Source: https://law.justia.com/cases/california/supreme-court/3d/26/154.html
Timestamp: 2020-05-31 06:59:22
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Matched Legal Cases: ['§ 220', '§ 204', '§ 205', '§ 13', 'art 1', '§ 211', '§ 40', '§ 35']

County of Inyo v. Public Utilities Com. :: :: Supreme Court of California Decisions :: California Case Law :: California Law :: US Law :: Justia
Justia › US Law › Case Law › California Case Law › Cal. 3d › Volume 26 › County of Inyo v. Public Utilities Com.
(Opinion by Tobriner, J., with Bird, C. J., Mosk and Newman, JJ., and White, J., concurring. Separate concurring and dissenting opinion by Manuel, J., with Clark, J., concurring.) [26 Cal. 3d 155]
A dramatic chapter in California history lies behind the present controversy. fn. 1 The Owens Valley in Inyo County, situated in the lee of the [26 Cal. 3d 157] Sierra Nevada escarpment, receives little rain or snow. The annual snowmelt in the Sierra, however, sends numerous streams into the valley, which flowed through the Owens River into a large lake at the southern end of the valley. During the last decades of the 19th century and the early years of this century, farmers began to divert streams for irrigation, and the valley developed an agricultural economy.
The city derives authority to own and operate water systems for other communities from article XI, section 9 of the California Constitution, and section 211 (j) of the Los Angeles City Charter. The charter further directs LADWP to set water rates: "such rates shall be of uniform operation, as near as may be, and shall be fair and reasonable, taking into consideration, among other things, the nature of the use, the quantity supplied and the value of the service; provided, further, that the rates inside the city may be less, but not greater, than the rates outside the city for the same or similar uses." (L. A. City Charter, § 220(2).) [26 Cal. 3d 158] Rates, set by LADWP, must be approved by the Los Angeles City Council.
The county argues that only regulation by the PUC can prevent abuse of LADWP's monopoly position. The PUC, it observes, was established to "protect the people from the consequences of ... monopoly in the public service industries." (Sale v. Railroad Commission (1940) 15 Cal. 2d 612, 617 [104 P.2d 38].) PUC regulation of rates charged by municipally owned utilities to municipal residents is not compelled because the residents exert political control over the rates. (Cf. McDaniels v. Park-Woods Mutual Water Co. (1971) 72 Cal.P.U.C. 247.) But because "the inhabitants of the outside city ... have no voice as voters or taxpayers in the shaping of the affairs of the municipality engaged in [26 Cal. 3d 159] the business, ... to deny the power of the commission to intervene is apparently to leave these consumers ... at the mercy of the other city." (Comment (1921) 9 Cal.L.Rev. 252, 255; see City of Lamar v. Town of Wiley (1926) 80 Colo. 18 [248 P. 1009, 1010].) The county therefore urges that we uphold PUC jurisdiction to prevent municipally owned utilities from charging unfair or discriminatory rates to its nonresident customers.
The county further contends that without PUC review it lacks an adequate remedy to challenge unfair rates. [1] Although the county recognizes that it can institute suit in superior court to attack the LADWP rates (see Elliott v. City of Pacific Grove (1975) 54 Cal. App. 3d 53 [126 Cal. Rptr. 371]; People ex rel. Pub. Util. Com. v. City of Fresno (1967) 254 Cal. App. 2d 76 [62 Cal. Rptr. 79]; Durant v. City of Beverly Hills (1940) 39 Cal. App. 2d 133 [102 P.2d 759]), it urges the inadequacy of that remedy. The county does not deny that decisions discussing judicial review of rates establish that a city which acquires the water system of another community incurs an obligation to deal fairly with its customers in that community and to provide them with reasonable service at reasonable rates. (See South Pasadena v. Pasadena Land, etc. Co. (1908) 152 Cal. 579, 587-588, 594 [93 P. 490].) Such an acquiring city, as to the water dedicated to the use of the outside community, holds "title as a mere trustee, bound to apply it to the use of those beneficially interested." (Id., at p. 594; see Durant v. City of Beverly Hills, supra, 39 Cal. App. 2d 133, 138.) Consequently, the county can sue to enjoin rates which are themselves "unreasonable, unfair, or fraudulently or arbitrarily established" (Durant v. City of Beverly Hills, supra, 39 Cal. App. 2d 133, 139), or which discriminate without a reasonable and proper basis (Elliott v. City of Pacific Grove, supra, 54 Cal. App. 3d 53, 59). fn. 4
Judicial review of rates, however, does not provide protection comparable to PUC proceedings. The PUC maintains an expert, independent staff to investigate rate requests; it renders an independent decision on each record that it examines. A court, in contrast, must limit its review to the rates established by the involved utility and must depend upon [26 Cal. 3d 160] the expert testimony presented by the parties. (See Sale v. Railroad Commission, supra, 15 Cal. 2d 612, 617-618.) Thus while judicial review can protect consumers against plainly unfair rates, that remedy does not offer an opportunity for the detailed analysis and careful structuring of rates possible in a PUC proceeding.
The controlling constitutional provisions, article XII, sections 3 and 5, represent a revision without substantive change of the original 1911 and 1914 amendments. Those amendments had permitted the Legislature to extend the authority of the Railroad Commission to water companies and other public utilities. fn. 5 Section 3 states in part that "Private corporations and persons that own, operate, control, or manage a line, plant, or system for the ... furnishing of ... water ... to or for the public, and common carriers, are public utilities subject to control by the Legislature. The Legislature may prescribe that additional classes of private corporations or other persons are public utilities." (Italics added.) Section 5 grants the Legislature further authority: "plenary power, unlimited by the other provisions of this constitution but consistent with this article, to confer additional authority and jurisdiction upon the commission." [2a] The county relies primarily upon its contention that a municipal utility, when selling to customers beyond the municipal boundaries, constitutes a "private corporation or person" within the meaning of section 3. [26 Cal. 3d 161]
Based upon this language, the county argues that LADWP, in supplying water to Inyo County and its residents, acts in a private, proprietary capacity. The county therefore contends that the 1911 and 1914 constitutional amendments authorizing Railroad Commission jurisdiction over "private corporations and persons" encompasses jurisdiction over such sales by LADWP. Putting the argument differently, the county maintains that the supplied city (South Pasadena in the cited case) possessed, prior to 1911, the power to regulate the rates charged by the supplying city, and that the 1911 and 1914 amendments transferred that power to the Railroad Commission. fn. 6 [26 Cal. 3d 162]
The county contends that City of Pasadena was wrongly decided and should be overruled. It argues that the term "private corporations and persons" in the 1911 amendment confers jurisdiction upon the Railroad Commission over municipally owned utilities to the extent that such utilities were selling beyond municipal limits. The county, however, can point to no language in the constitutional amendments, the ballot arguments presented for or against those amendments, or the legislation enacted pursuant to those amendments which distinguishes a municipally owned utility operating within city limits from that operating outside [26 Cal. 3d 163] such limits. fn. 7 Since the county concedes -- as it must, in view of the history of the 1911 and 1914 amendments and the ballot arguments presented in their behalf -- that the amendments do not encompass municipally owned utilities selling within city limits, its failure to find a basis for the distinction in the constitutional language fatally flaws its argument. fn. 8
The county also asserts that City of Pasadena v. Railroad Commission, supra, 183 Cal. 526, was discredited by our decision in Los Angeles Met. Transit Authority v. Public Util. Com. (1963) 59 Cal. 2d 863 [31 Cal. Rptr. 463]. In the latter case, we upheld the constitutionality of a specific statute granting the PUC authority over safety standards of the Metropolitan Transit Authority. Noting that section 23 authorized PUC authority over "every private corporation ... and every common carrier," we held the section encompassed all common carriers, including those owned by a municipal government. Our opinion expressly disapproved "statements in City of Pasadena to the effect that the Legislature is prohibited by the California Constitution from conferring regulatory jurisdiction over municipally owned public utilities." (59 Cal.2d at p. 870.) But Los Angeles Met. Transit Authority relies upon, and emphasizes, the explicit language that confers jurisdiction over "every common carrier" and does not involve itself in the question whether the term "private corporations and persons" in section 3 includes a municipally owned utility. The conclusion of City of Pasadena that the language of section 3 does not include such a utility is therefore not affected by the Transit Authority case.
Although we conclude that section 3 of article XII would not authorize legislation conferring PUC jurisdiction over a municipally owned water company selling beyond municipal boundaries, we note that the county persuasively points out that such legislation could be enacted under section 5 of that article. That section, we noted earlier, grants the [26 Cal. 3d 164] Legislature "plenary power, unlimited by the other provisions of this constitution but consistent with this article, to confer additional authority and jurisdiction upon the commission."
Our final task must then be to determine whether the Legislature has enacted a statute conferring jurisdiction over municipally owned water systems selling to outside customers. Review of the pertinent legislation reveals no statute that expressly provides for such jurisdiction. We do find statutory references to municipal corporations as purchasers of water but absolutely no references to such corporations as suppliers of [26 Cal. 3d 165] water. The omission of any reference to municipal corporations as suppliers of water can hardly serve as the basis for inferring legislative intent that such corporations be the subject of PUC regulation. As we shall explain, we have concluded that the Legislature has not exercised its constitutional authority to grant the PUC jurisdiction over municipally owned water companies supplying outside customers.
Nor do the earlier sections that define terms appearing in section 2701 so much as refer to a municipal utility. Section 240 defines "water system" as all facilities used for the storage, distribution, and sale of water. Section 241 states that "water corporation" includes "every corporation or person owning, controlling, operating or managing any water system for compensation ...." fn. 11 The term "corporation" includes "a company, an association, and a joint stock association" (Pub. Util. Code, § 204); "person" includes "an individual, a firm, and a copartnership" (Pub. Util. Code, § 205). None of these sections mention municipal corporations. In contrast, section 207 dealing with recipients of utility service, defines the term "public, or any portion thereof" to include "a person, private corporation, municipality, or other political subdivision." [26 Cal. 3d 166]
[3] Established doctrine declares that, "In the absence of legislation otherwise providing, the Commission's jurisdiction to regulate public utilities extends only to the regulation of privately owned utilities." (Los Angeles Met. Transit Authority v. Public Utilities Com. (1959) 52 Cal. 2d 655, 661 [343 P.2d 913].) [2b] The Court of Appeal noted the same principle in People ex rel. Pub. Util. Com. v. City of Fresno, supra, 254 Cal. App. 2d 76, 81. We reiterated in Orange County Air Pollution Control Dist. v. Public Util. Com. (1971) 4 Cal. 3d 945, 953 at footnote 7 [95 Cal. Rptr. 17, 484 P.2d 1361], that "The commission has no jurisdiction over municipally owned utilities unless expressly provided by statute." Significantly, when the Legislature first granted the PUC regulatory authority over the Los Angeles Metropolitan Transit Authority, it enacted such a specific statute (Stats. 1951, ch. 1668, p. 3804), and observed that in so doing it "has made exceptions to a long established policy. ..." (Stats. 1951, ch. 1668, § 13.4.) No comparable enactment grants the PUC jurisdiction in the case at bar.
From the foregoing review of the relevant statutes, it is plain -- and the county concedes -- that the Legislature has not granted the PUC jurisdiction [26 Cal. 3d 167] over rates charged by municipally owned utilities to municipal residents. Although the county seeks to distinguish regulation of rates charged nonresidents from those charged residents, we can find nothing in the statutes or the cases interpreting them which supports that distinction. However compelling the policy arguments in favor of such a distinction, we must reluctantly conclude that the Legislature has not as yet accepted that distinction as a basis for legislation extending the jurisdiction of the PUC.
Bird, C. J., Mosk, J., Newman, J., and White, J., concurred. [26 Cal. 3d 168]
I concur in the judgment affirming the commission's order dismissing the complaint for want of jurisdiction. I do not agree, however, that article XII, section 5 of our Constitution grants the Legislature the power to confer on the commission jurisdiction to regulate municipally owned water companies. The express terms of that section establish that the Legislature's power "to confer additional authority and jurisdiction" must be exercised in a manner "consistent with this article" -- i.e., article XII. In my view a municipally owned water company, being neither a "private corporation or person" nor a "common carrier" within the meaning of section 3 of that article, may not be made subject to commission jurisdiction under the present provisions of our Constitution. (See City of Pasadena v. Railroad Commission (1920) 183 Cal. 526, 532-536 [192 P. 25, 10 A.L.R. 1425]; cf. Los Angeles Met. Transit Authority v. Pub. Util. Com. (1963) 59 Cal. 2d 863 [31 Cal. Rptr. 463, 382 P.2d 583].)
FN 1. The historical discussion in this opinion is based upon Nadeau, The Water Seekers (1974) part 1, and Smith (edit.), Deepest Valley (rev. ed. 1978) pages 188-227.
FN 2. Los Angeles City Ordinance No. 150,787. Nonresidents outside of Inyo and Mono Counties, however, are charged at 1.5 times the rates charged city residents. (L. A. Ord. No. 150,359.)
FN 3. Division 1 of the Public Utilities Code provides for regulation of public utilities; division 2 provides for regulation of related businesses such as highway carriers, household goods carriers, and charter carriers.
FN 4. A showing that rates are discriminatory is in itself insufficient to fulfill the complainant's burden of proof (see Durant v. City of Beverly Hills, supra, 39 Cal. App. 2d 133, 138); a showing, however, that such discrimination rests solely on the nonresident status of the customer, and not on the cost of service or some other reasonable basis, will prove the rate invalid (see Elliott v. City of Pacific Grove, supra, 54 Cal. App. 3d 53, 59).
FN 5. 1911 constitutional amendments modified article XII, section 23 to permit the Legislature to grant the Railroad Commission, whose jurisdiction had previously been limited to transportation companies, jurisdiction over many other forms of public utilities including water companies. The amendments also modified section 22 to restate the powers of the Railroad Commission and authorized the Legislature to grant it additional powers.
FN 6. The court in City of Pasadena v. Railroad Commission (1920) 183 Cal. 526, 535 [192 P. 25, 10 A.L.R. 1425], stated that "by reason of the recent amendment of section 19, article XI [authorizing cities to provide services to nonresidents], in the few cases where one city operates a municipal plant for a public service which extends into another city, there may be some doubt which one of the the two cities shall have the right to fix the rates for such outside service. The terms of the amendment are not clear on the question." Our review of the amendment indicates that, rather than being ambiguous on the subject, it does not deal with the issue at all, and thus leaves in effect the prior law, as stated in South Pasadena, that the city where the customers reside has priority in establishing rates for service.
FN 7. Even the language from South Pasadena v. Pasadena Land etc. Co., supra, 152 Cal. 579, on which the county relies, fails to draw this distinction. It states that "[i]n administering ... a water system, even within its own limits, a city [acts] in a proprietary and only quasi-public capacity." (152 Cal. at p. 593.) Such language offers no basis for treating a municipally owned utility as a "private corporation or person" only when it sells to outside customers.
FN 8. The county argues that the term "person" can be construed to include a municipal corporation (see City of Los Angeles v. City of San Fernando (1975) 14 Cal. 3d 199, 277 [123 Cal. Rptr. 1, 537 P.2d 1250]), but does not explain how it can reasonably be construed to include a municipal corporation only to the extent that such corporation is selling to nonresidents.
FN 9. City of Pasadena's assertion that a municipally owned utility is not a "public utility" within the meaning of article XII (see 183 Cal. at pp. 530-532), although not expressly disapproved by Los Angeles Met. Transit Authority v. Public Util. Com., supra, 59 Cal. 2d 863, is clearly inconsistent with the holding in the Transit Authority case sustaining PUC jurisdiction over a municipally owned common carrier.
FN 10. Language in City of Pasadena v. Railroad Commission, supra, 183 Cal. 526, contrary to the reasoning of this opinion is disapproved.
FN 11. The county notes that in Los Angeles Met. Transit Authority v. Public Util. Com., supra, 59 Cal. 2d 863, the court relied on the statutory definition of "common carrier" as including "every corporation or person engaged ... in the ownership, control, operation, or management of any passenger stage ...." (59 Cal.2d at p. 868, quoting from Pub. Util. Code, §§ 211, 226.) We held that a publicly owned carrier was still a common carrier within the quoted definition. (59 Cal.2d at p. 869.) The county suggests on similar reasoning that a municipal corporation operating a water system, should be considered a "water corporation" under section 241. The argument is plausible, but offers no basis for distinguishing between sales of that corporation to customers within city limits and sales to outside customers.
FN 12. In similar fashion, sections 11501 to 14509 regulate municipal utility districts. Section 12804 authorizes sales to customers outside the district limits, but no section provides for PUC regulation of such sales.
FN 13. The county relies upon Colorado decisions, in particular City of Lamar v. Town of Wiley, supra, 248 P. 1009, which permit the Colorado Public Utilities Commission to regulate rates charged by municipal utilities to nonresident customers. The structure of Colorado constitutional and statutory law on this subject, however, is quite different from ours. Under Colorado statutes, public utilities subject to regulation include municipal utilities. (See Colo. Rev. Stats., § 40-3-103.) Their public utilities commission, however, is forbidden to interfere with the performance of a "municipal function" by the state Constitution (Colo. Const., art. V, § 35), which courts have construed to bar commission regulation of rates charged by a municipal utility to city residents. (See Town of Holyoke v. Smith (1924) 75 Colo. 286 [226 P. 158].) California statutes, on the other hand, fail to grant our PUC any authority over municipal utilities other than common carriers; thus the PUC lacks jurisdiction over sales to nonresidents whether or not such sales are considered a municipal function.