Cole v. Washington Utilities and Transp. Commission

• Decision Date: 13 May 1971
• Docket Number: No. 41542,41542
• Citation: 485 P.2d 71,79 Wn.2d 302
• Court: Washington Supreme Court
• Parties: , 90 P.U.R.3d 62 W. W. COLE et al., Appellants, v. WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION et al., Respondents.

Page 302

79 Wn.2d 302

485 P.2d 71, 90 P.U.R.3d 62

W. W. COLE et al., Appellants, v. WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION et al.,

Respondents.

No. 41542.

Supreme Court of Washington, En Banc.

May 13, 1971.

Rehearing Denied July 1, 1971.

Rutherford, Kargianis & Austin, George Kargianis, Seattle, for appellants.

Slade Gorton, Atty. Gen., Robert E. Simpson, Asst. Atty. Gen., Olympia, for Washington Utilities and Transportation Comm.

Cartano, Botzer & Chapman, John W. Chapman, Seattle, for Washington Natural Gas Co.

McGOVERN, Associate Justice.

This is an appeal from an order of the Superior Court for Thurston County which affirmed a ruling of the Washington Utilities and Transportation Commission that certain promotional practices of Washington Natural Gas Company were appropriate for a regulated public service corporation. The appeal also challenges the commission's refusal to allow the intervention of the Oil Heat Institute in the administrative hearing or the amendment of the appellant's complaint to include the institute's charges. Stated simply, the suit involves an attempt by the fuel oil industry to halt a program of Washington Natural Gas Company that has dramatically expanded the latter's market at the expense of other competitive fuel dealers.

In 1957, Washington Natural Gas Company (hereinafter the gas company) began offering new home 'dry-out' gas service to home builders at a lower rate than that which it normally charged its residential customers. It was hoped that the practice would build service on existing gas mains and promote the use of gas in areas of new construction. The cheaper 'dry-out' rate did induce more builders to use gas heating and appliances, but the gas company felt that further promotions were necessary to realize the potential consumer use of existing facilities. In 1961, the utility started renting conversion burners to homeowners for $1.95 per month. Thus, for a low monthly charge, residents along existing gas mains were able to convert their oil furnaces to gas use without having to purchase an expensive unit. The program was successful to the extent that the gas company expanded its leasing service in 1964 to include gas circulating heaters, furnaces and water heaters.

Cole, a fuel oil dealer and residential customer of Washington National Gas Company, complained, in 1965, to the Washington Utilities and Transportation Commission (hereinafter the Commission) that the low-cost leasing program and 'dry-out' rate were being operated as 'loss leaders' to gain new gas customers at the expense of the gas company's existing customers, who were forced to subsidize the promotions with higher rates. (An amended complaint was filed shortly thereafter by 25 other gas consumers who failed to appear at the subsequent proceedings.)

In February 1966, public hearings were held on the rate complaint. The Oil Heat Institute (hereinafter the Institute), an association of independent fuel oil dealers, attempted to intervene in the proceedings in order to show the adverse impact of the gas company's promotional practices on local fuel oil dealers. The commission twice denied the institute's petition for leave to intervene and denied subsequent motions by the appellants to amend the pleadings to include this broader area of concern. The commission determined that, under existing law, a rate complaint entitled to be heard had to be a gas consumer and that the institute, therefore, had no standing to intervene. Secondly, the commission held that it had no jurisdiction to examine the economic effects of practices of a regulated public service utility upon nonregulated competitors. Commission counsel also raised the question of whether or not the leasing program of the gas company was a 'jurisdictional' activity of a regulated public service utility.

The commission's final order in 1968 approved the challenged activities of the gas company as permissible under state law. On appeal, the Superior Court for Thurston County affirmed the ruling of the commission, including its ruling that the attempted intervention of the institute and the related motions to amend the complaint were improper. This appeal followed.

Appellants reargue here the same issues which were resolved adversely to them at both the administrative and trial court levels. And for the same reasons announced in those proceedings, we affirm the commission and trial court rulings in favor of the gas company.

We believe that the trial court correctly affirmed the commission's denials of the institute's petitions to intervene and the appellants' motions to amend the complaint. Appellants contend that the institute should have been allowed to participate in the proceedings because the commission is required under RCW 80.01.040(3) to 'regulate in the public interest' and the public interest is best served by a thorough examination of the competitive inbalances caused by the gas company's promotional practices.

However, rule 7.3 of the commission's Rules of Practice and Procedure, now WAC 480--08--070(3), delineates the factors which the commission should consider in deciding whether or not to grant a petition to intervene:

If it appears * * * that the petition or motion discloses a substantial interest in the subject matter of the hearing, or that participation of the petitioner may be in the public interest, the Commission May grant the same * * *

(Italics ours.)

Under the facts before us, it is doubtful whether the institute can prove a 'substantial interest' in rates charged to customers of a competitor who is regulated by different laws and who provides an entirely different type of fuel service. Secondly, it is clear that the institute's objections are beyond the concern of the commission under a reasonable interpretation of the term 'public interest.' At page 12 of the proposed order, the commission concluded that it had

jurisdiction only to consider the effects of competitive practices of one regulated utility upon another regulated utility and no other business. Although the words 'public interest' are used extensively throughout the Public Service Laws, this interest of the public which is to be protected is that only of customers of the utilities which are regulated.

This interpretation by the commission of its regulatory power is amply supported by statute and case law. Although RCW 80.01.040(3) demands regulation in the public interest, that mandate is qualified by the following clause 'as provided by the public service laws * * *' Appellants fail to point out any section of Title 80 which suggests that nonregulated fuel oil dealers are within the jurisdictional concern of the commission. An administrative agency must be strictly limited in its operations to those powers granted by the legislature. State ex rel. Pub. Util. Dist. No. 1 of Douglas County v. Department of Pub. Serv., 21 Wash.2d 201, 150 P.2d 709 (1944). We conclude that the commission correctly determined that it had no authority to consider the effect of a regulated utility upon a nonregulated business.

Our viewpoint is in accord with the weight of authority elsewhere. Re Promotional Activities by Gas and Elec. Corps., 68 P.U.R.3d 162 (1967); Re Promotional Practices of Elec. & Gas Util., 65 P.U.R.3d 405 (1966); Virginia State Corp. Comm'n v. Appalachian Power Co., 65 P.U.R.3d 283 (1966); Superior Propane Co. v. South Jersey Gas Co., 60 P.U.R.3d 217 (1965); Illinois Coal Operators Ass'n v. Peoples Gas Light & Coke Co., 7 P.U.R. (n.s.) 403 (1934).

Since the commission had neither express nor implied authority to examine the institute's contentions, its denial of the institute's petition to intervene was both proper and reasonable. We also note that even if the institute could demonstrate that it has a 'substantial interest' that is cognizable under Title 80, the commission still retains the discretion to grant intervention. There was no showing that such discretion was manifestly abused by the denial of the institute's petitions. For similar reasons, we hold that the appellants' motions to amend the complaint to require consideration of the effect of the gas company's promotional practices upon nonregulated fuel dealers were properly denied.

Appellants next argue that the leasing of gas appliances is not a 'jurisdictional' activity of a regulated utility. They find support for that contention in Re Intermountain Gas Co., 67 P.U.R.3d 511 (1967) and RCW 80.04.270. The latter statute requires that profits and losses associated with the 'sale of merchandise or appliances' by public service companies be separately accounted and excluded from those accounts used to determine rates. Because the leasing program has virtually displaced sales, appellants maintain that the gas company is merchandising gas appliances within the spirit of the statute.

We disagree. As noted by the commission's order, Re Intermountain Gas Co., Supra, cited by the appellants, is readily distinguishable and is clearly a minority view. Such cases as Re Promotional Activities by Gas and Elec. Corps., 68 P.U.R.3d 162 (1967), Re Lakeland Natural Gas Ltd., 70 P.U.R.3d 1 (1967), Re Promotional Practices of Elec. & Gas Util., 65 P.U.R.3d 405 (1966), and Re City Gas Co. of Fla., 64 P.U.R.3d 518 (1966), suggest that this leasing activity of the gas company is an appropriate method of stimulating growth of the utility enterprise.

It is also apparent that there is a well-recognized difference in meaning between the terms 'sale' and 'lease,' and that the jurisdictional exclusion of RCW 80.04.270 relates only to the former. Absent proof by the appellants of incidents of sale in the agreement between the gas company and its customers, appellants cannot expect the commission to decide that a common lease falls within the purview of RCW 80.04.270. An administrative agency cannot amend its statutory framework under the guise of interpretation. State v. Spino, 61 Wash.2d 246...