Lewis v. Jackson Energy Co-Op. Corp., No. 2003-SC-0119-DG.
| Decision Date | 23 November 2005 |
| Docket Number | No. 2003-SC-0119-DG.,No. 2004-SC-0135-DG. |
| Citation | 189 S.W.3d 87 |
| Parties | J. Randolph LEWIS Appellant/Cross-Appellee, v. JACKSON ENERGY COOPERATIVE CORPORATION and Jackson Service Plus, Inc. Appellees/Cross-Appellants. |
| Court | United States State Supreme Court — District of Kentucky |
This appeal and cross-appeal are from an opinion of the Court of Appeals which affirmed an order of the circuit court granting summary judgment in favor of Jackson Energy Cooperative Corporation and Jackson Service Plus, Inc. We will refer to the appellees as Jackson Energy in this opinion.
The principal issue in this utility case is whether Jackson Energy, a rural electric cooperative, is in violation of KRS Chapter 279 for providing propane gas and other non-electric services to its members and customers. In its cross-appeal, Jackson Energy raises the issue of whether Lewis has standing to challenge its actions.
Lewis is a customer and member of the cooperative. He is also a propane gas dealer and a member of the Kentucky Propane Gas Association. According to the findings of the circuit judge, all the fees and expenses incurred by Lewis in connection with this action are being paid by the Kentucky Propane Gas Association, Inc.
Jackson Energy is a not-for-profit rural electric cooperative that was first organized and incorporated in 1938, pursuant to KRS Chapter 279. It is based in McKee, Kentucky, and provides electric services to approximately 46,000 members in a 12-county area in South Central Kentucky. It is owned by its membership and regulated by the Public Service Commission of Kentucky.
In 1998, Jackson Energy conducted two written surveys of its membership to determine their interest in receiving additional non-electric services from the organization. One of the surveys was forwarded to members of the Jackson Energy "Leadership Group" which is a select group of cooperative members who hold leadership or influential positions in the twelve counties served by the cooperative. Another survey was also sent to 300 of the approximately 7,500 Jackson Energy members who were known to the cooperative's directors to use propane gas purchased from private distributors.
As a result of these surveys, Jackson Energy determined that there was interest in providing some non-electric services. The directors selected services that they believed to be the most significant requests from the membership. Those services being: tree trimming, home monitoring and propane gas distribution to the general public. Jackson Service Plus, Inc., a for-profit corporation formed pursuant to KRS 271B, was incorporated to provide the new non-electric services to both members and the general public. The corporation is a wholly-owned subsidiary of Jackson Energy. The two entities have identical boards of directors and share employees and office space.
Jackson Energy Services, Inc. was formed in 1998 as a for-profit corporation pursuant to KRS 271B. Jackson Energy owns 75 percent of Energy Services with East Kentucky Power Cooperative, Inc., owning the remaining 25 percent. Energy Services, through its wholly-owned affiliate, Jackson Thermogas Energy, LLC, distributes and sells propane gas to members as well as to the general public.
Lewis filed suit against Jackson Energy in an effort to block the sale of propane gas. Both parties moved for summary judgment, which the circuit judge granted in favor of Jackson Energy. The circuit judge noted that the word "energy" is not defined in KRS 279. He selected a definition from Webster's Ninth New Collegiate Dictionary, p. 412 (1985), which defined "energy" as "usable power" and "resources for producing such power." The circuit judge also found that propane gas was a form of energy because it is a flammable material that can be used to produce heat and power.
Upon the entry of the summary judgment, Lewis appealed to the Court of Appeals. That court adopted the same definition of energy as used by the circuit judge, and concluded that:
Propane gas is a form of energy because it can be utilized to produce heat and power. Therefore, based upon the language of the statute, Jackson Energy is permitted to furnish all forms of energy, including propane gas, to its members and to the public.
The Court of Appeals noted that the original version of KRS 279.020 (prior to 1974) explicitly and repeatedly stated that the legislative purpose of the Act was to promote the "... use of electric energy in this state by making electric energy available...." These statutory statements have since been deleted. The Court of Appeals also observed that the statute was amended in 1974 so as to remove the word "electric" before the word "energy." Thus, it believed that by deleting the statutory statements and by replacing "electric energy" with the word "energy," the General Assembly intended to allow rural electric cooperatives to produce, transmit, distribute or furnish other forms of energy. It should be remembered that Jackson Energy was incorporated under the pre-1974 statute.
The Court of Appeals also found support for its decision in the year — 2000 amendments to KRS Chapter 278, which governs public utilities generally. The amendments in question deal with nonregulated services provided by utilities through affiliates. The Court of Appeals believed that by expressly exempting rural electric cooperatives from some provisions, the General Assembly appeared to contemplate that these cooperatives could provide nonregulated services. Consequently, it reached the same conclusion as the circuit court, although for somewhat different reasons, to the effect that Jackson Energy is operating pursuant to the laws of the Commonwealth by furnishing nonregulated services, such as propane gas, to its customers, through its affiliates. This appeal and cross-appeal followed.
Jackson Energy challenged the standing of Lewis in the circuit court which ruled that Lewis did have standing as he was the "ideal party" to challenge the sale of propane by Jackson Energy. On the merits of the case, Jackson Energy prevailed and Lewis appealed. Jackson Energy did not cross-appeal on the standing issue, but argued the question in its appellate brief. The Court of Appeals did not mention the issue, affirming the decision of the circuit court in favor of Jackson Energy on the merits. Without entering an extended discussion of this issue, we must agree with the decision of the circuit judge that Lewis, as a member of the cooperative and a propane gas proprietor, had standing to challenge the sale of propane in this matter.
Lewis argues that KRS 279.020 prescribes that the only purpose of a rural electric cooperative is to provide electric energy and electric services. He also contends that the courts below erred in construing KRS 279.020.
Jackson Energy responds that the plain language of KRS 279.020 allows the sale of propane; that propane is a form of energy that may be provided by cooperatives; that the 1974 amendment supports a broad definition of "energy"; that the distribution of propane was a service requested by the members and was deemed advisable or desirable to the operation of a utility; that other Kentucky statutes support the conclusion that Jackson Energy may sell propane; that the 2000 amendments to Chapter 278 support the rulings of the courts below; that the February 2000 PSC order supports the decision by the circuit court and the Court of Appeals; and that relevant case law from other jurisdictions supports the decisions of the courts below.
This case began under the authority of Section 192 of the Kentucky Constitution, which was repealed effective November 5, 2002, and was replaced by Section 190. The amendment did not change the universally accepted principle that corporations are creatures of statute and that their powers are expressed and prescribed by statute. See 1 Charles Keating & Gail O. Gradney, Fletcher Cyclopedia of Law of Private Corporations § 3635, at p. 226 (1990).
KRS Chapter 279 is an act relating to rural electric and rural telephone cooperative corporations. KRS 279.020 states as follows:
Any three (3) or more individuals, partnerships, associations or private corporations a majority of whom are citizens of Kentucky, may organize to conduct an electric generation, transmission, distribution or service nonprofit cooperative corporation to produce, transmit, distribute or furnish energy to any person or corporation and/or to provide electrical devices, wiring and equipment and any services that are requested or deemed advisable or desirable to operate a utility, by executing, filing and recording articles of incorporation as provided in KRS 279.030 and 279.040. (Emphasis added.)
The statute defines the scope of permissible activities of the special purpose rural electric cooperatives. The use of the adjective "electric" to show the precise type of cooperative authorized by the statute is an important limitation on the legislative grant of authority. It is a primary rule of statutory construction that the enumeration of particular things excludes ideas of something else not mentioned. See Smith v. Wedding, 303 S.W.2d 322 (Ky.1957). Use of the word "electric" limits the cooperative and prevents the organization of any other type of cooperative under the statute. If the legislature had intended to convert "electric cooperatives" into "energy cooperatives," it would have deleted the word "electric" from the statute altogether. That was not done.
Statutes should be construed in such a way that they do not become ineffectual or...
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