(a) The regulatory authority shall ensure that each rate a gas utility or two or more gas utilities jointly make, demand, or receive is just and reasonable. A rate may not be unreasonably preferential, prejudicial, or discriminatory but must be sufficient, equitable, and consistent in application to each class of consumer. In establishing a gas utility's rates, the railroad commission may treat as a single class two or more municipalities that a gas utility serves if the commission considers that treatment to be appropriate.
(b) A rate for a pipeline-to-pipeline transaction or to a transportation, industrial, or similar large volume contract customer is considered to be just and reasonable and otherwise to comply with this section and shall be approved by the regulatory authority if:
(1) neither the gas utility nor the customer had an unfair advantage during the negotiations;
(2) the rate is substantially the same as the rate between the gas utility and at least two of those customers under the same or similar conditions of service; or
(3) competition does or did exist with another gas utility, another supplier of natural gas, or a supplier of an alternative form of energy.
(c) Subsection (b) does not apply:
(1) if a complaint is filed with the railroad commission by a transmission pipeline purchaser of gas sold or transported under the pipeline-to-pipeline or transportation rate; or
(2) to a direct sale for resale to a gas distribution utility at a city gate.
(d) The reasonableness of gas purchase costs included in a city gate rate proposed to be charged for a sale for resale to a gas distribution utility at a city gate may be reviewed at a city gate rate proceeding even though the costs have been previously approved as a rate for other parties under Subsection (b).
(e) Subsection (b)(1) does not apply to a rate charged or offered to be charged to an affiliated pipeline utility.