Emerald People's Utility Dist. v. Pacificorp

• Decision Date: 03 January 1990
• Citation: 100 Or.App. 79,784 P.2d 1112
• Parties: EMERALD PEOPLE'S UTILITY DISTRICT, Appellant, v. PACIFICORP, a Maine corporation, dba Pacific Power & Light Company, Respondent, and The Public Utility Commission of Oregon, Intervenor-Respondent. L87-1282; CA A49816.
• Court: Oregon Court of Appeals

Page 1112

784 P.2d 1112

100 Or.App. 79

EMERALD PEOPLE'S UTILITY DISTRICT, Appellant, v. PACIFICORP, a Maine corporation, dba Pacific Power & Light Company, Respondent and The Public Utility Commission of Oregon, Intervenor-Respondent.

L87-1282; CA A49816.

Court of Appeals of Oregon.

Argued and Submitted July 17, 1989.

Decided Jan. 3, 1990.

Donald R. Stark, Portland, argued the cause for appellant. With him on the briefs were Barry L. Adamson and Williams, Fredrickson, Stark & Weisensee, Portland; and Arthur C. Johnson, Richard L. Larson, Don Corson and Johnson, Clifton, Larson & Bolin, Eugene.

Charles F. Hinkle, Portland, argued the cause for respondent. With him on the brief was Gregory R. Mowe and Stoel, Rives, Boley, Jones & Gray, Portland.

W. Benny Won, Asst. Atty. Gen., Salem, argued the cause for intervenor-respondent. With him on the brief were Dave Frohnmayer, Atty. Gen., Virginia L. Linder, Sol. Gen., and Paul A. Graham, Asst. Atty. Gen., Salem.

Before RICHARDSON, P.J., and NEWMAN and DEITS, JJ.

NEWMAN, Judge.

After adopting the resolution that ORS 35.235(1) ¹ prescribes, plaintiff, a people's utility district, brought this action to condemn four hydroelectric generating plants and related facilities that defendant public utility owns and operates on the North Umpqua River. ² Defendant and the intervenor Public Utility Commission (PUC) asserted through affirmative defenses that the proposed condemnation was not "most compatible with the greatest public good and the least private injury." The court denied plaintiff's motion to strike the defenses and, after trial, ruled in accordance with them and dismissed the action. Plaintiff appeals, and we affirm.

We state the facts consistently with those found by the court in its memorandum opinion. Defendant operates eight hydroelectric generating plants on the river, including the four that plaintiff seeks to acquire. The eight plants comprise an integrated and coordinated system. Defendant's total capacity consists of a "resource mix," of which hydroelectric power that defendant's own facilities generate constitutes 35 percent. Over half of defendant's capacity is derived from thermal sources, which are substantially more expensive than hydroelectric generation. Hydroelectric facilities play a significant role in defendant's overall "strategy" of producing and supplying electricity.

Unlike defendant's, plaintiff's current capacity consists mainly of power derived from hydroelectric sources, including power obtained at preferential rates from the Bonneville Power Administration. As a result, plaintiff's customers are already served at favorable rates, which would improve still more if plaintiff acquires defendant's power plants. The court found that the benefit to plaintiff's customers from that acquisition would be substantially outweighed by the economic detriment to defendant and its customers, the number of which exceed plaintiff's by many times. The costs to defendant, which would be reflected in its rate structure, would include operational inefficiency resulting from the disruption of its integrated system; increased operating costs; duplication of and inefficient use of facilities resulting from simultaneous operations by the two parties; and the cost of replacement capacity, which will have to be derived from more expensive sources. There was evidence that the construction of new hydroelectric facilities in the future is unlikely.

In its memorandum opinion, the court said:

"Although the analysis is complex, it is based upon a simple premise: Plaintiff is substituting one source of low-cost power with another, and [defendant] will be replacing the low-cost portion of its resource mix with much higher cost alternatives. * * * If [plaintiff] succeeds in acquiring the four lower plants, it will simply replace low-cost federal hydropower with low-cost private hydropower."

Defendant, on the other hand, to paraphrase the court, would incur substantial additional expense in the production and delivery of power, outmeasuring the benefits to plaintiff's customers by approximately a two-to-one ratio. The court concluded:

"The evidence in this case shows that the private injury to [defendant] is of so great a degree that [plaintiff's] decision to take the lower four plants was clearly erroneous. [Defendant] has overcome the statutory preferences to be afforded [plaintiff's] resolution and has shown that its * * * affirmative defense has merit. As such, it is a complete defense to the taking."

Plaintiff first assigns error to the court's denial of its motion to strike the affirmative defenses. Its second assignment is that the

"trial court erred in its construction of the last clause of ORS 35.235(2) as creating litigable issues and erred in concluding that [plaintiff] had abused its discretion."

Although the arguments that plaintiff offers in support of the two assignments differ, they are substantially related, and we will discuss them together. ³

ORS 35.235(2) provides:

"The resolution or ordinance of a public condemner is presumptive evidence of the public necessity of the proposed use, that the property is necessary therefor and that the proposed use, improvement or project is planned or located in a manner which will be most compatible with the greatest public good and the least private injury."

Plaintiff contends, first, that the statute is unconstitutional as applied, because it abridges plaintiff's condemnation authority under Article XI, section 12, of the Oregon Constitution. That provision authorizes the creation of people's utility districts, empowers the districts to "exercise the power of eminent domain," and concludes with the paragraph:

"The legislative assembly shall and the people may provide any legislation that may be necessary, in addition to existing laws, to carry out the provisions of this section."

Plaintiff argues that the constitutional grant of the condemnation power is unconditional and that the legislature may not impose "substantive" conditions on that authority through implementing legislation that the constitutional provision requires. We disagree. The Supreme Court has taken a broader view than plaintiff's of the scope of the legislature's authority under Article XI, section 12. In People's Util. Dist. et al. v. Wasco Co. et al., 210 Or. 1, 305 P.2d 766 (1957), the court rejected the argument that the state's taxation of the district's property violated Article XI, section 12. It explained that the constitutional provision

"is not self-executing. The legislature could not have been compelled to pass any legislation pursuant to Art. XI, § 12, and, thus, it could have prevented the formation of people's utility districts entirely. To say that once it has created them according to the constitutional mold, it subsequently burdened them, the objects of its own creation, would be an imposition on the wide scope of legislative action heretofore recognized by this court." 210 Or. at 19, 305 P.2d 766.

Moreover, eminent domain was comprehensively regulated by statute in Oregon long before Article XI, section 12, was adopted in 1930. The grant of eminent domain authority in that section 12 is stated in general terms. The legislative implementation clause of the section clearly envisioned that existing or subsequent legislation relating to the subject would define the details of and limitations on the districts' condemnation authority.

Plaintiff's remaining arguments under these assignments relate to the meaning and application of ORS 35.235(2). The parties' principal disagreement concerns the extent to which plaintiff's decision to acquire the facilities is subject to judicial review. In City of Eugene v. Johnson, 183 Or. 421, 192 P.2d 251 (1948), the court said:

"[T]he necessity, propriety, or expediency of appropriating property for public use, the amount and location of the property to be taken, and its suitableness for the proposed use are all political or legislative questions. And the determination of those matters, by a grantee of the power of eminent domain is, in the absence of fraud, bad faith or abuse of discretion, final and not subject to review by the court." 183 Or. at 426, 192 P.2d 251.

The definition that the Supreme Court has developed for abuse of discretion by a condemner is that the taking decision must be "clearly erroneous." See Port of Umatilla v. Richmond et al., 212 Or. 596, 321 P.2d 338 (1958). In Moore Mill & Lbr. Co. v. Foster, 216 Or. 204, 244, 336 P.2d 39, 337 P.2d 810 (1959), the court equated abuse of discretion with a decision having "no basis in reason and * * * without any economic justification."

The parties appear to agree that, to rebut the "presumptive evidence" that arises under ORS 35.235(2) from plaintiff's taking resolution, defendant must show an abuse of discretion. ⁴ Plaintiff, however, takes a narrow view, and defendant and PUC a broad one, of the matters that are reviewable in connection with the greatest public good/least private injury test in ORS 35.235(2). Plaintiff maintains that the text and history of ORS 35.235(2) demonstrate that the statute was designed only to codify the common law defenses of public use and necessity and that the phrases "greatest public good" and "least private injury" do not create additional "litigable issues." We disagree. The statute specifies that the resolution is presumptive evidence of public necessity for the use, necessity for the property and compatibility with the greatest public good and least private injury. Plaintiff's argument would make surplusage of the third item, the phrase in question, which plainly does not replicate the first two. ⁵

Plaintiff argues next that, "if [the test of the greatest public good/least private injury] bears any intended meaning at all," it applies only to siting decisions and not "to the condemnation of an existing facility"--that is, it applies only to the planning or location...