

100 cubic fee t of g as. Collectively , these pric es may be ter med the “ba se rate” 15 beca use they set the base from which the actua l c ustomer char g e will va ry acc ording to the terms of the third part of

the rate sche dule, the PGA cla use. The thi rd component, the PGA clause , states that the “ne t monthly

rate per unit sold is predicated upon a pr ice of natura l ga s purcha sed for resa le” at $4.5705 per Mc f. As a re sult, the actual c ustomer cha rg e for g as would be the amount set by the 16 base r ate, a djusted for the deviation of the cost of g as to E ntex from the assumed purcha se price of $4.5705 per Mc f.

This “ rule” fits squarely

within the statutory

definition of “r ate.” See Tex. Util . Code Ann. § 101.003(12)( B) . We thus conclude that a n Entex gas r ate consists of its e ntire rate schedule , which may

resul t i n d i ffering customer c harg es month-to-month. See 16 Tex. Admin. C ode § 7 .3 15 (a ), (c )( 8) (2 00 5) (f or mul a may c on sti tut e rate ; r a te a dju stm e nt p ro vis ion mus t be p art of rate filing) ; cf. Chevr o nTexaco E xploration & Prod. Co. v. Fede ral Energy Re gulatory Comm’n , 38715

F. 3 d 8 9 2 , 8 9 5 (D
. C
. C i r. 2 0 0 4 ) ( qu o t i n g Tra ns weste rn Pi pe lin e Co. v . F

e de ra l E ne rg yRe gu lator y Comm’n , 897 F.2d 570, 578 ( D.C. Cir. 1990)) (unde r F eder al Natur al Gas A ct, FE RC may approve “a ta riff c ontaining a

rate ‘for mula’ or a

rate ‘rule’ ” instead of a spec ific number) ; Pierce, 97 H arv. L . Rev. at 349 n.29 (r ates g ener ally may consist of fixed values and va riable c omponents).
The Commissio n’

s a utho rit y ov e r the ra te The re g ulatory

authority , whether

the Commiss ion or a municipality , “shall ensur e that eac h rate a g as utilit y or two or more g as utiliti es jointly make, de mand, or re ceive is just and
re a so na ble .” Te x. Ut il. Cod e Ann. § 1 04 .0 03 (We st 19 98 ). Ra tes mus t be e sta bli sh e d s o a s to permit the utilit y “a rea sonable opportunity to ear n a re asonable return on the utilit y ’s invested capital use d and useful in pr oviding service to the public in excess of its reasona ble and ne cessa

ry
o p erating e x penses.” Id
. § § 1 0 4
. 0 5 1 , . 0 5 3
. “ A g a s u ti li ty ma y n o t d ir e c tl y

o r in d ir e c tl y

c h ar g e, demand, collect, or rec eive from a person a gre ater or l esser compensation for a se rvice provided or to be provided by

the utility

than the compe nsation presc ribed by the applica

bl e s ch ed u l e o f rates filed.” Id . § 104.00 5. Finally , the Commiss ion “may require the examination and audit of the
a c c ounts of

a g a s o r m un ic ip all y own ed utili ty ” and may ins pe c t “ the pa

pe rs , b oo ks , a c c ounts , documents, and other business rec ords of a gas util ity within its jurisdi ction.” Id
. §§ 102.202, .203.

The utilities code does not de fi n e “e x am ination” or “ audit,” so we may rely on definitions list ed in commonly used dictionarie s to disc ern the plain meaningof terms in the statute. See P owell v. Stover , 1 6 5 S. W. 3 d 3 2 2 , 3 2 6 (Tex. 2005); Te x as De p’ t of Pr ote c tiv e & Re

gu lator y Servs. v . Mega Child Care, Inc. , 14 5 S.W. 3d 17 0, 19 6 ( Te x. 20 04 ); Sh esh un off v . S he sh un off , 172 S.W .3d 686, 695 n.8 (Tex. App.—Austin 2005, pet. filed). An “examination” is “ an inspec tion” or16

“ana ly sis.” American H

eritage Dictionary 456 (1973). An a udit is a “forma l examination of an individual’s or org anization’s acc ounting r ecor ds, financia l situa ti o n , o r complianc e with some other set of standa

rds.” Black’

s Law Dictionar

y 1 2 6 ( 7 th e d
. 1 9 9 9 )
. I t ma y inv o lv e “ an a d

ju s tm e n t or
corr ection of a ccounts.” American H eritage Dictionary 86. The leg islature has c harg ed the Commission t o ensure “compliance with the ob lig a tio ns of

g a s u til iti e s” in G UR

A a nd to r e g ulat e “ uti lity

rate s, op e ra

tio ns , a nd se rv ic e s a s a
su bs tit ute fo r c omp e tit ion ,” Te x. Ut il. Cod e Ann. § 1 04 .0 01 , a nd ha s sp e c if

icall y enu mer a te d it s power to conduct examinations and audit the utiliti es. Id . §§ 102.202, .203. The PGA c lause, a s part of the rate, is a

n important and vary

ing fac tor in the cha

rg e to the utilities’ customers, and the amount char g ed to customers ultimately depends, unde r the term s o f t h e P GA clause , on the price of g as purc ha se d. PGAc la

us e s are me re ly

re c ou pme nt d e vic e s d e sig ne d to pe rm it u til iti e s a do ll ar - f o r - d o ll ar r e c o v e r

y o f f lu c tu a ti o n s in f

u e l c o s ts
. T h e c u s to me r is h ar me d by the implementation of such cla uses only if such clause s are manipulated or abused, thus e ncoura g ing the promulg ation of rate charg es t hat are neither just nor rea sonable to the ratepay er. See F ow le r, 6 St
. M ar y ’ s L
. J. a t5 78 -8 1; s ee also In re Niagara Mohawk Power Corp. , 507 N.E.2d 287, 291 (N.Y
. 1987). These c riticisms are met, howe ver, w hen the r eg ulatory body revie ws cha

rg es re couped by a utility throug h a PGA cla

use and de termines that s u ch ch arge s were “just and re asonable .” A
nece s s ar y co ro llary

to such revie w is the power to take cor

rec tive action whe n the utility has mis a pp lie d th e te rm s o f i ts r a te s. I n o the r w or ds , a n a lle g a tio n th a t a

uti lity ha s ma nip ulated its purc ha se s to art if

ic ia lly ra ise the c os t of f

ue l di ff e rs in n o s ub sta

nti a l w ay fr om t he c la im that a

uti lity char g ed customer s a price g reater than a n approve d fix ed rate. As the Ohio Supreme Court17

observe d, “the require ment of fairne ss w hich compels adjustment in r ates to compe nsate utilities for
e sc a la tin g fu e l c os ts a lso c omp e ls r e tr os pe c tiv e re c on c ili a tio n to ex clu de cha rg e s id e nti fi a

bly resulting from unre asonable computations or inclusions.” Ohio Power Co. v. Public Utils. Comm’n , 376 N.E.2d 1337, 1338-39 ( Ohio 1978).

I n response , E n t ex p o ints out t hat althoug h GURA and PURA shar e a c ommon leg islative history , the leg islat u re ga ve the Commission ex press a uthority in PURA to review and
rec oncile the prudenc e of the fue l costs of e le c tri c utilit ies, see Te x. Ut il. Cod e Ann. § 3 6. 20 3 ( Wes t 1998), y et included no suc h provision in GURA reg ardingg as utiliti es. Entex would have us infer that th e le g isl a tur e did no t int e nd to e mpo we r the Com mis sio n to re vie w and re c on c ile g a s u til iti e s’ fu e l c os ts. Ho wever, the le g isl a tur e e na c te d th e pr ov isi on g ra nti ngthe Com mis sio n a

uth or ity to revie w and r econc ile the prude nce of fuel c osts at a time when it had pr ohibited the P UC from allowing elec tric utili t i es t o u s e automatic fuel cost adjustment cla uses like PGAs. Id . § 36.201 (We st 1 99 8) ; see also Entergy Gulf States, Inc. v. Public Util. Comm’n of Tex. , 173 S.W .3d 199, 206 (T e x. Ap p. —A us tin 20 05 , pe t. fi le d)
. B y c on tr a st, Te xas c ourt s b y that ti me ha d a

pp ro ve d th e us e of PGA cla

uses by g as utiliti es. See H

igh Plains N

atural Gas Co. , 6 13 S.W. 2d a t 48 . A g a ins t th is leg al bac kdrop, the leg islature under standably provided a method for timely revie w and adjustment of an elec tric utilit y ’s fuel costs as an a lternative f or fue l fac tor adjustment clause s while including no such provision reg ardingg as utiliti es. See T e x. U ti l. Co d e A n n . § 3 6
. 2 0 3 ( d ) . Thus, we f ind
un ins tr uc tiv e En te x’s c omp ari so n w iththe e xpre ss p ow e rs g ive n to the PUC
. As we have dis c us se d, wh e n a PGAc la us e is a pp ro ve d, the po we r t o r e vie w p a st purc ha se s and

or de r r e fu

nd s is ne c e ssa

ry to en sure c omp lia

nc e wi th t he a pp ro ve d r a te . We fi nd

it18

rea sonably

nece ssary

for the Comm ission to have the power to reviewpast g as purc hases a nd order ref unds as par

t of its ex press a

udit power to ensur e complianc e with the appr oved rate and its implied po we r t o appro ve PGAc la us e s. Se e id . § § 1 04 .0 05 (a ), (c ) ( Com mis sio n ma y or de r r e fu

nd wi th int e re st i f i t f

ind s th a t ut ili ty vio la te d te rm s of its fi le d r a te ); see also City Pub. Serv . Bd. , 53 S.W .3d at 316 (Te x . 2001); Lakeshore Util. Co. , 16 4 S.W. 3d a t 37 8. Othe rw ise , th e Com mis sio n’ s a uth or ity would be re duced to the ministerial task of verify ing the utilit y ’s ar ithmetic, and having the ge nera l power s to reg ulate rates and ensure c ompliance tog e the r wi th the jur isd ic tio n to e xami ne and a ud it the utiliti es would “be hollow and meaning less.” See Texas Bl d g . Owners & Managers Ass’n v

. Public Util. Comm’n of Tex. , 11 0 S.W. 3d 52 4, 53 2 ( Te x. Ap p. —A us tin 20 03 , p e t. d e nie d) ; Pu bli c Ut il. Com m’n o

f Te x . v . Ci ty of A us tin , 728 S.W .2d 907, 915 (Tex. App.—Austin 1987, writ ref’ d
n. r. e .) ; see also In re Redi-Flo Corp. , 384 A.2d 1086, 1097 (N.J. 1978) (court could not be satisfied that PGA cl ause itself w as “just and r easona ble” if c lause ope rate d fre e fr om reg ulatory board’ s supervision and without periodic sy stematic re view more compre hensive than “ monitoring” ).
File d rate

do c tri ne Entex nex t argues t hat t he powe r to conduc t a re troac tive prudenc e re view violates the filed ra

te doctrine . We disag ree . The “filed rate doctrine” applies when state law cre ates a state ag ency and a statutory scheme under which the ag ency deter mines rea sonable ra

tes for the service provided. Arkansas La. Ga s Co . v . H

all , 4 53 U. S. 5 71 , 5 79 (1 98 1) ; Keogh v. Chicago &Northw estern Ry

. , 260 U.S. 156, 16 3 ( 19 22 ); se e als o Tex. Util. Code Ann. § 104.005(a) (codify ing f iled rate doctrine) . The doc trine ho lds that a tar if

f fi le d with and

a pp ro ve d b y

an a dmi nis tr a tiv e a g e nc y un de r a statut or y sc he me is19

presumed r easona

ble unl ess a litiga

nt proves other

wise. Southwestern Elec. Power Co. v. G rant , 73 S.W .3d 211, 216 (Tex. 2002)
. I t c oncomitantly prohibits reg ulated utilities from “cha rg ing r ates for their ser vices other than those prope rly filed with the appr opriate r eg ulatory authority .” Entex v

. Railroad Comm’n of Tex. , 18 S.W .3d 858, 862-63 (Tex. A pp.—Austin 2000, pet. denied) (quoting Southwestern Bell Tel. Co. v. Metro-Link Telec om, Inc

. , 919 S.W .2d 687, 692 (Tex. App.—Houston [14t h Dist.] 1996, writ denied) ). A tar iff filed w ith and approve d by an administrative a g ency under a statutory

scheme is presumed reasona ble unl ess a litigant proves otherwise. Grant , 73 S.W .3d at 21 6; see W

estern Union Tel. Co. v. Esteve Bros. & Co. , 256 U.S. 566, 572 (1921); W egoland, Ltd. v. NY NEX Corp. , 2 7 F .3 d 17 , 18 (2 d Ci r. 19 94 ); Metro-Link Telec om , 9 19 S.W. 2d a t 69 1. Thus , under the doctrine f

iled tariff s g overn a

utilit y ’s relationship with its customers and have the forc e and ef fec t of law until suspended or se t aside. Grant , 7 3 S. W.3 d at 21 7; see Keogh , 260 U.S. at 16 2- 63 ; Carter v. AT& T Co. , 3 65 F .2 d 48 6, 49 6 (5 th Cir . 1 96 6) ; Metro-Link Telec om , 919 S.W .2d
a t 69 2. Ad dit ion a lly , r e g ulate d u til iti e s c ann ot v ary a tari ff’s ter ms with in div idu a l c us tom e rs , dis c ri min a te in p ro vid ingse rv ic e s, or c h a r g e r a t e s o the r t ha n th os e pr op e rl y

fi le d w iththe a

pp ro pr ia te regulatory

authority
. Maislin Indus. v. Primary Stee l, Inc. , 4 97 U. S. 1 16 , 1 26 (1 99 0) ; Arkansas La. Gas , 4 5 3 U
. S
. a t57 7; Me t r o -L i nk Telec om , 9 19 S.W. 2d a t 69 2. A util ity ’s ob lig a tio ns to i ts customers c annot exceed its duties under the filed tar iff. See Tex aco, Inc . v. Central Power & Light Co. , 95 5 S.W. 2d 37 3, 37 7 (T e x. Ap p. —Sa n An ton io 1 99 7, pe t. d e nie d) ; Central Power & Light Co.
v . R om e ro , 948 S.W. 2d 76 4, 76 7 (T e x. Ap p. —Sa n Ant on io 1 99 6, wr it d e nie d) ; see also Arkansas La. Gas , 453 U.S. at 577-78.I n East Tennessee , t h e ga s s u p p l i er h adt ar i ff

s t h a ti n cl u d eda f

i x edd em an d

ch ar ge 17 (entitling the purcha ser to minimum amounts eac h day ) and a “commodity

char g e” ( an amount base d on the ac tual amount rec eived)
. East Tenn. Natural Gas Co. v. Fede ral Energy Re gulatory Comm’n , 631 F.2d 794, 797 ( D.C. Cir. 1980). Due to shortag es, the supplier be g an to cur tail delivery

of g as an d wa s u n ab l e t o m e e t i t s m i n i m u m am o u n to b l i gat i o n s (a s p ro m i s edun d er t h e d em an d

ch ar ge provision). Id
. T h e s u

p p l i er t h u s gav e i t s cu s t o m er s , as t er m edb y t h e D
. C
. C i rc u i t , “d em an d ch ar ge cr edits.” Id
. T o r e c o v e r th is lo s s , it a ls o a d d e d a s u r c h ar g e to it s c o mm o d it y c h arg e, ther eby allowing the supplier to re coup all its reve nue l o s t t h ro u gh the demand c harg e cr edit. Id . E a st Tenne ssee invoked its PGA cla use to pass throug h the surcha rg e to i ts customers but did not fac tor in the demand c harg e cr edit. Id . FERC order ed the de mand cha rg e also pa ssed thoug h. Id
. at 798. Howeve r, t he subst ance of the dispute bef ore F ERC was the nature of the c redit. Id
. a t 79 7 n .6 . E a st Ten n es s ee argued that they wer e “c urtailment cre dits,” a position FERC rejec ted. Id . Thus, the revie w at issue in the ca se wa s the proper char acte riza t i o n of the c redit themselves. O nly afte r 20 The c onsiderations under ly ing the doctrine a re the prese rvation of th e reg ulatory ag ency ’s primary

jurisdiction over re asonable ness o f ra t es and the ne ed to insure that r eg ulated companies c harg e only

those rate s of w h i ch t h e re g ulatory ag ency has bee n made c og nizant. See C o n co rd v. F ed er a l E n er g y R eg u l a t o r

y Co mm’n , 9 55 F .2 d 6 7, 71 (D .C. Cir . 1 99 2) ; City of Cl eve land v. Fe deral Power Comm’n , 5 25 F .2 d 8 45 , 8 54 (D .C. Cir
. 19 76 ). I n a dd iti on , th e do c tr ine se rv e s to provide pre dictability

and ce rtainty

to enable c ustomers to make decisions acc ording to the rate s as approve d and “the cost of what they are rec eiving .” Electrical Dist. N o . 1 v. Fede ral Energy Regulatory Comm’n , 7 74 F .2 d 4 90 , 4 93 (D. C. Cir. 1 98 5) ; cf
. Indiana & Michigan Elec . Co. v. Fede ral Power Comm’n , 502 F.2d 336, 344 ( D.C. Cir. 1974). A re g ulatory ag ency cannot retroa ctively

alter the cost-adjustment mec hanism, nor ca n it rejec t calculations on the theory that the method of c alculation itself is not just or r easona ble, bec ause the rate rule is the filed r ate. See , e.g. , ChevronTexac o , 387 F.3d at 896. Howeve r, the filed-r ate doctrine does not prec lude a r eview based on the char g e that a utility misapplied its rate. See E a s t Tenn. Natural Gas Co. v. Fe deral Energy R egulatory Comm’n , 631 F.2d 794, 800 n.10 ( D.C. Cir. 1980). 17d et er m i n i n g how to c h ar a c te r iz e th e c r e d it s ( a s d e ma n d c h ar g e c r e d it s in s te a d

o f a s “ c u rta ilment c re dits”) did

F ERC , a nd the n th e D. C. C ir c uit , c on sid e r w he the r t he re fu nd vio la te d th e fi le d r a te doctrine. I n this way , FERC first conducte d a review of the underlying tr ansac tions, to determine the nature of the tra

nsactions and, a fter makin g that deter mination, only

then eng ag ed in the application—ca lculating the cor rec t char g e. Simi larly , the central allegation in this case is the circumstances of Entex’s ga s purcha ses and sale s—that it charg ed its residential a nd small commercia l customers for the wrongg as. The Commi ssion is seeking to r eview which purc hased g as wa s the corr ect one for de livery to the re sid e nti a l and sma ll c omm e rc ia l c us tom e rs . O nc e it d oe s th a t, i t w ill e ng a g e in t he min ist e ri a l ta sk of ca lculating the cor

rec t char g e. 21 As we ha ve explained abo ve, the Commission’s authority to conduct a r etroa ctive
re vie w of g a s p ur c ha se s d oe s n ot i nv olv e re tr oa c tiv e ly c ha ng ingthe te rm s o f E nte x’s a pp ro ve d r a te schedule . I nstead, the Commi ssion is attempting to r eview g as purcha ses that resulted in cha ng es to the a mo u n ts c h ar g e d to E n te x’ s c u s to me r s u n d e r th e te r ms o f it s PG A c la

u s e . T h e City ’s underlying c laim, the basis for the Commi ssion’s a ction, amounts to one of abuse of the PGA c lause,
a var iable in Entex’s approved r ate; the pr ocee dings c oncer n the alleg ed misapplication of Entex’s rate s rathe r than an attempt to c hang e the terms of the rate s. I n other words , t h e C o mmissi on’s
rev ie w is n o t an a tt e mp t to o r d e r E n te x to c a lc u late it s c h ar g e s d if f e r e n tl y ; r a th e r , it would be order ing E ntex onl y

to calculate its c harg es corr ectly
. Thus, we c onclude that the f iled rate doctrine d o es not preve nt reg

ulatory revie w of a lleg edly

i m p ru d en tex p en d i tu re s au t o m at i ca l l y p as s edt h ro u gh to the rate pay ers throug h a PGA cla use.
Rule ag ain st re tro ac tiv era te making Finally , Entex arg ues that the a uthority to con d u ct a re troac tive revie w of g as purcha ses would violate the r ule ag ainst retroa ctive ratemaking . We disag ree .22 F un dame nta l in

the uti lity rate makin g pr oc e ss is the pr inc ipl e , te rm e d th e ru le a g a ins t retroa ctive rate making , that utilit y rate s are set for the future and not the past. Railroad Comm’n of Tex. v. Lone Star Gas Co. , 656 S.W .2d 421, 425 (Tex. 1983). Uti lities code sec tions 104.110 and 104.151 codify

the rule a g ainst retroa ctive ratemaking for g as rate s. Rates set by the Commiss ion

“ c o n s ti tute th e le g a l r a te s o f th e g a s u ti li ty

u n ti l c h an g e d ” in

th e ma n n e r p r o v id e d b y G U RA
. T e x. Ut il. Cod e Ann. § 1 04 .1 51 (b ). I f, a ft e r a he ari ng , th e Com mis sio n f ind s a rate un re a so na

ble , it sh a ll “ente r an or der e stablishing the rate s the g as utilit y shall char g e or apply for the se rvice in question.” Id . § 104.110(a) (1). The new rate “shall be obse rved the rea fter until cha ng ed.” Id . § 104.110(b). The rule ag ainst retroa ctive ratemaking is often misunderstood and misapplied. See State v. Public Util. Comm’n of Tex. , 883 S.W .2d 190, 199 (Tex. 1994) (citing Stefan Kr ieg er, The Gh os t of Re gu lat ion Pa st: Cur

re nt Ap pl ica tions of t

he Ru le Ag

ain st R e tro ac tiv e Ra te ma k ing in Public Utility Procee dings , 1 99 1 U . I ll. L . Re v. 98 3, 98 8 ( 19 91 )). I t proh ibi ts a pu bli c uti lity commission from setting futur e rates to allow a uti lity to rec oup past losses or to ref und to consumers excess utilit y

profits. Id
. “R es t at ed , t h e r u l e p ro h i b i t s a u t i l i t y

co m m i s s i o nfr o m m ak i n g a
re t ro s p ec tive inquiry

to determine w hether

a prior r ate wa s rea sonable a nd imposing a sur char ge when ra tes wer e too low or a ref und when r ates we re too hig h.” Id . T hat is , th e ru le a g a ins t retroa ctive rate making only require s that natural g as compa nies, the Commissi on, and cour ts abide by an administrative de ter m i n at i o n t h at a particular r ate is just and re asonable
. See E ast Tenn. Natural Gas Co. , 631 F.2d at 800.

The Commission’s attempt to revie w Ent ex’s g as purchases, which direc tly aff ecte d the a mou nts c ha rg e d to En te x’s c us tom e rs , a nd to order

re fu nd s to c omp e ns a te fo r a lle g e dlyThe rule ag ainst retroa ctive ratemaking g ener ally protec ts the utilit y from beingsubject 18 to later de cisions by

a re g ulatory ag ency that the age ncy ’s earlier decision in approving a rate was “unsound.” See P ublic Util. Comm’n of Cal. v. Fe deral Energy Regulatory Comm’n , 894 F.2d 1372, 1383 (D.C. Cir. 1990)
. I n the context of PGA clause s, this reasoning cannot a pply —no regulatory authority has eve r consider ed the c ircumstance s under whic h Entex m ade its g as purc hases. 23 imprudent purcha ses may well be retroac tive in effe ct, but it is not retroa ctive ratemaking . As we have a lrea dy

discussed, t he Commissi on is not attempting to disturb the deter mination that Entex ’s
rate sc he du le s are jus t and re a so na ble. Ra ther , th e Com mis sio n’ s r e vie w w ill on ly c on c e rn its
a pp lic a tio n o f t

he a pp ro ve d r ate s—

havin g be e n g ive n th e be ne fi t of inc lud ingPGAc la

us e s in its
rate s, En te x will be su

bje c t to re vie w of g a s pur c ha se s to ens ur e that it did no t mi sa pp ly its fi le d r a te schedule . The Commission i s not modify ing the rate
.

The rule ag ai n st retroa ctive ratemaking does not prohibit the Commi ssion from
or de ri ng a uti lity to hon or its rate sc he du le wh e n th e rate sc he du le its e lf inc lud e s a

va ri a ble te rm . 18 A customer c harg e deter

mined by the application of a PGA clause cannot be decla red r easona

ble or jus t un til a ft e r i t ha s b e e n im ple me nte d. Th us, a

re g ulator y a g e nc y c an id e nti fy

ov e rc ha rg e s o nly throug h retrospe ctive analy sis. As the D.C
. Circuit explained when conside ring a similar problem
un de r t he F e de ra l N a tur a l G a s A c t, “ Th e a lle g e dly re tr oa c tiv e c ha ng e s he re are no t re tr oa c tiv e a t a ll; they simply implement an exist ing r ate sy stem t h at re q uires per iodic adjustments.” East Tenn. Na tu ral Gas Co. , 63 1 F .2 d at 80 0 n .9 ; se e als o Co nc or d , 955 F.2d at 75; Boston Edison Co. v. Fede ral Energy Re

gulatory Comm’n , 856 F.2d 361, 370 ( 1st Cir. 1988). En te x off e rs tw o c a se s f

ro m ot he r s ta te s to su

pp or t it s argume nt t hat th e po wer to
or de r r e fu

nd s a ft e r c on du c tin g re tr oa c tiv e re vie w o f g a s p ur c ha se s v io late s th e ru le a g a ins t retroac t i v e ra t emaking
. See M atanuska Elec. A ss’n v. Chugach Ele c. Ass’n , 53 P.3d 578 (Alaska24

20 02 ); W isc on sin Po we r & Lig

ht C o. v . P ub lic Se rv . Co mm ’n of W is. , 511 N.W.2d 291 ( Wis . 1994). Matanuska conce rned a

fuel surc harg e included a s an esti ma te in its rate, subject to quar terly true-up pr oc e e din g s. 53 P .3 d at 58 1. Va ri anc e s b e tw e e n th e e sti ma te d a nd a c tua l c os ts w e re take n in to
acc ount when ca lculating the next quarterly fuel surc harg e filing
. Id
. P a r to f i t s fu el s u rc h ar ge
e sti ma te inc lud e d a

lin e -l os s e sti ma te to a c c ount fo r the a mou nt o f e ne rg y

los t th ro ug h th e pr oc e ss of g ener ation and tra

nsmissi on. Id
. C h u gac h h adu s eda 5
. 2 1 9 % l i n e lo s s fa ct o r i ni t s ra t e f i l i n gs with the regulatory

ag ency , but later re view re veale d that its own internal do cu ments showed the actua l line loss factor to be substantially lower. Id
. at 582. Chuga ch corr ecte d its e rror when f iling future ta riffs but re fused to issue re funds. Id . The Ala ska Supre m e Court held that, when initial estimates are later shown to be inacc urate , previously set rate s cannot be chang ed to cor rec t for the
e r r o r. Id . at 585. I t found confir mation in that approac h beca use of the e x tensive re view the regulatory ag ency employ ed when setting the rate and acce pting the line loss fa ctor. Id
. Chugach does not aid our a

naly sis here; we are not consideringan estim at e l ater found to be inac curate, a
nu mb er t hat c ou ld h a ve be e n v e ri fi e d b e fo re imp le me ntatio n, bu t th e pr ud e nc e of g a s p ur c ha se s, which we re not re adily

subject to revie w until after the y occur red. I n dic ta , the Matanuska court re lied on W isco n s i n Power & Light , a ca se that considere d fuel a djustment clauses conta ined in wholesale elec tricity rate s. Id . at 586 (re viewing W isconsin Power & Light , 511 N.W.2d at 2 9 5 -9 7 ). The Wisconsin Supreme Court held that
o rd er i n g a r ef

u n d fo r i mp ru d e n t f

u e l p u rc h as es v i o l at edt h e r u l e a gai n s tre t ro ac t i v e r at em ak i n g. W isconsin Power & Light , 5 11 N. W.2 d at 297
. In part , the c ourt fo un d th a t th e re g ulator

y a uth or ity
a c tua lly ha d p e rf or me d a ud its duri ngthe pe ri od

su bje c t to la te r r e vie w a

nd so c ou ld n ot r e vis it i tsAs the Rhode I sland Supreme Court has observed, the “ specte r of r etroa ctive ratemaking 19 mus t no t be vie we d a s a

ta lis manic inh ibi tio n a g a ins t th e a pp lic a tio n o f p ri nc ipl e s b a se d u po n e qu ity and common sense .” Roberts v. Narragansett Elec. Co. , 470 A.2d 215, 217 (R.I . 1984)) See F itchburg Gas & Elec. Li

ght Co. v. De

partment of Telecomm s. & Energy , 801 N.E.2d 20 22 0, 23 0- 31 (M a ss. 20 04 ); Daily Adve rtiser v
. Trans-La, Div. of Atmos Energy Corp. , 612 So. 2d 7, 23 (L a . 1 99 3) ; MGTC Inc. v . Public Serv. Comm ’n of W yo. , 735 P.2d 103, 107 (Wy o. 1987); Equitable Gas Co. v. Pennsy lvania Pub. Util. Comm’n , 5 26 A. 2d 82 3, 83 0- 31 (P a. Co mmw . Ct
. 19 87 ); Gulf Power Co. v. Florida Pub. Serv. Comm’n , 487 So. 2d 10 36 , 103 7 (F la . 1 98 6) ; Pu bli c Serv. Comm’n of Md. v. Delmarv a Power & Light Co. , 400 A.2d 1147, 1153 (Md. Ct. Spec. App. 25 deter mination in later proce eding s. Id . at 296. The a g ency had, in fa ct, often approved r ates on interim bases so that it could re view fue l costs and orde r re funds af ter that re view. Id
. As a

re su lt, the c ourt he ld t hat, h a vin g “ a

pp ro ve d [the uti lity ’s ] ra

te s, inc lud ing the uti lity ’s e xpe c te d c oa l c os ts, 14 times, the [age ncy ] cannot now claim that the [utili ty ] m ust return this money .” Id . at 297.

W isconsin P ower & Light

dif fe rs sig nif

ic antl y fr om t his c a se . E nte x’s PG A c la us e
was a p p roved as part of its rate. As fue l costs chang ed, sometimes as fr equently as eve ry month, there was no re quirement to re ceive approva l from a reg ulatory authority to alter the a

mount charg ed to customers. Instead, the c harg es cha ng ed ac cordingto the terms of the f iled rate
. To th e ex te nt t

hat W isconsin Power & Light could be inter

prete d broadly

as pr oh ibi tin g a s r e tr oa c tiv e rate makin g in Wi sc on sin any re fu nd ba se d o n a

re vie w of

fu e l pu rc ha se costs passed throug h to customers throug h fuel a djustment clauses, we decli n e t o ad o pt that
re a so nin g he re . I ns te a d, we fi nd pe rs ua siv e the dis se nti ngop ini on to t hat c a se , a rguin g that, b e c a

us e “rates cal cu l at ed u n d er the fuel a djustment clause g o into effe ct without advanc e appr oval by the [reg ulatory

ag ency ], the utilit y cannot validly expect that char g es thus collecte d are insulated from retroa ctive modification.” Id . at 299 (Abr ahamson, J., dis sentin g ) . Many other c ourts have r eac hed 19 simil ar c onclusions. We have c oncluded that the pr oper c hara cter ization of the Comm i s s ion’s 2019 79 ); Southern Cal. Edison Co. v. Public Util. Comm’n , 576 P.2d 945, 954-55 (Cal. 1978). En te x a pp e ars to ma ke an a dd iti on a l argume nt— that th e pe ri od

to b e su bje c t to re vie w i s 21 not limi ted in a wa

y that will pass constituti onal muster conc erningits ve sted rig hts in the approved rate s. See Te x. Con st. art . I , § 16 ; Southwestern Bell Tel. Co. v. Public Util. Comm’n of Tex. , 615 S.W .2d 947, 956-57 (Te x . App.—Austin 1981), writ r ef’d n.r.e. , 6 22 S.W. 2d 82 (T e x. 19 81 ). Thus , En te x ar g ue s, the Co mm is sion’ s r e vie w c ann ot f un c tio n a s an e xce pti on to t he ru le a g a ins t re tr oa c tiv e rate makin g . We e mph a size that ou r h old inghe re is that th e ru le do e s n ot a pp ly to retroa ctive re view of g as purc hase c osts under a PGA clause . The Commission’s review is there fore no t an “ex cept io n” to the ru le . In a ny e ve nt, En te x did n ot p re se nt t his a s- a pp lie d v e ste d- ri g hts challeng e to the Commi ssion, a nd we will not consider it on appe al. See Tex as W ater Comm’n v

. Bu sh y Cre e k Mu n. Ut il. Di

st. , 9 17 S.W. 2d

19 , 2 3- 24 (T e x. 19 96 ); Buddy Gre gg Motor Homes, I

nc. v. Motor Ve hicle Bd. , 1 56 S.W. 3d 91 , 1 04 (T e x. Ap p. —A us tin 20 04 , p e t. d e nie d) ; Am aralW hit te nb e rg

v . A lan is , 123 S.W .3d 714, 719 n.4 (Tex. App.—Austin 2003, no pet.). 26 re vie w r e c og nize s th a t in c re a se d co ns ume r c ha rg e s r e su lti ngfr om g a s p ur c ha se s w e re no t pr od uc ts of rate makin g . We the re fo re ho ld t hat th e y c ann ot b e re nd e re d invio la ble by the ru le a g a ins t
re t ro ac t i v e r at em ak i n g. 21
Conclu sion concernin g retroactive re views of gas purchases

After car eful re view of Ente x ’s ar g uments, w e h a v e c o n c lu d e d

tha t the Commi ssion’s claimed a uthority to conduct re troac tive revie ws of g as purc hases and to or der r efunds ha s statutory
s u p p o rt an d d o es n o tv i o l at e ei t h er t h e fi l ed ra t e do ct ri n e or t h e r u l e a gai n s tre t ro ac t i v e r at em ak i n g. We overrule Entex’s first issue. Expe nse r e im bur se m e nt

I n it s se c on d is su e , E nte x ar g ue s that re tr oa c tiv e re vie w of its g a s p ur c ha se s is no t a

“ rate makin g pr oc e e din g ” in wh ic h the Com mis sio n c ou ld re qu ir e it to re imb ur se the City fo r i ts c os ts for pa rticipating in the revie w. See Tex. Util . Code Ann. § 103.022. We ag ree .27 “The g as utilit y in a

rate making proce eding shall reimburse the g overningbody of the municipality

f o r th e r e a s o n a

b le c o s t o f

th e s e r v ic e s o f a p e r s o ne n g a g e d

u n d e r [th e s tatute ] t o the extent the applicable r eg ulatory authority deter mines rea sonable.” Id . § 103.022 ( b ) . As noted above , t h e u t i l i t i e s c o d e d e f

i n e s “ r a t e ” b r o a d l y: (A ) any c omp e ns a tio n, tari ff

, c ha rg e , f are , to ll, re nta l, o r c la ssi fi c a tio n th a t is d i r e c tly or indirec tly

demande d, observe d, char g ed, or c ollected by a g as utili t y fo r a se rv ic e , p ro du c t, or c omm od ity de sc ri be d in the de fi nit ion of g a s u til ity

in t his section; and (B ) a rule , regulation, prac tice, or c ontrac t affe cting the compensation, tariff, c har g e, far e, toll, rental, or c lassification.
Id . § 101.003(12). A “ proce eding ” is a hearing , investigation, inquiry , or ot her procedur e for finding fac ts or m aking a decision under GURA. Id
. § 101.003(11). The term includes a denial of r elief or dismiss al of a

complaint. Id
. Under GURA, a utility ’s rates may be cha ng ed in only

two way s—by

petition of the utilit y or by a rate-setting authority , such as the C ommissi on or t he C ity
. See id . §§ 104.102, .151. A p r o c e e d i n g t h a t c h an g e s t h e a m o u n t c h ar g e d c u s t o m e r s m ay b e a r a t e m ak i n g p r o c e e d i n g in circ u m s t an ce s wher e the pr ocee ding is func tionally equivalent of

the proc edure s for notice and hear ing describe d in subchapter s C and D of the utilities code. See Southwestern Pub. Serv. Co. v. Public Util. Comm’n of Tex. , 962 S.W. 2d 20 7, 21 9- 20 (T e x. Ap p. —A us tin 19 98 , p e t. d e nie d) ; see als o Tex. Util
. Code Ann. §§ 104.103-.151. “[N]ot all matters that have a pot ential ef fec t on rates
are rate making proce eding s. Only matters dire ctly

resulting in chang ed rates constitute rate making proce eding s.” Southwestern Pub. Serv. Co. , 962 S.W .2d at 220. The requireme nt that a ratemakingT h e C i t y ’s petition to the Comm ission to enga g e in re troac tive revie w of Entex’s g as 22 purc ha se s r e fl e c ts this dis tin c tio n. Th e City did no t c e de its ju ri sd iction t o s e t r a te s. I ns te a d, it alleg ed only

that (1) Entex’s g as purcha ses wer e unrea sonable; (2) Entex’s allocation of purc hased 28 proceed i ng be the r esult of some sort of a pplication to chang e the amount of money a utility can char g e its c ustomers ensure s “that the proc eedingis one direc tly devoted to setting rate s and is not one per iphera lly

related to rate s.” Id . at 219. The Ci ty argues t hat t he procee dings at issue in Southwestern Public Servic e Co. , 962 S.W. 2d a t 21 7- 20 , a

re su bs tanti a lly

ide nti c a l to tho se a t is su e in th is cas e and sh ou ld e nti tle it t o
re imbursement of its expenses. I n Southwestern Public Servic e Co. , w e c o n s id e r e d th e issue of whether fuel re conciliation proc eeding s in the cont ext of electricity regulation were “ratemaking proce eding s.” Id . T he uti lity in t hat c a se so ug ht r e vie w t o rec on c ile its fu e l e xpe ns e s w he n it s “pre deter mined customer rates” r esulted in over- or under -re cover y of its fuel expenses. Id . at 210. We held that those rec onciliation proce eding s were the funct i onal equivale nt of rate making proce eding s beca

use the a ctual amount of the rate was fix ed in an earlier proce eding
. Id . at 219-20. The purpose of the re conciliation proc eeding , in other words, w as t o chang e the r ates that ha d no provision for allowing a pass-throug h for costs related to va riations in the cost of fue l. Se e id . As we have explained above , the PGA clause s in this case are an integ ral part of the a pproved r ate. No pa rt y is atte mpt ingto m od if

y the c la us e s the mse lve s, on ly to re vie w co mpl ianc e wi th t he rate . T hu s, the proc eeding s at issue in Southwestern Public Servic e Co. are not sim i l ar t o t h o s e we are consideringhere
.

We have a lrea dy

conclude d that the issue prese nted here is one conc erningalleg ed misapplication of Entex’s approved r ates, not the setting of Entex’s rates. The City is not seeking 22g as discriminated ag ainst residential and small c ommercia l c ustomers; (3) its tar iffs wer e false a nd mi s l ea d i n g (b u t did not request that new rate s be set); a

nd (4) the PGA c lause include d improper char g es. 29 to adjust the formula c ontained in the PGA clause or to c hang e Entex’s rates. I t is merely reque sting
a revie w of g as purcha ses to e nsure that the customer char g e complies with E ntex’s approved rate. As a re su lt, the se pr oc e e din g s are no t “ ra te makin g pr oc e e din g s, ” and the City is no t e nti tle d to reimburse ment for its costs for its par ticipation in the review . We sustain Entex ’s sec ond issue.
CO NC LU SION We have c oncluded that the Commission has the authority to review Entex’s past g as purcha ses when the costs associate d with those purcha ses wer e passe d throug h to Entex ’s customers throug h the application of t he P GA clauses i n Entex’s filed rates and that the C ommissi on has the po we r t o o rd e r r e fu

nd s if it de te rm ine s that En te x’s g a s purc ha se s w e re imp ru de nt. We h a ve a lso deter mined that the Commiss ion’s exercise of those power s do not violate the filed rate doctrine or the rule a g ainst retroa ctive ratemaking , and we thus affirm the judg m en t of the district cour t
conce rning those is s u es . We emphasize that Entex has only prese nted for our

revie w fa cial challeng es to the Commissi on’s authority to conduct the pr

udence revie ws. We express no opinion
re g ard ingoth e r i ssu e s, if

any , th a t mi g ht b e ra ise d b y the Com mis sio n’ s a

pp lic a tio n of thi s a

uth or ity in any particula r circ umstance. We have a ls o fo u n d t hat a pr udence revie w is not a rate making proce eding for purp os e s o f util iti e s c od e se c tio n 1 03 .0 22 (b) , and the re fo re the City is n ot e nti tle d to re c ov e r i ts expenses incurre d while par ticipating in those pr ocee dings. A ccor dingly , we r ever se the judg ment30

of the district cour

t in part an d rende r judg ment that the City is not entitl ed to its ex penses unde r utilit ies code section 103.022(b)
.

Bob Pembe rton, J ustice Be fore Chief J ustice L aw, Justi ces B . A. Smith and Pemberton Affir med in Part; Reverse d and Rende red in Part Filed: Apr il 21, 200631 AP P ENDIX A EN TEX RA TE SHE ET RESIDENTI AL SERVICE RATE SCHE DULE NO. R-1446-2 AP P LIC AT ION OF SCH ED UL E

Th is s c he du le is a

pp lic a ble to c us tom e rs re c e ivi ngg a s f or us e s u su a l in

a ho me throug h a sing le meter

servinga s i n gle family

dwelling and its relate d structure s. Natura l ga s supplied here under is for the i ndividual use of the c ustomer at one point of de livery and shall not be re so ld o r s ha

re d w ithoth e rs . NE T M ON THLYRA TE

First 400 cubic f

eet or less $9.19 Next 2,600 cubic f

eet .6536 per 100 c ubic fe et Next 7,000 cubic f

eet .5412 per 100 c ubic fe et Over 10,000 cubic f

eet .5208 per 100 c ubic fe et M IN IM UM M ON THLYBILL $9.19 P AYMENT Bills shall be re ndere d on a monthly basis and ar e d u e an d p ay able within ten (10) da y s f ro m th e date of

bil l. P UR CH ASE D GAS A DJ UST M EN T P RO VI SION

The a bove net monthly

rate per unit sold is predicated upon a pr ice o f natura l ga s purcha sed for

resa le her eunder

of $4.5705 per

Mcf. To the extent that ENTEX’s price of natura l ga s to be purc hased ( adjusted to corr ect a ny prior var iations from ac tual costs) for re sale he reunde r inc re a se s o r d e c re a se s, sa id ne t monthly ra te sh a ll be a dju ste d up or dow n to re fl e c t (i) c ha ng e s in such cost of g as per unit sold and (ii) chang es in g ross rec eipts taxes re sulting from such incre ases or decr ease s in the net monthly rate . For purposes of c alculatingsaid adjustment, it shall be proper for EN TEX to deter

mine its cost of g as fr om its several suppliers a nd the g ross rec eipts tax es to be paid on the basis of a

logic al g eog raphic al ar ea. I f ENTEX r ece ives any

ref unds of any

incre ased c ost of purcha sed g as that have been passed on unde r this provision, a ref und shall be made to customers ser ved by this rate sche dule.