             THEA'H~'ORNEYGENEEAL
                         OF-WAS




Mr. Wm. J. Burke                  Opinion No. W-1044
Executive Director
State Board of Control            Re:   Whether the State of Texas
Austin, Texas                           now has a valid contract
                                        with the City of Austin
                                        for supplying of electrical
                                        power to the state build-
                                        ings in the Capitol complex
                                        at the rates set forth In
                                        the contract dated March
                                        15, 1935, and related ques-
Dear Mr. Burke:                         tions.
        Your request for an opinion reads as follows:
              "On March 15, 1935, the State of Texas,
        acting by and through the State Board of Con-
        trol, and the City of Austin, acting by and
        through Its City Manager, entered into a con-
        tract, a copy of which is attached, whereby
        the City of Austin was to furnish electrical
        power to the institutions at that time under
        the control and supervision of the Board of
        Control. In March, 1936, a purported contract
        between the City of Austin, executed only by
        the City Manager of the City of Austin, a
        copy of which is attached, purportedly extended
        the terms of the contract entered into March
        15, 1935. In November, 1943, the Chairman of
        the Board of Control received a letter from
        the acting City Manager of the City of Austin,
        a copy of which Is attached, wherein it was
        stated that the 'State Capitol and buildings'
        would be Included in the contract dated March
        15, 1935.
             "From March 17, 1935, through and includ-
        ing November, 1959, the State of Texas has paid
        for the supply of electricity used in connection
        with the Capitol complex at the rate prescribed
        in the contract with the City of Austin, dated
        March 15, 1935. The City of Austin has accepted
Mr. Wm. J. Burke, page 2.   (WW-1044)


        such payments. The budget proposals for the
        State Board of Control for appropriation for
        the payment to the City of Austin for electric
        power were presented to the Legislature on the
        assumption that the rates in existence during
        the biennium ending August 31, 1959, would con-
        tinue In existence through the biennium ending
        August 31, 1961, and based on those figures,
        the Legislature appropriated Item 65 to the
        State Board of Control.
             "On or about August 31, 1959, the City of
        Austin adopted new electric rate schedules.
        For the first two months of the biennium ending
        August 31, 1961 (the months of September and
        October, 1959), the City of Austin submitted
        its bill under rates set forth In the contract
        dated March 15, 1935, and such bills have been
        paid by the State of Texas and accepted by the
        City of Austin. The City of Austin billed the
        State of Texas for electric power during the
        month of November, 1959, at the new electrical
        rates adopted by the City of Austin on or about
        August 31,1959. This bill was rejected by the
        State Board of Control and returned to the City
        of Austin. The City of Austin then billed the
        State of Texas under the rate set forth In the
        contract dated March 15, 1935, and the State of
        Texas made payment of this bill and such payment
        was accepted by the City of Austin. Since Novem-
        ber 30,1959, until the present date, the City
        of Austin has billed the State of Texas under
        the new electrical rates adopted by the City of
        Austin on or about August 31, 1959, and such
        bills have been rejected by the State of Texas,
        and the City of Austin has refused to bill the
        State of Texas under rates set out in the con-
        tract dated March 15, 1935. No electrical bill
        has been paid by the State of Texas to the City
        of Austin for the months of December, 1959, Jan-
        uary, 1960, and February, 1960. If the rates
        adopted by the City of Austin on or about August
        31, 1959, are payable by the State of Texas,
        there are not now sufficient monies appropriated
        to the State Board of Control to pay for the
        electrical supply estimated to be needed for the
        biennium ending Ausust 31, 1961.
Mr. Wm. J. Burke, page 3   (ww-1044)


              'In view of the foregoing, your opinion
         is requested on the following questions:
              "1. Does the State of Texas, under the
         facts submitted, now have a valid contract
         with the City of Austin for the supplying of
         electrical power to the Capitol complex at
         the rates Identified and set forth in the
         contract dated March 15, 1935?
              "2. If your answer to Question No. 1
         is in the affirmative, does the City of Austin
         have the power to cancel the contract without
         the approval of the State of Texas through its
         duly authorized agents?
             "3. If your answer to Question No. 1
        is in the negative, does the State of Texas
        have any valid contract with the City of Austin
        for the supplying of electrical power to the
        Capitol complex? If your answer to this ques-
        tion is in the affirmative, what are the rates
        to be paid for the supplying of such electric
        power?
             "4. If your answer to Question No. 3
        is in the affirmative, and the rates to be
        paid the City of AUBtiII exceed the amount of
        the appropriation made for such purpose, is
        the State Board of Control subject to the pen-
        alties provided for in Section 3 of Article V,
        House Bill 4, Acts of the 56th Legislature,
        Third Called Session, 1959, Chapter 23, page
        442?
             "5. If the State of Texas does not now
        have an existing valid contract, may the State
        of Texas enter into a contract with the City of
        Austin calling for rates in excess of the amount
        appropriated for such purpose?"
         Subsequent to your request, the following information
has been furnished our office. The City of Austin billed the
State of Texas under rates set out In the contract dated March
15, 1935, with the understanding and stipulation that such bills
would not affect its claim for adjustment to the e!ectrical
rates adopted by the City of Austin on or about August 31, 1959,
and such bills have been paid by the State of Texas to the City
of Austin with the understanding that such bills and payment
Mr. Wm. J. Burke, page 4.   (WW-1044)


would not affect the claim, if any, of the City of Austin for the
difference in the rates under the contract dated March 15, 1935
and the electrical rates adopted by the City of Austin on or about
AW?Wt 31, 1959.
         We will answer your questions In the order they are pre-
sented in your request.
                       Question No. 1.
         "Does the State of Texas, under the facts
         submitted, now have a valid contract with
         the City of Austin for the supplying of
         electrical power to the Capitol complex
         at the rates identified and set forth in
         the contract dated March 15, 1935?"
         Under the terms of the contract attached to your re-
quest, the contract was automatically renewed for a one-year
period beginning March 17 of each year. Therefore, assuming
that the State of Texas and the City of Austin had the power
to enter into the contract dated March 15, 1935, and had the
power to call for automatic renewals, the State of Texas and
the City of Austin would have a valid contract until one of
the parties, by written notice, terminated the contract at
the end of a one-year period beginning March 17.
         In Attorney General's Opinion V-941 (lg@),   it was
held:
             "A public utility is usually a mono-
        poly operating under a franchise with the
        type of service defined and rates controlled.
        These factors make purchase of public utili-
        ty services on the basis of competitive bids
        Impracticable. The courts have recognized these
        conditions and have held that purchases of
        utility services do not come within the statutes
        which require 'supplies' to be purchased by compe-
        titive bidding."
         Therefore, you are advised that the City of Austin and
the State of Texas had the power to enter into the contract at-
tached to your request and such contract is a valid contract.
         Since the C!ty of Austin accepted the payments for the
months of March, lg58,through November, 1959, on rates called
for in the contract uated March 15, 1935, it Is our opinion
Mr. Wm. J. Burke, page 5,   (ww-1044)


that the State of Texas had a valid contract with the City of
Austin for the supplying of electrical power to the Capitol
complex at rates identified and set forth in the contract dated
March 15, 1935.
         Whether the State of Texas has a valid contract after
March 16, 1959, depends on whether the City of Austin cancelled
the contract pursuant to its provisions.
                       Question No. 2.
         "If your answer to Question No. 1 is in
         the affirmative, does the City of Austin
         have the power to cancel the contract with-
         out the approval of the State of Texas
         through its duly authorized agents?"
The provisions of the contract state:
        II
         . . . and the same is hereby renewed and
        extended in all of its terms and particulars
        for the period ending March 16, 1937; pro-
        vided, that unless written notice is given
        by either party hereto to the other party
        not less than thirty days before the expira-
        tion of this agreement, the said contract
        shall be continued for another year, and
        thereafter from year to year until terminat-
        ed by such written notice served not less
        than thirty days before the expiration of
        any one such yearly period."
         Therefore, under the terms of the contract, the City
of Austin had the power to cancel the contract on March 16,
1961, provided it had given written notice to the State Board
of Control of such cancellation at least thirty days prior to
March 1.6,1961. If the City of Austin has not cancelled the
contract pursuant to the above quoted provisions, it is our
opinion that the City of Austin does not have the power to now
cancel the contract prior to March 16, 1962, without the approv-
al of the State of Texas through its duly authorized agents.
                       Question No. 3.
        "If your answer to Question No. 1 is in the
        negative, does the State of Texas have any
        valid contract with the City of Austin for
        the supplying of electrical power to the
Mr. Wm. J. Burke, page 6.   (WW-1044)


         Capitol complex? If your answer to this
         question is in the affirmative, what are
         the rates to be paid for the supplying of
         such electric power?'
         In the event the City of Austin has cancelled the
contract by giving written notice to the State Board of Con-
trol of its desire to terminate the contract as of March 16,
1961, and assuming that the State of Texas and the City of
Austin have not entered into another agreement, the State of
Texas in that event would not have a valid contract with the
City of Austin, and the rates to be paid in any new contract
entered into would, of course, be subject to negotiations be-
tween the State of Texas and the City of Austin.
                       Questions Nos. 4 and 5.
        "If your answer to Question No. 3 is in the
        affirmative, and the rates to be paid the
        City of Austin exceed the amount of the appro-
        priation made for such purpose, is the State
        Board of Control subject to the penalties pro-
        vided for in Section 3 of Article V, House Bill
        4, Acts of the 56th Legislature, Third Called
        Session, 1959, Chapter 23, page 442?
        "If the State of Texas does not now have an
        existing valid contract, may the State of Texas
        enter into a contract with the City of Austin
        calling for rates in excess of the amount appro-
        priated for such purpose?"
         Section 3 of Article V, House Bill 4, Acts of the 56th
Legislature, Third Called Session, 1959, Chapter 23, page 442,
(General Appropriation Act), provides:
             "EXCESS OBLIGATIONS PROHIBITED. No
        department or agency specified in this Act
        shall incur an obligation in excess of the
        amounts appropriated to it for the respect-
        ive objects or purposes named. In the event
        this provision is violated, the State Auditor
        shall certify the fact and the amount of the
        over-obligation to the Comptroller, and the
        Comptroller shall deduct an amount or amounts
        equivalent to such over-obligation from the
        salary or other compensation due the responsi-
        ble disbursing or requisitioning officer or
        employee. This provislon is specified pur-
Mr.   Wm.   J. Burke, page 7.   (WW-1044)


             suant to Section 10, Article XVI, of the Constl-
             t&Ion of Texas."
         Section 3 of Article V specifically prohibits any
department from incurring any obligation in excess of the
amounts appropriated to the department for the respective
objects and purposes made in the appropriation. The State of
Texas cannot enter into a valid contract calling for an ex-
penditure in excess of the amount appro riated for that pur-
pose. Nichols v. State, 32 S.W. 452 (1ii95); Fort Worth Cavalry
Club v. Sheppard, 125 Tex. 339, 83 S.W.2d 660 (1935); Austin
National Bank v. Sheppard, 123 Tex. 272, 71 S.W.2d 242(143-4);
State v. Raldeman, 163 S.W. 1020 (Civ.App. 1913); State v. Steck
Company, 23b S.W.2d 866 (Civ.App. 1951, error ref.).
         You are, therefore, advised that the State of Texas
does not have the authority to enter into a contract with
the City of Austin calling for rates in excess of the amount
appropriated for such purposes.
         In answer to your fourth question, if the Board of
Control entered into a contract calling for an obligation In
excess of the amount appropriated to it, it would be subject
to the penalties provided for in Section 3 of Article V, House
Bill 4, Acts of the 56th Legislature, Third Called Session,
1959, Chapter 23.
                                SUMMARY
                 Under the facts submitted, the State of
                 Texas and the City of Austin now have a
                 valid contract for the supplying of elec-
                 trical power to state buildings In the
                 Capitol complex, and the State Board of
                 Control is not authorized to enter Into
                 any agreement with the City of.Austln
                 calling for an expenditure in excess of
                 the amount appropriated for such purpose.
                                      Yours very truly,
                                      WILL WILSON
                                      Attorney General of Texas



JR:zt
                                         ._   .




Mr. Wm. J. Burke, page 8.    (WW-1044)


APPROVED:
OPINION COMMITTEE
W. V. Geppert, Chairman
J. Milton Richardson
William T. Blackburn
John C. Steinberger
REVIEWED FORTHEATTORNEY     GENERAL
BY: Morgan Nesbitt
