Cajun Elec. Power Co-op., Inc. v. Louisiana Public Service Com'n

• Decision Date: 31 October 1988
• Docket Number: No. 88-CA-1719,88-CA-1719
• Citation: 532 So.2d 1372
• Parties: CAJUN ELECTRIC POWER COOPERATIVE, INC., et al. v. The LOUISIANA PUBLIC SERVICE COMMISSION. 532 So.2d 1372, 98 P.U.R.4th 531
• Court: Louisiana Supreme Court

Page 1372

532 So.2d 1372

CAJUN ELECTRIC POWER COOPERATIVE, INC., et al. v. The LOUISIANA PUBLIC SERVICE COMMISSION.

No. 88-CA-1719.

532 So.2d 1372, 98 P.U.R.4th 531

Supreme Court of Louisiana.

Oct. 31, 1988.

Rehearing Granted Dec. 15, 1988.

John Schwab, Schwab & Walter, Baton Rouge, James J. Thornton, Johnston & Thornton, Shreveport, W.M. Shaw, Shaw & Shaw, Homer, E. Rudolph McIntyre, Winnsboro, James B. Supple, Darnall, Biggs, Trowbridge, Supple & Cremaldi, Franklin, James J. Davidson, III, Davidson, Meaux, Sonnier & Mcelligott, Lafayette, Wendell Miller, Millican, Miller & Buisson, Jennings, James Funderburk, Duval, Funderburk, Sundbery & Lovell, Hoyma, for plaintiffs-appellants.

Marshall Brinkley, Baton Rouge, Michael R. Fontham, Paul L. Zimmering, Noel J. Darce, Stone, Pigman, Walther, Wittmann & Hutchinson, New Orleans, for defendant-appellee.

WATSON, Justice.

Plaintiffs, ¹ nonprofit electric cooperatives, ask for a declaratory judgment on the constitutionality of LSA-R.S. 12:409 G.(3)(a) and (b) ² which deal with rate fixing and elections for "Any cooperative not under the jurisdiction of the Public Service Commission." Plaintiffs also ask injunctive relief against regulation by the Public Service Commission, except as authorized by LSA-R.S. 45:123 ³ and LSA-R.S. 45:1163. ⁴ In addition, plaintiffs petition for a declaratory judgment as to their rights under LSA-R.S. 12:401, et seq.; LSA-R.S. 45:121, et seq.; and LSA-R.S. 45:1161, et seq. They pray that these laws be decreed constitutional under the 1974 Louisiana Constitution, Art. IV, Sec. 21(B). ⁵

The trial court held that plaintiffs are public utilities and therefore within the constitutional jurisdiction of the Public Service Commission over public utilities under Art. IV, Sec. 21(B) of the Louisiana Constitution of 1974. LSA-R.S. 45:1163 was declared unconstitutional insofar as it allows electric cooperatives to exempt themselves from the jurisdiction of the Louisiana Public Service Commission. Plaintiffs' suit was dismissed, and plaintiffs have appealed. ⁶

In a separate judgment involving LSA-R.S 45:1180 B., ⁷ the trial court assessed the cooperatives 90% of the attorneys' fees and expenses certified by the secretary of the Commission and 7/13ths of the remaining 10%.

Plaintiffs are rural electric cooperatives which were established under the Rural Electrification Administration (REA) as authorized by the Rural Electrification Act of 1936. ⁸

Ark. Elec. Coop. v. Ark. Pub. Serv. Comm'n, 461 U.S. 375, 103 S.Ct. 1905, 76 L.Ed.2d 1 (1983) decided that state regulation of electric cooperatives is not barred by the Supremacy and Commerce Clauses of the United States Constitution. Recognizing that the REA could pre-empt state regulation of rural power cooperatives, the United States Supreme Court decided that there is no express preemption. Refusing to draw a bright line between state regulation and unexercised federal power, the court applied a balancing test to find that state regulation of rates is permissible when there is only an incidental effect on interstate commerce. While a particular rate structure might unreasonably disturb the interstate market for electric power, thereby imposing an excessive burden on interstate commerce, the REA may otherwise operate within the constraints of a state regulatory system. Thus, absent compromise of an important federal interest, such as the ability of a cooperative to repay its loans, state regulation may be allowed.

Louisiana Power & L. Co. v. Louisiana Pub. Serv. Com'n, 250 La. 596, 197 So.2d 638, 643 (1967) decided that electric cooperatives were not public utilities per se because: (1) they were not in existence when Act 254 of 1936 defined public utilities; (2) they were specifically excepted from the jurisdiction and control of the Public Service Commission by LSA-R.S. 12:326; and (3) the cooperatives were not included in the definition of public utilities regulated by the Public Service Commission in Act 254 of 1936.

Central La. Elec. Co. v. Louisiana Pub. Serv. Com'n, 251 La. 532, 205 So.2d 389 (1967) held that the 1921 Constitution did not place all "public utilities" under the Public Service Commission. In deciding that an electric cooperative is not an "electric public utility" under that Constitution, the court noted that electric cooperatives were not in existence in 1921. The Central court concluded that Commission customer protection was not necessary in a cooperative operation. ⁹ Adding additional persuasion was a legislative exemption and the Commission's failure to attempt regulation of the cooperatives for a long period of time.

In a later Central opinion authored by then Justice Barham, ¹⁰ this court reaffirmed the holding that electric cooperatives were not "electric public utilities" or "other utilities" placed under the Public Service Commission by the 1921 Constitution. Therefore, the Legislature had the perogative of dictating whether they were subject to Commission jurisdiction.

Although electric cooperatives were not defined as "public utilities" in the Louisiana Constitution of 1921, that Constitution allowed the legislature to place them under the Commission's authority as "other public utilities." Hence, under the 1921 Constitution, the legislature had plenary power to place "other public utilities" under the authority of the Public Service Commission.

Nonprofit electric cooperatives have always been characterized as "Special Corporations" under LSA-R.S. 12:401 through 430, the Electric Cooperative Law. They were exempted from the jurisdiction of the Public Service Commission at their inception in 1940 ¹¹ and remained exempt until 1970. ¹²

In 1970, LSA-R.S. 45:121 was amended to include electric cooperatives in the definition of electric public utilities and LSA-R.S. 12:426 was amended to place electric cooperatives under the jurisdiction of the Public Service Commission. Thus, when the 1974 Constitution was adopted, the Public Service Commission had been exercising statutory control over electric cooperatives for four years. Dixie Electric Membership Cooperative v. Louisiana Public Service Commission, 509 So.2d 1002 (La.1987).

The Louisiana Constitution of 1974 went into effect at midnight on December 31, 1974 and delineated the jurisdiction of the Public Service Commission in Art. IV, Sec. 21(B), which states that "the commission shall regulate all common carriers and public utilities and have such other regulatory authority as provided by law." Although electric cooperatives were statutory public utilities when the 1974 Constitution was adopted, Dixie did not decide whether they were "public utilities" under the 1974 Constitution. In fact, the majority in Dixie was careful to note that the decision was "... a resolution of the legal dispute which does not require a constitutional interpretation." ¹³

The 1974 constitutional debates indicate that the delegates did not intend to change the Commission's authority. The question then becomes whether the 1974 Constitution placed electric cooperatives under the Public Service Commission as "public utilities" or whether statutory implementation by the legislature was required to give the Commission "other regulatory authority as provided by law" over the cooperatives. ¹⁴ The Louisiana legislature adopted the latter interpretation and decided in 1978 ¹⁵ to exempt the cooperatives from Commission control of rates and service. ¹⁶ In 1983, electric cooperatives were given the option of Commission regulation when a majority of the members voted in favor of Commission jurisdiction. ¹⁷

Nonprofit rural electric cooperatives are not public utilities in the broad sense of the term. The legislature recognized this in 1975 when it enacted LSA-R.S. 33:4170 ¹⁸ which allows municipalities owning revenue producing electrical utilities ¹⁹ to contract with electric public utility companies, other municipalities owning utilities or with Rural Electric Association Cooperatives.

Between September 8, 1978, and September 3, 1987, the Public Service Commission deferred to the legislative intent expressed in LSA-R.S. 45:1163 and other statutes. The Commission then decided to assert authority over the electric cooperatives. An order directing rate and service regulation of the electric cooperatives by the Public Service Commission was issued on September 3, 1987. ²⁰ This suit followed on September 30, 1987. Prior to September 3, the Commission had acceded to the legislation allowing electric cooperatives to choose or refuse Commission regulation.

While rural electric cooperatives are a type of public utility in that they furnish a necessary public service, they are instrumentalities of the United States created by federal law and "something more than public utilities." ²¹ Being federal creations, rural electric cooperatives should be considered in the context of federal law. REA cooperatives are not "public utilities" under the regulation of the Federal Power Act, even though they "seem to fall within the ambit" of that phrase. ²²

"Though REA regulation and supervision of cooperatives are, in many respects, far more comprehensive than those which the Federal Power Commission exercises over investor-owned utilities, there are certain areas, such as rate-making, where the cooperatives enjoy a freer hand. But it is in these areas that, by their structural nature, the cooperatives are effectively self-regulating. They are completely owned and controlled by their consumer-members, and only consumers can become members. They are nonprofit. Each member has a single vote in the affairs of the cooperative, and service is essentially limited to members. No officer receives a salary for his services and officers and directors are prohibited from engaging in any transactions with the cooperative from which they can earn any profit." ²³

Between 1978 and 1987, the Louisiana Public Service Commission refrained from regulating the electric...