Opinion ID: 2105618
Heading Depth: 2
Heading Rank: 1

Heading: Does the UCC Apply to SWEPCO'S Tariff?

Text: SWEPCO contends that the UCC does not apply here. SWEPCO argues that its utility service is not a good under article 2 of the UCC, because its dominant aspect is not the electric current's physical characteristics, but the services that SWEPCO provides. Further, SWEPCO contends that the UCC's general presumptions must give way to specific tariff provisions that the PUC approves under its exclusive jurisdiction. Moreover, SWEPCO asserts that even if the UCC applies to SWEPCO's tariff, the PURA and PUC regulations prohibit SWEPCO from bargaining with its customers to vary the tariff's terms. Thus, SWEPCO argues, SWEPCO could not contract with Grant for additional protections beyond those the tariff specifically provides. In response, Grant argues that a utility cannot absolve itself from all responsibility for its negligence. Furthermore, Grant asserts that the PUC's approving SWEPCO's tariff does not relieve SWEPCO of the duty to protect a customer from injuries the utility's own negligence causes. Grant argues that a tariff's mere existence cannot shield SWEPCO from liability if it acts in an unreasonable manner. Therefore, Grant contends, the tariff's limitation on liability for personal injury is unconscionable under the UCC. We disagree with the court of appeals' conclusion that article 2 of the UCC applies here. See 20 S.W.3d at 771-72. Rather, we conclude that applying article 2 would impair the comprehensive statutory scheme regulating the sale of electricity to Texas consumers. And the UCC expressly prohibits such an application. Tex. Bus. & COM.CODE § 2.102; see also Olson, 341 N.W.2d at 378; Pugh, 450 P.2d at 465. The PURA expressly provides that its purpose is to establish a comprehensive and adequate regulatory system for electric utilities to assure rates, operations, and services that are just and reasonable to the consumers and electric utilities. Tex. Util.Code § 31.002(a). Under the PURA, the PUC controls a utility's rates, operations and services. Tex. Util.Code § 31.001(b). The PUC does so as a substitute for competitive forces that would typically regulate prices in a free enterprise market. See Tex. Util.Code § 31.001(b). Thus, unlike contracts for the sale of goods that unregulated companies may enter into in a free market, a public utility can only enter into contracts consistent with the regulatory scheme. Accordingly, applying the UCC would impede the PUC's authority to approve and determine a utility's rates, operations, and services. Tex. Util. Code § 31.001(b). Additionally, the PURA regulatory scheme directly conflicts with UCC section 2.719's prohibiting limitations on personal-injury liability in consumer goods transactions. When a regulatory agency approves a tariff, courts presume, under the filed-rate doctrine, that the tariff is reasonable. See, e.g., Western Union, 256 U.S. at 572, 41 S.Ct. 584; Auchan, 995 S.W.2d at 672; Metro-Link Telecom, 919 S.W.2d at 692. Here, under the pre-1999 PURA, utilities had to submit tariffs for the PUC's approval before conducting business in Texas, and they are bound by those tariffs' terms. See Tex. Util.Code §§ 32.101, 36.004; 16 Tex. Admin. Code § 23.24. To apply the UCC's general provision prohibiting limitations on liability to SWEPCO's tariff would directly conflict with the presumption that the tariff is reasonable because the PUC approved it under its ratemaking authority. See Farmers Livestock Exchange, 393 N.W.2d at 68. When such a conflict exists, the comprehensive regulatory scheme must prevail over the UCC's general provisions. See Hughes, 355 So.2d at 81; Gimbel, 286 N.W.2d at 508. Accordingly, we hold that the UCC does not apply to SWEPCO's tariff. Consequently, the court of appeals erred in holding that UCC section 2.719 requires a conclusion that the tariff's limitation on liability for personal injury is prima facie unconscionable.