Arizona Corp. Com'n v. State ex rel. Woods

• Decision Date: 21 April 1992
• Docket Number: No. CV-91-0082-SA,CV-91-0082-SA
• Parties: , 131 P.U.R.4th 604, Util. L. Rep. P 26,195 ARIZONA CORPORATION COMMISSION, Marcia Weeks, Renz D. Jennings and Dale H. Morgan, as members of said Commission, Petitioners, v. STATE of Arizona ex rel. Grant WOODS, the Attorney General, Respondent, and The Mountain States Telephone and Telegraph Company, Pinnacle West Capital Corporation, US West New Vector Group, Inc., Arizona Sierra Utility Company, First National Utilities, Inc., Bella Vista Water Company, Granite Oaks Water Users Association, Water Utility of Greater Buckeye, West Valley Utility Water Combine, Tucson Electric Power Company, Arizona Public Service Company, Citizens Utilities Company/Phelps Dodge Corporation, Morenci Water & Electric Company, AJO Improvement Company, Alltell Corporation, CP National Corporation, Great Southwest Telephone Company, Inc., Navajo Communications Company, Inc., Southern Union Company, Southwest Gas Corporation, Intervenors.
• Court: Arizona Supreme Court

Page 807

830 P.2d 807

171 Ariz. 286, 131 P.U.R.4th 604, Util. L. Rep. P 26,195

ARIZONA CORPORATION COMMISSION, Marcia Weeks, Renz D. Jennings and Dale H. Morgan, as members of said Commission, Petitioners, v. STATE of Arizona ex rel. Grant WOODS, the Attorney General, Respondent and The Mountain States Telephone and Telegraph Company, Pinnacle West Capital Corporation, US West New Vector Group, Inc., Arizona Sierra Utility Company, First National Utilities, Inc., Bella Vista Water Company, Granite Oaks Water Users Association, Water Utility of Greater Buckeye, West Valley Utility Water Combine, Tucson Electric Power Company, Arizona Public Service Company, Citizens Utilities Company/Phelps Dodge Corporation, Morenci Water & Electric Company, AJO Improvement Company, Alltell Corporation, CP National Corporation, Great Southwest Telephone Company, Inc., Navajo Communications Company, Inc., Southern Union Company, Southwest Gas Corporation, Intervenors.

No. CV-91-0082-SA.

Supreme Court of Arizona, In Banc.

April 21, 1992.

Reconsideration Denied June 16, 1992.

[171 Ariz. 287] Arizona Corp. Com'n by Janet Wagner, Christopher C. Kempley, Phoenix, for petitioners.

Grant Woods, Atty. Gen. by Grant Woods, Charles S. Pierson, Phoenix, for respondent.

Dennis R. Nelson, Tucson, for Tucson Elec. Power Co.

W. Douglas Hickey, Phoenix, for Mountain States Tel. & Tel. Co.

Fennemore Craig, P.C. by C. Webb Crockett, Timothy Berg, Phoenix, for Mountain States Tel. & Tel. Co., Tucson Elec. Power Co.

Beus, Gilbert & Morrill by Susan P. Segal, Phoenix, for Pinnacle West Capital Corp.

Johnston Maynard Grant & Parker by Michael M. Grant, Catherine M. Cheney, Phoenix, for US West New Vector Group, Inc.

Martinez & Curtis, P.C. by Michael A. Curtis, William P. Sullivan, James M. Flenner, Phoenix, for Arizona Sierra Utility Co., First Nat. Utilities, Inc., Bella Vista Water Co., Granite Oaks Water Users Ass'n, Water Utility of Greater Buckeye, West Valley Utility Water Combine.

Snell & Wilmer by Steven M. Wheeler, Thomas L. Mumaw, Phoenix, for Arizona Public Service Co.

Brown & Bain, P.A. by Lex J. Smith, Terence W. Thompson, Charles S. Price, Phoenix, for Citizens Utilities Co./Phelps Dodge Corp., Morenci Water & Elec. Co., Ajo Imp. Co., Alltell Corp., CP Nat. Corp., Great Southwest Telephone Co., Inc., Navajo Communications Co., Inc., Southern Union Co.

Southwest Gas Corp. by Andrew W. Bettwy, Las Vegas, for Southwest Gas Corp.

OPINION

FELDMAN, Chief Justice.

In this special action, the petitioner, Arizona Corporation Commission (the "Commission"), challenges the Arizona Attorney General's refusal to certify certain rules proposed by the Commission. The proposed rules give the Commission governance over various transactions between public service corporations and their corporate affiliates. The narrow procedural issue before us is whether the Attorney General failed to perform a duty required by Arizona's Administrative Procedure Act, under A.R.S. § 41-1041, when he refused to certify the proposed rules.

The underlying substantive issue before us is whether article 15, section 3 of the Arizona Constitution gives the Commission power to require a public service corporation to report information about, and obtain permission for transactions with, its parent, subsidiary, and other affiliated corporations. The Attorney General and a number of public service corporations (the "Utilities Group") that have been allowed to intervene claim the proposed rules exceed the Commission's jurisdiction because they are not connected to its ratemaking functions and also violate the Commerce Clause of the United States Constitution.

I. SPECIAL ACTION JURISDICTION

This court has original jurisdiction over issuance of extraordinary writs ¹ against state officers under article 6, section 5.1 of the Arizona Constitution. Arizona Corp. Comm'n v. Superior Court, 107 Ariz. 24, 25-26, 480 P.2d 988, 989-90 (1971). Agreeing that the Commission lacks a remedy by appeal, the Attorney General and the Commission both emphasize that the issues presented are questions of first impression and statewide importance. They submit that these factors make it appropriate for this court to exercise its discretion to accept jurisdiction. See United States v. Superior Court, 144 Ariz. 265, 269, 697 P.2d 658, 662 (1985).

The Utilities Group argues that we should not accept special action jurisdiction because the issues pertaining to the rules are presently before the superior court on a related matter. It contends that the Commission therefore has a plain, speedy, and adequate remedy in the superior court, and we should decline jurisdiction under Rule 1(a), Ariz.R.P.Spec.Act., 17B A.R.S.

We agree with the Commission and Attorney General that the extent of the Commission's constitutional power to regulate transactions between public service corporations and their affiliates is an urgent question with great importance to the people of this state. Additionally, the purely legal issues presented can be conveniently decided at this stage because they do not require the submission of evidence, are separate from the issues pending in the superior court, and have been a topic of concern, according to the Attorney General, for more than five years.

Noting that the special action could have been commenced in the superior court, see Arizona Corp. Comm'n, 107 Ariz. at 26, 480 P.2d at 990, the Utilities Group argues that the Commission also could have brought this special action in the court of appeals. While all this may be true, we believe this court can best serve the public interest and principles of judicial economy by resolving fundamental legal questions regarding the Commission's constitutional power at this time. ² We therefore accepted jurisdiction of the special action and now turn to the issues raised in the petition.

II. FACTS AND PROCEDURAL HISTORY

On March 14, 1990, the Commission promulgated A.A.C. R14-2-801 through R14-2-806 (the "Proposed Rules") in Commission Decision No. 56844 (the "Order") (the full text of R14-2-801 to R14-2-806 is set forth in Appendix A attached hereto). The Commission later submitted the Proposed Rules to the Attorney General for certification pursuant to the Administrative Procedure Act (the "APA"). See A.R.S. § 41-1041. A.R.S³. § 41-1041(A) provides, in pertinent part, that:

The attorney general shall review and certify that the proposed rule is:

1. Approved as to form.

2. Clear, concise and understandable.

3. Within the power of the agency to adopt and within the legislative standards enacted.

4. Adopted in compliance with the appropriate procedures.

Pursuant to A.R.S. § 41-1041(D), the Attorney General informed the Commission that he would not certify the Proposed Rules because they were not within the Commission's power to adopt. Letter of record from the Honorable Grant Woods, Attorney General, to James Matthews, Executive Secretary, Arizona Corporation Commission (Jan. 22, 1991).

The Proposed Rules fall into three categories: (1) definitions--defining the rules' terms and scope of application; (2) reporting requirements--requiring certain information to be filed with the Commission and/or maintained by the utility and its affiliates; and (3) approval provisions--requiring public service corporations to obtain the Commission's prior approval for certain transactions. The Attorney General and the Utilities Group attack the reporting and approval requirements. The former require notice from any utility or affiliate intending to organize or reorganize a public utility holding company. The notice must disclose specific information regarding the proposed holding companies: the officers and directors and their business purposes, various financial and organizational information, diversification plans, and anticipated changes in the utility's costs and services. See Proposed Rule R14-2-803(A), (B). The informational rules also permit the Commission to gain access to an affiliate's books and records regarding its transactions with a public utility. See Proposed Rule R14-2-804(A), (E). Finally, the rules require annual reports from utilities and their holding companies regarding diversification plans and business activities between affiliates and the utility. See Proposed Rule R-14-2-805(A), (B).

The approval rules require utilities to obtain Commission approval of the organization or reorganization of utility holding companies. See Proposed Rule R14-2-803(C). These rules also require Commission approval of transactions by which utility corporations acquire or assume any financial interest in, or liabilities of, certain affiliates, lend to those affiliates, or use utility funds to form a subsidiary. See Proposed Rule R14-2-804(B), (C), (D).

According to the Commission, the Proposed Rules are its response to a diversification movement by Arizona public utilities. Specifically, the Commission adopted the rules after the largest public utility in Arizona, Arizona Public Service Company (APS), created a utility holding company now known as Pinnacle West Capital Corporation ("Pinnacle West"). After the APS shareholders approved that corporate reorganization, the Commission issued an order requiring reports from APS and Pinnacle West's predecessor concerning transactions between the two entities, as well as information regarding the holding company's diversification plans and activities with subsidiaries. ⁴ Our courts issued two opinions discussing that Commission order. In Arizona Public Service Co. v. Arizona Corporation Comm'n, 155 Ariz. 263, 746 P.2d 4 (Ct.App.1987) (APS I ), the court of appeals held that the Commission could require information from the public service corporation but not the holding company. This court partially vacated the latter holding and concluded that the Commission could also require reports from the holding company. See Arizona Pub. Serv. Co. v. Arizona Corp. Comm'n, 157 Ariz. 532, 760 P.2d...