675 N.W.2d 222 (S.D. 2004), 22827, In re West River Elec. Ass'n, Inc.

Docket Nº22827, 22834.
Citation675 N.W.2d 222, 2004 SD 11
Party NameIn the Matter of the Petition of West River Electric Association, Inc., for a Declaratory Ruling Regarding Service Territory Rights Concerning Black Hills Power, Inc., and WEST RIVER ELECTRIC ASSOCIATION, INC.
Case DateJanuary 28, 2004
CourtSupreme Court of South Dakota

Page 222

675 N.W.2d 222 (S.D. 2004)

2004 SD 11

In the Matter of the Petition of West River Electric Association, Inc., for a Declaratory Ruling Regarding Service Territory Rights Concerning Black Hills Power, Inc., and WEST RIVER ELECTRIC ASSOCIATION, INC.

Nos. 22827, 22834.

Supreme Court of South Dakota

January 28, 2004.

Argued Nov. 19, 2003

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[Copyrighted Material Omitted]

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Gregory J. Erlandson, Allen G. Nelson of Bangs, McCullen, Butler, Foye and Simmons, Rapid City, South Dakota, Attorneys for appellant West River Electric.

Lawrence E. Long, Attorney General, John J. Smith, Assistant Attorney General, Public Utilities Commission, Pierre, South Dakota, Attorneys for appellant SD Public Utilities Commission.

Steven J. Helmers, General Counsel, Linden R. Evans, Associate Counsel, Black Hills Corporation, Rapid City, South Dakota, Attorneys for appellee Black Hills Power.

ZINTER, Justice.

[¶ 1.] Rapid City intends to expand its waste water treatment plant. West River Electric Association, Inc. (WREA) and Black Hills Power, Inc. (BHP) are in a dispute over the right to provide the increased electric service necessary for the expansion. WREA contends that it has the right to provide the new service because the plant is located within its service territory. BHP contends that it has the right to provide new service as the plant grows because it has provided the past service at that "location." The Public Utilities Commission (PUC) ruled that BHP's statutory right to continue to serve a "location" did not include the right to increase the electricity provided because the new load required changes in BHP's distribution system. The circuit court reversed, concluding that the right to continue to serve a "location" meant the right to serve a geographical location. Therefore, the court held that BHP was entitled to provide the increased load at the plant. We affirm the circuit court.

FACTS AND PROCEDURAL HISTORY

[¶ 2.] In 1975, the Legislature enacted the "Territory Act," SDCL ch. 49-34A, which completely revised the electric utilities' territories in which they provide electrical service. This Act was adopted to reduce wasteful spending and the duplication of services in the industry. The Act gave the PUC the power to assign specific service areas to each utility. These areas were geographically defined and provided boundaries in which each utility enjoyed the right to provide exclusive service.

[¶ 3.] However, the Act also authorized utilities to continue to serve existing "locations" where they were serving "a customer." It provided, "[e]ach electric utility has the exclusive right to provide electric service at retail at each and every location where it is serving a customer as of March 21, 1975," even if that location was in another utility's territory. SDCL 49-34A-42 (emphasis added). Customers that continued to be serviced by an out of territory utility under this provision are referred to as "frozen customers" in the industry.

[¶ 4.] The Rapid City waste water treatment plant is one such frozen customer. The land on which the plant is situated is within the territory that was assigned to WREA. However, BHP was providing service to that location on March 21, 1975. Therefore, BHP had the "exclusive right" to continue to provide service at that "location." This dispute developed because the plant's need for electricity has increased, and the parties are unable to agree whether providing the increased load is within this statutory right to provide service at a "location."

[¶ 5.] The origin of this dispute actually began to develop in the 1960s. In 1965, the city purchased forty acres of land for the waste water treatment plant. Because WREA was already providing electric service to that area, it constructed a 3-phase primary voltage distribution line to construct

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the plant. WREA also began providing electric service to the plant.

[¶ 6.] However, in 1967, pursuant to the territory law in effect at that time, voters in Rapid City approved a city council proposal to change service providers and "accept service from Black Hills Power & Light for furnishing power to the new waste water treatment plant [then] under construction." Consequently, in 1967, BHP also built a primary distribution line to the plant, and BHP became the exclusive provider of electricity at the plant through one service point (Service Number One).

[¶ 7.] In 1973, Rapid City purchased an additional eighty acres of land. This land is adjacent to the original forty acres on which the plant is located. The new land was important to the City because it provided access to Rapid Creek: "because that's where after they've treated the water where it goes and they planned to grow as the city did.... [T]hey bought extensive land so that they'd have that taken care of as they then grew into the future."

[¶ 8.] BHP continued to service the plant via Service Number One from 1967 until 1987. In 1987, BHP installed a second service point at the plant (Service Number Two). BHP did not consult with WREA when this installation occurred. Although WREA subsequently learned of Service Number Two, it took no action at that time to contest BHP's right to provide that new service.

[¶ 9.] Now, Rapid City is in the process of expanding the plant further. Consequently, four new electric service points will be installed. These are referred to as Service Numbers Three, Four, Five, and Six. This expansion will require new transformers and the extension of primary voltage wires. The new service points will, however, be located at the same plant on the original forty acre site.

[¶ 10.] BHP claims the right to provide all needed service at all six service points. However, WREA also claims the right to provide the new service added, or to be added, including the 1987 addition of Service Number Two. WREA contends that BHP's provision of service to Service Numbers Two through Six violates a second provision of the Territory Act. That provision generally prohibits one utility from rendering or extending service into the assigned service area of another utility. SDCL 49-34A-42. WREA specifically argues that the provision of service to anything other than the original Service Number One would be an illegal "extension of service" into WREA's assigned service area in violation of this second provision.

[¶ 11.] On a petition for declaratory ruling, the PUC agreed with WREA, determining that WREA had the right to provide the new service at Service Numbers Two through Six. It concluded that "the [statutorily protected] 'location' served by Black Hills at the Plant as of March 21, 1975, was [only] such service as could be provided by means of the primary distribution line and transformer installed at such time to serve Service Number One without the necessity for extending primary voltage lines." (Emphasis added.) Because the PUC ruled that the right to serve a "location" was restricted to that level of service available under the distribution system that existed in 1975, it concluded that "[t]he Plant is within West River's assigned service territory and West River has the right to provide all electric service at retail to the Plant with the exception of the service provided by Black Hills to Service Number One, which Black Hills was providing as of March 21, 1975."

[¶ 12.] The circuit court reversed the PUC's interpretation of the term "location":

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an interpretation that limited the right to serve a "location" to the level of service that was available under the distribution system existing in 1975. Instead, the circuit court reasoned that the term "location" inherently implied a "geographically-described" parcel of property. The court concluded that the PUC erred in construing the word location "so as to preclude the extension of 'primary wires' or 'primary voltage lines,' which construction erroneously equate[d] the term 'location' to the extension of an 'electric line....' " The court also ruled that:

The 120 Acres is an undivided parcel of real property, that is not divided by a public road, a body of water, or other natural geographic features, and has never been legally platted or subdivided by Rapid City, and, as such, comprises a uniform "location" where Black Hills has served a customer since 1967.

The court ultimately declared that BHP had the right to provide the new service at the Rapid City waste water treatment plant because it was within the contiguous 120 acre tract.

[¶ 13.] WREA and the PUC appeal the circuit court's decision and raise the following questions: (1) whether BHP is rendering or has extended service within WREA's territory in violation of the second sentence of SDCL 49-34A-42; and (2) whether the circuit court erred in determining that the right to serve a "location," as provided in the first sentence of SDCL 49-34A-42, means the entirety of a contiguous tract of real property. We believe both questions are resolved by the following issue:

Whether the legislature intended the word "location" to be a geographically based concept, or whether it intended that the right to serve a "location" was limited to the level of service that was provided by means of the distribution system existing on March 21, 1975.

ANALYSIS AND DECISION

[¶ 14.] The Territorial Act, found in SDCL ch. 49-34A, "evidences a legislative intent for [the] PUC to have broad inherent authority in matters involving utilities in this state." In re Northern States Power Co., 489 N.W.2d 365, 370 (S.D.1992). However, a resolution of the issue in this case requires statutory construction. Questions of law concerning statutory construction are reviewed de novo. Goetz v. State, 2001 SD 138, ¶ 8, 636 N.W.2d 675, 678 (citing State v. Karlen, 1999 SD 12, ¶ 6, 589 N.W.2d 594, 597). Therefore, this determination is "fully reviewable without deference to legal conclusions drawn by either the PUC or the...

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