Electrical Dist. No. 2, Pinal County, Ariz. v. Arizona Corp. Com'n, s. CV

• Decision Date: 27 October 1987
• Docket Number: Nos. CV,s. CV
• Citation: Electrical Dist. No. 2, Pinal County, Ariz. v. Arizona Corp. Com'n, 745 P.2d 1383, 155 Ariz. 252 (Ariz. 1987)
• Parties: ELECTRICAL DISTRICT NO. 2, PINAL COUNTY, ARIZONA, a political subdivision of the State of Arizona, Petitioner, v. ARIZONA CORPORATION COMMISSION; Marcia Weeks, Renz Jennings and Dale Morgan, as members thereof; and Arizona Public Service Co., an Arizona corporation, as the Real Party in Interest, Respondents, and Richard Ungar and Joan Ungar, husband and wife, Intervenors. ARIZONA PUBLIC SERVICE COMPANY, Plaintiff-Defendant, Appellant, Cross-Appellee, v. ELECTRICAL DISTRICT NO. 2, PINAL COUNTY, ARIZONA, a political subdivision of the State of Arizona, Defendant-Plaintiff, Appellee, Cross-Appellant. 87-0071-SA, CV 86-0532-PR.
• Court: Arizona Supreme Court

Page 1383

745 P.2d 1383

155 Ariz. 252

ELECTRICAL DISTRICT NO. 2, PINAL COUNTY, ARIZONA, a political subdivision of the State of Arizona, Petitioner, v. ARIZONA CORPORATION COMMISSION; Marcia Weeks, Renz Jennings and Dale Morgan, as members thereof; and Arizona Public Service Co., an Arizona corporation, as the Real Party in Interest, Respondents and Richard Ungar and Joan Ungar, husband and wife, Intervenors ARIZONA PUBLIC SERVICE COMPANY, Plaintiff-Defendant, Appellant, Cross-Appellee, v. ELECTRICAL DISTRICT NO. 2, PINAL COUNTY, ARIZONA, a political subdivision of the State of Arizona, Defendant-Plaintiff, Appellee, Cross-Appellant.

Nos. CV 87-0071-SA, CV 86-0532-PR.

Supreme Court of Arizona In Banc.

Oct. 27, 1987.

Reconsideration Denied Dec. 15, 1987.

Martinez & Curtis, P.C. by Michael A. Curtis, Jay M. Martinez, William P. Sullivan, Steven B. Bennett, Phoenix, for Elec. Dist. No. 2.

Arizona Corp. Com'n by Christopher C. Kempley, Timothy M. Hogan, Janice M. Urbanic, Phoenix, for Arizona Corp. Com'n.

Snell & Wilmer by Steven M. Wheeler, George H. Lyons, George J. Coleman, Phoenix, Stanfield & McCarville by Thomas A. McCarville, Casa Grande, for Arizona Public Service.

Mariscal, Weeks, McIntyre & Friedlander, P.A. by Michael S. Rubin, Phoenix, for Richard and Joan Ungar.

CAMERON, Justice.

I. JURISDICTION

Pinal County Electrical District No. 2 (The District) petitioned this court for review of a court of appeals' memorandum decision [1 CA-CIV 8334]. The District also filed a special action, seeking review of Decision No. 55298 of the Arizona Corporation Commission (Commission) (Nov. 19, 1986). We granted the petition for review of the court of appeals' memorandum decision and accepted jurisdiction of the petition for special action from the Commission's decision. We consolidated the two matters for argument and decision. We have jurisdiction pursuant to Ariz. Const. Art 6, §§ 5(3), 5(1), and A.R.S. § 40-254(F).

II. ISSUES

A. As to the court of appeals' opinion:

1. Are the rights given under A.R.S. § 40-281(B) within APS' certificate?

2. Was the B'N'B Restaurant within the APS certificated area?

3. Was the Tierra Grande subdivision and trailer park within the APS certificated area?

B. As to the Arizona Corporation Commission's decision:

1. Was the Arizona Corporation Commission bound by the decision of the trial court as modified by the court of appeals?

III. FACTS

This matter is preceded by years of litigation over the right of Arizona Public Service (APS) and the District to provide electrical service in Pinal County. This case focuses on service to two properties. One property is a restaurant, B'N'B, located fifty feet outside the city limits of Casa Grande. The other is a subdivision, Tierra Grande, located approximately three miles from the town limits of Eloy and eight miles from the city limits of Casa Grande.

Both properties lie within the geographic boundaries of the District. The District was created in 1923 for the primary purpose of providing electricity for the irrigation of arid lands in Pinal County. A.R.S. § 48-1701 et. seq. The District is a political subdivision of the state pursuant to Ariz. Const. Art. 13 § 7 and not a public service corporation under Ariz. Const. Art. 15, § 2. As such it is not subject to regulation by the Commission.

APS is a public service corporation, Ariz. Const. Art. 15, § 2, regulated by the Commission, Ariz. Const. Art. 15, § 3; A.R.S. § 40-202. Before a public service corporation shall construct a line, plant, service or system, it must first obtain from the Commission a certificate of public convenience and necessity (certificate), A.R.S. §§ 40-281(A), -282, and is otherwise obligated to comply with the orders, decisions, rules and regulations of the Commission. A.R.S. § 40-202(B).

Dating back to the 1920s, the Commission granted numerous certificates to APS and its predecessors in interest to provide electrical service in Pinal County. The scope of the certificates was described in decisions issued by the Commission. Some of the decisions employed vague descriptions of the certificated territories, describing the areas to be served with such terms as "in the vicinity thereof" and "territory adjacent thereto."

Such vague and ambiguous terms were used to describe the certificated areas now at issue. In 1928, the Commission issued a certificate to APS' predecessor in interest authorizing the operation of electric light and power utilities in the "City of Casa Grande, Pinal County, Arizona, and vicinity." Decision No. 4440 (May 23, 1928). In 1929, the Commission granted a certificate to a predecessor in interest for the operation of an electric plant "serving Eloy and territory adjacent thereto." Decision No. 4850 (June 12, 1929). A later certificate authorized service to "the unincorporated Town of Eloy and territory adjacent thereto." Decision No. 18694 (Feb. 10, 1949).

Operating pursuant to these certificates, APS and its predecessor in interest provided electrical service to customers in Casa Grande and Eloy. As these municipalities grew and their boundaries expanded, the area served by APS expanded even though APS did not seek specific authority from the Commission to expand its certificated territories. This was allowed by A.R.S. § 40-281(B) which reads:

B. This section shall not require such corporation to secure a certificate for an extension within a city, county or town within which it has lawfully commenced operations, or for an extension into territory either within or without a city, county or town, contiguous to its street railroad or line, plant or system, and not served by a public service corporation of like character, or for an extension within or to territory already served by it, necessary in the ordinary course of its business. If a public service corporation, in constructing or extending its line, plant or system, interferes or is about to interfere with the operation of the line, plant or system of any other public service corporation already constructed, the commission, on complaint of the corporation claiming to be injuriously affected, may, after hearing, make an order and prescribe terms and conditions for the location of lines, plants or systems affected as it deems just and reasonable.

In the 1970s, APS and the District began to encroach upon each others territory; litigation in the courts and the Commission followed.

A. The Court Suit

In 1972, APS filed an action in the Superior Court of Pinal County for declaratory relief. APS claimed that the District was acting in excess of its statutory authority by providing electrical services to customers other than those pumping water for irrigation of arid farms within the district and domestic uses incidental to farming, thereby violating the certificate which authorized APS to serve Casa Grande and vicinity.

On 1 December 1981, Judge McBryde of the Pinal County Superior Court held that the District's primary purpose was to provide electrical service to irrigate farm lands and to supply incidental electricity to the farms. However, the District could also provide electrical service to other classes of customers (residential, industrial, commercial and municipal), when such service would not interfere with its primary purpose and when it would not directly compete with a public service corporation, such as APS, capable of and properly certificated to serve such customers. Judge McBryde held that there should be no duplication of service in the future and that APS, within the area of its certification, should be given the first right to serve new customers, other than irrigation pumping and farm and domestic services incidental thereto, which it was ready, willing and able to serve. Neither party appealed this judgment.

In 1983, APS filed a post-judgment proceeding seeking to enjoin the District from providing electrical service to B'N'B after B'N'B had moved from a location where it had been served by the District. The District, at approximately the same time, filed a suit in Maricopa County Superior Court seeking to enjoin APS from constructing facilities to serve a second phase of development of the Tierra Grande subdivision. The cases were consolidated in Maricopa County and decided by Judge Linda K. Scott in one proceeding.

Concluding that each party would be more likely to succeed in these respective claims, Judge Scott enjoined the District from providing electrical service to B'N'B, pendente lite and enjoined APS from providing electrical service or undertaking construction to provide electrical service to the Tierra Grande development and trailer park, pendente lite. Noting that the Commission has concurrent jurisdiction to interpret the scope and extent of issued certificates of convenience and necessity, Judge Scott directed APS to pursue a final resolution of the matter with the Commission so as to identify those portions of Pinal County which are within the APS certificates. Judge Scott arrived at the following conclusions of law:

"1. For purposes of interpreting and enforcing Judge McBryde's December 1, 1981 Judgment, A.P.S. has a right of first refusal to serve all new (subsequent to December 1, 1981) electrical customers, other than irrigation pumping and farm and domestic services incidental thereto, within those areas encompassed by its Certificates of Convenience and Necessity issued pursuant to Arizona Corporation Decision Nos. 4440 and 18694.

2. Outside the areas encompassed by A.P.S.' Certificates of Convenience and Necessity, A.P.S. may provide electricity as set forth in A.R.S. § 40-281(B).

3. In areas not within A.P.S.' Certificates of Convenience and Necessity E.D. No. 2 [The District] can provide electrical service to residential, industrial, commercial and municipal customers for which electrical service is not otherwise available.

4. A.P.S. does not have a right of first refusal in areas it can serve under A.R.S. § 40-281(B).

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