Public Service Co. of Colorado v. Public Utilities Com'n of State of Colo.

• Decision Date: 05 December 1988
• Docket Number: No. 86SA461,86SA461
• Citation: 765 P.2d 1015
• Parties: The PUBLIC SERVICE COMPANY OF COLORADO, a Colorado corporation; and Morning Fresh Farms, Inc., a Colorado corporation, Petitioners-Appellees, v. The PUBLIC UTILITIES COMMISSION OF the STATE OF COLORADO; and Edythe S. Miller, Andra Schmidt and Ronald L. Lehr; and Union Rural Electric Association, Inc., a Colorado corporation, Respondents-Appellants.
• Court: Colorado Supreme Court

Page 1015

765 P.2d 1015

99 P.U.R.4th 549

The PUBLIC SERVICE COMPANY OF COLORADO, a Colorado corporation; and Morning Fresh Farms, Inc., a Colorado corporation, Petitioners-Appellees, v. The PUBLIC UTILITIES COMMISSION OF the STATE OF COLORADO and Edythe S. Miller, Andra Schmidt and Ronald L. Lehr; and Union Rural Electric Association, Inc., a Colorado corporation, Respondents-Appellants.

No. 86SA461.

Supreme Court of Colorado En Banc.

Dec. 5, 1988.

Kenneth V. Reif, Kelly, Stansfield & O'Donnell, Denver, for petitioner-appellee Public Service Co. of Colorado.

Pamela A. Shaddock, Harlan C. Stientjes, Stientjes & Shaddock, Greeley, for petitioner-appellee Morning Fresh Farms, Inc.

Duane Woodard, Atty. Gen., Charles B. Howe, Chief Deputy Atty. Gen., Richard H. Forman, Sol. Gen., Mark A. Davidson, Asst. Atty. Gen., Regulatory Law Section, Eugene C. Cavaliere, Deputy Atty. Gen., Mark W. Gerganoff, Asst. Atty. Gen., Denver, for respondent-appellant Public Utilities Com'n of Colorado.

Walker Miller, Julie Coy, Greeley, for respondent-appellant Union Rural Elec. Assn.

Randolph W. Starr, Loveland, for amicus curiae Poudre Valley Elec. Ass'n, Inc.

John J. Conway, Denver, for amicus curiae Colorado Rural Elec. Assn.

ROVIRA, Justice.

This is an appeal by Union Rural Electric Association, Inc. (Union) and the Public Utilities Commission of Colorado (PUC) from a judgment of the Denver District Court which reversed a PUC decision prohibiting Public Service Company of Colorado (Public Service) from providing electricity to facilities located in Union's exclusive area of service. We reverse the judgment of the district court and remand with directions to reinstate the PUC decision.

I.

This dispute concerns the rights of two territorially certificated public utilities when a customer's facilities are located in both of their exclusive service areas. Morning Fresh Farms, Inc. (Morning Fresh) is an egg, pullet, and poultry waste production facility located on a half-section of land in Weld County, Colorado. The northern two-thirds of the land occupied by Morning Fresh lies within Public Service's exclusive service territory, and the southern one-third lies within Union's certificated territory. Both Union and Public Service have the exclusive right to serve those facilities located within their respective service areas.

Prior to May 18, 1984, Morning Fresh received electrical service from both Public Service and Union. A feed mill, three brooder houses, and two residences were located in Union's service area, and thus were served by Union. Morning Fresh's remaining facilities, consisting of twenty-three egg laying houses, a dried poultry waste fertilizer plant, and several residences were situated in Public Service's certificated area, and thus were served by Public Service. Several of the egg laying houses extended into Union's exclusive territory, but because they were interconnected with the laying houses in Public Service's territory, Union did not dispute Public Service's right to provide them with electricity.

In order to receive more favorable rates, Morning Fresh constructed an electric distribution system which integrated all of its buildings and facilities into a single system. As a result, Public Service now provides all electricity to Morning Fresh at a point within Public Service's exclusive service territory, and Morning Fresh distributes this electricity to its buildings, including those facilities previously served by Union.

Union filed a formal complaint with the PUC, alleging that Public Service was unlawfully interfering with its exclusive right to serve its customers within its certificated territory, and that Public Service's actions violated a prior agreement of the parties which was incorporated into PUC Decision No. 63322. Public Service denied the allegations, contending that it properly delivered electricity to a customer within its exclusive service territory, and that it could not control what the customer did with the electricity after delivery. Morning Fresh filed a petition to intervene, which was granted.

After a hearing, the PUC hearing examiner issued a recommended decision which concluded that Union's complaint should be dismissed. The hearing examiner considered three tests which have been used to determine the legality of service by a particular utility when a customer's facilities lie within two exclusive service areas: the point of service test, the geographic load center test, and the point of use test. Applying the geographic load center test, he concluded that Public Service was the appropriate utility to provide electricity to Morning Fresh.

The PUC rejected the recommended decision, concluding that the point of use test was required in order to be consistent with the doctrine of regulated monopoly under the facts of this case. The PUC ordered Public Service to cease and desist providing electric service to Morning Fresh's facilities located in Union's certificated territory. After exhausting their administrative remedies, Public Service sought review by the Denver District Court and Morning Fresh sought review in the Weld County District Court. The proceedings were consolidated in the Denver District Court by agreement of the parties. ¹

The district court reversed the PUC decision. The court first noted that the PUC made no finding of agency, collusion, or subterfuge as to either Public Service or Morning Fresh. The court acknowledged that the doctrine of regulated monopoly applied to the controversy, but concluded that the PUC erroneously applied Colorado law in holding that the doctrine of regulated monopoly compelled adoption of the point of use test. The court found that the other tests, based upon the record in this case, did not result in increased duplication, subterfuge, or the other evils sought to be controlled by the doctrine of regulated monopoly, and thus the point of use test was not required by law.

The district court also found that the PUC's decision to apply the point of use test was inconsistent with its acquiescence to Public Service's provision of electricity to those egg laying houses located within Union's service territory. The court held that the findings were fatally inconsistent and must be set aside.

Finally, the court found that although the PUC decision was couched in terms of ordering Public Service to discontinue service to Morning Fresh facilities in Union's territory, the effect of the order was to require Morning Fresh to rework its distribution system. The court concluded that this result was flawed for two reasons:

[F]irst it is an unlawful attempt by the Commission to assert subject matter jurisdiction over Morning Fresh, a non-utility corporation; and, second, it deprives Morning Fresh of ... the protections of due process of law in acquiring, using and disposing of [its] property. Morning Fresh had no notice, nor could it have any notice, of the Commission's policy in this regard. No regulation had been formulated, nor did any statute exist to cover this situation at the time Morning Fresh installed its system.

We believe the district court improperly substituted its judgment for that of the PUC in deciding which test should be used to measure Public Service's actions, and erred in holding that the PUC improperly asserted subject matter jurisdiction and denied Morning Fresh its constitutional rights.

II.

Considerable discretion is vested in the PUC in order to carry out its legislative functions and the scope of judicial review is limited. Section 40-6-115(2)-(3), 17 C.R.S. (1984), provides:

(2) The findings and conclusions of the commission on disputed questions of fact shall be final and shall not be subject to review, except that, in any proceeding wherein the validity of any order or decision is challenged on the ground that it violates any right of a petitioner under the constitution of the United States or the constitution of the state of Colorado, the district court shall exercise an independent judgment on the law and the facts, and the findings or conclusions of the commission material to the determination of the said constitutional question shall not be final.

(3) Upon review, the district court shall enter judgment either affirming, setting aside, or modifying the decision of the commission. So far as necessary to the decision and where presented, the district court shall decide all relevant questions of law and interpret all relevant constitutional and statutory provisions. The review shall not extend further than to determine whether the commission has regularly pursued its authority, including a determination of whether the decision under review violates any right of the petitioner under the constitution of the United States or of the state of Colorado, and whether the decision of the commission is just and reasonable and whether its conclusions are in accordance with the evidence.

Because Morning Fresh alleges that the PUC decision unconstitutionally deprived it of property without due process of law, the district court was required to "exercise an independent judgment on the law and the facts." In doing so, however, the district court was required to recognize that the actions of the PUC are presumed to be regular and will be upheld absent clear evidence to the contrary. GTE Sprint Communications Corp. v. Public Utils. Comm'n, 753 P.2d 212 (Colo.1988). Moreover, the exercise of discretion and judgment should not be interfered with by the reviewing court. "We adhere to the proposition that the legislature contemplated that the reviewing court, since it does not have the aid of a staff and the expertise of the PUC, should not undertake to duplicate the evaluation and judgment processes followed by the PUC in arriving at its decision." Atchison, Topeka & Santa Fe Ry. v. Public Utils. Comm'n, 194 Colo. 263, 267, 572 P.2d 138, 141 (1977).

A.

Union and the PUC contend that the trial court erred in...