Opinion ID: 2632475
Heading Depth: 2
Heading Rank: 2

Heading: Implied and incidental powers

Text: ¶ 16 Specifically, we must determine whether the legislature, in authorizing cities to operate facilities for the purpose of furnishing electricity and to handle any necessary equipment, impliedly authorized City Light to purchase greenhouse gas offsets. The test for determining the implied powers of cities was spelled out at length in Taxpayers of Tacoma, 108 Wash.2d at 693-95, 743 P.2d 793, as follows: Like other state supreme courts, we have historically taken different approaches to construing municipal powers according to whether the power exercised is governmental or proprietary in nature. When a governmental function is involved, less opportunity exists for invoking the doctrines of liberal construction and of implied powers. But when the Legislature authorizes a municipality to engage in a business, `[it] may exercise its business powers very much in the same way as a private individual.' . . . Since 1910, we have broadly construed the means a municipality may use to conduct a statutorily authorized business. We have viewed the Legislature as implicitly authorizing a municipality to make all contracts, and to engage in any undertaking necessary to make its municipal electric utility system efficient and beneficial to the public. . . . [M]unicipal utility authority has limits. In exercising its proprietary power, [a city] may not act beyond the purposes of the statutory grant of power, or contrary to express statutory or constitutional limitations. Thus, if municipal utility actions come within the purpose and object of the enabling statute and no express limitations apply, this court leaves the choice of means used in operating the utility to the discretion of municipal authorities. We limit judicial review of municipal utility choices to whether the particular contract or action was arbitrary or capricious, or unreasonable. (Citations omitted; footnotes omitted.) ¶ 17 Thus, Taxpayers of Tacoma established that a city acts within its implied powers if all of the following conditions are met: (1) the city is exercising a proprietary power, (2) the action is within the purpose and object of the enabling statute, (3) the action is not contrary to express statutory or constitutional limitations, and (4) the action is not arbitrary, capricious, or unreasonable. Id. at 693-95, 700, 743 P.2d 793; accord Hite v. Pub. Util. Dist. No. 2, 112 Wash.2d 456, 463, 772 P.2d 481 (1989).
¶ 18 The ratepayers argued that City Light's GHG offset contracts serve a general government function, not a proprietary function, and therefore are not impliedly authorized by the utility's enabling statute, RCW 35.92.050. This court has said that [t]he principal test in distinguishing governmental functions from proprietary functions is whether the act performed is for the common good of all, or whether it is for the special benefit or profit of the corporate entity. Okeson I, 150 Wash.2d at 550, 78 P.3d 1279. Here, the ratepayers argue that City Light's offset contracts provide no special benefit to the utility. Cleaning up the utility's own emissions is an inherent part of the utility's operations, and therefore serves a utility purpose, but cleaning up other parties' emissions in order to combat global warming for the betterment of everyone everywhere serves a general governmental purpose and is not for the special benefit of the utility or its ratepayers. Reply Br. of Appellants at 2. ¶ 19 Seattle responded that buying greenhouse gas offsets from a third party is the equivalent of reducing emissions from a utility's own operations. Br. of Resp't at 36. Seattle also noted that the offset contracts secure the GHG offset credit only for Seattle City Light, suggesting that such credit is a special benefit for the utility. Id. at 39. The city also cited Taxpayers of Tacoma for the proposition that all utility operations are proprietary in nature. In that case we said that [a]ctions taken pursuant to RCW 35.92.050 serve a business, proprietary function, rather than a governmental function. Taxpayers of Tacoma, 108 Wash.2d at 694, 743 P.2d 793. Similarly in Hite, 112 Wash.2d at 459, 772 P.2d 481, we said, It is clear that in the production and sale of electricity, a municipal corporation acts in its proprietary capacity. See also Okeson I, 150 Wash.2d at 550, 78 P.3d 1279 (The electric utility operates for the benefit of its customers, not the general public.). ¶ 20 Distinguishing proprietary from government functions was a key issue in Okeson I, the first phase of this case. There, we held that providing street lights is a general government function rather than a proprietary utility function because, unlike furnishing electricity, it is not for the `comfort and use' of individual utility customers who can control their own usage but instead serves the general public. Okeson I, 150 Wash.2d at 550, 78 P.3d 1279 (quoting in part Twitchell v. City of Spokane, 55 Wash. 86, 89, 104 P. 150 (1909)). We reached that conclusion although in 2002, before we issued the Okeson I decision, the legislature had amended RCW 35.92.050 to specifically authorize cities to operate streetlights as part of their rate-based electric utilities. Id. at 547, 78 P.3d 1279 (quoting Laws of 2002, ch. 102, § 1). [4] Thus, in light of Okeson I, we cannot say todayas we did in Taxpayers of Tacoma in 1987that all actions taken pursuant to RCW 35.92.050 are proprietary. Rather, an electric utility's action is proprietary only if: (a) it is part of the production and sale of electricity and (b) it is for the `comfort and use' of individual customers paying only for their own usage, not for general public use. Okeson I, 150 Wash.2d at 550, 78 P.3d 1279. ¶ 21 Applying the Okeson I standard to the current phase of the case, we conclude that City Light's GHG offset contracts are not proprietary because they are not part of the services for which individual customers are billed. Like the streetlights at issue in Okeson I, the offset contracts are charged to City Light customers regardless of how much electricity they use. In other words, there is no relationship between an individual's power use and what that individual pays through City Light rates for the GHG emission reduction program. While it is true that the program may be viewed as a legitimate part of the utility's production of electricity because its purpose is to prevent City Light's production from causing a net increase in global greenhouse gas emissions, that is not enough to make the program a proprietary function. ¶ 22 Under Okeson I, there must also be a connection between the amount paid and the benefit received by the ratepayer. The dissent contends that the requisite connection is met because City Light's ratepayers benefit specially from knowing the electricity they consume is not contributing to anthropogenic climate change. Dissent at 566. We know of no authority for the proposition that a function performed by a public utility is to be viewed as a proprietary function simply because some of the utility's ratepayers feel good about a particular function a utility is performing. We also disagree with the dissent's assertion that City Light's ratepayers benefit because the offset program allows City Light to operate more efficiently and saves the ratepayers money. Dissent at 566, 566. While, as we have indicated, there may be legitimate reasons for a government agency to encourage a worldwide reduction in greenhouse gas emissions, it is a stretch to say that City Light's distribution of money to other entities that have reduced their emissions allows City Light to produce electricity more efficiently and provide that electricity to its customers at lower rates. The record simply does not support this assertion. In sum, the contracts are of a general government nature.
¶ 23 The next part of the test for determining a utility's implied powers is whether an action is within the purpose and object of the enabling statute. Taxpayers of Tacoma, 108 Wash.2d at 695, 743 P.2d 793. A city program is impliedly authorized by RCW 35.92.050 if it bears a sufficiently close nexus to the purpose and object the Legislature intended to serve in granting the power to operate an electric utility. Id. at 696, 743 P.2d 793. We have said that the primary purpose of RCW 35.92.050 is supplying electricity to the municipal corporation and its inhabitants. Id. at 696, 743 P.2d 793. Thus, the question here is whether City Light's offset contracts bear a sufficiently close nexus to its statutory purpose, supplying electricity to its customers. ¶ 24 Here, the ratepayers argued that the required nexus is missing because global warming has only a slight and speculative impact, if any, on City Light's ability to supply electricity. They noted that the city is unable to quantify, for example, the extent to which GHG reductions at the DuPont plant in Kentucky help to preserve the Cascades snow pack, upon which the city relies for its hydropower. Seattle responded that it need not prove a precise correlation between saving one molecule of greenhouse gas and saving snowpack in the Cascades. Br. of Resp't at 38 n. 12. Rather, the city argued that because reducing its own greenhouse gas emissions is a legitimate utility purpose, it necessarily has a close nexus to the utility's mission of furnishing electricity. ¶ 25 We agree with the city that its authority for the offset contracts does not hinge on proving that a specific emission reduction somewhere on the globe translates into more snow melt flowing through the city's hydropower plants. It is not for us to evaluate the scientific merit of the city's offset contracts. Rather, the question is whether the offset contracts are closely related to the purpose of supplying electricity to City Light customers. Here, the decision in Okeson II, the second phase of this case, is instructive. ¶ 26 In that case the Court of Appeals concluded that there was an insufficient nexus between City Light's statutory purpose and its funding of certain art projects. The court essentially conflated the first two parts of the test for determining a utility's implied powers, saying that a close nexus exists when a utility exercises its proprietary power and does not exist when a utility exercises its governmental power. The court held that City Light could buy art for its own facilities, and for conservation education, because such expenses supported City Light's efficiency and therefore benefited the utility itself rather than the general public. But the court also said City Light could not buy art for public exhibitions, other city offices, or mitigation projects because such expenses were primarily designed to benefit the public as a whole. In other words, a close nexus to supplying electricity exists when the action benefits the utility and its customers, but not when it benefits the general public. ¶ 27 We agree with the Court of Appeals that the nexus prong of the implied powers test largely mirrors the proprietary prong, in that both prongs focus on whether a utility action serves the general public or the individually billed customer. [5] In this case, we have already concluded that the offset contracts do not serve the individually billed customer and therefore are not proprietary. Accordingly, we hold that the contracts also lack the required nexus to the purpose of supplying electricity because, although they are designed to clean up City Light's own emissions and therefore benefit the utility, they also are designed to benefit the public as a whole. This broader public purpose is evident in the City Council resolution that directed the utility to execute the contracts. That resolution cited the threat that global warming poses to the economic and environmental health of the world as well as to specific qualities of life for the Seattle area. CP at 560. In sum, the offset contracts are not within City Light's implied powers because they do not fall within the object and purpose of the utility enabling statute.