Morningstar Water Users Ass'n v. New Mexico Public Utility Com'n

• Decision Date: 21 September 1995
• Docket Number: No. 21985,21985
• Citation: 120 N.M. 579,1995 NMSC 62,904 P.2d 28
• Parties: MORNINGSTAR WATER USERS ASSOCIATION, Appellant, v. NEW MEXICO PUBLIC UTILITY COMMISSION, Appellee.
• Court: New Mexico Supreme Court

Page 28

904 P.2d 28

120 N.M. 579

MORNINGSTAR WATER USERS ASSOCIATION, Appellant, v. NEW MEXICO PUBLIC UTILITY COMMISSION, Appellee.

No. 21985.

Supreme Court of New Mexico.

Sept. 21, 1995.

[120 N.M. 581] Arthur A. Greenfield, Albuquerque, for Appellant.

Lee W. Huffman, Commission Counsel, Santa Fe, for Appellee.

OPINION

FROST, Justice.

Morningstar Water Users Association, Inc. sought an order to restrain the City of Farmington from invading the Morningstar water supply service territory. The sole question before us is whether the New Mexico Public Utility Commission (Commission) had jurisdiction to grant the order. We review this case under SCRA 12-102(A)(3) (Cum.Supp.1995) and NMSA 1978, Section 62-11-1 (Repl.Pamp.1993), both of which provide for Supreme Court review of final orders by the Commission. We conclude the Commission had no such jurisdiction.

I. FACTS

This case arises from the same dispute between Morningstar and Farmington that we addressed in Morningstar Water Users Association, Inc. v. Farmington Municipal School District No. 5, 120 N.M. 307, 901 P.2d 725 (1995) [hereinafter Morningstar I ]. Morningstar is a water users' association, incorporated under NMSA 1978, §§ 73-5-1 to -9 (Orig.Pamp. & Cum.Supp.1995), that provides water to over 500 member-consumers, all located outside the boundaries of Farmington. Farmington owns a water utility that until recently serviced residents and businesses only within its municipal boundaries. Farmington has now begun to extend its services into a geographical area that had previously been served only by Morningstar.

In discussing Morningstar's "service area" and "territory," we refer only to the general location of Morningstar's member-consumers. We do not imply that Morningstar had a certified service area or territory that was obtained--as will be explained below--through the issuance by the Commission of a certificate of public convenience and necessity. See § 62-9-1. Also, as discussed below, Farmington, like Morningstar, is an unregulated utility and lacks a certified territory within a specific geographical region.

In 1993 Morningstar and Farmington competed for contracts to supply water for a new junior high school that was to be constructed inside Morningstar's service area. Over Morningstar's objections, the contracts were ultimately awarded to Farmington. This dispute was the subject of Morningstar I.

On January 24, 1994, a complaint was filed with the Commission in which Morningstar alleged that Farmington was encroaching upon its service area. Morningstar pointed out that in order to provide water to the school Farmington intended to add new pressure zones, and construct a water storage tank, pumping facilities, and water lines, all within Morningstar's territory. In its complaint Morningstar also objected to an alleged agreement in which Farmington would furnish water to land owned by the City of Albuquerque that is located within Morningstar's service area. Morningstar argued that it already had in place the facilities, including pipelines, needed to provide water to the Albuquerque lands. Farmington, on the other hand, could only effectuate the agreement by building through Morningstar's territory. In its request for relief Morningstar sought an immediate hearing before the Commission and a cease and desist order restraining Farmington from invading Morningstar's service territory.

Farmington filed a motion to dismiss arguing that the Commission had no jurisdiction to hear this dispute. Under the Commission's regulations, "[i]f the Commission determines that a cause of action within the jurisdiction of the Commission does not exist ... the Commission will advise the complainant by issuing an Order dismissing the complaint with or without prejudice." Procedure Upon Receipt of a Formal Complaint, 1 N.M.Pub.Util.Comm'n Rule 110.47(b) (Oct. 4, 1993) (flush language) (compiled in Code of Rules and Regulations of the N.M.Pub.Util.Comm'n (1988 Ann.)) [hereinafter NMPUC Rule].

The Commission dismissed the complaint in its final order on February 23, concluding the matter was outside its jurisdiction. Morningstar appealed, arguing that the Commission does indeed, under the Public Utility Act, NMSA 1978, §§ 62-3-1 to -6-27, 62-8-1 to -13-14 (Repl.Pamp.1993 & Cum.Supp.1995) [hereinafter PUA], have jurisdiction over the dispute, and that, if there were no jurisdiction under the PUA, Morningstar's equal protection rights would be violated. We conclude the Commission has no jurisdiction over this matter and that Morningstar's constitutional rights are not violated. We therefore affirm the Commission.

II. STANDARD OF REVIEW

The parties disagree about the appropriate standard of review that should be applied when a court reviews an agency's determination of its own jurisdiction. Morningstar argues that the Commission should be given little deference in this matter. The Commission argues that Morningstar bears a heavy burden of overcoming the presumption that the agency has correctly interpreted its statutory jurisdiction. Each party emphasizes different aspects of the standard we are to apply.

The party challenging a Commission decision bears the burden on appeal of showing that the decision "is unreasonable, or unlawful." Section 62-11-4. More specifically, the party must show that agency action falls within one of the oft-mentioned grounds for reversal including whether the decision is arbitrary and capricious; whether it is supported by substantial evidence; and whether it represents an abuse of the agency's discretion by being outside the scope of the agency's authority, clear error, or violative of due process. See El Vadito de los Cerrillos Water Ass'n v. New Mexico Pub. Serv. Comm'n, 115 N.M. 784, 787, 858 P.2d 1263, 1266 (1993); 2 Am.Jur.2d Administrative Law § 522 (1994).

When reviewing administrative agency decisions courts will begin by looking at two interconnected factors: whether the decision presents a question of law, a question of fact, or some combination of the two; and whether the matter is within the agency's specialized field of expertise. Cf. El Vadito 115 N.M. at 792, 858 P.2d at 1271 (Ransom, C.J., dissenting).

When an agency that is governed by a particular statute construes or applies that statute, the court will begin by according some deference to the agency's interpretation. Public Serv. Co. v. New Mexico Pub. Serv. Comm'n, 106 N.M. 622, 625, 747 P.2d 917, 920 (1987). The court will confer a heightened degree of deference to legal questions that "implicate special agency expertise or the determination of fundamental policies within the scope of the agency's statutory function." Tesoro Alaska Petroleum Co. v. Kenai Pipe Line Co., 746 P.2d 896, 903 (Alaska 1987); see also Stokes v. Morgan, 101 N.M. 195, 202, 680 P.2d 335, 342 (1984) ("The special knowledge and experience of state agencies should be accorded deference."). However, the court is not bound by the agency's interpretation and may substitute its own independent judgment for that of the agency because it is the function of the courts to interpret the law. See Thomas v. Missouri Dep't of Social Servs., 805 S.W.2d 286, 288 (Mo.Ct.App.1991). The court should reverse if the agency's interpretation of a law is unreasonable or unlawful. See Maestas v. New Mexico Pub. Serv. Comm'n, 85 N.M. 571, 574, 514 P.2d 847, 850 (1973).

When the matter before the court is a question of fact, the court will generally defer to the decision of the agency, especially if the factual issues concern matters in which the agency has specialized expertise. See Attorney Gen. v. New Mexico Pub. Serv. Comm'n, 111 N.M. 636, 642, 808 P.2d 606, 612 (1991). The court will review the evidence in the light most favorable to the agency decision but it is not limited by the old standard of ignoring evidence unfavorable to the agency decision. Rather, the court can employ a whole record review to determine if the agency's factual determination is supported by substantial evidence. Duke City Lumber Co. v. New Mexico Envtl. Improvement Bd., 101 N.M. 291, 294, 681 P.2d 717, 720 (1984).

The determination of whether an administrative agency has jurisdiction over the parties or subject matter in a given case is a question of law. El Vadito, 115 N.M. at 787, 858 P.2d at 1266. As an administrative body created by statute, the agency's authority and jurisdiction are defined by statute. New Mexico Elec. Serv. Co. v. New Mexico Pub. Serv. Comm'n, 81 N.M. 683, 684-85, 472 P.2d 648, 649-50 (1970) [hereinafter Electric v. Commission ]. New Mexico courts will accord "little deference" to the agency's own interpretation of its jurisdiction. El Vadito, 115 N.M. at 787, 858 P.2d at 1266.

III. STATUTE IN QUESTION

In seeking to restrain Farmington from invading its service territory, Morningstar has attempted to invoke the provision of the PUA that prevents certain kinds of public utilities from interfering with one anothers' service:

Notwithstanding any other provision of the Public Utility Act ... if any public utility or mutual domestic water consumer association in constructing or extending its line, plant or system unreasonably interferes or is about to unreasonably interfere with the service or system of any other public utility or mutual domestic water consumer association rendering the same type of service, the commission, on complaint of the public utility or mutual domestic water consumer association claiming to be injuriously affected, may ... make such order and prescribe such terms and conditions ... so as to provide for the construction, development and extension, without unnecessary duplication and economic waste.

Section 62-9-1 (emphasis added).

We note that ordinarily a municipality that operates a water system is authorized to furnish water outside its corporate boundaries under NMSA 1978, § 3-27-8 (Repl.Pamp.1995). This statutory power is limited if the municipality comes within the...