Could the Greater Texoma Utility Authority promise not to serve areas claimed by Denison without the city's consent?

Texas AG Opinion JM-181: Texoma Water Service Agreement

Plain-English summary

JM-181 concluded that the Greater Texoma Utility Authority could not contract with Denison to recognize an exclusive city water-service right and promise to serve parts of Grayson County only with Denison's consent.

"The Greater Texoma Utility Authority may not contract with the city of Denison to acknowledge Denison's exclusive right to provide water service to certain geographical areas of Grayson County ... and bind itself to provide service therein only with the consent of the city of Denison."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1984/jm0181.pdf

The authority had a governmental duty to decide the people it served and the conditions under which it sold water. JM-181 said that police-power-type duty could not be bargained away.

"The police power of a government or of a governmental agency can never be abdicated or bargained away, and is inalienable even by express grant."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1984/jm0181.pdf

The proposed contractual clause was also unnecessary. Denison already held the certificate to serve the areas, and the regulatory scheme permitted only one retail public utility certificate for a given area.

"Only one retail public utility may obtain a certificate of convenience and necessity for any given area."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1984/jm0181.pdf

"The city of Denison is certificated by the Public Utility Commission to provide water service within certain areas of Grayson County. The Authority therefore may not be certificated for that area."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1984/jm0181.pdf

Currency note

This opinion was issued in 1984. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What exactly did Denison want the authority to promise?

Denison wanted a formal agreement that the authority would not provide water service to specified county areas served by the city without the city's consent.

"The city of Denison requested that the Authority formally agree not to provide water service to certain areas of Grayson County served by the city of Denison."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1984/jm0181.pdf

Why could the authority not make that promise?

The opinion treated the choice of customers and service conditions as a governmental function that could not be surrendered through contract.

"The attempt of the Authority to bargain away its governmental duty to the city of Denison is in direct conflict with Banker and is therefore unenforceable."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1984/jm0181.pdf

Were Denison and the authority both regulated utilities?

Yes. JM-181 said both qualified as retail public utilities under the Public Utility Regulatory Act.

"Both the city of Denison and the Authority are regulated by article 1446c, V.T.C.S., the Public Utility Regulatory Act (PURA) as retail public utilities."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1984/jm0181.pdf

What did the certificate rule prohibit?

It prohibited a retail public utility from extending service into an area lawfully served by another utility without the required certificate covering that area.

"No retail public utility may furnish, make available, render, or extend retail public utility service to any area to which retail utility service is being lawfully furnished by another retail public utility" without the required certificate.
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1984/jm0181.pdf

Did the authority have an exclusive right that it needed to surrender?

No. The opinion said Denison's certificate meant the authority could not obtain a certificate there, so it had no governmental right to bargain away in that area.

"The result is that the Authority cannot nor need not bargain away a governmental right which it does not possess."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1984/jm0181.pdf

Background and statutory framework

The Greater Texoma Utility Authority was created in 1979 as a conservation and reclamation district under article XVI, section 59 of the Texas Constitution.

"The Greater Texoma Utility Authority was created by the Sixty-sixth Legislature, Acts 1979, chapter 97. The Authority is a conservation and reclamation district pursuant to article XVI, section 59 of the Texas Constitution."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1984/jm0181.pdf

Its jurisdiction originally included Denison and Sherman, and the authority later annexed additional areas.

"Initially, the jurisdiction of the Authority included only the cities of Denison and Sherman. However, additional areas have been annexed by the Authority."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1984/jm0181.pdf

The regulatory statute defined a retail public utility broadly to include municipalities, political subdivisions, agencies, and other entities controlling facilities that provided retail utility service.

"'Retail public utility' means any person, corporation, water supply or sewer service corporation, municipality, political subdivision or agency, or cooperative corporation ... operating, maintaining, or controlling in Texas facilities for providing retail utility service."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1984/jm0181.pdf

Citations and references

• The authority's 1979 enabling legislation and article XVI, section 59 supplied its governmental status.

"The Authority is a conservation and reclamation district pursuant to article XVI, section 59 of the Texas Constitution."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1984/jm0181.pdf

• PURA sections 49(a) and 50(2) supplied the retail-utility definition and exclusive certificate framework.

"Section 50(2) of PURA requires both entities to obtain a certification of convenience and necessity for any area they seek to serve."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1984/jm0181.pdf

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-0181
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1984/jm0181.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain. The linked PDF is authoritative.

The Attorney General of Texas
July 25, 1984
JIM MATTOX
Attorney General

Supreme Court Building Mr. Charles E. Neml:: Opinion No. JM-181 P. 0. BOX 12646 Au~lin, TX. 7671 l- 2546
Executive~Director
51214752501 Texas Department o:iWater Resouries Re: Validity of agreement
Telex 910/674-1367
P. 0. Box 13087, C;x),ltol
Station between the city of Denison
Telecopier 5121475.0266 Austin, Texas 78'1.l and the Greater Texoma
Utility Authority
714 Jackson, Suite 700
Dallas, TX. 75202.4506
Dear Mr. Nemir:
214/742-6944
You ask whethI,:: the Greater Texoma Utility Authority [hereinafter the Authority] ma); contract with the city of Denison to acknowledge 4624 Alberta Ave., Suite 160
El Paso, TX. 799052793
Denlson's exclusf?,t right to provide water service to certain
9151533.3464
geographical areas of Grayson County. Certain of these areas comprise
service areas of thz Authority. In effect, you inquire as to whether the Authority may llind itself to provide service within these areas
,,lOOt Texa$, Suite 700
only with the consl?llt
of the city of Denison.
,ouston, TX. 77002-3111
713/223?s6M
The Greater 1'e:xomaUtility Authority was created by the Sixty- sixth Legislature, Acts 1979, chapter 97. The Authority Is a con-
806 Broadway, Suite 312
servation and reclmation district pursuant to article XVI, section 59
Lubbock, TX. 79401.3479 of the Texas Comjtitution. Initially, the jurisdiction of the
606/747-5236
Authority included only the cities of Denison and Sherman. However, additional areas hme been annexed by the Authority. In 1983, the
4309 N. Tenth. Suite B
city of Denison requested that the Authority formally agree not to
McAllen. TX. 76501.1685
provide water servt,:eto certain areas of Grayson County served by the
5121882.4547
city of Denison.

200 Main Plaza. Suite 400
In Banker v. Jefferson County Water Control and Improvement
San Antonio, TX. 76205.2797 District No. One, :?I7S.W.2d 130 (Tex. Civ. App. - Beaumont 1955, writ
512/225-4191
ref'd n.r.e.). the court held that a water district created uursuant
to article XVI, tzection 59 is vested with certain gove&uental functions. Among ,cllesefunctions is the duty to determine the persons An Equal Opportunity/
Affirmative Actlon Employer to whom and the conditions upon which any water owned by the district is sold. The court held that such governmental functions are in the nature of police ptxrersand that:

The police power of a government or of a governme:1:al agency can never be abdicated or bargained away, and is inalienable even by express grant.

-Id. at 134. r .

Mr. Charles E. Nemir - Page 2 (JM-181)

The attempt of the Alchority to bargain away its governmental duty to the city of Denison is in direct conflict vith Banker and is therefore unenforceable. However, such a contractual provision is unnecessary in the present situation.

Both the city of DelLson and the Authority are regulated by article 1446~. V.T.C.S., the Public Utility Regulatory Act (PURA) as retail public utilities. Section 49(a) of PURA provides:

'Retail public utility' means any person, corporation, waiisr supply or Sewer service corporation, munL:ipality, political subdivision or agency. or cooperative corporation, now or hereafter operat:lug,maintaining, or controlling in Texas facilitL,?sfor providing retail utility service.

As such, section 50(2) of PURA requires both entities to obtain a certification of convenience!and necessity for any area they seek to serve :

Except as otherwise provided in this article no retail public ut3lity may furnish, make available, render, or extend retail public utility service to any area to which retail utility service is being lawfully furnishad by another retail public certificate of prlblic convenience and necessity that includes t:x area in which the consuming facility is located.

As provided in section 50(2) of PURA. only one retail public utility may obtain a certificate oj' convenience and necessity for any given area. The city of Deniscxl is certificated by the Public Utility Commission to provide water service within certain areas of Grayson county. The Authority therefore may not be certificated for that area. The result is that t:heAuthority cannot nor need not bargain away a governmental right which it does not possess.

SUMMARY

The Greater 'I'rxomaUtility Authority may not contract with tha city of Denison to acknowledge Denison's exc1usix.eright to provide water service to certain geographical areas of Grayson County, some of which <,omprise service areas of the Authority, and bind itself to provide service therein only with the consent of the city of Denison.

L-LAG
Very truly yours a

JIM MATTOX
Attorney General of Texas
Mr. Charles E. Nemir - Page :; (JM-181)

TOM GREEN
First Assistant Attorney Genwal

DAVID R. RICHARDS
Executive Assistant Attorne:rGeneral

Prepared by Jerry Benedict
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

Rick Gilpin, Chairman
Jerry Benedict
David Brooks
Colin Carl
Susan Garrison
Jim Moellinger
Nancy Sutton

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