Poudre Valley Rural Elec. Ass'n, Inc. v. City of Loveland

• Decision Date: 18 March 1991
• Docket Number: No. 90SA26,90SA26
• Parties: , Util. L. Rep. P 26,050 POUDRE VALLEY RURAL ELECTRIC ASSOCIATION, INC., a Colorado nonprofit corporation, Plaintiff-Appellee, v. CITY OF LOVELAND, a Colorado municipal corporation, Defendant-Appellant, and United States of America, Department of Agriculture, Rural Electrification Administration; and National Rural Utilities Cooperative Finance Corporation, a District of Columbia corporation, Third-Party Defendants-Appellees.
• Court: Colorado Supreme Court

Page 547

807 P.2d 547

123 P.U.R.4th 61, Util. L. Rep. P 26,050

POUDRE VALLEY RURAL ELECTRIC ASSOCIATION, INC., a Colorado

nonprofit corporation, Plaintiff-Appellee, v. CITY OF LOVELAND, a Colorado municipal corporation,

Defendant-Appellant,

and

United States of America, Department of Agriculture, Rural

Electrification Administration; and National Rural

Utilities Cooperative Finance Corporation, a District of

Columbia corporation, Third-Party Defendants-Appellees.

No. 90SA26.

Supreme Court of Colorado,

En Banc.

March 18, 1991.

Rehearing Denied April 15, 1991.

Randolph W. Starr, P.C., Randolph W. Starr, Loveland, for plaintiff-appellee.

Gorsuch, Kirgis, Campbell, Walker and Grover, Paula M. Connelly, Gerald Dahl, Joseph B. Wilson, Denver, Colton W. Babcock, City Atty., City of Loveland, Loveland, for defendant-appellant.

Jessie A. Messenger, Sp. Asst. U.S. Atty., Denver, for third-party defendants-appellees U.S. of America, Dept. of Agriculture, Rural Electrification Admin.

No appearance for third-party defendant-appellee Nat. Rural Utilities Co-op. Finance Corp.

John J. Conway, Denver, for amicus curiae Colorado Rural Elec. Ass'n.

Walker Miller, Julie Coy, Greeley, for amicus curiae United Power, Inc., formerly Union Rural Elec. Ass'n, Inc.

Anderson, Johnson & Gianunzio, Gregory L. Johnson, Mark T. Pifher, M. Cole Emmons, Colorado Springs, for amicus curiae Colorado Ass'n of Mun. Utilities.

Jack P. Wolfe, Longmont, for amicus curiae Mountain View Elec. Ass'n, Inc.

Justice ERICKSON delivered the Opinion of the Court.

This is an appeal of the district court's decision upholding the constitutionality of sections 40-9.5-201 to -207, 17 C.R.S. (1990 Supp.), and awarding compensatory damages to Poudre Valley Rural Electric Association (Poudre Valley). We affirm.

Poudre Valley is a Colorado cooperative electric corporation operating as a public utility under a certificate of public convenience and necessity granted by the Colorado Public Utilities Commission (PUC). The City of Loveland owns and operates an electric utility, and provides electric service to areas abutting Poudre Valley's service territory. Loveland's annexation of property exclusively supplied with electricity by Poudre Valley led to this dispute.

In 1980, Poudre Valley and Loveland entered into an agreement essentially granting Loveland an option to purchase Poudre Valley's facilities and customers within the annexed area. The 1980 agreement provided a mechanism for determining the compensation Poudre Valley would receive if Loveland chose to exercise the option, and excluded certain facilities, including transmission and feeder lines, from the contract terms. Loveland had until January 31, 1987, to annex territory under the agreement.

Before the agreement expired, Loveland exercised its option to annex service areas known collectively as Barnstorm One and Two. The city later annexed a second area known as the East Loveland Industrial Addition. Both of those annexations fell within the terms of the agreement, and Poudre Valley transferred its facilities within the two areas to Loveland. Poudre Valley did not, however, transfer two primary feeder lines physically located within the East Loveland Industrial Addition, referred to as the North and South Loops, claiming the lines were not included under the agreement. The North Loop ran along Boeing Drive, and the South Loop was located along Earhart Road.

In August 1987, after the contract expired, Loveland annexed the Hach Chemical Addition and the Collins Plating Addition, both of which were primarily served by the South Loop. Because the agreement had expired, those annexations were governed by a Colorado statute enacted in 1986, sections 40-9.5-201 to -207, which generally provides for compensation to a cooperative electric association whose customers are acquired by a municipal electric utility. Loveland agreed to pay for the South Loop facilities, which it acknowledged supplied service to the Hach Chemical and Collins Plating Addition and therefore fell outside the East Loveland Industrial Addition annexation, but refused to pay for the North Loop. According to Loveland, the agreement under which the East Loveland Industrial Addition was annexed excluded from transfer only those primary feeder lines servicing customers outside of the annexed area. Loveland asserted that, unlike the South Loop, the North Loop did not serve any existing customers outside the East Loveland Industrial Addition, and therefore compensation was dictated by the agreement rather than the statute. Loveland claimed that since the North Loop was not being used when the East Loveland Industrial Addition was annexed, no further compensation was warranted.

Poudre Valley filed an inverse condemnation action based on the statute, demanding compensation for the North Loop, 25% of the gross revenues for the next ten years received from existing customers within the annexed area, and 5% of the revenues received for the next ten years from all customers acquired after the annexation. Poudre Valley contended that the North Loop provided back-up service to Hach Chemical and Collins Plating, and moreover was excluded from transfer under the 1980 agreement because it was a primary feed line, regardless of whether it served existing customers.

In addition to the arguments regarding the North Loop, Loveland contended that sections 40-9.5-201 to -207 were unconstitutional and thus refused to pay the 25% or 5% surcharges required by the statute. Loveland also argued that, even if constitutional, the payments required were not percentages of gross revenue, as Poudre Valley claimed, but rather excluded "base rate" charges.

The district court rejected Loveland's constitutional arguments, and found that the North Loop, because it was a primary feeder line, was not included in the East Loveland Industrial Addition annexation. The court also found that the revenues referred to in subsections 40-9.5-204(1)(c) and (d) were gross revenues. The court awarded Poudre Valley compensation for the North Loop, 25% of the gross revenues from existing customers for a period of ten years, and 5% of the gross revenues from new customers, also for ten years. The court also awarded interest and costs. We have jurisdiction over Loveland's appeal because it challenges the constitutionality of sections 40-9.5-201 to -207. See § 13-4-102, 6A C.R.S. (1987 & 1990 Supp.); People v. Salazar, 715 P.2d 1265 (Colo.App.1985).

I

Poudre Valley claims that, because Loveland is a statutory city, it does not have standing to challenge the facial constitutionality of a state statute, since political subdivisions of the state lack standing to challenge constitutional provisions directing performance of their duties. Denver Urban Renewal Auth. v. Byrne, 618 P.2d 1374, 1379-80 (Colo.1980); cf. City of Denver v. State of Colo., 788 P.2d 764 (Colo.1990) (home rule cities are not political subdivisions of the state). In this case, however, Loveland is acting as a municipally owned utility under article XXV of the Colorado Constitution, and has satisfied Wimberly v. Ettenberg, 194 Colo. 163, 570 P.2d 535 (1977), which requires that a party must allege an injury in fact to a legally protected interest in order to have standing. The allegation that sections 40-9.5-201 to -207 are unconstitutional directly relates to Loveland's legally protected interest and whether it owes Poudre Valley compensation under those sections of the statute. We hold that Loveland has standing to challenge the facial constitutionality of sections 40-9.5-201 to -207.

We also reject Poudre Valley's argument that Loveland is estopped from challenging the statute since it supported adoption of the statute by the legislature. Poudre Valley has failed to prove equitable or collateral estoppel based on Loveland's testimony supporting enactment of the statute.

II

Loveland first contends that sections 40-9.5-201 to -207 are unconstitutional because they violate article V, section 35, and article XXV of the Colorado Constitution. Loveland's argument is that the statute requires payment for the takings of rights that are, under the constitution, nonexclusive. According to Loveland, since it has the constitutional right to compete in areas serviced by Poudre Valley, there is no right to compensation if Loveland decides to compete for that service.

Article V, section 35, provides that the General Assembly cannot interfere with or delegate any municipal function. Article XXV vests the public utilities commission with broad powers to regulate all public utilities in Colorado, including home rule cities and other municipalities, "provided however, nothing [ ] shall affect the power of municipalities to exercise reasonable police and licensing powers, nor their power to grant franchises; and provided, further, that nothing [ ] shall be construed to apply to municipally owned utilities."

In Town of Holyoke v. Smith, 75 Colo. 286, 296, 226 P. 158, 161 (1924), we declared that article V, section 35, prohibited the PUC from regulating municipal utilities operating within municipal boundaries. Id. at 296, 226 P. at 161; see also City of Lamar v. Town of Wiley, 80 Colo. 18, 248 P. 1009 (1926) (reaffirming the general rule that the PUC may not regulate municipal utilities servicing their own citizens). In 1954, article XXV was added to the state constitution. Although article XXV granted the PUC significant new authority to regulate public utilities within home rule cities, we have interpreted the last clause of article XXV as merely stating that "there is no intention to give the General Assembly authority to regulate a municipally owned utility within the corporate limits of the municipality." City and County of Denver v. Public Utils. Comm'n, 181 Colo. 38, 46, 507 P.2d 871, 875 (1973). In City of Loveland v. Public Utilities Commission, 195 Colo. 298, 580 P.2d 381 (1978), however, we recognized that the...