Data Foundry, Inc. v. City of Austin

Data Foundry, Inc. v. City of Austin

Opinion

 [*693]  Justice Huddle delivered the opinion of the Court.

The City of Austin, through its city council, sets the rates that Austin Energy, an electric utility owned by the City, charges to Austin residents for retail electric services. Data Foundry, Inc., an internet service [**2]  provider, purchases electricity from Austin Energy for its facilities in Austin. Data Foundry alleges that the rates charged by the City are illegal, and it filed a lawsuit to challenge those rates. The City filed a motion to dismiss under Texas Rule of Civil Procedure 91a. The trial court granted the motion on the sole ground that Data Foundry lacked standing because it failed to allege it had suffered a particularized injury. The court of appeals concluded Data Foundry suffered a particularized injury sufficient to confer standing but affirmed the dismissal of Data Foundry's claims in part on other grounds. We conclude that Data Foundry has standing to bring its claims, and we remand the case to the trial court.

Data Foundry is an internet service provider that operates data centers located within the boundaries of the City of Austin. The City owns and operates Austin Energy, an electric utility system, as authorized by statute. Tex. Loc. Gov'T Code § 552.001(b). Like many utility systems, Austin Energy has traditionally operated as a monopoly; any City resident wishing to purchase electric services must obtain those services from Austin Energy. The City sets the rates that Austin Energy charges to retail customers through rate ordinances passed [**3]  by the Austin City Council.

In 2016, Austin Energy proposed to change the retail rates it was charging for electric services. The City hired a hearing examiner to conduct a review of the proposed new rates. Several ratepayers, including Data Foundry, intervened and participated in the hearing process. Ratepayers were permitted to conduct discovery, provide testimony, and cross-examine witnesses at a public hearing. Data Foundry submitted briefs in which it argued, as it does here, that Austin Energy's proposed  [*694]  rate structure would result in rates that were unreasonable, unlawful, and confiscatory. In particular, Data Foundry asserted that it was improper for Austin Energy to recoup losses resulting from its power-generation operations (over $200 million, according to Data Foundry) through the rates it charges to captive retail customers. Ultimately, the Austin City Council rejected Data Foundry's arguments and passed an ordinance establishing new "base" charges and various "pass-through" charges that Austin Energy would charge to retail customers of electric services.

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