Capital Elec. Coop., Inc. v. N.D. Pub. Serv. Comm'n

• Decision Date: 28 March 2016
• Docket Number: No. 20150227.,20150227.
• Citation: 877 N.W.2d 304
• Parties: CAPITAL ELECTRIC COOPERATIVE, INC., Appellant v. NORTH DAKOTA PUBLIC SERVICE COMMISSION and Montana–Dakota Utilities Co., a Division of MDU Resources Group, Inc., Appellees.
• Court: North Dakota Supreme Court

877 N.W.2d 304

CAPITAL ELECTRIC COOPERATIVE, INC., Appellant

v.NORTH DAKOTA PUBLIC SERVICE COMMISSION and Montana–Dakota Utilities Co., a Division of MDU Resources Group, Inc., Appellees.

No. 20150227.

Supreme Court of North Dakota.

March 28, 2016.

Matthew H. Olson, Minot, N.D., for appellant.

John M. Schuh, Special Assistant Attorney General, North Dakota Public Service Commission, Bismarck, N.D., for appellee North Dakota Public Service Commission.

Paul R. Sanderson (argued), Bismarck, N.D. and Daniel S. Kuntz (on brief), MDU Resources Group, Inc., Bismarck, N.D., for appellee Montana–Dakota Utilities Co.

KAPSNER

, Justice.

[¶ 1] Capital Electric Cooperative, Inc. ("Capital"), appeals from a judgment affirming a Public Service Commission order granting Montana–Dakota Utilities Company ("MDU") a certificate of public convenience and necessity to extend its electric service in Burleigh County. Because the Commission's order is in accordance with the law, its findings of fact are supported by a preponderance of the evidence and sufficiently address the evidence presented, and those findings support the conclusions of law, we affirm the judgment.

I

[¶ 2] Menard, Inc., is developing a manufacturing and distribution center near McKenzie, an unincorporated community located in Burleigh County. Capital, a rural electric cooperative, and MDU, an investor owned electric utility, are the only electric suppliers operating in the general area of the Menard site. Since 1928 MDU, through its predecessors in interest, has held a franchise and a certificate of public convenience and necessity issued by the Commission, then called the Board of Railroad Commissioners, to serve the McKenzie community. The certificate of public convenience and necessity allows MDU service to the eastern boundaries of McKenzie, which is immediately northeast of and adjacent to the Menard site. Capital serves rural customers adjacent to the site. MDU serves 28 customers within a one-mile radius of the Menard site and 29 customers within a two-mile radius. Capital serves four customers within a one-mile radius of the Menard site and 11 customers within a two-mile radius.

[¶ 3] In October 2013, Menard requested estimated rates from Capital and MDU based on the anticipated load at its site of approximately 1.2 MW and an estimated annual consumption of 7 million kWh. Both MDU and Capital would need to construct extensions to provide three-phase electric supply lines to serve the Menard site. MDU estimated the total annual estimated cost to Menard would be $513,669.84 while Capital estimated the cost would be $575,883.84. Menard requested service from MDU based on present and future cost savings, reliability of service, and the Commission's regulatory oversight over rates and services.

[¶ 4] In November 2013, MDU applied to the Commission to extend electric service to the Menard site. Capital filed a protest and requested a hearing. Following a public hearing, the Commission, in a two-to-one decision, decided to grant MDU a certificate of public convenience and necessity and allow the company to provide electric service to the Menard site. In a nine-page decision consisting of 34 findings of fact, the Commission explained:

34. The Commission finds that public convenience and necessity reasonably requires approval of Montana–Dakota's application because:

• The customer prefers electric service from Montana–Dakota as it results in more than $60,000 in annual cost savings and better meets the customer's needs;

• Montana–Dakota has served customers in the area since 1928 and has more customers within a one-mile and two-mile radius of the location;• Montana–Dakota's substation is located closer to the Menard Site providing less voltage drop and less line length on which a fault could occur;

• The proposed extension of Montana–Dakota's three-phase system to serve the site is shorter than the proposed extension of Capital Electric's three-phase system.

• Montana–Dakota will serve the Menard Site more economically when considering both the cost to extend service and the annual costs to the customer as reflected in rates for service;

• Montana–Dakota's extension of service would best serve the community of McKenzie and realize significant cost savings to Menard, Inc., therefore best serving orderly and economic development of the area.

The district court affirmed the Commission's order.

II

[¶ 5] Capital argues the Commission erred in granting MDU a certificate of public convenience and necessity to provide electric service to the Menard site.

[¶ 6] In North Cent. Elec. Coop., Inc. v. N.D. Pub. Serv. Comm'n, 2013 ND 158, ¶¶ 6–7, 837 N.W.2d 138

, we explained:

An appeal from a Commission decision is governed by the Administrative Agencies Practice Act, N.D.C.C. ch. 28–32. Capital Elec. Coop., Inc. v. City of Bismarck, 2007 ND 128, ¶ 30, 736 N.W.2d 788

. As relevant to this appeal, a district court must affirm a Commission order under N.D.C.C. § 28–32–46, unless:

1. The order is not in accordance with the law.

....

5. The findings of fact made by the agency are not supported by a preponderance of the evidence.

6. The conclusions of law and order of the agency are not supported by its findings of fact.

7. The findings of fact made by the agency do not sufficiently address the evidence presented to the agency by the appellant.

In an appeal to this Court from a district court's decision on an appeal from a Commission decision, we review the Commission's order in the same manner as the district court. See N.D.C.C. § 28–32–49. The Commission's decision on questions of law is fully reviewable. Capital Elec. Coop., 2007 ND 128, ¶ 31, 736 N.W.2d 788. In reviewing the Commission's findings of fact, however, we do not substitute our judgment for that of the Commission or make independent findings. Id. See Power Fuels, Inc. v. Elkin, 283 N.W.2d 214, 220 (N.D.1979). Rather, in reviewing the Commission's findings of fact, " ‘[w]e determine only whether a reasoning mind reasonably could have determined that the factual conclusions reached were proved by the weight of the evidence from the entire record.’ " Capital Elec. Coop., at ¶ 31 (quoting Power Fuels, at 220).

"Agency expertise is entitled to appreciable deference if the subject matter is highly technical." Cass Cty. Elec. Coop., Inc. v. N. States Power Co., 518 N.W.2d 216, 220 (N.D.1994)

.

[¶ 7] Under the Territorial Integrity Act, an electric public utility, unlike a rural electric cooperative, must secure a certificate of public convenience and necessity before extending service to a new customer outside the corporate limits of a municipality. See N.D.C.C. §§ 49–03–01

and 49–03–01.1 ; Capital Elec. Coop., Inc. v. Pub. Serv. Comm'n,

534 N.W.2d 587, 590 (N.D.1995). The criteria for the Commission to consider in deciding whether a certificate of public convenience and necessity should be issued are:

[C]ustomer preference for service by the electric public utility [is] not determinative of public convenience and necessity, but should be considered along with:

"the location of the lines of the suppliers; the reliability of the service which will be rendered by them; which of the proposed suppliers will be able to serve the area more economically and still earn an adequate return on its investment; and which supplier is best qualified to furnish electric service to the site designated in the application and which also can best develop electric service in the area in which such site is located without wasteful duplication of investment or service."

Capital Elec. Coop., Inc., at 591 (quoting Application of Otter Tail Power Co., 169 N.W.2d 415, 418 (N.D.1969)

).

A

[¶ 8] Capital argues the Commission erred in considering Menard's preference for service from MDU because "customer preference is not a criterion of public convenience and necessity."

[¶ 9] While not controlling, customer preference has long been recognized as a proper consideration for the Commission in deciding whether a certificate of public convenience and necessity should be issued. See, e.g., Cass Cty. Elec. Coop., Inc. v. Wold Props., Inc., 249 N.W.2d 514, 521 (N.D.1976)

; Tri–County Elec. Coop., Inc. v. Elkin, 224 N.W.2d 785, 792 (N.D.1974) ; Montana–Dakota Utils. Co. v. Hagen, 219 N.W.2d 174, 181 (N.D.1974) ; Cass Cty. Elec. Coop., Inc. v. Otter Tail Power Co., 169 N.W.2d 415, 418 (N.D.1969). While Capital correctly points out that "customer preference is a minor consideration" in rural areas and "cannot prevail where economic factors ... provide other criteria for choice," Tri–County Elec. Coop., Inc., at 792, on the basis of the record before us we cannot say the Commission placed undue significance on customer preference in this case. Indeed, the Commission found most of the factors it reviewed, including economic factors, favored MDU.

[¶ 10] Menard preferred electric service from MDU, and the Commission did not err in weighing that preference in its public convenience and necessity analysis.

B

[¶ 11] Capital argues the Commission's findings on the numbers of customers served in the area by MDU and Capital are not supported by the preponderance of the evidence and do not sufficiently address the evidence presented. Capital does not dispute that MDU has 28 customers within a one-mile radius and 29 customers within a two-mile radius of the Menard site, or that Capital has four customers within a one-mile radius and 11 customers within a two-mile radius. Capital contends the preponderance of the evidence nevertheless shows that it has more customers in the immediate vicinity of the Menard site, apparently because it contends the Commission's finding that McKenzie "is immediately northeast and adjacent to the site" is incorrect.

[¶ 12] First, the Commission's finding that McKenzie is immediately northeast and adjacent to the Menard site is supported by the evidence. Although the platted land immediately adjacent to the site is currently undeveloped, MDU's franchise and certificate of public...