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TX Case Challenging LDC Transportation-Only Service

TX Case Challenging LDC Transportation-Only Service

While supplier choice is catching on across the land, Edinburg, TX, Pop. 29,885, is suing its local distribution company for providing 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and complex lawsuit, rests on a provision of a franchise agreement between the city and Southern Union Gas Co. that was originally made with Rio Grande Valley Gas Co. in 1985. The provision says 4% of gross income from all gas sales is to be paid to the city of Edinburg. Southern Union, which bought Rio Grande in 1993, passes the 4% tax on to customers as a separate line item on their bills. The city maintains it is being deprived of revenue that would be realized if the large end-users were captive LDC customers. The city maintains the LDC never had permission to allow the end-users to buy their gas from third-party marketers.

That claim is disingenuous because the city functions as the LDC's regulator, and transportation-only tariffs were in fact approved by the city, said Andre "Butch" Bouchard, an attorney for Southern Union Co. "Eventually they approved the actual transportation service and the charge that we can charge for the service. These were approved by city ordinance. Additionally, the City of Edinburg General Hospital has been a transportation customer for 11 years." The city claims that because it was a separate hospital authority at the time it entered into a transportation agreement it wasn't aware of it.

Bouchard suggested the lawsuit is one driven by the city's outside legal counsel, the Houston law firm of O'Quinn &amp Laminack, which became famous for its breast implant litigation against Dow Corning as well as seeking to tax pipelines for crossing city streets in a number of Texas municipalities. "The first time the city ever complained to Southern Union was by virtue of this lawsuit," Bouchard said. "No one contacted us but the attorney and only after the city had retained him to sue Southern Union. The city also is our regulator, and as a regulator they have the right at any time to audit our accounts, and they never availed themselves of that provision until they had already filed suit against us."

Benjamin Hall, the O'Quinn &amp Laminack attorney representing Edinburg, could not be reached by press time. The case went before a jury in the 92nd District Court June 22 and could continue for six more weeks, Bouchard said.

Joe Fisher, Houston

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