Tri-County Elec. Ass'n, Inc. v. City of Gillette, TRI-COUNTY

• Decision Date: 24 August 1978
• Docket Number: No. 4880,TRI-COUNTY,4880
• Citation: 584 P.2d 995
• Parties: ELECTRIC ASSOCIATION, INC., Appellant (Plaintiff below), v. The CITY OF GILLETTE, Wyoming, a Municipal Corporation, Appellee (Defendant below).
• Court: Wyoming Supreme Court

Page 995

584 P.2d 995

TRI-COUNTY ELECTRIC ASSOCIATION, INC., Appellant (Plaintiff below), v. The CITY OF GILLETTE, Wyoming, a Municipal Corporation, Appellee (Defendant below).

No. 4880.

Supreme Court of Wyoming.

Aug. 24, 1978.

Cecil K. Hughes, Sundance and David D. Uchner of Lathrop & Uchner, Cheyenne, signed the brief and appeared in oral argument on behalf of the appellant.

Thomas S. Smith of Smith, Stanfield & Scott, Laramie, signed the brief and appeared in oral argument on behalf of the appellee.

Before GUTHRIE, C. J., and McCLINTOCK, RAPER, THOMAS and ROSE, JJ.

RAPER, Justice.

The plaintiff-appellant public utility (hereafter Tri-County), selling electricity, claimed in its declaratory judgment action filed in the district court that defendant-appellee City (hereafter Gillette), a municipality authorized to sell electricity to its inhabitants, was invading its territory. The district court found that Gillette had the "exclusive right to serve electrical customers within the City of Gillette and to grant franchises within its boundaries." The trial court further found that Gillette "may take over Plainitiffs (sic) facilities only upon paying just compensation."

Tri-County on appeal frames the issues to be:

"(a) Whether the Certificate of Public Convenience and Necessity of August 15, 1960, comprised a vested property interest and whether the City of Gillette's action amounted to a taking thereof without just compensation.

"(b) Whether the territorial rights created by the contract of May 5, 1960, between Appellant and the City of Gillette could be unilaterally abrogated by the City's program of annexation.

"(c) Whether the City of Gillette's Ordinance No. 624 invested in it the power to restrict appellant's activity within the area certificated to Appellant."

We shall affirm.

The basic facts of this case have previously been before this court, Tri-County Electric Association, Inc. v. City of Gillette, Wyo.1974, 525 P.2d 3, but in a different posture. That case was on a petition for review of a decision by the Wyoming Public Service Commission (hereafter P.S.C.). This court there held that the questions sought now to be settled could not be adjudicated by the P.S.C. and were matters for relief in the courts and not the agency. It was further held in that decision that because of defective joinder of an equitable action for injunction with a petition for review, for technical reasons, Tri-County could not be enjoined by the district court in that proceeding from furnishing electrical service to areas annexed by Gillette. The reversal by this court in that earlier case specifically provided that it was without prejudice to Gillette to secure a full adjudication of all legal questions which might arise in a proper forum.

Gillette has since 1915 lawfully owned and operated its own electrical power utility. It buys power at wholesale and sells at retail. The profits from its sale of electrical energy to its inhabitants are used to supplement other revenues to meet budgetary requirements for municipal operations. Prior to 1961, the P.S.C. had regulatory jurisdiction over municipally owned utilities. In that year, § 37-1-101, W.S.1977 ¹ was amended to exclude from the P.S.C. that jurisdiction within the corporate limits of a city.

On January 29, 1947, the P.S.C. issued its Certificate of Public Convenience and Necessity to Tri-County authorizing it to sell electricity to the inhabitants of Campbell, Crook and Weston counties, Wyoming, excepting communities then being served by an electric utility, which by its language excluded Gillette. Tri-County, according to its articles of incorporation and other data in the record, is an association organized to serve its members, not the public, and for the benefit of the rural community, pursuant to the Rural Electrification Act, 7 U.S.C. § 901 et seq., and is financed through loans from the Rural Electrification Administration of the United States. On May 5, 1960, Gillette and Tri-County entered into an agreement defining Gillette's service area in the immediate surrounding area of Gillette, generally on the basis that Gillette service "consumers which are by nature a part of the municipality, and the rural area surrounding be serviced solely and essentially by the Second Party (Tri-County). That this principle, however, shall not be considered a precedent for expansion in any direction in the future without further agreement by the parties." ² (Emphasis added.) The parties then agreed upon a purchase price for each other's facilities within overlapping areas, which the record shows has been paid.

At the time that agreement was entered into, "public utility" included a municipality, subject to regulation, § 37-1, W.S.1957, so Gillette applied to the P.S.C. for approval of the agreement between it and Tri-County and for issuance of a Certificate of Public Convenience and Necessity authorizing it to continue operations within the delineated area. The P.S.C. by order of approval in pertinent part directed:

"3. That a certificate of Public Convenience and Necessity be and the same is hereby issued to the Town of the City of Gillette, Wyoming authorizing it to continue to operate and maintain its electric utility system and To extend the same from time to time as and when it becomes necessary for the purpose of furnishing electric utility service to the public within its corporate limits and the fringe and rural area surround (sic) said municipality, as described in our Findings herein, at its presently filed and effective tariff rates; and * * * " (Emphasis added.)

Since that agreement was entered into, Gillette has undergone the impact of phenomenal growth due to mineral development within the surrounding region. The population of Gillette in 1960 was about 3,000; at the time of trial it was estimated to be 12,200. Oil and mineral extraction caused some growth ultimately starting in 1969 but the real force struck in 1973 as a result of coal mining development. Exhibits in the record include twelve separate ordinances of Gillette annexing as many parcels of land to the City between June 1969 and August 1975, inclusive. In 1970, Tri-County applied to the Gillette City Council for an easement across city property preparatory to furnishing electric service to the Pioneer Addition, an area apparently located outside Gillette's territory as described in the 1960 agreement and Certificate of Convenience and Necessity. As shown by city council proceedings, "The Council declined to grant any easement to any supplier of services in which the City of Gillette has pre-empted that particular service field."

Thereafter in July, 1970, the city council passed an ordinance providing that no person or corporation shall construct any electrical power line or furnish electric power without first having obtained a franchise from the City to do so, ³ relying on § 4, Article XIII, Wyoming Constitution:

"No street passenger railway, telegraph, telephone or electric light line shall be constructed within the limits of any municipal organization without the consent of its local authorities."

Tri-County, relying on what it considered to be vested rights by virtue of its contract of June, 1960, and the P.S.C. Certificate of Convenience and Necessity of the same year, nevertheless went ahead and constructed electric lines and facilities and commenced its electrical service to persons it solicited as members within what the City considered a forbidden area. As we understand it, Tri-County is also serving electricity in other subdivisions, the exact extent and details of which do not appear. No prosecutions were undertaken under the ordinance. The case is now before us in that attitude.

In summary, we will hold that Gillette has authority by proper eminent domain proceedings to take property of Tri-County within its municipal boundaries, for the purpose of expanding its electric distribution system; Gillette's and Tri-County's territorial rights subsist only by action of the P.S.C. and applicable statutes, not by contract; upon annexation, any rights of Tri-County terminate in the annexed area, except as to those members of its association served at the time of annexation, pursuant to § 4, Article XIII, Wyoming Constitution; Tri-County is not authorized to serve within the corporate limits of Gillette without its consent, except to the extent just stated, which right cannot be taken away except by condemnation. We do not in this action and appeal decide any questions pertaining to just compensation except to hold that whenever Gillette takes property of Tri-County for public use, it must pay just compensation in accordance with the law pertaining to eminent domain and consistent with applicable holdings in this case; and, the matter of the mortgages of the United States on Tri-County's property is properly an issue in condemnation proceedings where the United States may be made a party.

When a municipality is in the business of selling electricity, it is acting in a proprietary, not governmental, capacity. When a municipality engages in the business as an electric utility for a profit, ⁴ it is in competition with private enterprise and should be treated no differently than the latter. Frank v. City of Cody, Wyo.1977, 572 P.2d 1106; Town of Pine Bluffs v. State Board of Equalization, 1958, 79 Wyo. 262, 333 P.2d 700.

Next, we can eliminate any issue of compensation which might be payable by Gillette to Tri-County, because of the admissions of Gillette stated with a generously broad brush in its brief:

"Appellee cannot in good conscience burden this court with an attempt to rebutt (sic) the respectable authorities quoted by appellant, since appellee agrees that appellant does indeed possess a property right in its facilities which have heretofore been constructed within what is now the municipal boundary of appellee, and acquiesced in that premise in the lower court; however,...