Bowie v. Louisiana Public Service Com'n

Citation627 So.2d 164
Decision Date29 November 1993
Docket NumberNos. 92-CA2236,92-CA2237,s. 92-CA2236
PartiesJames BOWIE, Jr., Bobby Joe Howell, Sr., & Seashore Utilities, Inc. v. LOUISIANA PUBLIC SERVICE COMMISSION.
CourtSupreme Court of Louisiana

Carolyn L. DeVitis, Baton Rouge, Michael R. Fontham, Paul L. Zimmering, New Orleans, for applicant.

Theodore G. Edwards, IV, Davidson, Meaux, Sonnier, McElligott & Swift, Lafayette, Charles William Roberts, M.J. Bodenhamer, Baton Rouge, Domengeaux & Wright, Hammond, for respondent.

DENNIS, Justice. *

This case presents the question of whether the Louisiana Public Service Commission has power to prohibit the sale of 100% of the capital stock of a public utility as being contrary to the public interest. The Commission's order disallowing such a sale of all of the stock of two water and sewerage service corporations was reversed by the district court. On original hearing, this court affirmed, holding that in the absence of a statute expressly granting such authority the Commission lacked power to prohibit the sale of a utility's stock. We granted a rehearing because of the restriction imposed by that decision on the broad constitutional powers of the public service commission to regulate all common carriers and public utilities.

1.

The opinion of this court on original hearing correctly stated the background facts and procedural history of the case.

2.

Article IV Sec. 21(B) of the 1974 Louisiana Constitution provides:

(B) Powers and Duties. The [public service] commission shall regulate all common carriers and public utilities and have such other regulatory authority as provided by law. It shall adopt and enforce reasonable rules, regulations, and procedures necessary for the discharge of its duties, and shall have other powers and perform other duties as provided by law.

This provision delegates to the Public Service Commission the exclusive and plenary power to regulate all common carriers and public utilities. The Commission's power in this regard is as complete in every respect as the regulatory power that would have been vested in the legislature in the absence of Article IV Sec. 21(B). Therefore, the legislature's acts or omissions can not subtract from the Commission's exclusive, plenary power to regulate all common carriers and public utilities. Cajun Electric Power Cooperative, Inc., v. LPSC, 544 So.2d 362 (La.), cert. denied 493 U.S. 991, 110 S.Ct. 538, 107 L.Ed.2d 536 (1989); Cajun Electric Power Cooperative, Inc., v. LPSC, 532 So.2d 1372, 1380, 1381 (La.1988) (on original hearing) (Dennis, J. dissenting) (Calogero, J. dissenting); South Central Bell Telephone Co. v. LPSC, 412 So.2d 1069, 1070 (La.1982); Central Louisiana Electric Co. v. LPSC, 373 So.2d 123, 128 (La.1979); Louisiana Consumers' League Inc. v. LPSC, 351 So.2d 128, 131 (La.1977).

3.

The Public Service Commission is created for the purpose of exercising regulatory police power over all common carriers and public utilities and compelling the performance of their public duties for the benefit of the state and its citizens. Morehouse Natural Gas Co. v. LPSC, 242 La. 985, 140 So.2d 646 (1962); Southern Bell Telephone & Telegraph Co. v. LPSC, 187 La. 137, 174 So. 180 (1937). Accordingly, the constitutional provisions creating and granting powers to the commission must be construed with practicality and liberality in order to accomplish their objects and to enable the Commission to perform the duties required of it by the people. Moreover, Article IV Sec. 21(B) expressly authorizes and requires the Commission to adopt and enforce reasonable rules, regulations, and procedures necessary for the discharge of its duties. See Louisiana Consumers' League, Inc. v. LPSC, 351 So.2d 128, 132 (La.1977) (Concurring opinion). Consequently, the Commission is vested explicitly and implicitly with the constitutional power necessary to the performance of its function of regulating common carriers and public utilities through the adoption and enforcement of reasonable rules and orders requisite to these purposes. See Cajun Electric Power Cooperative, Inc., v. LPSC, 544 So.2d 362 (La.1989); Consumers' League Inc. v. LPSC, 351 So.2d 128 (La.1977); Denegre v. LPSC, 257 La. 503, 242 So.2d 832 (La.1971).

4.

In our opinion, a rule or regulation prohibiting the sale of all of the stock in a closely held corporate public utility without a prior determination by the public service commission that the transfer of ownership will be consistent with the public interest is necessary to the proper performance of the agency's regulatory function. Even though the balance sheet of a corporation is not affected when the ownership of stock is transferred, in reality the transfer of the ownership of a closely held corporation through a stock purchase presents significant possibilities of affecting the management, technical expertise, credit worthiness, and stability of the corporate utility. As the opinion of this court on original hearing indicates, in at least twenty-two states where the public utilities commissions are not vested with autonomous regulatory powers, the legislatures by law have granted commissions the authority to regulate the transfers of public utilities' corporate stock. The Federal Energy Regulatory Commission has also been empowered with this authority through legislation. See Re Central Vermont Public Service Corp. 84 PUR 4th 213, 1987 WL 257899 (FERC 1987). In states where the authority to regulate public utility stock transfers has not been expressly granted, the implied power has been found in the statutes or constitutions creating the commissions. Re Pacific Power and Light Co. 96 PUR 4th 371, 1988 WL 391296 (Mont.Pub.Serv.Comm'n 1988); Pub. Serv. Comm'n v. Cities of Southgate, etc., 5 PUR 3d 519, 268 S.W.2d 19 (Ky.Ct.App.1954). In these other jurisdictions it is well settled that whether the power to regulate is express or implied, the public utilities commission has the power to disallow the sale, lease, mortgage, encumbrance, or other transfer of the properties of public utilities until the commission determines that the purchaser is ready, willing, and able to continue providing adequate service and that the transfer is consistent with the public's interest. Committee of Consumer Services v. Public Service Commission of Utah, 595 P.2d 871 (Utah, 1979), cert. denied 444 U.S. 1014, 100 S.Ct. 664, 62 L.Ed.2d 644 (1980); City of Catlettsburg v. Public Service Comm'n of Kentucky, 486 S.W.2d 62 (Ct.App.Ky.1972); Blue Grass State Telephone Co., v. Public Service Comm'n of Kentucky, 382 S.W.2d 81 (Ct.App.Ky.1964); Pacific Power and Light v. Federal Power Comm'n, 111 F.2d 1014, 1016 (9th Cir.1940). Because our Public Service Commission is vested with plenary regulatory power by a self-executing constitutional provision, the Commission can on its own initiative adopt and enforce reasonable rules and procedures necessary to govern the regulation of corporate stock transfers having potential detrimental effects upon the public interest.

5.

As a general rule, an administrative agency, such as the Public Service Commission, may use its informed discretion in choosing whether to establish rules, standards, or policies in an individual adjudication rather than in a rulemaking proceeding. SEC v. Chenery Corp., 332 U.S. 194, 67 S.Ct. 1575, 91 L.Ed. 1995 (1947). As a plurality of the Supreme Court observed in that case:

Since the Commission, unlike a court, does have the ability to make new law prospectively through the exercise of its rule-making powers, it has less reason to rely upon ad hoc adjudication to formulate new standards of conduct within the framework of the Holding Company Act. The function of filling in the interstices of the Act should be performed, as much as possible, through this quasi-legislative promulgation of rules to be applied in the future. But any rigid requirement to that effect would make the administrative process inflexible and incapable of dealing with many of the specialized problems which arise.... Not every principle essential to the effective administration of a statute can or should be cast immediately into the mold of a general rule.... [T]he agency must retain power to deal with the problems on a case-by-case basis if the administrative process is to be effective. There is thus a very definite place for the case-by-case evolution of statutory standards. And the choice made between proceeding by general rule or by individual, ad hoc litigation is one that lies primarily in the informed discretion of the administrative agency. Id. at 202-03 .

See also National Ass'n for the Advancement of Colored People v. FPC, 425 U.S. 662, 668, 96 S.Ct. 1806, 1811, 48 L.Ed.2d 284 (1976) ("As a general proposition it is clear that the Commission has the discretion to decide whether to approach these problems through the process of rulemaking, individual adjudication, or a combination of the two procedures.")

The alternative to rulemaking that the Supreme Court had in mind in SEC v. Chenery Corp., however, was not unguided discretion to make a determination that would not be treated as a precedent. The Court was referring to the reasoned opinions written by the SEC in formal adjudications that are likely to be used as precedents. Consequently, reviewing courts have found that it is arbitrary for an administrative agency with substantive rulemaking power to fail either to use that power to make rules or to develop precedents through adjudication. In such cases, administrative agencies without systems of adjudicative precedents have been judicially required to use their rulemaking power to provide guiding standards that would reduce otherwise unguided discretion. See Davis, 2 Administrative Law Treatise Sec. 7:26 (2nd ed. 1979).

For example, in cases decided under the due process clause, courts have held that an agency must make selections among applicants for scarce governmental benefits on the basis of "ascertainable standards."...

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