Title: Cody Gas Co. v. Public Service Com'n of Wyoming

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Cody Gas Co. v. Public Service Com'n of Wyoming1988 WY 11748 P.2d 1144Case Number: 87-62Decided: 01/27/1988Supreme Court of Wyoming
 
 
 
 
CODY GAS 
COMPANY, PETITIONER,

v.

PUBLIC 
SERVICE COMMISSION OF WYOMING, WYOMING GAS CO., AND MARATHON OIL COMPANY, 
RESPONDENTS.

Petition for 
review from the Public Service Commission.

Richard P. Boley of Lathrop & Uchner, Cheyenne, and Michael L. Williams, Colorado Springs, Colo., for 
petitioner.

Joseph B. Meyer, Atty. Gen., Mary B. Guthrie, Sr. Asst. Atty. Gen., Roger 
C. Fransen, Asst. Atty. Gen., for 
respondent Public Service Com'n of Wyoming.

Bruce S. Asay of Kline, Buck & Asay, Cheyenne, for respondent Wyoming Gas 
Co.

Before BROWN, C.J., and THOMAS, 
CARDINE, URBIGKIT and MACY, JJ.

URBIGKIT, 
Justice.

[¶1.]     This is a certification 
from the district court, pursuant to Rule 12.09, W.R.A.P., for review of an 
order of the Public Service Commission of Wyoming finding that Cody Gas Company 
was encroaching upon Wyoming Gas Company's certificated area by selling natural 
gas to Marathon Oil Company, and is a case framed as a utility franchise contest 
based on a dispute of the point-of-delivery definition of certificated 
territory.

[¶2.]     Petitioner Cody Gas 
states the issue:

"Did the 
Commission exceed its jurisdiction or authority in prohibiting Cody Gas Company, 
a division of The Coastal Corporation (Cody), from selling gas to Marathon Oil 
Company (Marathon) from facilities which it had previously granted Cody a 
Certificate of Public Convenience and Necessity and after finding that it would 
not be in the public interest for any other utility to sell gas to 
Marathon,"

and 
also defines the issues in its summary of argument 
as:

"I. The 
Commission's Order Must Be Set Aside Because There Was No Substantial Evidence 
to Support Its Finding That Even Though Cody Should be Permitted to Serve 
Marathon, It Was In the Public Interest That It Do So Only Through a 
Transportation Agreement.

"II. The 
Continuing Sale of Gas To Marathon By Cody Would Not Violate the Certificated 
Territories Concept."

The 
respondents are the Public Service Commission of Wyoming, and Wyoming Gas Co.; 
Marathon Oil Company declined to file a 
respondent's brief.

[¶3.]     We will address these 
subjects by inquiry of (a) substantial evidence; (b) propriety of the 
application of the certificated-territories concept; and (c) jurisdiction and 
equity. We affirm the Commission decision.1

I. 
FACTS

[¶4.]     Wyoming Gas filed a 
complaint with the Wyoming Public Service Commission (PSC) against Cody Gas on 
October 9, 1985, alleging that its Certificate of Public Convenience and 
Necessity territory in Hot SpringsCounty was subject to trespass by Cody 
Gas in sale of natural gas to Marathon. It was 
contended that Cody Gas had a gas delivery point within its territory from which 
the gas was transported and used within the area certificated by the PSC to 
Wyoming Gas. On October 29, 1985, Cody Gas filed its answer and counterpostured 
an application to expand its own certificated territory to permit continued 
service to Marathon. Responsively, Wyoming Gas 
filed its further application to expand its certificated territory to include 
all the area of the Grass Creek and Walker Dome oil and gas fields where 
Marathon used gas.

[¶5.]     With Marathon next intervening, the complaint and applications 
were consolidated and set for hearing before the PSC. After a three-day hearing, 
by order of April 8, 1986, the PSC denied Cody Gas authority to expand its 
territory to allow sales of natural gas to Marathon, and granted in part the 
application of Wyoming Gas to expand its certificated territory. However, the 
PSC did preserve Cody Gas' authority to provide transportation service in its 
pipeline to Marathon. After denial of a 
petition for rehearing, Cody Gas petitioned for judicial review, as now 
certified to this court without district court 
review.

II. 
SUBSTANTIAL EVIDENCE

[¶6.]     Under § 
16-3-114(c)(ii)(E), W.S. 1977, this court will set aside agency action if not 
supported by substantial evidence. In Montana-Dakota Utilities Co. v. Wyoming 
Public Service Commission, Wyo., 746 P.2d 1272, 1275-76 (1987), we 
reiterated:

"The 
standard of review for substantial evidence is well established in Wyoming:

"`"We 
examine the entire record to determine if there is substantial evidence to 
support an agency's findings, and if there is, we will not substitute our 
judgment for that of the agency. Substantial evidence is such relevant evidence 
as a reasonable mind might accept as adequate to support a conclusion; it may be 
less than the weight of the evidence but cannot be contrary to the overwhelming 
weight of the evidence." Wyoming Insurance Department v. Avemco Insurance 
Company, Wyo., 
726 P.2d 507, 509 (1986) (citations omitted).' TetonValley 
Ranch v. State Board of Equalization, Wyo., 735 P.2d 107, 113 
(1987)."

Additionally, Wyoming precedent 
imposes:

"* * * The 
burden of proving a lack of substantial evidence is upon the party appealing the 
agency's determination. Laramie River Conservation Council v. Industrial Siting 
Council, [Wyo.], 588 P.2d [1241,] 1253 [(1978)]; Chicago & North Western 
Railway Company v. Public Service Commission of Wyoming, 79 Wyo. 343, 334 P.2d 519 (1959). If there is present substantial evidence to support a finding of the 
agency, the ultimate weight to be given that evidence before the PSC, as the 
trier of fact, is to be determined by the PSC in light of its expertise and the 
experience of its members in such matters. Williams v. Public Service Commission 
of Wyoming, [Wyo.], 626 P.2d [564,] 573 [cert. denied 454 U.S. 896, 102 S. Ct. 394, 70 L. Ed. 2d 211 (1981)]; Telstar Communications, Inc. v. Rule Radiophone 
Service, Inc., [Wyo.], 621 P.2d [241,] 245 [(1980)]; Big Horn Rural Electric 
Company v. Pacific Power and Light Company, Wyo., 397 P.2d 455 (1964)." Mountain 
Fuel Supply Co. v. Public Service Commission of Wyoming, Wyo., 662 P.2d 878, 883 
(1983).

[¶7.]     The hearing extended 
through three days, and created a transcript of 639 pages and voluminous 
exhibits in defining the factual status and posture of the litigants. Testing 
our decision by § 16-3-114(c), W.S. 1977,2 and in answering the criteria of 
subsection (ii)(E), we find substantial evidence within the record to sustain 
the administrative decision made.

III. 
PROPRIETY OF THE APPLICATION OF THE CERTIFICATED-TERRITORY 
CONCEPT

[¶8.]     Petitioner Cody Gas 
alleges that the certificated-territory concept means that the PSC, under § 
37-2-205(a), W.S. 1977, can only regulate the building of facilities and not 
service within an area. It is argued that the point-of-delivery rather than 
point-of-use test should be applicable under § 37-2-205(a).3 The evidence is unrefuted that Cody 
Gas sells natural gas to Marathon within Cody 
Gas' territory and that this gas is transported by marathon and utilized in 
Wyoming Gas' certificated territory.

[¶9.]     Although the argument 
challenges method rather than function, the Wyoming statute does not limit the PSC to 
regulation of facilities, as is contended. The issue is not factual in basic 
legal concept, but rather invokes the intrinsic authority of the PSC as an 
administrative agency, for which we find substantial justification for issuance 
of an area certificate. In Tri-County Electric Association, Inc. v. City of 
Gillette, Wyo., 584 P.2d 995, 1001 n. 6 (1978), it was said 
that

"* * * the 
grant of a Certificate of Convenience and Necessity is the grant of a franchise 
to do business and provide a service in a particular, designated area." (Emphasis 
added.)

[¶10.]  Additionally, in analyzing specifically § 
37-2-205, W.S. 1977, and the certificate authority, it has been pointed 
out:

"Before a 
public utility can build facilities or commence service to a particular area not 
previously certificated to a like utility, it must apply for and be granted a 
Certificate of Public Convenience and Necessity by the PSC which authorizes it 
to build the particular facility or serve the particular geographic area in 
question. A public utility may generally 
provide service only within its duly authorized certificated area." 
(Emphasis added.) Carroll, State Jurisdiction Over the Regulation of Energy 
Distribution and Other Public Utility Services, XV Land & Water L.Rev. 5, 35 
(1980).

[¶11.]  The Supreme Court of Mississippi was 
faced with this issue of whether a certificate of public convenience and 
necessity was properly awarded on an area basis rather than on a facility basis 
in Mississippi Power Company v. East Mississippi Electric Power Association, 244 
Miss. 40, 140 So. 2d 286 (1962). In upholding the regulatory commission decision 
to certificate by area and not by facility, that court referred to the case as 
"peculiarly one that should be determined by a body such as the Public Service 
Commission." Id., 140 So. 2d  at 288. See also City of 
Kosciusko v. Mississippi Power & Light Co., 
Miss., 370 So. 2d 1339 (1979).

[¶12.]  While § 37-2-205(a) does not define the 
certificated area concept, it does refer to territory with no certificate and 
extensions within or to territory already served by a utility. Additionally, the 
record indicates that regulation by area avoids duplication. Clearly, public 
service commissions have the power to grant blanket or area certificates, Empire 
District Electric Company v. Cox, Mo. App., 588 S.W.2d 263, 266 (1979); State ex 
rel. Webb Tri-State Gas Co. v. Public Service Commission, Mo. App., 452 S.W.2d 586, 588 (1970); and there was substantial evidence in the record in the instant 
case for the PSC to choose to regulate by area rather than facility. Statutory 
designation of an administrative agency function encompasses a reasonable 
delegation of process determination required or adopted for performance. Teton 
Valley Ranch v. State Board of Equalization, Wyo., 735 P.2d 107 (1987); Gulf Oil 
Corp. v. Wyoming Oil and Gas Conservation Commission, Wyo., 693 P.2d 227 (1985); 
Great Western Sugar Co. v. Johnson, Wyo., 624 P.2d 1184 (1981); Barry & 
Barry, Inc. v. State Department of Motor Vehicles, 81 Wn.2d 155, 500 P.2d 540 
(1972).4 Any constraints on methods 
available to the agency to exercise designated responsibilities should be 
emplaced by specific statutory restrictions if constitutional interests are 
otherwise protected.5 Administrative Law Symposium, 16 
Wyo.L.J. (1962). See Public Service Commission v. Formal Complaint of WWZ Co., 
Wyo., 641 P.2d 183 (1982), invoking statutory construction of agency 
authority.

IV. 
JURISDICTION AND EQUITY

[¶13.]  Petitioner also argued that the PSC does 
not have the jurisdiction to prohibit Cody Gas from selling gas to Marathon. We disagree. Clearly, Cody Gas and Wyoming Gas 
are public utilities. Section 37-2-112, W.S. 1977 expressly grants the PSC 
powers over public utilities.6

"* * * The 
P.S.C. is authorized in the event of a conflict between two utilities to make 
such order and prescribe such conditions as seem just and reasonable, Dubois 
Telephone Exchange v. Mountain States Telephone & Telegraph Co., Wyo. 1967, 
429 P.2d 812, citing § 37-31, W.S. 1957, now § 37-2-205(a), W.S. 1977." 
Tri-County Electric Association, Inc. v. City of Gillette, supra, 584 P.2d  at 
1003-1004.

[¶14.]  Petitioner alternatively claims that 
leaving Cody Gas with just the transportation service is not equitable. In 
essence, this is a restated sufficiency-of-the-evidence presentation for 
exercised discretion. The PSC's decision showed that the competing interests of 
two utility companies and their customers were discretionally balanced in 
decision concept. The PSC weighed and balanced the public interest, examining 
the benefits Wyoming Gas' customers would receive and the costs to the customers 
of Cody Gas. Although Wyoming Gas had asked the PSC to enjoin Cody Gas from 
making any deliveries of natural gas to Marathon, the PSC authorized Cody Gas to enter into a 
transportation agreement and receive the benefits of such. Alternatives were 
weighed, and the PSC chose a result that would only partially benefit Cody Gas 
in conflict with Wyoming Gas. This court cannot invade the decisional processes 
of the administrative agency if the evidentiary test of sufficiency is met, 
constitutional rights are not ignored, and statutory justification for the 
activity is provided. Western Radio Communications, Inc. v. Two-Way Radio 
Service, Inc., Wyo., 718 P.2d 15 (1986); Great Western Sugar 
Co. v. Johnson, supra; 2 Schwartz, Administrative Law § 10.8, p. 600. See § 
16-3-114(c).

[¶15.]  When operating in the field of a 
regulated monopoly as a business choice, substantive principles of 
administrative law apply to the certificated entity. The appeal parameter of 
regulation is legal discretion of the agency, and complaints founded on equity 
cannot seriously be presented if legal standards and administrative rules are 
followed. Failure or neglect of the agency to comply afford right to legal 
redress, not equitable inquiry.

[¶16.]  Finding substantial evidence in the 
record to support the Public Service Commission's decision, and that the Public 
Service Commission had the jurisdiction to act in this matter, we uphold the 
agency determination.

[¶17.]  Affirmed.

FOOTNOTES

1 A further 
issue is raised by the PSC after initial brief was filed in this court: that the 
case may be moot because of post-hearing information that Marathon is disinclined to purchase from either party. The 
issue will not be considered because of an inadequate present record combined 
with petitioner's opposition and the possibility of a factual question now 
presented for the first time to this court.

2 "(c) To the extent 
necessary to make a decision and when presented, the reviewing court shall 
decide all relevant questions of law, interpret constitutional and statutory 
provisions, and determine the meaning or applicability of the terms of an agency 
action. In making the following determinations, the court shall review the whole 
record or those parts of it cited by a party and due account shall be taken of 
the rule of prejudicial error. The reviewing court 
shall:

"(i) Compel 
agency action unlawfully withheld or unreasonably delayed; 
and

"(ii) Hold 
unlawful and set aside agency action, findings and conclusions found to 
be:

"(A) 
Arbitrary, capricious, an abuse of discretion or otherwise not in accordance 
with law;

"(B) 
Contrary to constitutional right, power, privilege or 
immunity;

"(C) In 
excess of statutory jurisdiction, authority or limitations or lacking statutory 
right;

"(D) Without 
observance of procedure required by law; or

"(E) 
Unsupported by substantial evidence in a case reviewed on the record of an 
agency hearing provided by statute." Section 16-3-114(c), W.S. 
1977.

3"(a) No 
public utility shall begin construction of a line, plant or system, or any 
extension of a line, plant or system without having first obtained from the 
commission a certificate that the present or future public convenience and 
necessity require or will require such construction. This act shall not be 
construed to require any public utility to secure a certificate for an extension 
within any city or town within which it has lawfully commenced operation, or for 
an extension into territory contiguous to its line, plant or system for which no 
certificate is in force and is not served by a public utility of like character 
or for any extension within or to territory already served by it, necessary in 
the ordinary course of its business. If any public utility, in constructing or 
extending its line, plant or system interferes or is about to interfere with the 
operation of the line, plant or system or any other public utility already 
authorized or constructed, the commission on complaint of the public utility 
claiming to be injuriously affected, may after hearing make such order and 
prescribe the terms and conditions for the location of the lines, plants or 
system affected, as to it are just and reasonable. The power companies may, 
without the certificate, increase capacity of existing plants." (Emphasis 
added.) Section 37-2-205(a), W.S. 1977.

4 See 2 K. 
Davis, 
Administrative Law Treatise § 1.13, p. 57:

"The main 
focus of this treatise is on governmental mechanisms for fairly and effectively carrying out the 
policies adopted by the legislative body. The constant emphasis is on fairness 
and effectiveness of administrative processes and never on the supposed 
undesirability of the legislative policies." (Emphasis 
added.)

See 
also Id., Supplement § 3.15, p. 8, and cases cited on requirement that broad 
authorization demands procedural and judicial safeguards against arbitrary, 
unreasonable, or oppressive conduct of the agency.

"Control of 
discretion is not typically a judicial function, nor is there promise of any 
assured gain to be derived from superimposing the discretion of the judge upon 
that of the administrator. Rather, the problem of controlling the scope of 
administrative discretion is fundamentally political; it is for the legislature, 
primarily, to determine the breadth of discretionary power to be vested in a 
branch of the government which is comparatively free of popular control." 2 
Cooper, State Administrative Law, Ch. XIX, Scope of Review: 
Adjudication, p. 670 (1965).

5 "The 
difference between the legislative and judicial choices lies in the range of 
criteria that are available to the decisionmaker for the making of his choices." 
Christie, An Essay on Discretion, 86 Duke L.J. 747 (1986). See comprehensive 
discussion of judicial responsibility, Gerwin, The Deference Dilemma: Judicial 
Responses to the Great Legislative Power Giveaway, 14 Hastings Const.L.Q. 298 
(1987); Note, Deference to Discretion: Scalia's Impact on Judicial Review of 
Agency Action in an Era of Deregulation, 38 Hastings L.J. 1223 
(1987).

6"The 
commission shall have general and exclusive power to regulate and supervise 
every public utility within the state in accordance with the provisions of this 
act." Section 37-2-112, W.S. 1977.