Court Opinion

ID: 4250031
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:22:44.27374+00
Date Added: 2024-06-11T14:44:12.206776
License: Public Domain

IN THE SUPREME COURT OF IOWA
                             No. 17 / 07–0558

                            Filed May 30, 2008

CITY OF CORALVILLE, IOWA,

      Appellant,

vs.

IOWA UTILITIES BOARD
(DEPARTMENT OF COMMERCE),

      Appellee,

MIDAMERICAN ENERGY COMPANY, and
CONSUMER ADVOCATE DIVISION OF
THE DEPARTMENT OF JUSTICE,

      Appellees.

      Appeal from the Iowa District Court for Polk County, Robert B.

Hanson, Judge.

      A city challenges an Iowa Utilities Board ruling affirming a public

utility’s right under a tariff to include the costs of relocating power lines

in the price charged to its customers for electricity. AFFIRMED.

      Ivan T. Webber, Ahlers & Cooney, P.C., Des Moines, for appellant.

      David J. Lynch, General Counsel, and Gary Stump, Assistant

General Counsel, for appellee Iowa Utilities Board.

      Sheila K. Tipton of Belin Lamson McCormick Zumbach Flynn, P.C.,

Des Moines, for interested party-appellee MidAmerican Energy Company.

      John R. Perkins and Ben A. Stead, Office of Consumer Advocate,

for interested party-appellee Office of Consumer Advocate.
                                         2

HECHT, Justice.

          In this case we examine the limits of a municipality’s home rule

authority to control its right-of-way. On review of a decision of the Iowa

Utilities Board, we conclude a tariff filed by a public utility does not

conflict with an ordinance adopted by the City of Coralville so as to

constitute a violation of the City’s home rule authority. We affirm.

          I.        Factual and Procedural Background.
          A controversy between MidAmerican Energy Company and the City

of Coralville arose in January 2000, when the City notified MidAmerican

of a plan to widen 1st Avenue in Coralville. The plan necessitated the

relocation of MidAmerican’s overhead power lines.                   MidAmerican

determined the lines should be placed underground, and claimed a tariff

it had filed with the Iowa Utilities Board (IUB) permitted the company to

charge the costs of “undergrounding” to the City. In City of Coralville v.

MidAmerican Energy Co., Johnson Co. No. LACV61728 (Coralville I), the

district court determined that although the tariff addressed the

imposition of the costs of “undergrounding” on customers requesting a

change of service, the City was not acting as a customer when it passed

its undergrounding ordinance and undertook the road-widening project.
The court concluded the City acted instead in its role as the owner of the

right-of-way, and had authority, incident to its police power, to order the

utility        to   move   wires   underground   “at   the   utility’s   expense.”

MidAmerican did not appeal the judgment in Coralville I.

          In 2005, the City of Coralville determined the overhead power lines

in a different location along Quarry Road and 7th Street should be placed

underground to facilitate another public project. The City, relying on its

ordinance requiring utilities to relocate at their expense equipment

located in the City’s right-of-way, directed MidAmerican to place its
                                           3

power lines at that location underground and refused MidAmerican’s

request for reimbursement of the cost. MidAmerican acquiesced to the

City’s undergrounding directive, but informed the City it reserved the

right to recover from its customers in the City of Coralville the costs of

relocating the wires in accordance with a tariff on file with the IUB.

        The relevant tariff became effective in 2003. It provides, in relevant

part:
        Conversion of existing overhead facilities to underground or
        relocation of facilities will be allowed unless an engineering,
        operating, construction, safety or legal reason would make
        such installation inadvisable.

        The customer(s) requesting the conversion or relocation
        must pay a contribution. . . .

        If conversion is required by a governmental unit, the
        conversion cost will be charged to the governmental unit or
        to the Company’s customers in the governmental unit.1
        The City filed a petition in the district court seeking a declaration

that the tariff was inapplicable and enjoining MidAmerican from

assessing the tariff against Coralville residents.2 While that action was

pending in the district court, MidAmerican filed a petition before the IUB

seeking a declaration that the IUB had exclusive jurisdiction over the

rates and tariffs charged by public utility companies, and requesting a

determination that the City could not, through its ordinance, prevent the

company from charging its customers for the costs of relocating its

equipment.       The City intervened in the proceeding before the IUB,

contending (1) the preclusive effect of the district court’s decision in

        1Thetariff relied upon by MidAmerican in Coralville I included identical language
permitting the conversion costs to be “charged to the governmental unit or to the
Company’s customers in the governmental unit.”

        2The district court’s decision addressing the declaratory judgment action is the
subject of our opinion filed today in City of Coralville v. MidAmerican Energy, No. 06–
1420, 2008 WL 2222234.
                                       4

Coralville I barred MidAmerican’s plan to pass through the costs of

undergrounding     to   its   Coralville   customers,    (2)   the   IUB   lacked

jurisdiction “over a dispute that is not about rates and services but about

use of [the City’s] right of way,” (3) the tariff violated the City’s home rule

authority to control its right-of-way, and (4) the tariff violated provisions

of the Iowa Constitution requiring uniform application of the state’s laws.
      The IUB issued a declaratory order rejecting the City’s preclusion

argument on the ground the issue before the agency was different than

the one addressed by the court in Coralville I.         The board’s order also

rejected the City’s claim that the utility’s plan to charge the costs of the

undergrounding to the City’s residents would violate the City’s home rule

authority to control the right-of-way. The board further concluded the

interpretation of the ordinance advanced by the City would infringe on

the board’s “jurisdiction related to utility tariffs, cost recovery, and cost

allocation,” reasoning if the City’s position were to prevail, “[c]ities across

Iowa could impose all manner and types of costs on utilities, regardless

of reason, and force ratepayers in other areas to pay the bill.”

      The City sought judicial review of the IUB’s declaratory order,

contesting the IUB’s jurisdiction to limit a municipality’s control of its

right-of-way and challenging the validity and constitutionality of the

tariff. The district court affirmed the board’s exercise of jurisdiction and

the validity of the tariff.      The court also rejected the City’s issue

preclusion claim, and denied the City’s constitutional challenge.

      II.    Scope of Review.

      On appeal from judgment entered on judicial review of agency

action, we review for errors at law.        Gaffney v. Dep’t of Employment

Servs., 540 N.W.2d 430, 433 (Iowa 1995).          Where interpretation of a

statute has clearly been vested in the agency’s discretion, we generally
                                      5

defer to the agency’s interpretation, and may grant relief only if the

agency’s interpretation is “irrational, illogical, or wholly unjustifiable.”

Iowa Code § 17A.19(10)(l) (2005). If interpretation of the statute has not

clearly been vested in the agency’s discretion, we afford no deference to

the agency’s interpretation, and may substitute our own judgment for

that of the agency.       Id. § 17A.19(10)(c), (11)(b); Auen v. Alcoholic

Beverages Div. of the Iowa Dep’t of Commerce, 679 N.W.2d 586, 589–90
(Iowa 2004). Interpretation of a statute has been clearly vested in the

agency’s discretion where
      the precise language of the statute, its context, the purpose
      of the statute, and the practical considerations involved
      [indicate] that the legislature intended (or would have
      intended had it thought about the question) to delegate to
      the agency interpretive power with the binding force of law
      over the elaboration of the provision in question.
Arthur E. Bonfield, Amendments to Iowa Administrative Procedure Act,

Report on Selected Provisions to Iowa State Bar Association and Iowa
State Government 68 (1998).

      The issue before the IUB involved the intersection between Iowa

Code section 476.1, which grants to the IUB authority to regulate public

utility rates and services, and section 364.2(4)(e), which grants to cities

the power to regulate the use of their streets and public grounds.

Consequently, the agency’s resolution of this matter necessitated an

interpretation of the intended scope of these provisions.       The IUB has

been granted “broad general powers to effect the purposes” of chapter

476, which includes the authority to regulate public utility rates.        Id.

§ 476.2(1).   The agency has clearly been vested with authority to

interpret the “rates and services” provision of section 476.1, and we may

therefore overturn its interpretation only if it is “irrational, illogical, or

wholly unjustifiable.” Id. § 17A.19(10)(l). The agency has not, however,
                                          6

been vested with authority to interpret chapter 364, and we therefore

review     its    interpretation   of   section   364.2(4)(e)   de   novo.   Id.

§ 17A.19(10)(c); Birchansky Real Estate, L.C. v. Iowa Dep’t of Pub. Health,

State Health Facilities Council, 737 N.W.2d 134, 138 (Iowa 2007).

      We review de novo constitutional challenges to a statute. Wright v.

Iowa Dep’t of Corr., 747 N.W.2d 213, 216 (Iowa 2008).

      III.       Discussion.
      A.         Issue Preclusion. The City contends the district court erred

in concluding the holding in Coralville I did not preclude a finding in this

case that MidAmerican could charge the cost of undergrounding to its

Coralville customers.          We identified the four elements of an issue

preclusion claim in Hunter v. City of Des Moines, 300 N.W.2d 121 (Iowa

1981):

      (1) the issue concluded must be identical; (2) the issue must
      have been raised and litigated in the prior action; (3) the
      issue must have been material and relevant to the
      disposition of the prior action; and (4) the determination
      made of the issue in the prior action must have been
      necessary and essential to the resulting judgment.
300 N.W.2d at 123 (citation omitted). The City’s issue preclusion claim

fails to satisfy these elements.
      The City claims the issue of who must pay for the undergrounding

was raised and decided in Coralville I, and that the issue raised in this

case is identical.       This claim relies primarily on the district court’s

statement in Coralville I that “[t]he central question in the case is

whether the City of Coralville has authority to order a utility to move

overhead utility service and place it underground at the utility’s expense.”

(Emphasis added.) A careful reading of the court’s decision in Coralville

I, however, discloses the court was not asked to decide, and did not

decide, whether MidAmerican could pass the costs of undergrounding
                                      7

through to its Coralville customers.      In fact, MidAmerican’s effort to

recover the costs of undergrounding from its Coralville customers was

not undertaken until after the district court determined in Coralville I

that the City, as a governmental unit, should not bear the costs of the

undergrounding.        We conclude the district court’s determination in

Coralville I that undergrounding be undertaken “at the utility’s expense”

must be read in its proper context: viz., as between the City and the
utility, which party should bear the cost of the relocation of the utility’s

wires.        The court was not called upon to decide whether, should

MidAmerican rather than the City be required to bear the cost, the utility

could pass that cost through to its Coralville customers under the

prevailing tariff. Thus, the issue in Coralville I was clearly not identical

to the issue decided in this case by the IUB. We therefore agree with the

district court on this issue.

         B.     Authority of the IUB to Issue a Tariff Permitting a Utility

to Recover Costs Incurred for the Relocation of Equipment. The City

contends the tariff exceeded the IUB’s authority. In particular, the City

asserts the tariff regulates and infringes illegally upon the City’s right to

control its right-of-way.        See Iowa Code § 364.2(4)(e) (granting
municipalities the right to “regulate the conditions required and the

manner of use of the streets and public grounds of the city”). The tariff

regulation goes far afield, the City contends, from the IUB’s legitimate

authority to regulate the “rates and charges for public utility service.” Id.

§ 476.1. We disagree. Coralville’s argument is precariously based on a

perceived conflict between the City’s and the IUB’s authority to control

the City’s right-of-way.      We now address the question whether the

conflict perceived by the City is real or imagined.
                                     8

      The City has exercised its right to regulate the “conditions

required” of its streets by enacting an ordinance, section 141.28, which

provides:

      Upon written notification by the City, the registrant shall
      promptly and at its own expense remove and replace,
      relocate or otherwise adjust its equipment located in the
      right-of-way and restore the right-of-way to the same
      condition it was in prior to said removal or relocation.

(Emphasis added.) The requirement that public utilities relocate at the

City’s request equipment situated in the right-of-way can be reasonably

understood as a regulation of the “conditions required” of the right-of-

way. The types of equipment permitted and their location in the right-of-

way are essential features of the City’s statutory authority to control the

condition of the right-of-way.   In contrast, the italicized phrase “at its

own expense” within the ordinance relates only to the means by which a

utility elects to generate the funds required to pay for a relocation of its

equipment. The manner in which a public utility chooses to allocate or

recover such costs bears no factual or legal relationship to the City’s

exercise of control over its right-of-way.     We therefore conclude the

conflict perceived by the City between its ordinance and the tariff is

nonexistent. The absence of an actual conflict between the tariff and the

City’s authority to control its right-of-way dooms the claim that the IUB’s

decision contravenes the City’s home rule authority.

      An ordinance is within a municipality’s home rule authority only if

it is not inconsistent with a state statute.   Iowa Const. art. III, § 38A

(stating a city may exercise its home rule authority only to the extent

that its actions are “not inconsistent with the laws of the general

assembly”); Iowa Code § 364.1 (same).          “A municipal ordinance is

‘inconsistent’ with a law of the General Assembly and, therefore,
                                     9

preempted by it, when the ordinance prohibits an act permitted by a

statute, or permits an act prohibited by a statute.”       Sioux City Police

Officers’ Ass’n v. City of Sioux City, 495 N.W.2d 687, 694 (Iowa 1993)

(citations omitted).   Prior to 1963, the Iowa Code authorized cities to

regulate utility rates.   Davenport Water Co. v. Iowa State Commerce

Comm’n, 190 N.W.2d 583, 590 (Iowa 1971) (superseded on other grounds

by statute as stated in Interstate Power Co. v. Iowa State Commerce
Comm’n, 463 N.W.2d 699, 702 (Iowa 1990)). That power is now vested

exclusively in the IUB under chapter 476. Id. Iowa Code section 476.1

provides the IUB “shall regulate the rates and services of public utilities.”

With the creation of the IUB, and the vesting of authority in that agency

to regulate public utility rates, municipalities lost their authority to

regulate such rates. Davenport Water Co., 190 N.W.2d at 590; see Sioux

City Police Officers’ Ass’n, 495 N.W.2d at 694 (noting the legislature may

impose limitations on municipalities’ power over local affairs). The City’s

interpretation of the cost-allocation provision in section 141.28, if

accepted, would have the effect of prohibiting MidAmerican from

reflecting its costs of doing business through the appropriate adjustment

of rates charged to its customers under a valid tariff. That interpretation
of the ordinance cannot be reconciled with the legislature’s abrogation of

municipal authority over public utility rates and the statutory grant of

broad authority to the IUB to “regulate the rates and services of public

utilities.” Sioux City Police Officers’ Ass’n, 495 N.W.2d at 694 (stating

that “[i]f a statute and ordinance cannot be reconciled, the statute

prevails”). We find no error in the board’s rejection of the City’s home

rule argument.

      The City also challenges the IUB’s affirmation of the validity of the

tariff, contending no rule or contested case specifically authorizes
                                       10

utilities to recover from their customers costs incurred in equipment

relocation. Iowa Code section 476.4 requires a public utility to file tariffs

with the IUB “showing the rates and charges for its public utility

services,” and requires the IUB to promulgate rules for the filing of

tariffs. Based on this rulemaking authority, the IUB requires that “rates

charged by an electric utility for providing electric service to each class of

electric   consumers    shall    be   designed,   to   the   maximum   extent
practicable, to reasonably reflect the costs of providing electric service to

the class.” Iowa Admin. Code r. 199—20.10(2). These authorities amply

support the board’s issuance of the subject tariff.             The cost of

municipally mandated undergrounding is clearly a cost of providing

service to MidAmerican’s customers, and may be reflected in the rates

charged by MidAmerican. The tariff constituted a valid exercise of the

broad authority vested in the IUB.

      C.     Constitutional Claims. Finally, the City contends the tariff

regime under chapter 476 violates the uniformity requirements of

article I, section 6 and article III, section 30 of the Iowa Constitution.

Article I, section 6 provides:

      All laws of a general nature shall have a uniform operation;
      the General Assembly shall not grant to any citizen, or class
      of citizens, privileges or immunities, which, upon the same
      terms shall not equally belong to all citizens.

Article III, section 30 contains a similar requirement that all laws be

general and operate uniformly throughout the state. Iowa Const. art. III,

§ 30 (requiring that “where a general law can be made applicable, all laws

shall be general, and of uniform operation throughout the state”). We

have generally viewed these provisions of the Iowa Constitution as being

similar in scope, import, and purpose to the equal protection provision of

the Fourteenth Amendment to the federal Constitution. See Dickinson v.
                                          11

Porter, 240 Iowa 393, 400, 35 N.W.2d 66, 71–72 (1949). But see Racing

Ass’n of Cent. Iowa v. Fitzgerald, 675 N.W.2d 1, 4–5 (Iowa 2004) (noting

that we may, in an appropriate case, adopt a different analytical

framework under the state constitution).                 While we maintain our

authority to adopt our own equal protection analysis under the Iowa

Constitution, we see no basis for doing so in this case.3
       We review the City’s constitutional challenge to this economic

legislation under the rational basis standard.              State v. Simmons, 714
N.W.2d 264, 277 (Iowa 2006).            Under this standard we will sustain a

legislative classification if it is rationally related to a legitimate state

interest. Id.

       The City asserts the tariff system violates the Iowa uniformity

clauses in two ways. First, the City contends that because MidAmerican

is not the only public utility servicing Coralville, the Coralville residents

who are not serviced by MidAmerican will receive the benefit of the

undergrounding without bearing its costs. Assuming this to be true, we

nonetheless find no violation of equal protection.

       The Iowa Constitution “requires ‘uniform operation throughout the

State’, not uniformity of consequences resulting from such operation.”

Cook v. Dewey, 233 Iowa 516, 519, 10 N.W.2d 8, 10 (1943). The City’s

uniformity clause claim is in substance a misplaced argument for

       3
        The City urges us in this case to adopt an equal protection analysis different
from the one routinely followed under the federal Equal Protection Clause. See Racing
Ass’n of Cent. Iowa, 675 N.W.2d at 5. Specifically, the City urges that the uniformity
provisions in the Iowa Constitution require that all Iowa laws be geographically uniform,
applying to all parts of the state. The City does not explain how its proposed
“geographic uniformity” standard differs from the equal protection analysis undertaken
in our previous decisions in which we discussed the Iowa uniformity clauses. See Cook
v. Dewey, 233 Iowa 516, 519, 10 N.W.2d 8, 10 (1943) (noting the Iowa Constitution
“requires ‘uniform operation throughout the State’, not uniformity of consequences
resulting from such operation”). We therefore decline in this case to depart from our
long-standing uniformity clause jurisprudence.
                                     12

uniformity of consequences rather than uniformity of operation. Chapter

476 and the regulations implementing it provide a uniform system for

filing and approval of tariffs setting rates based on costs of the individual

public utility. Iowa Code § 476.4 (“Every public utility shall file with the

board tariffs showing the rates and charges for its public utility services

. . . .”); Iowa Admin. Code r. 199—20.10(2) (requiring that public utility

rates “reasonably reflect the costs of providing electric service to the
class”).   All public utilities are required to file tariffs with the IUB

reflecting the costs unique to their service area. Iowa Code § 476.4; Iowa

Admin. Code r. 199—20.10(2); see Fleur de Lis Motor Inns, Inc. v. Bair,

301 N.W.2d 685, 689 (Iowa 1981) (holding amendments to local option

hotel-motel tax statute that did not single out certain classes or entities

and applied equally to all municipalities were valid under the uniformity

clauses “even though when applied they incidentally affect some entities

differently due to differing fact situations”).    Dissimilar treatment of

persons dissimilarly situated does not offend equal protection. In re Det.

of Hennings, 744 N.W.2d 333, 339 (Iowa 2008).          Citizens serviced by

different public utilities are not similarly situated, and consequently the

City cannot sustain a constitutional challenge based on the fact that
customers of different utilities may pay different rates.

      Finally, the City asserts the tariff system violates the uniformity

clauses because other regulated, investor-owned utilities operating in the

same area allegedly do not have tariffs on file permitting them to recover

from their customers the costs of undergrounding. We need not engage

in a constitutional analysis of this claim because the record does not

support the factual contention upon which it purports to be based. The

only other regulated, investor-owned utility mentioned in the record,

Interstate Power and Light Company, has a similar tariff on file with the
                                    13

IUB in which the utility reserves the right to recover from customers the

costs of equipment relocation.    The district court correctly determined

the tariff is not unconstitutional on its face or as applied by the IUB in

this case.

      IV.    Conclusion.

      We conclude MidAmerican is not precluded from utilizing its valid

tariff to recover from its Coralville customers the costs of relocating the
company’s equipment in the City’s right-of-way.       We affirm the IUB’s

determination that MidAmerican’s cost-recovery tariff was a valid

exercise of the board’s authority which did not illegally infringe upon the

City’s home rule authority to control its right-of-way.          Coralville’s

constitutional claims against the tariff are without merit.

      AFFIRMED.

      All justices concur except Baker, J., who takes no part.