Capital Electric v. City of Bismark

• Decision Date: 27 July 2007
• Docket Number: No. 20060199.,No. 20060270.,20060199.,20060270.
• Citation: 736 N.W.2d 788,2007 ND 128
• Parties: CAPITAL ELECTRIC COOPERATIVE, INC., Plaintiff and Appellant v. CITY OF BISMARCK, North Dakota, Defendant and Appellee and Montana-Dakota Utilities, Inc., a Division of MDU Resources Group, Inc., Defendant, Counterclaimant, and Appellee and The Public Service Commission of North Dakota, Defendant Montana-Dakota Utilities Company, a Division of MDU Resources Group, Inc., Appellant v. The Public Service Commission of North Dakota and Capital Electric Cooperative, Inc., Appellees.
• Court: North Dakota Supreme Court

736 N.W.2d 788

2007 ND 128

CAPITAL ELECTRIC COOPERATIVE, INC., Plaintiff and Appellant v. CITY OF BISMARCK, North Dakota, Defendant and Appellee and Montana-Dakota Utilities, Inc., a Division of MDU Resources Group, Inc., Defendant, Counterclaimant, and Appellee and The Public Service Commission of North Dakota, Defendant Montana-Dakota Utilities Company, a Division of MDU Resources Group, Inc., Appellant v. The Public Service Commission of North Dakota and Capital Electric Cooperative, Inc., Appellees.

No. 20060199.

No. 20060270.

Supreme Court of North Dakota.

July 27, 2007.

Rehearing Denied August 27, 2007.

Carol K. Larson (argued), Pringle & Herigstad, Minot, N.D., for Capital Electric Cooperative, Inc., The Public Service Commission of North Dakota and Capital Electric Cooperative, Inc.

Randall J. Bakke (argued) and Mitchell D. Armstrong (on brief), Smith Bakke

Porsborg & Schweigert, Bismarck, N.D., for City of Bismarck, North Dakota.

Daniel S. Kuntz (argued), MDU Resources Group, Inc., Bismarck, N.D., Jerome C. Kettleson (appeared) and Patrick W. Durick (on brief), Pearce & Durick, Bismarck, N.D., for Montana-Dakota Utilities, Inc., a Division of MDU Resources Group, Inc., Montana-Dakota Utilities Company, a Division of MDU Resources Group, Inc.

William W. Binek (argued), Special Assistant Attorney General, Public Service Commission, State Capitol, Bismarck, N.D., for appellee Public Service Commission of North Dakota.

SANDSTROM, Justice.

[¶ 1] Capital Electric Cooperative and Montana-Dakota Utilities Company ("MDU") both contend they are entitled to provide electric service to certain customers within the City of Bismarck. Capital Electric appeals from a judgment that "denied" its appeal from a Bismarck City Commission decision construing Bismarck's electric distribution franchises with Capital Electric and with MDU to allow MDU, and not Capital Electric, to provide electric service to new customers in the Boulder Ridge First Addition in northwest Bismarck. MDU appeals from a judgment affirming a Public Service Commission ("PSC") decision ordering MDU not to provide electric service to Boulder Ridge. We conclude each utility's franchise authorizes it to provide electric service to Boulder Ridge, and, therefore, the PSC's decision controls the distribution of electric service in Boulder Ridge. We reverse the judgment in Capital Electric's appeal and affirm the judgment in MDU's appeal.

I

[¶ 2] In 1987, Bismarck, a home rule city with an ordinance requiring electric service providers to have a franchise to provide service within the city, adopted a resolution renewing a twenty-year "non-exclusive" franchise for MDU to operate an electric distribution system in Bismarck as "now, or hereafter constituted." MDU's franchise did not include any geographic limitations.

[¶ 3] In 1973 and again in 1993, Bismarck also granted Capital Electric a twenty-year "non-exclusive" franchise to operate an electric distribution system in Bismarck as "now, or hereafter constituted." Capital Electric's franchise included a geographic limitation that provided:

1. In order to avoid a duplication of facilities between [Capital Electric] and other electrical franchises, the authority granted Capital Electric under this franchise is limited geographically to the areas within the city described in the Area Service Agreement dated July 5, 1973 executed by Capital Electric Cooperative, Inc., and Montana-Dakota Utilities Co., as modified by Amendment dated October 25, 1990, and any future amendments to the Area Service Agreement agreed to by [Capital Electric] and Montana-Dakota Utilities. [Capital Electric] shall enjoy all of the privileges and rights described in the Area Service Agreement. If the Area Service Agreement and Amendments thereto are canceled by either electric supplier during the term of this franchise, all privileges, rights, obligations and restrictions as therein stated shall continue to apply to both Capital Electric Cooperative, Inc., and Montana-Dakota Utilities Co. [¶ 4] In 1973, Capital Electric and MDU executed an area service agreement that included an attached map outlining each company's respective service areas and provided MDU would continue to serve the area encompassing the city of Bismarck and new areas contiguous to Bismarck and Capital Electric would continue to serve rural areas not receiving central station service and other areas identified in the area service agreement. The area service agreement further provided:

4. It is agreed that the interests of the consumer can best be met by providing that [MDU] serve those consumers within the area bounded by the heavy dashed black line on the attached map, which shall be made a part of this agreement, as well as any new consumers who come into that area and that [Capital Electric] will continue to serve its present consumers within the heavy dashed black line and will serve new consumers within the heavy dashed black line only under conditions further stipulated in this agreement. The principal service area of [Capital Electric] will be that area which lies outside the heavy dashed black line. The agreement shall apply only to area described by the map.

5. In the event there is need for either party to this agreement to serve a prospective consumer located in the area served by the other party, such service shall be supplied only with the written consent of the other party, provided that such individual exception shall not in any way alter the basic intentions of the parties, that each shall serve or offer service to the new consumers within their respective service areas.

....

8. It is mutually agreed by both parties that each will continue to serve customers it now has within the boundaries of the other party as stipulated and identified in the agreement. Such customer identification shall be from the books and records of each of the parties as of date of signing of this agreement. If an exchange of customers can be agreed upon by both parties and to the satisfaction of the consumer or consumers, such an exchange can be made.

9. This agreement will in no way affect [MDU's] or [Capital Electric's] needs or plans to construct transmission line facilities for the purpose of providing adequate electric power for the consumers in the area it serves.

10. This agreement is subject to approval, order, and other actions of the Public Service Commission of North Dakota or any other governmental agencies or bodies having jurisdiction over transactions and service herein covered.

11. It is realized that the foregoing instrument will not cover all conditions which may arise, but if followed in good faith by both parties, will serve as a guide to future developments and growth for both organizations, thus it is mutually agreed that this agreement will be reviewed at least once every five years for the purpose of evaluating its operation and to discuss possible modifications which may be desirable to more efficiently carry out the intent of both parties.

The area service agreement was subject to cancellation "by either party by giving twelve month's written notice to the other party of such cancellation." By letter dated June 26, 2002, MDU provided Capital Electric with "12 months written notice ... of Agreement cancellation for all areas covered by the Agreement outside the city limits of Bismarck and thereby not covered by Capital Electric's limited electric franchise from the City of Bismarck."

[¶ 5] In April 2005, the Boulder Ridge First Addition was annexed to Bismarck. Boulder Ridge is a subdivision in northwest Bismarck in section 16 of Township 139 North, Range 80 West, Haycreek Township. Capital Electric provides electric service in the rural areas outside and urban areas inside and outside Bismarck and had provided electric service to at least some customers in Boulder Ridge before the annexation. The Boulder Ridge area is "outside the heavy dashed black line" on the map attached to the area service agreement and was located in the "principal service area" of Capital Electric under the language of that agreement. Both MDU and Capital Electric sought to provide electric service to new customers in Boulder Ridge.

[¶ 6] In August 2005, MDU petitioned the Bismarck City Commission for a declaration of MDU's franchise rights to provide electric service to Boulder Ridge. After a hearing before the Bismarck City Commission and a subsequent special meeting, the Commission issued November 2005 findings of fact and conclusions of law on MDU's petition. The Commission concluded it was authorized to "decide questions regarding the franchises issued by it." The Commission said MDU and Capital Electric had offered differing opinions regarding the meaning of the franchises and the area service agreement and decided the area service agreement was ambiguous. The Commission considered extrinsic evidence from the early 1960s to indicate the parties' intent to allow Capital Electric a limited presence in the city, with MDU being the primary electric supplier. The Commission interpreted the area service agreement and related provisions of Capital Electric's franchise to mean:

The intention of the parties in the Area Service Agreement and by extension, the intention of the City when it awarded a franchise to [Capital Electric], was for MDU to remain the main provider of electric services within the City, except for [Capital Electric's] existing customers and any other customers or service areas conceded to [Capital Electric] by MDU. It was not the intention of the parties or of the City, that the map attached to the Area Service Agreement would be in place for 40 years without amendment but rather that it would be amended as the City grew to allow for healthy efficient growth for both utilities. It was not the intent of the City that [Capital Electric] would become the exclusive electric power supplier for all new areas of the City outside the line...