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and complex lawsuit,rests on a provision of a franchise agreement between the city andSouthern Union Gas Co. that was originally made with Rio GrandeValley Gas Co. in 1985.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 since the city functions as the LDC’sregulator and transportation-only tariffs were in fact approved bythe city, said Andre “Butch” Bouchard, an attorney for SouthernUnion Co. “Eventually they approved the actual transportationservice and the charge that we can charge for the service. Thesewere approved by city ordinance. Additionally, the City of EdinburgGeneral Hospital has been a transportation customer for 11 years.The city claims that since it was a separate hospital authority atthe time they entered into transportation that they weren’t awareof it.”
Bouchard suggested the lawsuit is one driven by the city’soutside legal counsel, the Houston law firm of O’Quinn &Laminack, 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 & Laminack attorney representingEdinburg, could not be reached by press time. The case went beforea jury in 92nd District Court June 22 and could continue for sixmore weeks, Bouchard said.
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