Fort Pierce Utilities Authority of City of Fort Pierce v. Florida Public Service Commission, 57854

• Decision Date: 25 September 1980
• Docket Number: No. 57854,57854
• Citation: 388 So.2d 1031
• Parties: FT. PIERCE UTILITIES AUTHORITY OF the CITY OF FT. PIERCE, Gainesville-Alachua County Utility Board, City of Lakeland, Florida, City of Starke, Florida, City of Homestead, Florida, City of Tallahassee, Florida, Sebring Utilities Commission, New Smyrna Beach Utilities Commission, City of Kissimmee, Florida, City of Gainesville, Florida, Petitioners, v. FLORIDA PUBLIC SERVICE COMMISSION, Respondent.
• Court: Florida Supreme Court

Page 1031

388 So.2d 1031

FT. PIERCE UTILITIES AUTHORITY OF the CITY OF FT. PIERCE, Gainesville-Alachua County Utility Board, City of Lakeland, Florida, City of Starke, Florida, City of Homestead, Florida, City of Tallahassee, Florida, Sebring Utilities Commission, New Smyrna Beach Utilities Commission, City of Kissimmee, Florida, City of Gainesville, Florida, Petitioners, v. FLORIDA PUBLIC SERVICE COMMISSION, Respondent.

No. 57854.

Supreme Court of Florida.

Sept. 25, 1980.

Joseph C. Jacobs, C. Everett Boyd and J. Lawrence Johnston of Ervin, Varn, Jacobs, Odom & Kitchen, Tallahassee, and George Spiegel, Robert A. Jablon and Alan J. Roth of Spiegel & McDiarmid, Washington, D. C., for petitioner.

Prentice P. Pruitt, Legal Director, and Joseph A. McGlothlin, Staff Counsel, Tallahassee, for respondent.

Hugh C. Macfarlane and Ansley Watson, Jr., of Macfarlane, Ferguson, Allison & Kelly, Tampa, for Peoples Gas System Inc., intervening respondent.

SUNDBERG, Chief Justice.

We have for review pursuant to our jurisdiction under article V, section 3(b) (3), Florida Constitution (1972), an order of the Florida Public Service Commission (Commission) approving an application of Peoples Gas System, Inc. (Peoples) to issue certain securities. The issue presented is whether the Commission is empowered to consider, in connection with an application for issuance of securities, a merger of two other corporate entities which allegedly will be made possible through the purchase of certain properties of one of those entities from the proceeds of the securities issue.

On May 24, 1979, Peoples, a public utility as defined in section 366.02, Florida Statutes (1977), applied to the Commission for authority to issue and sell (i) senior promissory notes, eleven percent, in the amount of $35,000,000, and (ii) up to 1,505,000 shares of Class B common stock (nonvoting), par value $3.331/3 per share, for a consideration of $10 per share. The application stated that the proceeds of the issuance would be utilized to purchase at net book value, pursuant to contract, the retail natural gas distribution properties owned by Florida Gas Company (Florida Gas).

On June 29, 1979, the Commission issued Order 8932 in which it granted to Peoples the authority sought in its application. The order concluded that the proceeds of the proposed issuance would be used for a lawful object within the legitimate corporate purposes of the applicant, and that the issuance would not impair the ability of Peoples to perform the service required of it as a public utility. The order observed that the effect of the issuance would be to replace the outstanding security instruments of Florida Gas with those bearing higher rates of interest. The Commission reserved for disposition in an appropriate ratemaking proceeding the issue of whether ratepayers should be required to bear the higher interest costs associated with the acquisition by Peoples. Additional language made clear the fact that the order determined only the authority of the applicant to enter into the transactions and that any other related matters arising as a result (rate-base valuation, costs, etc. in addition to the interest issues specifically described) were not passed upon by the Commission's action but would be treated in ratemaking proceedings.

On July 16, 1979, certain municipal utilities (petitioners) filed a motion to intervene and petition for reconsideration of Order No. 8932. In the petition the municipal utilities requested the Commission to set the application of Peoples for public hearing on the issue of whether, in view of the planned merger between Florida Gas and Continental Group, Inc. (Continental), approval of the application for authority to issue securities would be in the public interest. On July 18, the municipalities requested oral argument on their motion and petition. The reply of Peoples to these pleadings was filed on July 20, 1979. Oral argument was held before the Commission on August 13, 1979. On September 12, 1979, the Commission issued Order No. 9051, in which it denied the petition for reconsideration. The order essentially concluded that the Commission could not properly include as an issue in Peoples' application for issuance of securities the desirability of the merger between Florida Gas and Continental as demanded by the petition.

By their petition for review the municipal utilities raise two issues. We state and will address them in inverse order of their presentation. First, in a utility financing application, can the Commission reserve, for a subsequent ratemaking proceeding, issues of valuation and costs which may arise as a result of the financing? Second, in a utility financing application, is the Commission required to pass on the merger of two separate corporate entities, to which merger the applicant is not a party and over which merger the Commission otherwise has no jurisdiction, where the proceeds of the financing allegedly will make possible the merger?

Petitioners have presented no authority nor have we been able to find any statutory or case law which would require the Commission to resolve in the financing application, rather than defer to a ratemaking proceeding, issues pertaining to rate-base valuations and whether increased interest costs will be reflected in the rates Peoples is allowed to charge in the future. Since we find such reservation of jurisdiction by the Commission to be lawful, we reject petitioners' argument as to the first issue.

With respect to the second issue, the authority of the Commission to regulate the issuance and sale of securities by an intrastate natural gas distribution company arises from section 366.04(1), Florida Statutes (1977), which reads in pertinent part as follows:

In addition to its existing functions, the Florida Public Service Commission shall have jurisdiction to regulate and supervise each public utility with respect to its rates, service and the issuance and sale of its securities . . ..

This jurisdiction is implemented by chapter 25-8 of the rules of the Commission, ¹ which by section 25-8.02(L) provides that an applicant for issuance of securities should show that:

(T)he issue (1) is for some lawful object within the corporate purposes of the applicant and compatible with the public interest, which is necessary or appropriate for or consistent with the proper performance by the applicant of service as a public utility and which will not impair its ability to perform that service; and (2) is reasonably necessary or appropriate for such purposes.

Two other propositions are uncontradicted. First, the Commission has no jurisdiction to regulate the acquisition by Peoples of the gas distribution system of Florida Gas. Second, the Commission has no jurisdiction to regulate the merger of Florida Gas and Continental. See ch. 366, Fla.Stat. (1977).

Petitioners assert, however, that the public interest will not be served by the merger and that the Commission is obliged to consider that issue in connection with the financing application. This obligation, they say, arises from the legislative declaration contained in section 366.01, Florida Statutes (1977):

Legislative declaration. The regulation of public utilities as defined herein is declared to be in the public interest and this chapter shall be deemed to be an exercise of the police power of the state for the protection of the public welfare and all the provisions hereof shall be liberally construed for the accomplishment of that purpose.

Petitioners maintain that the public interest would be adversely affected by the merger because among the properties of Florida Gas which will be controlled by Continental after the merger are its exploration and gas transmission subsidiaries. The transmission subsidiary, Florida Gas Transmission Company,...