Pacificorp v. City of Ashland

RICHARDSON, P. J.

Plaintiff brought this action for declaratory and injunctive relief against the defendant city. It contends in its first claim that the city has unlawfully provided electric service to customers who reside both within the city and within areas that, before the city annexed them, the Public Utility Commissioner (PUC) had allocated to plaintiff as an exclusive service territory, pursuant to ORS 758.400 to 758.475. In its second claim, plaintiff contends that the city has no condemnation authority over property of plaintiff located within the city and used by plaintiff in connection with its utility service to customers, which the city intends to acquire and put to the same “public use” as plaintiff now does. Both parties moved for summary judgment on both claims. The trial court denied plaintiffs motions, allowed the city’s and entered a judgment declaring the parties’ rights accordingly. Plaintiff appeals and assigns error to the rulings on the motions for summary judgment. We reverse and remand on the first claim and affirm on the second.

ORS 758.400 to 758.475 gives the PUC authority to allocate service territories exclusively, under defined circumstances, to providers of utility services. The areas in question were allocated to plaintiff by a 1962 PUC order, as modified by a 1965 order. The city has since annexed the areas and, between 1965 and the present, has constructed distribution facilities and provided electric utility service in them. Plaintiff argues that the city’s doing so violates the territorial allocation statutes. ORS 758.450(2) provides that, after territory has been allocated to a “person,” under circumstances of the kind present here, “no other person shall offer, construct or extend utility service in or into an allocated territory.” ORS 758.400(2) defines “person” to include municipalities. However, ORS 758.470 reserves certain municipal powers and, in certain ways, restricts the application of the allocation statutes to cities. It provides:

“(1) ORS 758.015 and 758.400 to 758.475 shall not be construed or applied to restrict the powers granted to cities to issue franchises, or to restrict the exercise of the power of condemnation by a municipality; and when a municipality has condemned or otherwise acquired another person’s equipment, plant or facilities for rendering utility service, it shall acquire all of the rights of the person whose property is condemned to serve the territory served by the acquired properties.

“(2) ORS 758.015 and 758.400 to 758.475 shall not be construed to restrict the right of a municipality to provide utility service for street lights, fire alarm systems, airports, buildings and other municipal installations regardless of their location.

“(3)' ORS 758.015 and 758.400 to 758.475 shall not be construed to confer upon the commissioner any regulatory authority over rates, service or financing of cooperatives or municipalities.”

The city argues that those reservations, together with the affirmative authority conferred on cities by ORS 221.420(2) (a), 223.005,225.020 and 225.030, give it the right to provide service to customers in the incorporated portions of the territory allocated to plaintiff. ORS 221.420(2)(a) provides that every city may:

“Determine by contract or prescribe by ordinance or otherwise, the quality and character of each kind of product or service to be furnished or rendered by any public utility, furnishing any product or service within such city, and all other terms and conditions upon which any public utility may be permitted to occupy the streets, highways or other public property within such city and exclude or eject any public utility therefrom.”

ORS 223.005 provides:

“Any incorporated city may:

“(1) Appropriate any private real property, water, watercourse and riparian rights to any public or municipal use or for the general benefit and use of the people of the city, including but not limited to appropriation for an aviation field, park, city hall, city buildings, jail, or to protect the city from overflow by freshets.

“(2) Appropriate any real property, water, watercourse and water and riparian rights, including power sites, to any public or municipal use or for the general benefit and use of the people within or without the city, and to build dams, reservoirs and conduits for the purpose of storing and using water to aid in developing the necessary power to generate electricity for the use and benefit of the people within or without the city.

“(3) Condemn for its use private property for the purpose of erecting and maintaining electric lines thereon for the purpose of generating and conveying power to light and heat the city, and to be used and sold by the city for manufacturing, transportation, domestic and other purposes, either within or without the corporate limits of the city, and for the purpose of constructing electrical systems for municipal uses.”

ORS 225.020 provides:

“(1) When the power to do so is conferred by or contained in its charter or act of incorporation, any city may build, own, operate and maintain waterworks, water systems, railways and railroads, electric light and power plants, within and without its boundaries for the benefit and use of its inhabitants and for profit. To that end it may:

“(a) Acquire water systems and use, sell and dispose of its water for domestic, recreational, industrial, and public use and for irrigation and other purposes within and without its boundaries.

“(b) Build, acquire, own and operate railways operated by steam, electric or other power within and without its boundaries and running from such city to other towns, cities and points without its boundaries.

“(c) Acquire right of way, easements or real property within and without its boundaries for any such purpose.

“(2) In exercising such powers, any city may bring actions for the condemnation or taking of private property for public use in the same manner as private corporations are now authorized or permitted by law to do.”

ORS 225.030 provides:

“Any city owning, controlling or operating a system of waterworks or electric light and power system for supplying water or electricity for its inhabitants and for general municipal purposes, and any person, persons, or corporation controlling or operating any water system or electric light and power system under contract, lease or private ownership, may sell, supply and dispose of water or electricity from such system to any person, persons, or corporation within or without the limits of the city in which the water or electric light and power system is operated, and may make contracts in reference to the sale and disposal of water or electricity from such system, for use within or without the corporate limits.”

The territorial allocation statutes were first enacted in 1961. Or Laws 1961, ch 691. Although the statutes on which the city relies have been amended in some particulars since that time, their origins predate those of the allocation statutes by many years, and they remain largely similar in substance to their original texts. The city argues that plaintiff incorrectly understands the allocation provisions as having impliedly repealed the statutes giving cities the authority to provide utility services and authority over utility providers. That understanding, according to the city, is not warranted by anything in ORS 758.400 to 758.475. Plaintiff responds that its argument is not based on the implied repeal thesis that the city ascribes to it; its argument is that the two statutory schemes are not in conflict and that the allocation statutes rather than those granting powers to cities are the relevant ones here. Plaintiff explains:

“[Plaintiffs] first claim arose from the City’s decision to annex and then invade electric service territory allocated exclusively to [plaintiff]. It did not arise from any action by the City to ‘eject or exclude’ [plaintiff] from that territory, as described in ORS 221.420(2). Certainly, the power to ‘eject or exclude’ a utility from city streets does not in itself include the power to provide utility service in place of the ejected or excluded utility. ORS 221.420 grants no authority to a municipality to itself provide utility service; that authority must come from some other statutory source. [Plaintiffs] first claim also did not arise from any effort by the City to condemn [plaintiffs] facilities in the annexed and invaded territory. The City’s franchise and condemnation powers under ORS 221.420, ORS 223.005 and ORS 225.020 simply were never invoked in connection with its annexation and invasion of [plaintiffs] exclusive service territory and are not at issue with respect to [plaintiffs] first claim for relief.

“In any event, the allocation statutes are not in conflict with those statutes. To the contraiy, the allocation statutes expressly preserve whatever powers municipalities have to issue franchises and to condemn property. ORS 758.470(1). Whatever power cities may have to provide utility service to municipal installations also is expressly preserved by the allocation statutes. ORS 758.470(2).

“What is at issue with respect to [plaintiffs] first claim is the asserted right of a municipality to provide utility service to nonmunicipal installations in territory allocated exclusively to another utility. The allocation statutes unequivocably deny any such right.” (Emphasis plaintiffs.)

We do not necessarily agree with all of the particulars of plaintiffs argument. For example, we need not decide whether plaintiff is correct in implying that, if a city chooses to provide utility services and to “eject or exclude” a public utility from its allocated territory within the city, the allocation statutes would prevent the city from providing services in the territory from which it has ejected the exclusive provider. That is not the situation here. Plaintiffs overriding point is that, until December, 1985, when the city adopted the ordinance which authorized it to acquire or condemn certain property of plaintiffs (and which is the subject of plaintiffs second claim), the city exercised no regulatory or other authority under the statutes on which it relies; it simply began providing electric service in territory allocated exclusively to another provider.¹

Assuming that the city is correct in its understanding of what each of those statutes authorizes and of how that authority would affect the operation of the territorial allocation statutes if it were exercised, the city is not correct in its view that its unexercised authority under the statutes is relevant to the question presented in plaintiffs first claim. The mere existence of those powers does not permit the city, acting in its capacity as a provider of utility services, to act in violation of the allocation statutes to which it is expressly subject in that capacity. The city has not exercised its authority to regulate plaintiff or to exclude plaintiff from its territory and, until December, 1985, the city had not condemned any of plaintiffs property. It was simply a competitor of plaintiff s, and it acted unlawfully by competing in any territory which was allocated exclusively to plaintiff. The trial court erred by granting the city’s summary judgment motion on the first claim. We are unable to say, in the present posture of the case, whether plaintiff may be entitled to summary judgment on the claim. See note 1, supra, and note 3, infra. Further proceedings on the first claim are necessary.

Plaintiff’s second claim challenges the city’s December, 1985, ordinance authorizing the taking of certain property which is located in the city, owned by plaintiff and used by it in connection with providing electricity service. Plaintiff alleges that the city intends to use the property “for the purpose of providing electric power to residents” of the city. It contends that the city lacks authority to condemn property which is now used to provide electric utility services “in order to devote [the property] to the same use.” We do not understand plaintiff to contend, and would not agree if it did, that ORS 223.005 and 225.020, individually or in combination, do not give the city general authority to condemn property and use it for municipally-provided electric utility services. See also Ashland City Charter, Article II, section 1; Article XI, section 1; Davidson Baking Co. v. Jenkins etal, 216 Or 51, 337 P2d 352 (1959). The point of plaintiffs argument is that the city cannot condemn property which is already committed to the public use for which the city seeks it, unless the authority to condemn the property for that purpose is expressly conferred by or can be necessarily implied from a statute or other authorizing source. See Emerald PUD v. PP&L, 302 Or 256, 729 P2d 552 (1986).

The parties focus principally on the provisions of ORS chapters 221, 223 and 225, quoted above, in their arguments about whether the city has express or implied authority to condemn plaintiffs property and use it to provide services of the kind for which it is now used by plaintiff. We think that the more relevant language is to be found in the territorial allocation statutes themselves. ORS 758.470(1) provides, in relevant part:

“[W]hen a municipality has condemned or otherwise acquired another person’s equipment, plant or facilities for rendering utility service, it shall acquire all of the rights of the person whose property is condemned to serve the territory served by the acquired properties.”

Plaintiff states that ORS 758.470(1) “does not grant the power to condemn; rather, it simply preserves any condemnation power a municipality otherwise may be granted by law.” We do not agree with that statement insofar as plaintiff means by it that the quoted part of ORS 758.470(1) cannot constitute an express or necessarily implied grant of authority to condemn property for the purpose of providing electric utility services when the property is already being used for that purpose. It is correct that the language of ORS 758.470(1) which precedes the quoted language simply preserves unrestricted the franchise and condemnation powers which are conferred on cities by other statutes and sources of authority. That earlier language preserves, inter alia, the city’s general authority under ORS 223.005(3) and ORS 225.020(2) to condemn property for its use in furnishing electricity service. The quoted language, however, does more than simply preserve authority which is granted to the city elsewhere; it independently authorizes a city which condemns the property of a public utility in an allocated territory to use the property to continue the utility service in that territory. The language — at the least — necessarily implies that a city may exercise its general power to condemn property, notwithstanding the fact that the property is being used to provide utility services, for the purpose of putting it to the same use as its prior owner did.²

Amicus Oregon Rural Electric Cooperative Association also maintains that ORS 758.470(1) cannot be the source of the city’s authority to condemn existing utility property for municipal use in providing utility services. It explains:

“[ORS 758.470(1)] refers to acquiring the rights of the person whose property is condemned to serve the ‘territory’ served by the acquired properties. Assuming the right to condemn existing utility properties for the same use, the reservation of any such right of condemnation refers only to ‘territory served’ and not to ‘allocated territory’ defined in ORS 758.400(1). Thus, there is no suggestion that there would continue to be a condemnation power, if any existed before, over facilities within an allocated territory.”

The argument of amicus is incorrect. The subject of ORS 758.470(1) is the construction and application of ORS 758.015 and 758.400 to 758.475, the statutes governing exclusive territorial allocations. Given that, there is no possible substantive significance to the legislature’s choice of the term “territory served” instead of “allocated territory.” In the context of those statutes and in connection with territory which the PUC has allocated, both terms can only refer to that allocated territory. The only conceivable reason for the legislature’s choice of the term “territory served” rather than “allocated territory” — if it thought about the matter at all — is that the phrase which would have resulted from the use of the latter term, i.e., “acquire all of the rights of the person whose property is condemned to serve the allocated territory by the acquired properties,” would have been totally meaningless. The trial court correctly concluded that the city has authority to condemn the property in question and to use it to provide electric service.

Reversed and remanded on first claim;³ affirmed on second claim.

1 Although the city’s brief is not completely clear on the point, it appears to suggest that some or all of the annexed areas which it serves were not within the exclusively allocated territory at some or all of the times that the city has provided service to them. If that is the city’s position, the most that could follow from it is that there is a material and unresolved question of fact, which would necessitate that we reverse and remand the summary judgment in the city’s favor on the first claim. Because that disposition also follows under plaintiffs factual understanding, we assume its correctness in order to reach the legal issue which the parties dispute and which appears to have been the basis for the trial court’s decision. The trial court of course must resolve any factual questions on remand.

2 Although the point is outside the issues in this case, the ability of the condemning city to continue the displaced public utility’s service is integral to the operation of the territorial allocation statutes. Both the conditions which must exist for there to be an exclusive territorial allocation, see ORS 758.405; 758.415; 758.440(2), and the fact that an exclusive provider was serving the territory before the taking, may make the continuation of service by the successor to the property essential to assure the availability of utility service in the territory. It is very possible that that is the reason why ORS 758.470(1) gives the condemning city the authority to replace the public utility whose property it condemns as the exclusive provider in an allocated territory. The same considerations may also explain why the territorial allocation statutes are at least more clear than the general municipal condemnation statutes in implying to the authority of cities to condemn public utility property for the purpose of providing the same service as the public utility used the property to provide.

3 Whether our disposition of the second claim and the reasons which lead us to that disposition have any bearing on the first claim is for the trial court to consider on remand. The current status of the acquisition or condemnation, as well as the territorial relationship of the property the city plans to acquire to the allocated areas it has been serving, may be germane. See also note 1, supra.