Case Title: Springfield Utility Board v. Emerald PUD

Citation: 

Docket Number: S51305

State: oregon

Court: Oregon Supreme Court

Date: 2005-12-30T00:00:00Z

Document:
FILED:  December 30, 2005
IN THE SUPREME COURT OF THE STATE OF OREGON
SPRINGFIELD UTILITY BOARD,
acting for and on behalf of the
CITY OF SPRINGFIELD,
Petitioner on Review,
v.
EMERALD PEOPLE'S UTILITY DISTRICT,
Respondent on Review.
(CC No. 16-01-19121; CA A118530; SC S51305)
En Banc
On review from the Court of Appeals.*
Argued and submitted January 5, 2005.
Peter R. Mersereau, of Mersereau & Shannon, LLP, Portland,
argued the cause for petitioner on review.  Thomas W. McPherson,
of Mersersau & Shannon LLP, Portland, filed the briefs for
petitioner on review.
Timothy J. Sercombe, of Preston Gates & Ellis, LLP,
Portland, argued the cause for respondent on review.  With him on
the briefs was Carra L. Sahler.
John H. Hammond, Jr., of Berry, Elsner & Hammond, LLP,
Portland, filed a brief on behalf of amicus curiae Oregon
Municipal Electric Utilities.
Lori Irish Bauman, of Ater Wynne LLP, Portland, filed a
brief on behalf of amicus curiae Oregon People's Utility District
Association, Inc.
CARSON, C. J.
The decision of the Court of Appeals is affirmed.
The judgment of the circuit court is reversed in part and
affirmed in part, and the case is remanded to the circuit court
for further proceedings.
*Appeal from Lane County Circuit Court, Lyle C. Velure, Judge. 191 Or App 536, 84 P3d 167 (2004).
CARSON, C. J.
At issue in this declaratory judgment action is whether
a city possesses authority to exclude a people's utility district
(PUD) from providing electrical services in an area newly annexed
to the city when the Public Utility Commission of Oregon
(PUC) (1) previously had allocated that area to the PUD as part
of the PUD's exclusive service territory.  For the reasons that
follow, we conclude that a city does not possess such authority.
Springfield Utility Board (the board), acting on behalf
of the City of Springfield (the city), adopted an ordinance that
purported to exclude Emerald People's Utility District (Emerald)
from serving an area newly annexed to the city.  Much of the
annexed area fell within an area that the PUC previously had
allocated to Emerald as part of Emerald's exclusive service
territory.  The board filed a declaratory judgment action against
Emerald, seeking a determination that the board was the exclusive
provider of electrical services in the annexed area.  Emerald
counterclaimed, seeking a determination that the board could not
exclude Emerald from the newly annexed area.  On competing
motions for summary judgment, the trial court ruled that the
board had authority under ORS 221.420(2)(a) (2) to exclude
Emerald from providing electrical services in the annexed area,
and it entered a declaratory judgment in favor of the board. 
Emerald appealed.  The Court of Appeals reversed as to
the part of the annexed area that fell within Emerald's allocated
exclusive service territory, but affirmed as to the remainder of
the annexed area.  Springfield Utility Board v. Emerald PUD, 191
Or App 536, 84 P3d 167 (2004).  We allowed the board's petition
for review and, for the reasons that follow, now affirm the
decision of the Court of Appeals.
I.  FACTS AND PROCEDURAL BACKGROUND
The following undisputed facts are taken from the
opinion of the Court of Appeals and from the record.  The board
operates a municipal electric utility that was created in 1950
under the provisions of ORS chapter 225, following a voter-approved amendment to the Springfield city charter.  That city
charter also empowers the board to exercise the regulatory
authority provided in ORS 221.420, discussed post. (3)  The
board has acted as the exclusive provider of residential
electrical services within the city limits of Springfield since
1975.
Emerald is a PUD that was created by election in 1978
pursuant to Article XI, section 12, of the Oregon Constitution
and the provisions of ORS chapter 261. (4)  Emerald's political
boundaries encompass mostly unincorporated parts of Lane County
and, prior to the annexation at issue in this case, did not
encompass any part of the city.
At the time of Emerald's creation in 1978, the PUC had
allocated to Pacific Power & Light (PP&L) the exclusive right to
provide electrical services to the area within Emerald's
political boundaries.  In 1983, Emerald purchased certain
electric transmission and distribution facilities from PP&L that
were either within or adjacent to Emerald's political boundaries. 
The PUC approved the sale of those facilities and issued an order
transferring the allocation of that exclusive service territory
from PP&L to Emerald.  Emerald has acted as the exclusive
provider of electrical services within that area since the PUC
issued its 1983 allocation order.
The present dispute between the board and Emerald arose
in 2000, after the city sought to have an undeveloped parcel of
land annexed to the city to permit the development of a
residential subdivision.  Much of the area that the city sought
to annex fell within the exclusive service territory that the PUC
had allocated to Emerald in its 1983 order.  In April 2000, in
anticipation of the planned annexation, the board adopted an
ordinance that purported to exercise the city's authority under
ORS 221.420(2)(a) to exclude Emerald from the area to be annexed,
including the part of that area that fell within Emerald's
allocated exclusive service territory.  
For its part, Emerald disputed the board's authority to
exclude Emerald from its allocated exclusive service territory. 
Emerald also applied to the PUC for allocation of the additional
right to act as the exclusive service provider for the part of
the area to be annexed that fell outside the PUC's 1983
allocation order. (5)  In addition, Emerald began to construct
electric distribution facilities within the area to be annexed.
The Lane County Local Government Boundary Commission
ultimately approved the annexation of the area at issue to the
city on November 8, 2000.  In October 2001, the board filed a
declaratory judgment action against Emerald in Lane County
Circuit Court, seeking a declaration that the board enjoyed the
exclusive right to provide electrical services to the annexed
area at issue.  The board also sought an injunction prohibiting
Emerald from providing electrical services in the annexed area. 
Emerald answered and filed a counterclaim for declaratory relief,
seeking a judicial determination that the board could not exclude
Emerald from the annexed area or extend the board's utility
services into Emerald's allocated exclusive service territory.  
Both parties moved for summary judgment.  After hearing
arguments relating to those motions, the trial court determined
that the board had authority under ORS 221.420(2)(a) to exclude
Emerald from the annexed area, including the part of that area
that fell within Emerald's allocated exclusive service territory. 
Accordingly, the trial court entered a declaratory judgment in
favor of the board, declaring the board to be the exclusive
provider of electrical services to the entire annexed area at
issue.
Emerald appealed.  The Court of Appeals affirmed in
part and reversed in part.  Springfield Utility Board, 191 Or App
536.  In doing so, that court concluded that the board had
authority to exclude Emerald from the part of the annexed area
that fell outside of Emerald's allocated exclusive service
territory because, in the absence of a territorial allocation by
the PUC, no statute limits a city's authority to adopt an
ordinance excluding any competing utility providers from the
city's boundaries.  Id. at 551-52.  As to the part of the annexed
area that the PUC had allocated exclusively to Emerald, however,
the Court of Appeals held that the territorial allocation
statutes prohibited the city from excluding Emerald and serving
the area itself.  Specifically, after concluding that ORS 221.420
provided the sole basis of authority for a city to exclude a
utility provider from an allocated exclusive service territory,
the Court of Appeals held that ORS 221.420(2)(a) did not permit a
city to exercise that power against a PUD.  Id. at 551.
The board petitioned this court for review, challenging
the Court of Appeals' conclusion that the board lacked authority
to exclude Emerald and to extend its own utility services into
the part of the annexed area that the PUC had allocated to
Emerald as part of Emerald's exclusive service territory.  As
explained below, we agree with the Court of Appeals that the
board lacked authority to override the PUC's territorial
allocation to Emerald.  Accordingly, we affirm the decision of
the Court of Appeals.
II.  DISCUSSION
At the outset, we note that Emerald does not assign
error to the Court of Appeals' holding that the board possessed
authority to exclude Emerald from the part of the annexed area
that fell outside of Emerald's allocated exclusive service
territory.  Thus, the only question before us is whether the
board, exercising the powers of the city, enjoys the authority to
override the PUC's allocation to Emerald of the part of the
annexed area that falls within Emerald's exclusive service
territory.  
A.  Statutory Background
Before turning to the parties' arguments concerning
that question, we first provide background relating to the
territorial allocation statutes for electric and gas utilities. 
The legislature enacted the territorial allocation
statutes for gas and electric utilities, now codified at ORS
758.400 to 758.475, in 1961.  Or Laws 1961, ch 691.  Those
statutes empower the PUC to allocate exclusive service
territories to providers of electric and gas utility services
under certain circumstances.  See ORS 758.410 to 758.430
(prescribing procedure and requirements for allocation of service
territory by contract between utility providers); see also ORS
758.435 to 758.445 (prescribing procedure and requirements for
allocation of service territory by application).  In conferring 
that authority upon the PUC, the legislature described twin goals
underlying the territorial allocation statutes:  the prevention
of service duplication, and the promotion of adequate utility
services throughout the state.  Specifically, in a legislative
policy statement now codified at ORS 758.405, the legislature
explained:
 "The elimination and future prevention of duplication of utility facilities is a matter of state-wide concern; and in order to promote the efficient and
economic use and development and the safety of
operation of utility services while providing adequate
and reasonable service to all territories and customers
affected thereby, it is necessary to regulate in the
manner provided in [ORS 758.400 to 758.475] all persons
and entities providing utility services."



Or Laws 1961, ch 691, § 18.  
As one mechanism to achieve those identified statutory objectives, ORS 758.450(2) mandates that, subject to several
exceptions inapplicable to this case, (6) "no other person
shall offer, construct or extend utility service in or into" an
area if the PUC has exercised its statutory authority to allocate
that area to another utility provider as an exclusive service
territory.  ORS 758.450(2) (emphasis added).  The word "person"
is defined broadly in the territorial allocation statutes to
include "individuals, firms, partnerships, corporations,
associations, cooperatives and municipalities, or their agent,
lessee, trustee or referee."  ORS 758.400(2) (emphasis added).  
The parties agree, as do we, that there is no question
that the board qualifies as a "municipality" within the meaning
of ORS 758.400(2) and, consequently, also qualifies as a "person"
within the meaning of ORS 758.450(2).  Thus, the territorial
allocation statutes expressly apply to the board, and, at first
glance, ORS 758.450(2) appears to prohibit the board from
extending its own electric utility services into the part of the
annexed area that the PUC had allocated to Emerald as part of
Emerald's exclusive service territory.  The parties' dispute
raises the question whether, notwithstanding the PUC's
territorial allocation to Emerald and the prohibition in ORS
758.450(2), the board has the authority to exclude Emerald and to
extend its own electric utility services into the annexed area at
issue.  As explained below, we conclude that the answer to that
question is no.
B.  The Scope of the Board's Authority
The board makes several arguments in support of its
position that the territorial allocation statutes in general, and
ORS 758.450(2) in particular, do nothing to diminish the board's
authority to exclude Emerald and to extend the board's own
electric utility services into the part of the annexed area that
the PUC had allocated to Emerald.  First, the board contends that
ORS 758.470 expressly provides that the territorial allocation
statutes do not restrict certain powers that cities enjoyed
before the enactment of those statutes, including the power of
cities to issue franchises to gas and electric utility providers. 
See ORS 758.470(1) (ORS "758.400 to 758.475 shall not be
construed or applied to restrict the powers granted to cities to
issue franchises").  In that vein, the board argues that it may
override the PUC's territorial allocation, even if no statute
affirmatively permits it to do so, because the territorial
allocation statutes do not restrict a city's authority to adopt
an ordinance excluding any competing utility providers from the
city's boundaries. (7)  Second, even if that is not so, the
board argues that ORS 221.420(2)(a) confers upon it affirmative
authority to exclude Emerald from the city's boundaries and,
having exercised that authority, it may extend its own electric
utility services into the annexed area.  Finally, the board
argues that, if the territorial allocation statutes and ORS
221.420(2)(a) are not interpreted to permit the city to exclude
Emerald and to operate as the exclusive electric utility provider
within the city's boundaries, then those statutes impermissibly
deprive the city of its authority under the "home rule"
provisions of the Oregon Constitution (8) to elect its own
political form.  We address each of the board's arguments in turn
below.
1. The board's authority under the territorial allocation
statutes
We first consider whether the territorial allocation
statutes restrict the board's ability to exercise its charter
authority to exclude Emerald and to extend its own electric
utility services into Emerald's allocated exclusive service
territory. 
The board recognizes, as it must, that the territorial
allocation statutes expressly apply to cities and other
municipalities, that those statutes provide a comprehensive
framework for the allocation of exclusive service territories to
utility providers, and that the PUC has sole authority under that
statutory framework to approve such allocations.  Pointing to
certain municipal powers preserved under ORS 758.470 (9) --
including the power to issue franchises, the power of
condemnation, and the power to provide utility services to other
municipal installations -- the board nevertheless contends that
the territorial allocation statutes contemplate a city overriding
PUC territorial allocation to another utility provider within the
city's boundaries. 
Of the municipal powers preserved under ORS 758.470
that the board invokes, we view only a city's power to issue
franchises to utility providers as relevant to the question
whether the board may override the PUC's allocation to Emerald of
the annexed area at issue.  ORS 758.470(1) provides that the
territorial allocation statutes "shall not be construed or
applied to restrict the powers granted to cities to issue
franchises[.]"  We conclude that, by referring to the franchise
powers "granted to" cities, ORS 758.470(1) preserves a city's
franchise authority over utilities governed by the territorial
allocation statutes to the extent that the legislature had
granted cities that authority under ORS 221.420.  The territorial
allocation statutes therefore limit a city's franchise authority
in this context to only the authority that ORS 221.420(2)(a)
confers. 
We, therefore, now turn our inquiry to that statute to
determine whether the board is correct in asserting that ORS
221.420(2)(a) affirmatively authorizes a city to exclude a PUD
from the city's boundaries.
2. The board's authority under ORS 221.420
The legislature has provided for statewide regulation
of utilities other than railroads since 1911.  See Or Laws 1911,
ch 279 (providing same).  ORS 221.420 has its origins in that
1911 utility legislation and, although it has evolved over time,
that statute consistently has conferred cities with affirmative
statutory authority to regulate utilities within their
boundaries.  See Or Laws 1911, ch 279, § 61 (defining municipal
regulatory powers over utilities). 
ORS 221.420(2)(a) provides:
"Every city may:
"Determine by contract or prescribe by
ordinance or otherwise, the terms and conditions,
including payment of charges and fees, upon which
any public utility, electric cooperative, people's
utility district or heating company may be
permitted to occupy the streets, highways or other
public property within such city and exclude or
eject any public utility or heating company
therefrom."  
(Emphasis added.)  As the Court of Appeals pointed out below,
Springfield Utility Board, 191 Or App at 543-44, ORS
221.420(2)(a) sets out two different powers that cities enjoy to
regulate utilities within their boundaries, namely, the power to
prescribe the conditions and terms for occupation of a city's
streets and other public property, and the power to eject or
exclude another from a city's streets or other public property. 
ORS 221.420(2)(a) authorizes cities to exercise that first power
-- that is, the power to prescribe the terms and conditions for
occupation of a city's streets or other public property --
against "any public utility, electric cooperative, people's
utility district or heating company."  (Emphasis added.)  By
contrast, ORS 221.420(2)(a) authorizes cities to exercise that
second power -- that is, the power to exclude or eject -- only
against "any public utility or heating company."  (Emphasis
added.)  
By expressly referring to PUDs in describing a city's
power to prescribe the terms and conditions for occupation of the
city's streets or other public property, but omitting any such
reference in describing a city's exclusion and ejection power,
the text of ORS 221.420(2)(a) appears to limit a city's statutory
franchise authority over PUDs only to the authority to prescribe
the terms and conditions for occupation of the city's streets and
other public property.  See PGE v. Bureau of Labor and
Industries, 317 Or 606, 611, 859 P2d 1143 (1993) (in construing
statutes, court generally presumes "use of a term in one section
and not in another section of the same statute indicates a
purposeful omission").  In advancing a contrary interpretation of
ORS 221.420(2)(a), the board acknowledges that, if it has
statutory authority to exclude Emerald, then Emerald must qualify
as a "public utility" within the meaning of the second part of
ORS 221.420(2)(a), notwithstanding the apparent distinction
between a "public utility" and a "people's utility district" in
the first part of that statute.  For its part, Emerald disputes
the notion that the term "public utility" in ORS 221.420(2)(a)
includes PUDs.  For the reasons explained below, we agree with
Emerald.  
ORS 221.420 defines the term "public utility" by
adopting the statutory definition of that term in ORS 757.005,
which also applies to the statutes governing state regulation of
utilities.  See ORS 221.420(1)(a) (providing that term "public
utility" in ORS 221.420 has "the meaning for that term provided
in ORS 757.005"); see also ORS 756.010(6) (incorporating
definition of "public utility" in ORS 757.005 for ORS chapters
756, 757, 758, and 759).  As relevant in this context, ORS
757.005 defines a "public utility" as:
"Any corporation, company, individual, association
of individuals, or its lessees, trustees or receivers,
that owns, operates, manages or controls all or a part
of any plant or equipment in this state for the
production, transmission, delivery or furnishing of
heat, light, water or power, directly or indirectly to
or for the public, whether or not such plant or
equipment or part thereof is wholly within any town or
city."
ORS 757.005(1)(a)(A). (10)  That definition of a "public
utility" is refined further by ORS 757.005(1)(b), which provides
a list of entities that are excluded from that statutory term. 
One of the entities that ORS 757.005(1)(b) excludes from the
statutory definition of "public utility" is "[a]ny plant owned or
operated by a municipality."  ORS 757.005(1)(b)(A) (emphasis
added).
Applying those statutory definitions here, both parties
agree that, if a PUD qualifies as a "municipality" within the
meaning of ORS 757.005(1)(b)(A), then Emerald is excluded from
the statutory definition of the term "public utility" under ORS
757.005(1)(a)(A) and, consequently, also is excluded from that
term and from the city's exclusion authority under ORS
221.420(2)(a).  Thus, to decide whether ORS 221.420(2)(a)
authorizes the board to exclude Emerald, we must decide whether a
PUD qualifies as a "municipality" in this context.
This court previously has observed that "the terms 'municipality' and 'municipalities' have no fixed meanings and
that their meanings depend upon the context in which they are
used."  Emerald PUD, 302 Or at 265-66.  Thus, in deciding whether
PUDs are "municipalities" within the meaning of a particular
statute, this court examines the specific statutory context at
issue.  In Emerald PUD, for example, this court concluded that
PUDs do not qualify as "municipalities" within the meaning of ORS
543.610 because the legislature had enacted that statute together
with Oregon Laws 1931, chapter 279, (11) which distinguished
between municipalities and PUDs.  302 Or at 266-68.  In Wasco
County P.U.D. v. Kelly, 171 Or 691, 698-99, 137 P2d 295 (1943),
by contrast, this court concluded that PUDs were municipalities
within the meaning of former Article IV, section 1a, of the
Oregon Constitution, based upon the purposes and powers of such
districts.  See also Cent. Lincoln P.U.D. v. State Tax Com., 221
Or 398, 408, 351 P2d 694 (1960) (describing PUDs as "quasi-municipal corporation[s]"). 
The statutory definition of "municipality" set out in
ORS 756.010(4) generally controls the meaning of that term in ORS
757.005(1)(b)(A).  See ORS 756.010(4) (providing definition of
term "municipality" for ORS chapters 756, 757, 758, and 759
"except as otherwise specifically provided or unless the context
requires otherwise").  ORS 756.010(4) defines a "municipality" to
include "any city, municipal corporation or quasi-municipal
corporation."  According to Emerald, a PUD is a "municipality"
under that definition and, thus, is excluded from the statutory
term "public utility" under both ORS 757.005(1)(a)(A) and ORS
221.420(2)(a). 
As the Court of Appeals observed below, Springfield
Utility Board, 191 Or App at 550, the relevant context for
determining whether a PUD is "municipality" under ORS 756.010(4)
is the statutory framework for state regulation of utilities set
out in ORS chapters 756, 757, and 758. (12)  Examining those
statutes as a whole, the board acknowledges, and we agree, that a
PUD clearly qualifies as a "municipality" that is excluded from
the statutory term "public utility" in that context.  ORS
758.505, for example, expressly distinguishes between "public
utilities," which are subject to the PUC's rate and service
regulatory authority under ORS chapter 757, and PUDs, which have
the authority to set their own rates and establish their own
standards of service under ORS chapter 261.  Compare ORS
758.505(7) (defining "public utility" as "a utility regulated by
the commission under ORS chapter 757") with ORS 758.505(6)
(classifying PUDs as "non-regulated utilit[ies]").  Thus, if that
same distinction also applies to ORS 221.420(2)(a), then the
board lacks statutory authority to exclude Emerald from its
allocated exclusive service territory.
The board first seeks to avoid that result by arguing
that, rather than applying the broad definition of "municipality"
under ORS 756.010(4) to decide whether a PUD is excluded from the
statutory term "public utility," this court should apply the
narrower definition of "municipality" that is contained in ORS
221.420 itself.  ORS 221.420(1)(d) defines a "municipality" for
purposes of that statute as "any town, city or other municipal
government wherein property of the public utility is located." 
Applying that definition to ORS 757.005(1)(b)(A), the board
contends that Emerald is not a "municipality" that is excluded
from the statutory term "public utility" as that term applies to
ORS 221.420(2)(a). 
As did the Court of Appeals below, Springfield Utility
Board, 191 Or App at 548, we reject the board's suggestion that
we can import the definition of "municipality" from ORS
221.420(1)(d) to determine the meaning of "public utility" in ORS
757.005(1)(b)(A).  As the Court of Appeals pointed out, the
definition of "municipality" in ORS 221.420(1)(d) serves only to
define what entities have authority to exercise the powers set
out in that statute.  In addition, by incorporating the
definition of "public utility" in ORS 757.005 without any
qualification, ORS 221.420(1)(a) directs us to give the term
"public utility" in ORS 221.420 the same meaning that that term
possesses under the statutes providing for state regulation of
utilities.  That direction is reinforced further by the fact
that, as described above, the distinction between a "public
utility" and a "people's utility district" in the text of ORS
221.420(2)(a) is consistent with the distinction also made
between those entities by the statutes providing for state
regulation of utilities.
In arguing that the term "public utility" in ORS
221.420 includes PUDs, the board also relies upon ORS 221.415,
the legislative policy statement that accompanied the addition of
the words "people's utility districts" to various provisions in
ORS chapter 221 in 1987.  See Or Laws 1987, ch 245 (adding both
provisions).  ORS 221.415 provides:
"Recognizing the independent basis of legislative
authority granted to cities in this state by municipal
charters, the Legislative Assembly intends by ORS
221.415, 221.420, 221.450 and 261.305 to reaffirm the
authority of cities to regulate use of municipally
owned rights of way and to impose charges upon publicly
owned suppliers of electrical energy, as well as
privately owned suppliers for the use of such rights of
way."
(Emphasis added.)  
The board contends that the legislature's use of the
word "reaffirm" in that statute reveals that cities already had
the authority to exercise all the powers in ORS 221.420 against
PUDs even before that statute had listed PUDs specifically.  We
think that the board reads too much into that word.  In that
regard, we point out that ORS 221.415 also "reaffirm[ed]" the
city's authority under ORS 221.450 to collect privilege taxes
from PUDs, despite the fact that ORS 221.450 previously had
authorized cities to collect those taxes only from "privately
owned public utilit[ies]."  See ORS 221.450 (1985) (so
providing).  In addition, ORS 221.415 says nothing about the
authority of cities to exclude utility providers and, instead, is
consistent with the addition of the words "people's utility
district" only to the first part of ORS 221.420(2)(a).  We
conclude, therefore, that ORS 221.420(2)(a) does not provide the
board with authority to exclude Emerald from the territory
allocated to Emerald by the PUC.
3. The "home rule" provisions of the Oregon Constitution
Having concluded that the territorial allocation
statutes limit a city's authority to exclude a utility provider
from an allocated exclusive service territory only to the
authority provided under ORS 221.420(2)(a), and having concluded
that ORS 221.420(2)(a) does not permit a city to exercise that
power against a PUD, we finally consider the board's argument
that those statutes operate to deprive the city of its
constitutional "home rule" authority to elect its own political
form.  According to the board, a state law may not interfere with
the authority of a municipal electric utility to serve all
customers in a city, because such a utility is an "organ" of the
city government.
As noted above, the board relies upon the city's "home
rule" authority to pursue its own substantive policies in
accordance with the scope of its city charter.  The "home rule"
provisions of the Oregon Constitution, set out at 339 Or __ n 8
(slip op at 11 n 8), provide authority for the people of a city
to determine the organization, and to define the powers, of their
local government without first having to obtain authorization
from the state legislature.  Jarvill v. City of Eugene, 289 Or
157, 169, 613 P2d 1, cert den, 449 US 1013 (1980).  The "home
rule" provisions of the Oregon Constitution therefore preserve
the authority of the people of a city to choose the organization
and political form of their local government.  LaGrande/Astoria
v. PERB, 281 Or 137, 156-57, 576 P2d 1204, adhered to on reh'g,
284 Or 173, 586 P2d 765 (1978).  The exercise of that local
authority, however, is limited by the rule that, "when a local
enactment is found incompatible with a state law in an area of
substantive policy, the state law will displace the local rule." 
Id. at 149. 
In this case, we have no trouble concluding that the
territorial allocation statutes do not offend the city's
authority in the manner that the board contends. (13)  Those
statutes do nothing to affect the structure or the form of the
city's government and, instead, merely provide a comprehensive,
statewide system for allocating service territories to different
utility providers.
III.  CONCLUSION
In sum, we conclude that the territorial allocation
statutes limit a city's authority to exclude a utility provider
from an allocated exclusive service territory to the extent that
ORS 221.420(2)(a) authorizes such an exclusion.  Because ORS
221.420(2)(a) does not authorize a city to exclude a PUD, the
board lacked authority to exclude Emerald from the exclusive
service territory that the PUC had allocated to Emerald.
The decision of the Court of Appeals is affirmed. The judgment of the circuit court is reversed in part and
affirmed in part, and the case is remanded to the circuit court
for further proceedings.
1. At the time of the 1983 territorial allocation that is
at issue in this case, ORS chapter 756 conferred a single
commissioner, the Public Utility Commissioner of Oregon, with the
authority to regulate public utilities in Oregon.  In 1985, the
legislature amended ORS chapter 756 to create the current three-member body, the Public Utility Commission of Oregon.  See Or
Laws 1985, ch 834, § 2 (so providing).  That change has no effect
upon our analysis in this case, and we use "PUC" in this opinion
to refer to both the Public Utility Commissioner of Oregon and
the Public Utility Commission of Oregon.  
2. ORS 221.420(2)(a) provides:
"Every city may:
"Determine by contract or prescribe by
ordinance or otherwise, the terms and conditions,
including payment of charges and fees, upon which
any public utility, electric cooperative, people's
utility district or heating company may be
permitted to occupy the streets, highways or other
public property within such city and exclude or
eject any public utility or heating company
therefrom."
3. The city amended its charter in 2001, but did not
alter the board's authority in any way that affects our
analysis in this case.
4. Article XI, section 12, was added to the Oregon
Constitution in 1930 after the voters approved an initiative
petition commonly known as the "Grange Amendment."  See
Emerald PUD v. PP&L, 302 Or 256, 258, 9 P2d 552 (1986)
(discussing history of Article XI, section 12).  That
constitutional provision defines the powers of PUDs and
directs the Legislative Assembly to enact legislation
necessary to implement the provisions of the amendment. 
That implementing legislation now is found in ORS chapter
261.  See id. (discussing that same history). 
5. As the Court of Appeals noted, Springfield Utility
Board, 191 Or App at 539 n 2, the appellate record contains
no information about the result of Emerald's application to
the PUC for expansion of Emerald's exclusive service
territory. 
6. ORS 758.450(4) provides: 
"The provisions of ORS 758.400 to 758.475 do not
apply to any corporation, company, individual or
association of individuals providing heat, light or
power:
"(a) From any energy resource to fewer than 20
customers, if it began providing service to a customer
prior to July 14, 1985;
"(b) From any energy resource to fewer than 20
residential customers so long as the corporation,
company, individual or association of individuals
serves only residential customers;
"(c) From solar or wind resources to any number of
customers; or
"(d) From biogas, waste heat or geothermal
resources for nonelectric generation purposes to any
number of customers."
7. The board claims that its authority arises from
the "home rule" provisions of the Oregon Constitution.  We
address the board's "home rule" argument later in this
opinion.
8. The "home rule" provisions of the Oregon
Constitution, now contained in Article XI, section 2, and
Article IV, section 1(5), were adopted by initiative
petition in 1906.  See LaGrande/Astoria v. PERB, 281 Or 137,
140-41, 576 P2d 1204, adhered to on reh'g, 284 Or 173, 586
P2d 765 (1978) (describing that same history).  Article XI,
section 2, provides, in part, that "[t]he legal voters of
every city and town are hereby granted power to enact and
amend their municipal charter, subject to the Constitution
and criminal laws of the State of Oregon[.]"  Article IV,
section 1(5), provides that the initiative and referendum
powers set out in Article IV, section 1, of the Oregon
Constitution "further [are] reserved to the qualified voters
of each municipality and district as to all local, special
and municipal legislation of every character in or for their
municipality or district."
9. ORS 758.470 provides, in part:
"(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."
10. ORS 757.005 also defines a "public utility" as:
"Any corporation, company, individual or
association of individuals, which is party to an oral
or written agreement for the payment by a public
utility, for service, managerial construction,
engineering or financing fees, and having an affiliated
interest with the public utility."
ORS 757.005(1)(a)(B).  Both parties agree, as do we, that the
statutory definition of a "public utility" contained in ORS
757.005(1)(a)(B) is inapplicable to this case.
11. Oregon Laws 1931, chapter 279, provided for the
creation and establishment of PUDs to implement Article XI,
section 12.  See __ Or at __ n 4 (slip op at 3 n 4) (discussing
history of that constitutional provision).  As noted, that
legislation now is codified in ORS chapter 261.
12. The statutory definition of "municipality" set out in
ORS 756.010(4) also applies to ORS chapter 759, which relates to
telecommunication utility regulation.
13. We note that the board recognizes, as it must, that "ORS 758.405 expresses the purpose of [the territorial
allocation statutes] as a matter of statewide economic or
regulatory concern, and [that] those statutes themselves do
constitute a 'general law'" that would prevail over any contrary
local policy.  Nevertheless, the board appears to argue that the
PUC's allocation order to Emerald would not trump any contrary
local policy in any event because that order is merely an
administrative order that the PUC issued in the application of
those statutes.  We fail to understand the basis of that argument
because, as the board acknowledges, the territorial allocation
statutes authorized the PUC to issue the order allocating the
area at issue to Emerald.  Thus, although that order itself is
not a state law of general applicability, the authority for that
order comes from a state law of general applicability.