While supplier choice is catching on across the land, Edinburg,TX, Pop. 29,885, is suing its local distribution company forproviding transportation-only service to large end-users.

The dispute, which is part of a large and complex lawsuit,rests on a provision of a franchise agreement between the city andSouthern Union Gas Co. that was originally made with Rio GrandeValley Gas Co. in 1985. The provision says 4% of gross income fromall gas sales is to be paid to the city of Edinburg. SouthernUnion, which bought Rio Grande in 1993, passes the 4% tax on tocustomers as a separate line item on their bills. The citymaintains it is being deprived of revenue that would be realized ifthe large end-users were captive LDC customers. The city maintainsthe LDC never had permission to allow the end-users to buy theirgas from third-party marketers.

That claim is disingenuous because the city functions as theLDC’s regulator, and transportation-only tariffs were in factapproved by the city, said Andre “Butch” Bouchard, an attorney forSouthern Union Co. “Eventually they approved the actualtransportation service and the charge that we can charge for theservice. These were approved by city ordinance. Additionally, theCity of Edinburg General Hospital has been a transportationcustomer for 11 years.” The city claims that because it was aseparate hospital authority at the time it entered into atransportation agreement it wasn’t aware of it.

Bouchard suggested the lawsuit is one driven by the city’soutside legal counsel, the Houston law firm of O’Quinn &ampLaminack, which became famous for its breast implant litigationagainst Dow Corning as well as seeking to tax pipelines forcrossing city streets in a number of Texas municipalities. “Thefirst time the city ever complained to Southern Union was by virtueof this lawsuit,” Bouchard said. “No one contacted us but theattorney and only after the city had retained him to sue SouthernUnion. The city also is our regulator, and as a regulator they havethe right at any time to audit our accounts, and they never availedthemselves of that provision until they had already filed suitagainst us.”

Benjamin Hall, the O’Quinn &amp Laminack attorney representingEdinburg, could not be reached by press time. The case went beforea jury in the 92nd District Court June 22 and could continue forsix more weeks, Bouchard said.

Joe Fisher, Houston

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