Opinion ID: 2307095
Heading Depth: 1
Heading Rank: 1

Heading: The Power of The Board of Public Utility Commissioners to Override the Refusal of a Municipality to Grant a Franchise to a Water Company

Text: This first question derives from the basis upon which the Board and the Appellate Division approached and decided the case, i.e., that the creation of the Authority had no superseding or special effect because this occurred after South Lakewood had applied to the Township for a franchise to operate in the area involved. The solution of the question depends upon the meaning and effect of pertinent provisions of the public utilities law relating to water companies as it originally existed and after amendments in 1962 and 1966. The Board and South Lakewood contend that these provisions empower the Board to award the franchise despite the Township's refusal. (Consideration of the provisions is also involved in the second question concerning the effect of the creation of the Authority.) The statutory sections in question must be viewed in the light of some broad underlying precepts. It has long been established that a public utility may not operate without a franchise granting such a right. This was true even before public utilities were made subject to regulation by a governmental agency. Generally speaking, a franchise is a privilege of a public nature conferred by government on an individual or corporation to do that which does not belong to the citizens of the country generally by common right. In the case of public utilities, it means permission to operate a business, peculiarly of a public nature and generally monopolistic. (We use franchise throughout in this sense.) The power to grant the right is an inherent incident of sovereignty and resides in the legislature. A grant of a franchise is a legislative act. The legislature may delegate the power, and very frequently does, to affected municipalities. See generally, 36 Am. Jur. 2 d, Franchises, §§ 1-13, pp. 722-736; 43 Am. Jur., Public Utilities and Services, § 16, p. 581; Rhyne, Municipal Law, § 24-3, p. 508 (1957). In New Jersey, until 1875 public utilities of all kinds generally were granted franchises at the state level by special legislative charter. In that year a constitutional amendment forbade the passage of private, special or local laws granting to any corporation, association or individual any exclusive privilege, immunity or franchise. (The provision is currently found in N.J. Const. (1947), Art. IV, § 7, par. 9(8).) Since then, separate general statutes have been passed from time to time particularly dealing with the incorporation and functioning of various kinds of utilities ( e.g., gas companies, L. 1876, c. 192, p. 309, Rev. 1877, p. 460; water companies, L. 1876, c. 193, p. 318, Rev. 1877, p. 1365; electric light, heat and power companies, L. 1896, c. 189, p. 322; sewerage companies, L. 1898, c. 210, p. 484). Other statutes of more recent vintage have dealt with certain transportation utilities such as autobusses, jitneys, street railways and taxicabs. All were first brought together under one heading by the Revised Statutes of 1937, Title 48, Public Utilities. They all proceed upon the express or implied view that a franchise to operate is required and that it is to be granted by action of the affected municipality, thus evidencing a legislative policy of delegation of that legislative function to the local entity directly concerned with the overall government of the area involved. The various provisions with respect thereto in the original statutes were by no means uniform; the 1937 revision and subsequent amendments have done substantially nothing to make them so; the terminology used is frequently confusing; and they remain a hodge-podge much in need of clarification, cohesion and uniformity. We need be concerned, however, only with the particular provisions contained in the chapter of the utilities law relating to water companies. Superimposed upon these varied particular provisions as to each kind of utility, and in line with the thesis that the Legislature intended to delegate the granting of franchises to affected local governmental units, is the broad requirement of Board approval of granted franchises (as well as other privileges granted municipally), contained in the general utilities law which created the present Board, L. 1911, c. 195, p. 374, now N.J.S.A. 48:2-14, which reads as follows: No privilege or franchise granted after May first, one thousand nine hundred and eleven, to any public utility by a political subdivision of this state shall be valid until approved by the board. Such approval shall be given when, after hearing, the board determines that the privilege or franchise is necessary and proper for the public convenience and properly conserves the public interests. In granting its approval the board may impose such conditions as to construction, equipment, maintenance, service or operation as the public convenience and interests may reasonably require.