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Click here for the full text of this decision FACTS:The dispute involved the interplay of several facets of telecommunications regulation: universal service, switched access rates, incentive regulation and the Texas Universal Service Fund surcharge. Universal service that is, “adequate and efficient telecommunications service” available to all citizens at “just, fair, and reasonable rates” has long been a policy objective of the Texas and national governments. Achieving this goal requires subsidization of rural and residential service that would otherwise be prohibitively expensive. In the past, switched access rates rates paid by long-distance carriers to local carriers so that long-distance customers could access local networks were used to subsidize universal service. These rates were priced higher than their cost, in part so that local carriers could recoup the expense of providing service in high-cost rural areas of the state. This system changed, however, in 1995 when the Legislature introduced incentive regulation. These amendments permitted local carriers to opt out of the traditional regulatory framework if they agreed to cap rates for basic services, including switched access rates, at 1995 levels for four years. In exchange, the carrier could not, “under any circumstances, [be] subject to a complaint, hearing, or determination regarding the reasonableness of the company’s rates, overall revenues, return on invested capital or net income.” Because switched access rates were capped, the funds available to subsidize universal service could not increase and, due to competitive pressures, might decrease. Southwestern Bell Telephone Co. elected incentive regulation. Partially in response to the effects of incentive regulation, the Legislature again substantially amended the universal service law in 1997, directing the PUC to “adopt and enforce rules . . . to establish a universal service fund” that is “funded by a statewide uniform charge payable by each telecommunications provider that has access to the customer base.” The PUC promulgated 16 Texas Administrative Code �26.420(f)(6), a rule allowing providers to recover their portion of the Texas Universal Service Fund (TUSF) from retail customers via a “Texas Universal Service” surcharge, assessed as a percentage of the customer’s bill, excluding Lifeline and Link Up services. The TUSF plan included programs that, in conjunction with the Federal Universal Service Fund, assisted telecommunications providers in providing basic local services at reasonable rates in high cost rural areas. The PUC approved SWBT’s application to add the TUSF surcharge, and SWBT has been collecting it since 1999. Plaintiffs Debbie Clara Trevino, Arnoldo Benavides and Annette Muniz, individually and as representatives of a putative class consisting of all SWBT residential customers in Texas, sued SWBT in Hidalgo County district court. Plaintiffs alleged that SWBT’s electing incentive regulation under Chapter 58 of the Public Utility Regulatory Act (PURA) violated that chapter’s rate cap provisions because it also collected the TUSF under Chapter 56 of PURA. Specifically, plaintiffs alleged: “By applying the [TUSF] charge to the total bills of its residential customers, SWBT effectively increases the rate charged for many of the basic network services listed in Tex. Util. Code � 58.051(a). Since it was not a rate charged for basic network services on June 1, 1995, Plaintiffs allege SWBT’s [TUSF] charge violates SWBT’s rate freeze agreement under the incentive regulation found in Chapter 58 of PURA. Plaintiffs allege that SWBT’s billing of its [TUSF] charge for basic network services has resulted and continues to result in monthly overcharges to SWBT’s residential customers. Plaintiffs are not challenging the reasonableness of SWBT’s rates. Plaintiffs are challenging the legality of SWBT’s [TUSF] charge for basic network services, in light of its rate freeze agreement under Tex. Util. Code � 58.021.” Plaintiffs sought a declaration that SWBT’s TUSF charge was a rate charged for basic network services and that SWBT increased that rate in violation of its rate freeze agreement, as well as an order requiring SWBT to refund the [TUSF] to its customers (the core claims). Plaintiffs also requested attorneys’ fees. SWBT filed a plea to the jurisdiction, arguing that the PUC had exclusive jurisdiction over the core claims, and the trial court denied it. The court of appeals denied mandamus relief. SWBT sought a writ of mandamus from the Texas Supreme Court. HOLDING:The court conditionally granted the petition for writ of mandamus. At the outset, the court decided whether the core claims fell within the PUC’s exclusive jurisdiction. SWBT argued that the PUC should resolve this dispute, because Chapter 56 creates a comprehensive regulatory scheme for universal service in Texas, giving the PUC exclusive original jurisdiction. The plaintiffs argued that because SWBT elected incentive regulation, Texas Utility Code �58.025 prohibited the PUC from hearing this dispute. An agency, the court stated, has exclusive jurisdiction when a pervasive regulatory scheme indicates that the Legislature intended for the regulatory process to be the exclusive means of remedying the problem to which the regulation is addressed. If an agency has exclusive jurisdiction to resolve a dispute, a party must first exhaust administrative remedies before a trial court has subject matter jurisdiction. PURA, the court stated, is intended to serve as a pervasive regulatory scheme that governs TUSF. Plaintiffs, the court stated, attempted to cast some of their claims as a violation of Chapter 58′s rate caps, over which they assert the PUC lacks jurisdiction. But the pleadings, the court stated, demonstrated that the plaintiffs’ real point of contention is with the TUSF surcharge. Even if Chapter 58 were implicated, the court stated, two statutory provisions indicate that Chapter 56 � the TUSF chapter � controls over chapter 58. The court stated that in this case, while the PUC cannot determine the reasonableness of switched access rates under Chapter 58, it must nonetheless carry out its duties pursuant to Chapter 56′s regulatory scheme. Thus, the court concluded that the PUC had exclusive jurisdiction over the core claims and that the trial court abused its discretion in denying SWBT’s jurisdictional plea. Accordingly, the court conditionally granted the writ of mandamus as to those claims and directed the trial court t 1. vacate its January 6, 2004, order denying SWBT’s motion to dismiss; 2. dismiss the core claims for lack of subject matter jurisdiction; and 3. conduct further proceedings consistent with this opinion. OPINION:Jefferson, C.J., delivered the opinion of the court. Willett, J., did not participate in the decision.

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