City of Columbia City v. Indiana Utility Regulatory Com'n

• Decision Date: 28 July 1993
• Docket Number: No. 93A02-9207-EX-346,93A02-9207-EX-346
• Citation: 618 N.E.2d 21
• Parties: Util. L. Rep. P 26,341 CITY OF COLUMBIA CITY, Indiana, by its Municipally-Owned Electric Utility, Appellant-Petitioner Below, v. INDIANA UTILITY REGULATORY COMMISSION, Northeastern REMC and The Office of Utility Consumer Counselor, Appellees-Respondents Below.
• Court: Indiana Appellate Court

Page 21

618 N.E.2d 21

Util. L. Rep. P 26,341

CITY OF COLUMBIA CITY, Indiana, by its Municipally-Owned Electric Utility, Appellant-Petitioner Below, v. INDIANA UTILITY REGULATORY COMMISSION, Northeastern REMC and The Office of Utility Consumer Counselor Appellees-Respondents Below.

No. 93A02-9207-EX-346.

Court of Appeals of Indiana Third District.

July 28, 1993.

Rehearing Denied Oct. 4, 1993.

Michael B. Cracraft, Philip B. McKiernan, Hackman McClarnon Hulett & Cracraft, Indianapolis, for appellant-petitioner below.

Randolph L. Seger, Robert B. Scott, McHale, Cook & Welch, P.C., Indianapolis, John S. Bloom, Bloom, Bloom & Gage, P.C., Columbia City, for appellees-respondents below.

STATON, Judge.

In this consolidated appeal, two orders of the Indiana Utility Regulatory Commission ("Commission") are challenged. Northeastern REMC ("REMC") appeals Commission Order 38974 granting the City of Columbia City ("Columbia City") authority to modify its electrical service boundaries to serve annexed commercial territory. Four (restated) issues are presented for our review:

I. Whether the Commission erroneously interpreted the Electricity Suppliers' Service Area Assignments Act, IND.CODE 8-1-2.3, ("Act") to find a legislative preference that municipal utilities serve areas annexed by the municipality.

II. Whether the Commission failed to comply with the Act by making specific findings on the financial ability of Columbia City to serve annexed territory.

III. Whether the Commission disregarded substantial evidence of an annual operating deficit to Columbia City resulting from its proposal.

IV. Whether the Commission erroneously elevated the stated preferences of Columbia City officials over those of Whitley County officials.

Columbia City appeals Commission Order 39202 denying Columbia City's petition to modify its electrical service boundaries to serve annexed residential territory. Two additional (restated) issues are raised in the appeal of the second order:

V. Whether the Commission erred in admitting legal opinion testimony from the former Commission Chairman concerning appropriate factors for the Commission's consideration.

VI. Whether the Commission erred as a matter of law in specifically considering the financial ability (in addition to technical ability) of Columbia City to serve annexed territory.

We affirm.

On April 16, 1990, Columbia City filed a petition with the Commission requesting a modification of assigned service area boundaries to permit Columbia City to provide electrical service to a newly annexed territory consisting of 30 commercially-zoned acres ("annexed territory"). REMC had previously installed electrical facilities in the annexed territory.

Public hearings were held on July 16, 17 and 18, 1991. On April 1, 1992, the Commission issued its order granting Columbia City authority to modify its assigned service area boundaries. Additionally, the Commission ordered Columbia City to pay REMC the sum of $296,208.97 as actual and severance damages. Record, p. 335.

On May 16, 1991, Columbia City filed its petition seeking approval of a change in its electrical service boundaries to provide electrical service to a portion of newly annexed residential territory consisting of 120 acres. Public hearing was held on November 6, 7 and 8, 1991. On July 1, 1992, the Commission denied the petition.

Judicial review of Commission decisions is governed by IND. 8-1-3-1, providing in pertinent part: "An assignment of errors that the decision, ruling, or order of the commission is contrary to law shall be sufficient to present both the sufficiency of the facts found to sustain the decision, ruling, or order, and the sufficiency of the evidence to sustain the finding of facts upon which it was rendered."

Decisions of the Commission are reviewed under a multiple-tiered standard of review. First, we determine whether or not the decision is supported by specific findings of fact and by sufficient evidence. Second, we consider whether or not the decision is contrary to law. Citizens Action Coalition v. PSI (1991), Ind., 582 N.E.2d 330, 333, reh. denied.

I. Legislative Intent

REMC claims that the Commission erroneously detected, in construing the Act, a "preference" for municipally owned utility service in municipally owned territory; thus, the Commission was biased in favor of granting a service reassignment.

REMC contends that the legislature's intent was to protect the rights of existing electricity suppliers, as evidenced by a "general rule" providing for stability. REMC recognizes a "narrow exception" in the provision for change only upon the establishment of certain criteria within a narrow time frame. ¹ That is, established boundaries will be realigned only where the "public convenience and necessity" is served.

Columbia City responds that the Commission recognized the plain meaning of the Act and displayed no bias.

IND.CODE 8-1-2.3-6 provides that boundaries of assigned service areas of electricity suppliers may be changed only in certain circumstances, including municipality annexation, upon mutual agreement or the intersection of two boundary lines upon a single tract of land (a "split-site" situation). Pursuant to I.C. 8-1-2.3-6(1), the reassignment of boundaries upon municipality annexation may be ordered "if, upon notice and after hearing, the commission decides that it is in the public convenience and necessity for the municipally owned electric utility to render service to the annexed area."

In determining public convenience and necessity, the commission must consider all relevant matters, including but not limited to: (1) the preference of owners, occupiers and consumers in the annexed area, (2) the ability of the municipally owned electric utility to render service, (3) other utility services to be supplied in the annexed area by the municipality, (4) the proximity and capability of the service repair facilities of the electricity suppliers involved and (5) the preference of local government officials. Id.

With regard to REMC's argument against the existence of a statutory presumption in favor of municipally-owned service, the Commission's order provided:

"Respondent contends that the Electricity Suppliers' Service Area Assignments Act (I.C. 8-1-2.3-1 et seq.) does not require automatic assignment of annexed territory to a municipal electric utility nor does it reflect a presumption that municipalities should serve annexed territories. The Commission agrees that the annexation of property does not require automatic transfer of territorial rights to a municipal utility. We also agree that the statute does not contain a presumption that a transfer should be made upon annexation. However, we do believe the language of I.C. 8-1-2.3-4 does indicate a preference for a municipal utility serving all of a municipality, if the utility can provide adequate and reliable service and desires to do so. First, we note the Legislature directed that actions be taken in the original assignment of territories '... to assure that only one (1) electricity supplier shall serve within the existing municipal limits: ...' Then, the Legislature provided that assigned service areas '... may not be changed except under any one (1) of the following circumstances: ...' The first exception provides that a municipality may petition to serve newly annexed territory, if the municipality has its own electric utility. No other type of utility can petition in this manner. Therefore, some deference has been given to the municipality if certain conditions are met and if it is in the public convenience and necessity. The Commission does have the statutory responsibility to consider all relevant factors in rendering a finding on public convenience and necessity. As we have stated in numerous Commission orders, service area boundary cases are extremely fact sensitive and the Commission considers each case upon its individual merits."

Record, pp. 332-33.

The creation and realignment of utility service territories is a legislative function. This court is obliged to give effect to a clear legislative scheme of utility territorial alignment, without the necessity of interpreting statutory language so as to bring about territorial realignment by implication. Public Serv. Co., Inc. v. Knox County Elec. Corp. (1976), 170 Ind.App. 576, 354 N.E.2d 301, 305, reh. denied. A plain reading of the Act leads to the conclusion that a territorial realignment should take place only after significant Commission scrutiny.

There exists no explicit or implicit statutory preference in the Act for municipally owned utility service in municipally owned territory. The recognition of such a preference in the instant case was contrary to law.

II. Findings Relative to Financial Ability--Order 38974

REMC contends that the "ability to render service" as utilized in I.C. 8-1-2.3-6(1) necessarily includes the financial ability to render service. In REMC's view, Columbia City should have offered for the Commission's consideration a financial or economic feasibility analysis relative to its provision of electrical service in the annexed territory.

The final order of the Commission does not include specific findings on REMC's financial ability to provide service, focusing instead on technical ability to provide service. Based on the contention that evidence of financial ability is statutorily required, REMC moved to dismiss Columbia City's petition pursuant to Ind.Trial Rule 41(B). Columbia City Mayor Joseph Zickgraf admitted that the prefiled testimony of Columbia City included no incremental cost analysis or other economic feasibility study. Record, p. 534.

On appeal, REMC claims that the denial of dismissal and the ultimate finding of public convenience and necessity absent economic evidence is arbitrary and capricious, contrary to law and unsupported by substantial evidence. [Brief of Appellant, p. 25]

Columbia City responds that the...