Union Rural Elec. Ass'n, Inc. v. Public Utilities Com'n of State

• Decision Date: 21 March 1983
• Docket Number: No. 81SA286,81SA286
• Citation: 661 P.2d 247
• Parties: UNION RURAL ELECTRIC ASSOCIATION, INC., Petitioner-Appellee, v. The PUBLIC UTILITIES COMMISSION OF the STATE of Colorado and Public Service Company of Colorado, Respondents-Appellants.
• Court: Colorado Supreme Court

Page 247

661 P.2d 247

UNION RURAL ELECTRIC ASSOCIATION, INC., Petitioner-Appellee, v. The PUBLIC UTILITIES COMMISSION OF the STATE of Colorado and Public Service Company of Colorado, Respondents-Appellants.

No. 81SA286.

Supreme Court of Colorado En Banc.

March 21, 1983.

Rehearing Denied April 25, 1983.

Walker Miller, Alfred T. McDonnell, Greeley, for petitioner-appellee.

Kelly, Stansfield & O'Donnell, Donald D. Cawelti, Denver, for respondent-appellant Public Service Co. of Colorado.

J.D. MacFarlane, Atty. Gen., Richard F. Hennessey, Deputy Atty. Gen., Eugene C. Cavaliere, Asst. Atty. Gen., Denver, for Public Utilities Com'n of State.

LOHR, Justice.

The Public Service Company of Colorado (Public Service) filed a complaint with the Public Utilities Commission (Commission) against the Union Rural Electric Association, Inc. (Union), alleging that Union's provision of electric service to a newly-constructed concrete batch plant violated Commission Decision No. 63322, which approved and incorporated a 1964 agreement between the parties. The Commission found that Union was in violation of Decision No. 63322 and ordered Union not to serve the new customer. (Decision No. 2433.) The Adams County District Court set aside the Commission's Decision No. 2433, holding that the Commission had exceeded its authority and abused its discretion by interpreting the approved agreement in a manner contrary to the parties' intent and the public interest. We reverse the district court judgment and reinstate the Commission's decision.

The agreement at issue was the result of several years of conflict and competition between the parties concerning their rights to serve customers within certain areas. In 1938, Union was incorporated in Colorado for the purpose of providing electric service to its members, located in several rural counties north of Denver. Public Service, a certificated public utility, responded to urban and suburban growth by expanding its facilities into areas previously exclusively served by Union, resulting in overlapping of service areas and duplication of lines. Union had no legal standing to object to the presence of Public Service in its territory because Union was not considered to be a public utility. ¹ In 1955, Union sought and received Commission certification as a public utility, but the Commission denied Union's request to have certain territories certificated for its exclusive use. This court upheld the Commission's certification of Union as a public utility, authorized to provide service to its existing members and customers except for those located in areas certificated to other public utilities. We also held that Union's new status did not impair the rights of Public Service under its certificate and statutory authority to continue its expansion into areas contiguous to its facilities and that Union was required to apply to the Commission for approval of any of its proposed expansions. Public Service Co. v. Public Utilities Commission, 142 Colo. 135, 350 P.2d 543 (1960), cert. denied, 364 U.S. 820, 81 S.Ct. 53, 5 L.Ed.2d 50 (1960).

Competition between Union and Public Service for the right to serve customers continued, and the two utilities entered into negotiations to resolve problems of duplication of facilities in several areas. The parties signed an agreement on April 20, 1964, which was later approved by the Commission as consistent with the public interest in Decision No. 63322. In the agreement, the parties designated six service areas, labeled them A, B, C, D, E and E-1, and divided the areas between themselves, subject to Commission approval. Areas A, B and C were designated "Union Areas," and Areas D, E and E-1 were designated "Public Service Areas," although Union retained the right to serve certain customers in Areas E and E-1. In article II, paragraph 5 of the agreement, the parties provided for the following method of allocating customers in Area E:

Within Area E Public Service shall continue to serve all of its existing customers and shall serve all future electric loads of whatsoever nature occurring within said Area E, subject to the following:

a. Union may continue to serve its customers who were connected to its lines on March 29, 1963 and any successors of such existing customers who will receive service at the same dwelling, building, or point of delivery, but Union shall not serve any additional customers whatever or any additional electric loads of existing customers where service is provided at any other or additional dwelling, building, or point of delivery (except barns, sheds or other agricultural outbuildings) or which requires construction or extension of electric facilities by Union or by its customer.

b. Notwithstanding the above, however, Union shall be entitled to supply electric energy for increased consumption at the same dwelling or building or point of delivery of its existing customers occasioned by normal increases in use of electric energy for the same purpose utilized as of the date hereof and shall be entitled to convert or rebuild existing lines or add additional transformer capacity thereto, etc., for the purpose of supplying such increased consumption of its existing customers.

The present dispute involves the application of these provisions to a new customer within Area E. At the time of the 1964 agreement, Union was providing what it called "large power" electric service to a commercial customer, Averch Feed Lot, located in Area E. ² The transformer bank installed on the property to distribute electricity to the feedlot had a load-carrying capacity of 112.5 kva (kilovolt-amperes). Averch subsequently discontinued operations and sold the property to C&M Companies (C&M), which built a concrete batch plant on the property in a different location than that of the feedlot. On December 17, 1979, Public Service received an application from C&M for electric service to the proposed batch plant. When Public Service contacted Union to indicate its intention to serve the new customer, Union disputed the right of Public Service to serve C&M and requested that the parties meet to negotiate the dispute. ³ Attorneys for the parties discussed the possibility of negotiations, but the attorney for Public Service finally did not agree that Union's proposal to "trade territory" was a proper basis for negotiation.

On March 13, 1980, Union began extending its existing facilities in order to service the C&M plant, and on March 18, 1980, Public Service filed its complaint with the Commission. A prehearing motion by Union to dismiss the complaint on the ground that Public Service was required to negotiate the matter pursuant to a provision in the 1964 agreement was denied by the Commission on April 15, 1980. By the time of the hearing, on July 7, 1980, Union had made several changes in its facilities on the C&M property. Portions of an aerial three-phase power line were removed and replaced with an underground three-phase line in a different location. ⁴ The 112.5 kva transformer through which electricity was delivered to the feedlot from Union's three-phase power line was removed and replaced with a larger transformer with a load-carrying capacity of 300 kva to match the design load for the new batch plant. The new transformer is located at the site of the batch plant, away from the old feed mill site, and connected to the remaining portion of the aerial power line by a new underground three-phase line extension of 425 feet. Service to the batch plant is still classified by Union as "large power" commercial service.

The hearing examiner, after taking evidence concerning the changed service and the negotiating history of the parties, transmitted a recommended decision to the Commission holding that the Commission did not have jurisdiction to order specific performance of a contract and that, even if it did, the complaint would have to be dismissed because the relevant contract provisions violated the public policy against establishment of "non-exclusive" areas served by two or more utilities, citing Western Colorado Power Co. v. Public Utilities Commission, 163 Colo. 61, 428 P.2d 922 (1967). The Commission did not adopt the examiner's recommended decision but entered its own decision, finding Union to be in violation of the approved agreement in the following four particulars:

a. It has extended its electric facilities,

b. To a new point of delivery,

c. To serve a new customer,

d. Located at an additional building.

Neither the recommended decision of the examiner nor the final decision of the Commission addressed Union's argument that Public Service was required to negotiate prior to filing the complaint, an issue previously resolved in the order denying Union's motion to dismiss.

On appeal, the district court held that the Commission had abused its discretion in adopting an interpretation of the agreement contrary to the public interest and the intent of the parties during negotiations. The court held that the parties intended that Union would keep its present customers and all future customers on the same properties if no major changes in service occur. The court stated that the changes required to serve the C&M plant, including the increased transformer capacity, the 425 foot line extension and the change in transformer location, were not so substantial as to affect Union's right to furnish electricity to the customer. Further, the court stated that interpreting the agreement to give Public Service the right to provide the service would be against the public interest because duplication in facilities would occur. Finally, the court held that Public Service had failed to negotiate in good faith prior to filing a complaint, as required by the agreement. Both Public Service and the Commission appeal to this court from the judgment of the district court pursuant to section 40-6-115(5), C.R.S.1973. We agree with the Commission's construction of the...