Opinion ID: 2548844
Heading Depth: 2
Heading Rank: 2

Heading: the need for additional infrastructure

Text: ¶ 24 Bradshaw alternatively attacks the Commission's holding that he be required to bear a proportionate share of the costs associated with additional infrastructure by arguing that Wilkinson Water's existing plant is adequate to meet the anticipated needs of his proposed subdivision. Bradshaw reasons that he can be required to contribute to the costs of additional infrastructure only if the proposed subdivision will actually force Wilkinson Water to exceed its existing capacity. ¶ 25 Bradshaw argues that the Commission erred when it found that Wilkinson Water's source and storage capacity might be inadequate to meet the anticipated demands of the proposed subdivision. Specifically, Bradshaw argues that the Commission improperly departed from the source and storage requirements promulgated by the Utah Drinking Water Board (the Drinking Water Board Standards) [4] in estimating the necessary capacity for the system. Bradshaw maintains that the Commission was bound to rely on the Drinking Water Board Standards by their terms and also because he and Wilkinson Water had so stipulated. Bradshaw also argues that the Commission's factual findings with respect to the likely need for increased capacity were not supported by substantial evidence.
¶ 26 Whether the Commission was required to rely on the Drinking Water Board Standards in determining whether Wilkinson Water's existing facilities are adequate to supply Bradshaw's proposed subdivision presents a question of law that we review for correctness. Savage Bros. v. Pub. Serv. Comm'n, 723 P.2d 1085, 1087 (Utah 1986) (Where the issue involves the interpretation of a general question of law, we apply a correction-of-error standard, with no deference to the expertise of the Commission. (internal quotation omitted)). We are unpersuaded by Bradshaw's argument that the Commission was legally bound to use the Drinking Water Board Standards to resolve the factual issues presented in this case. Neither Title 54 of the Utah Code nor the Drinking Water Board Standards themselves require that the Commission rely on the Drinking Water Board Standards in estimating the need for utility plant expansion. Thus, while the Drinking Water Board Standards may have been informative, they were not binding. ¶ 27 Title 54 vests authority in the Commission to ensure that a public utility's charges are just and reasonable. By contrast, the Drinking Water Board Standards were promulgated for the purpose of the sizing of public drinking water facilities such as sources (along with their associated treatment facilities), storage tanks, and pipelines. Utah Admin. Code R309-510-1 (2003). The Drinking Water Board Standards exist to guarantee an adequate supply of drinking water to a utility's customers. They were not intended to constrain the Commission in determining whether a utility's charges are just and reasonable under Title 54 of the Utah Code. While the Commission found them useful in estimating future demand on the Wilkinson Water system, the Commission did not err in refusing to treat them as determinative. ¶ 28 In the alternative, Bradshaw argues that the Commission was bound by the Drinking Water Board Standards because the parties so stipulated. This argument fails because the Commission cannot permit itself to be bound by stipulated standards when doing so would contravene its statutory mandate to consider the public interest. ¶ 29 Upon agreeing to reconsider Bradshaw's appeal, the Commission requested that the parties provide a list of agreed upon and disputed facts and issues. In response, Bradshaw and Wilkinson Water submitted a statement of Stipulated Facts, which contained the agreement of the parties to use the Drinking Water Board Standards in estimating the water use and capacity that would be required to serve Bradshaw's proposed subdivision. ¶ 30 At the hearing, the Commission did not limit Wilkinson Water's evidence of anticipated future requirements to the Drinking Water Board Standards and Bradshaw objected. The Commission ruled that it might have to make resolutions beyond what [the parties] have stipulated to, as far as the issues to be resolved by the Commission. ¶ 31 In its order on reconsideration, the Commission indicated that it had not limited itself to the Drinking Water Board Standards in evaluating whether Wilkinson Water could meet the anticipated demand associated with Bradshaw's development. Although the Commission considered the Drinking Water Board Standards to be useful guidelines, it held that it was not strictly bound by the Standards in evaluating whether it was just and reasonable for Bradshaw to bear a proportionate share of the costs of constructing new facilities. ¶ 32 Whether the Commission was bound by the stipulation of the parties in this case is a question of law that we review for correctness. Utah Code section 63-46b-16(4)(h)(ii) authorizes the courts to grant relief to a petitioner if an agency decision is contrary to a rule of the agency. Utah Code Ann. § 63-46b-16(4)(h)(ii) (1997). Bradshaw alleges that rule 746-100-10(F)(4) of the Utah Administrative Code required the Commission to treat the parties' stipulations as binding. He therefore concludes that the Commission's failure to strictly apply the Drinking Water Board Standards as stipulated by the parties renders the Commission's decision invalid. ¶ 33 We disagree and hold that the Commission did not err when it refused to abide by the stipulation. Ordinarily, stipulations are binding in the context of administrative proceedings. [5] Yeargin v. State Tax Comm'n, 2001 UT 11, ¶ 19, 20 P.3d 287. However, an administrative body may not apply its rules in a way that is inconsistent with statute. See McKnight v. State Land Bd., 14 Utah 2d 238, 381 P.2d 726, 730 (1963) ([T]he rules and regulations of an administrative agency must conform to rather than be contrary and inconsistent with statutory law.); cf. First of Denver Mortgage Investors v. C.N. Zundel & Assocs., 600 P.2d 521, 527 (Utah 1979) (holding that stipulations are not binding when points of law requiring judicial determination are involved). The binding effect of parties' stipulations in hearings before the Commission must be relaxed where the Commission would act unlawfully in limiting itself to the stipulations. The principle that stipulations are binding must therefore yield to the Commission's statutory mandate to consider the interests of parties outside of the proceeding, such as a utility's customers and the public interest generally. See Utah Code Ann. §§ 54-3-1, 54-4-1 (2000). ¶ 34 The Stipulated Facts in question were agreements on the amount of water that would be required by Bradshaw's subdivision and on the method by which future outdoor water requirements would be estimated. The stipulations therefore constituted a limitation on the Commission's ability to meet its statutory mandate of considering the public interest. Had the Commission limited itself to these stipulated standards, it would have ruled out any other type of evidence tending to show that Wilkinson Water likely would need to construct additional facilities to meet future demand, or evidence to the contrary. To rule out such evidence would have been to turn a blind eye to the interests of parties outside the proceeding, such as current and future customers of Wilkinson Water. ¶ 35 The stipulated standards also would have intruded on the mandate in section 54-4-18 of the Utah Code that the Commission fix adequate and serviceable standards for the measurement of quantity, quality, pressure, initial voltage or other conditions pertaining to the supply of the product, commodity or service furnished or rendered by any such public utility. Id. § 54-4-18 (2000). Had the Commission permitted the parties to dictate the standards for estimating future water demand, it would have impermissibly delegated to the parties the task of determining standards of measurement for the supply of water to the public in Morgan County. ¶ 36 Unlike traditional court proceedings, hearings before the Commission are not designed to consider only the interests of the litigating parties. The Commission must consider the interests of the utility's customers and the interests of the public. See id. §§ 54-3-1, 54-4-1; Stewart v. Pub. Serv. Comm'n, 885 P.2d 759, 776 (Utah 1994) (holding that the role of the Commission is to accommodate the interests of a utility's ratepayers and shareholders to the overall public interest); cf. Comm. of Consumer Servs. v. Pub. Serv. Comm'n, 2003 UT 29, ¶ 15, 75 P.3d 481 (holding that the Public Service Commission must review a utility's affiliate transaction for prudence, as part of the Commission's responsibility to determine that a rate increase is just and reasonable, before it may accept a stipulation leading to a rate increase). Accordingly, the Commission cannot be bound by stipulated standards in contravention of its statutory mandate to serve the public interest.
¶ 37 Bradshaw challenges the Commission's conclusion that Wilkinson Water's existing facilities may be insufficient to supply Bradshaw's proposed subdivision. We will affirm the Commission's factual findings unless they are not supported by substantial evidence when viewed in light of the whole record before the court. Utah Code Ann. § 63-46b-16(4)(g) (1999). We have interpreted this substantial evidence standard to mean that quantum and quality of relevant evidence that is adequate to convince a reasonable mind to support a conclusion. Bradley v. Payson City Corp., 2003 UT 16, ¶ 15, 70 P.3d 47 (quotation and citation omitted). ¶ 38 Before addressing Bradshaw's specific arguments, we note that his general approach to this issue is inconsistent with the fundamental premise of the Commission's ruling. Indeed, the Commission explicitly stated that its ruling in this matter did not turn on its resolution of the competing calculations of plant capacity requirements offered by the parties. ¶ 39 The administrative law judge found that Wilkinson Water's system was operating at or near capacity for both source and storage resources, measured according to Utah Division of Drinking Water [S]tandards. Based in part on this finding, he found no violation of the Wilkinson Water tariff, or of any applicable law or rule, in Wilkinson Water's requirement that Bradshaw bear some of the cost of constructing additional facilities. ¶ 40 On reconsideration, the Commission declined to render any specific factual findings regarding the adequacy of Wilkinson Water's existing infrastructure and the amount of additional infrastructure that would be required to serve Bradshaw's proposed subdivision. Rather, the Commission held that evidence regarding the adequacy of Wilkinson Water's existing plant was not dispositive. It stated: Mr. Bradshaw will be required to pay for the proportionate share of water plant costs that are reasonably attributable to provide water service to his proposed subdivision.... We recognize that utility plant development is not necessarily sized, engineered or built to provide service solely to one development. Deployment of utility plant takes into consideration the current and future uses of existing customers, potential customers that might locate in the proposed subdivision and potential customers that may locate elsewhere in the utility's service territory. As long as the overall deployment of additional water plant is reasonable in relation to the Company's reasonable operations, Mr. Bradshaw should provide for the recovery of a proportionate amount of the costs. (Emphasis added.) ¶ 41 While the Commission recognized that it would have been helpful to the parties to provide specific guidance with respect to the level of reasonable plant deployment in this particular case, it determined that the record did not provide support for any detailed instructions. Accordingly, it ruled that to the extent the parties are unable to reach mutually acceptable resolution of future issues, further proceedings may be conducted by the Commission. ¶ 42 In contrast, Bradshaw's approach to the determination of plant capacity seems to proceed from the assumption that he will not be required to pay anything beyond connection fees if he can show that anticipated demand from his subdivision will not exhaust every remaining drop of Wilkinson Water's source and storage capacity. This assumption is wrong. The Commission did not hold that Bradshaw's obligation to bear a proportionate share of construction costs was contingent upon proof that Wilkinson Water's existing source and storage capacity could not possibly absorb the demands of Bradshaw's subdivision. Rather, the Commission upheld the administrative law judge's finding that Wilkinson Water's system was operating at or near capacity and that some expansion of Wilkinson Water's facilities was reasonably necessary to meet the anticipated demand of Bradshaw's subdivision. We therefore will affirm the Commission's holding so long as we are able to find substantial evidence suggesting that the anticipated demands of Bradshaw's proposed subdivision may exceed existing plant capacity. We first discuss the dispute over storage capacity, and then the issue of source capacity. ¶ 43 The most significant dispute, measured in terms of water volume, related to the question of storage capacity is whether the Commission should have considered the storage capacity owned by the Wilkinson family as part of Wilkinson Water's storage capacity. The Wilkinson Water storage tanks have a capacity to store 400,000 gallons of water, but 146,000 gallons of that storage capacity are owned by the Wilkinson family (the family capacity). That leaves 254,000 gallons of capacity owned by Wilkinson Water. ¶ 44 In the past, the family capacity has readily been made available to the utility to meet peak demand. In such cases, the family capacity apparently has been transferred to the utility without consideration. There is, however, no agreement obligating the Wilkinson family to make its storage capacity available to the company in the future. Because Wilkinson Water owns only 254,000 gallons of capacity, and has no contractual right to use the family capacity, the Commission's use of this figure is supported by substantial evidence. [6] We therefore affirm the Commission's finding with respect to the current storage capacity available to Wilkinson Water. [7] ¶ 45 Bradshaw also challenges the fire flow storage requirement applied by the Commission, arguing that it should have found the requirement to be 60,000 gallons rather than 120,000 gallons. Mr. Wilkinson testified at the first hearing that Wilkinson Water was required to have 60,000 gallons of storage at all times for fire flow. At the hearing on reconsideration, however, the Commission heard evidence that the State Fire Marshal had increased the fire flow requirement, and that the Water Quality Board had set a standard of 120,000 gallons of storage in cases where no local fire suppression authority exists. It also heard evidence that the local fire suppression authority, the Fire Marshal for Morgan, requires a fire flow capacity of 180,000 gallons. We find that this constitutes substantial evidence supporting the Commission's determination that the required fire flow storage was at least 120,000 gallons. ¶ 46 The resulting calculations show that the anticipated additional storage capacity required by Bradshaw's development would substantially exceed the 254,000 gallon storage capacity owned by Wilkinson Water. We therefore affirm the Commission's finding that the anticipated additional storage demands associated with Bradshaw's proposed development may require the construction of additional facilities. ¶ 47 Finally, we turn to Bradshaw's argument that Wilkinson Water has sufficient source capacity to meet the anticipated needs of Bradshaw's development. As presented to the Commission, the dispute on source capacity consisted of disagreement over the percentage of land in each lot that should be considered irrigable, as well as disagreement over the sizes of the lots currently served by Wilkinson Water. ¶ 48 The Commission made no specific findings as to these factual disputes. After noting the parties' disagreement over these issues, the Commission held: Although the Commission believes that consideration of well production capacity has relevance in this matter, it does not believe that the absolute numbers resulting from the competing calculations should be directly applied in the fashion advocated by the parties. Whether the Company's wells appear to have production capacity that falls short of or exceeds the gallons per minute recommendations of the Division of Drinking Water, is not singularly dispositive of determining the conditions by which Wilkinson Water would prepare to serve possible, future customers in Mr. Bradshaw's proposed development. The Commission's refusal to resolve the competing calculations of source capacity was further based on its observation that [t]he record also reflects that calculations of water needs based upon Division of Drinking Water recommendations and assumed water consumption does not mirror actual use for individual consumers. In short, the Commission made no finding resolving the dispute over source capacity and therefore did not rely on any such finding in deciding that Bradshaw must pay for a proportionate share of expansion costs that are reasonably necessary to meet the needs of Bradshaw's proposed development. ¶ 49 Because the Commission did not rule on the question of Wilkinson Water's source capacity, it would be inappropriate for us to resolve it on appeal. The proportion of the costs of additional source capacity, if any, for which Bradshaw will be obligated is therefore left to resolution by the parties or, failing that, to resolution by the Commission in subsequent proceedings.