Utility Relocation:

City of Richardson Prevails at Texas Supreme Court 

February 9, 2018

Last week, the Texas Supreme Court concluded in City of Richardson v. Oncor Electric Delivery Company that a city can require an electric utility to relocate its facilities and pay for that relocation as a result of a city project. 

The dispute began in 2010 when, pursuant to franchise terms, the city requested that Oncor relocate its utility poles in 32 alleys for alley reconstruction and widening.   Even though the franchise required the relocation of Oncor’s facilities – at Oncor’s cost – Oncor refused to do so.

In 2012, the city filed suit in state district court in Dallas to enforce the franchise provisions and, alternatively, to enforce the common law rule on relocation.  The common law rule has come from court opinions over the years concluding that the public’s right to use streets is paramount to a private company’s.  In 2014, the trial court ruled in favor of the city.

The appeals court later reversed and rendered judgment in favor of Oncor.  Why the reversal?  During the period in which the dispute occurred, Oncor had filed a rate case with the Public Utility Commission (PUC) seeking changes in  its  rates, operations, and services as set forth in its “tariff.”  The PUC defines “tariff” as “the schedule of a utility…containing all the rates and charges stated separately by type of service, the rules and regulations of the utility, and any contracts that affect rates, charges, terms or conditions of service.” 

In 2011, Oncor and the city reached a settlement on the rate changes, and the city enacted an ordinance accepting a proposed settlement with new tariff rates.  There was a dispute at the trial court about whether the tariff documents were properly in evidence.  The appeals court concluded that they were, and that the city had agreed to the tariff in the 2011 settlement ordinance.  Those issues were the deciding factors in the case because the tariff had a standard term providing that “the entity requesting such removal or relocation, shall pay to Company the total cost of removing or relocating such Delivery System facilities.” According to the appeals court, the case seemed to do away with the common law rule and replace it with a new interpretation of the language in a utility’s tariff.  (All investor owned electric utility tariffs have similar language.)  Of course, a state statute still mandates that an electric utility pay for relocations for the widening or straightening of a street.  But, according to the court, an alley isn’t a street.

The Texas Supreme Court reversed the appeals court, and concluded that the common law, coupled with the city’s franchise agreement, trumps the utility’s tariff. According to the Court: 

“As a home-rule city, Richardson has exclusive control over its public rights-of-way and has authority to manage the terms of use of those rights-of-way. Richardson did so in the Franchise Contract, which is consistent both with well-established common law and with the Utilities Code in requiring a utility forced to relocate facilities from a public right-of-way to do so at its own expense. The Tariff, on the other hand, governs Oncor’s relationship with its Retail Customers, and does not address Richardson’s relocations to accommodate the Alley-Relocation Project. For the reasons expressed above, we reverse the judgment of the court of appeals and reinstate the judgment of the trial court.

The result is a good one, and the City of Richardson should be commended for staying the course to the state’s highest court. 

TML member cities may use the material herein for any purpose. No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas Municipal League. 

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