Gas Utilities and Pipeline Safety

In January, 1920, Mayor Wozencraft of Dallas considered the gas problem the most vital one city officials in North Texas had to face. For the second consecutive winter, people in North Texas were suffering due to gas shortages. Lone Star Gas Company and its subsidiary corporations were the main, if not the only, suppliers of gas to the area. Not regulated, they felt free to enter into contracts with cities and towns at the highest possible price -- or not to enter into agreements with them at all. Dallas and Fort Worth were in a particularly bad position because Lone Star wanted not only to raise rates but also to serve the other North Texas cities, and even new cities with new pipelines, before delivering adequate supplies to the two biggest cities of the area.

Fort Worth and Dallas demanded that the company first improve its service and then higher rates would be considered. Lone Star stated it was unprofitable to serve the two cities at the existing rates, refused to give them more gas and made it clear that the new West Texas pipeline they were to build would serve more profitable cities, leaving Dallas and Fort Worth with poor service.

To make matters worse, the cities did not have the authority to force regulatory powers. They could appeal to the courts, but their attempts to secure adequate service through litigation and negotiations with the gas company were futile. The gas customers had even pleaded with the Railroad Commission to see that no other towns were served before they received an adequate supply. Railroad Commissioner Clarence Gilmore explained that the Commission had no statutory authority to step in. It could only bring producers, handlers and consumers of gas together and let them try to work it out on their own.

After the first winter of shortages, Representative Ben. L. Cox of Abilene introduced a bill in the Legislature to put gas carriers under Commission jurisdiction since the Commission was already regulating the natural gas production industry. Lone Star bitterly opposed regulation and the bill was defeated.

After the second winter of shortages, Governor W. P. Hobby called a special session of the Legislature in 1920, urging passage of regulatory legislation. Representative Cox once again introduced his bill which passed the House. In the Senate, it encountered bitter opposition on the grounds of threatening home rule, the ability of municipalities to regulate their own utilities. By amendment, Representative Cox solved that problem. The cities were allowed full control of the public utilities and the right to make rates and regulations. However, the utilities were given the right to appeal to the Railroad Commission if the city's charges were deemed unsatisfactory. The "Cox Act" was passed on June 12, 1920.

On March 18, 1937, a disastrous accident involving natural gas occurred in New London, Texas. The consolidated Junior-Senior High School exploded, resulting in the death of 293 students, teachers and visitors. As a result of this tragedy, the 45th Legislature enacted House Bill 1017 which amended Article 6053, Texas Revised Civil Statutes, 1925, giving the Railroad Commission the authority to adopt rules and regulations pertaining to the odorization of natural gas or liquefied petroleum gases. On July 27, 1937, Gas Utilities Docket 122 was adopted and the Commission began enforcement of odorization requirements for natural gas.

In the late 1980s, the Commission's gas utility activities and transportation programs were brought together as the Transportation/Gas Utilities Division. Its job is to ensure a continuous, safe supply of natural gas at a just and reasonable price for Texas consumers, through regulation of the transmission, distribution, and sale of gas by gas utility companies operating in the state.

The Commission approves rates for unincorporated areas of the state. City governments continue to carry responsibility for approving rates for citizens living inside their city limits. The Commission becomes involved in the rate-setting process inside cities only when the city government and the utility company can't agree on rates. Then, the Commission can hear appeals from either. Rate recommendations, based on evidence presented, are made to the Commissioners for final approval.

To determine a reasonable rate, the Commission examines a utility's expenses and revenues to make sure the company can adequately serve its customers. By law, a utility must have rates that give it the opportunity to buy gas, pay its employees, earn a reasonable return on invested capital, and maintain its system as safely as possible.

The division's pipeline safety section has been responsible for enforcing safety rules and regulations governing the transmission and distribution of natural gas throughout the state since late 1970. Personnel based in field offices inspect natural gas and hazardous liquid facilities in the state to evaluate their design, construction, operation, and maintenance. The emergency procedures of pipeline companies are also reviewed. The section began its hazardous liquids safety program in October 1985.