Court Opinion

ID: 9619443
Source: CourtListenerOpinion
Date Created: 2023-08-22 05:27:52.442773+00
Date Added: 2024-06-11T18:04:40.870816
License: Public Domain

DURHAM, Justice
(concurring and dissenting):
I concur in Part I of the Court’s opinion, but dissent from Part II.
It is the contention of CPN and the PSC that Garkane charged unlawful rates because they were in excess of the contract rate filed with the PSC. The defendants reach this conclusion by their interpretation of the Garkane-CPN contract. Garkane asserts that the interpretation of contracts is a judicial function and that the PSC acted beyond its statutory authority. The PSC points to the statement of its general jurisdiction in U.C.A., 1953, § 54-4-1 (Supp. 1983), which provides that the PSC is “vested with power and jurisdiction to supervise and regulate every public utility in this state, and to supervise all of the business of every such public utility ... and to do all things ... necessary or convenient in the exercise of such power and jurisdiction.” There is no question that the PSC has the authority to investigate, interpret and even alter contracts. That question was settled in an early series of cases brought just after the enactment of Utah’s Public Utility Act. In each case, the Public Utility Commission (PUC) found a contract, executed before the institution of the PUC, in violation of a subsequently filed rate. This Court upheld the PUC’s alteration of the contracts, holding that the regulation of public utility rates was an exercise of the state’s police power and was not an unconstitutional impairment of contractual obligations. See Utah Hotel Co. v. PUC, 59 Utah 389, 204 P. 511 (1922); Utah Copper Co. v. PUC, 59 Utah 191, 203 P. 627 (1921); U.S. Smelting, Refining & Milling Co. v. Utah Power & Light, 58 Utah 168, 197 P. 902 (1921); Union Portland Cement Co. v. PUC, 56 Utah 175, 189 P. 593 (1920).
Nevertheless, the authority of the PSC to alter a contract is not unlimited. In Arkansas Natural Gas Co. v. Arkansas Railroad Commission, 261 U.S. 379, 43 S.Ct. 387, 67 L.Ed. 705 (1923), the Supreme Court stated:
The power to fix rates ... is for the public welfare, to which private contracts must yield; but it is not an independent legislative function to vary or set aside such contracts, however unwise and unprofitable they may be. Indeed the exertion of legislative power solely to that end is precluded by the contract impairment clause of the Constitution .... It is the intervention of the public interest which justifies and at the same time conditions its exercise.
Id. at 383, 43 S.Ct. at 388 (emphasis added). In 1956, the Supreme Court further explained the role of a regulatory agency with regard to contracts privately entered:
[WJhile it may be that the Commission may not normally impose upon a public utility a rate which would produce less than a fair return, it does not follow that the public utility may not itself agree by contract to a rate affording less than a fair return or that, if it does so, it is entitled to be relieved of its improvident bargain. In such circumstances the sole concern of the Commission would seem to be whether the rate is so low as to adversely affect the public interest — as where it might impair the financial ability of the public utility to continue its service, cast upon other consumers an excessive burden, or be unduly discriminatory.
FPC v. Sierra Pacific Power Co., 350 U.S. 348, 355, 76 S.Ct. 368, 372, 100 L.Ed. 388 *1209(1956) (emphasis in original) (citation omitted). See also United Gas Pipe Line Co. v. Memphis Light, Gas & Water Division, 358 U.S. 103, 79 S.Ct. 194, 3 L.Ed.2d 153 (1958); Gulf States Utilities Co. v. FPC, 518 F.2d 450 (D.C.Cir.1975); Richmond Power & Light v. FPC 481 F.2d 490 (D.C.Cir.1973).
In Lemhi Tel. Co. v. Mountain States Tel. & Tel. Co., 98 Idaho 692, 571 P.2d 753 (1977), the Idaho Supreme Court, in considering the authority of the Idaho Public Utilities Commission to interpret a contract, quoted the above language from Sierra and concluded:
Before the Public Utilities Commission may involve itself with a contract between two utilities, it must find specifically that the contract is adverse to the public interest ....
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The Commission did not make a finding which would allow a conclusion of adversity to public interest. [Therefore,] [i]t lacked authority to construe or enforce the contract.
Id. at 697-98, 571 P.2d at 758-59. See also Bunker Hill Co. v. Washington Water Power Co., 101 Idaho 493, 616 P.2d 272 (1980).
I find this reasoning persuasive. There must be something more than the presence of a public utility as a party to a controversy in order to remove a contract interpretation dispute — traditionally a matter for the courts — from its usual forum. That “something more” is the need to protect the public interest, which is the proper concern of the PSC.1 In the instant case, the PSC investigated the Garkane-CPN contract to see if Garkane had charged rates in excess of those filed. To make this determination, the PSC received evidence regarding the formation of the contract and the parties’ course of conduct under the contract. The PSC concluded that it was the intent of the parties that the rate should “track” with the UP & L rate schedule attached to the letter of agreement. I agree that this finding of fact is supported by evidence in the record. The PSC, however, went on to conclude that because the rate “tracked” with UP & L rates that were subject to revision by the FERC, the Garkane-CPN rate was also subject to FERC orders, including the order of refunds, and that this effect was contemplated by the parties. I find no evidence or reasoning to support this conclusion of law. It is true that the UP & L schedules were subject to adjustment by the FERC since UP & L was subject to the FERC’s jurisdiction and UP & L’s schedules were on file with the FERC. However, the only express language in the Garkane-CPN contract that might possibly indicate the parties’ contemplation of FERC-ordered refunds is found in the printed form portion of the UP & L schedule attached to the contract:
GENERAL TERMS AND CONDITIONS: Service under this Schedule will be in Accordance with the terms of the Electric Service Agreement between the Customer and the Company. The Electric Service Regulations of the Company on file with and approved by the regulatory authorities having jurisdiction, including future applicable amendments, will be considered.as forming a part of and incorporated in said Agreement. The rates prescribed herein are subject to revision upon approval of the regulatory authorities having jurisdiction.
This general language, clearly referring to UP & L agreements and regulations and never referring to refunds specifically, is insufficient to imply that the parties intended thereby to subject their contract to FERC regulation.
Furthermore, the entire investigation undertaken by the PSC in this case is an ordinary contract investigation into the in*1210tent of the parties, a proceeding which a district court would be fully competent to conduct. The record shows no investigation into or consideration of the public interest aspects of the contract. In particular, there is no finding that Garkane’s proffered refund and interpretation of the contract are adverse to the public interest. Such a factual finding, based on adequate evidence, is a prerequisite for the exercise by the PSC of its authority to interpret a contract, as discussed above. In this case, there was no more than a cursory inquiry regarding the impact of the proposed refund. In the PSC hearing, Garkane was asked where the funds would come from if Garkane were ordered to pay to CPN a refund larger than the one received from UP & L. Garkane replied that the funds would come “from the general funds of the Association and, of course, ultimately from our consumers.” The PSC made no further inquiry regarding the effect of the refund on Garkane’s member consumers, nor did the PSC investigate the possibility that the larger refund might require Gar-kane's member consumers to subsidize the rates of CPN’s consumers. There was also no finding regarding the impact of the refund on continued coordination between the utilities, although Garkane pointed out that it would have difficulty making reasonable business plans if subject to FERC-ordered refunds based on UP & L financial requirements. The PSC’s finding of fact no. 7 specifically found, “There is no evidence which would support a finding that adoption of the RS rates of UP & L resulted in an unreasonable or unjust rate.” Since protection of the public interest was not considered and was apparently unnecessary, I would hold that the PSC acted beyond its authority in interpreting and attempting to enforce this contract. The parties would then be free to litigate their contract dispute in the district court, as would any other parties to a commercial contract. The method of distribution of a refund, should one be determined to be required by the contract, could then be heard and determined by the PSC if necessary.
Therefore, I would set the order of the PSC aside.

. The Court’s opinion cites the PSC’s broad grant of power in § 54-4-1 as authority to interpret the instant contract. However, this general statement of the PSC’s authority cannot expand specific authority spelled out under other statutes. Neither can it expand the PSC’s authority beyond the constitutional limits set in Arkansas Natural Gas Co. v. Arkansas Railroad Commission, 261 U.S. 379, 43 S.Ct. 387, 67 L.Ed. 705 (1923), and subsequent cases.