Court Opinion

ID: 9633770
Source: CourtListenerOpinion
Date Created: 2023-08-22 11:59:16.048105+00
Date Added: 2024-06-11T09:11:08.006751
License: Public Domain

Justice MULLARKEY,
dissenting:
I respectfully dissent from the majority’s decision. In my view, the majority misconstrues the statute. Its reading is not true to the language or legislative history of the act. Sections 40-9.5-201 to -207, 17 C.R.S. (1990 Supp.), are unconstitutional because the statute requires that an annexing municipality displace the public utility and provide exclusive service. Contrary to the majority’s opinion, the statute does not permit a municipality to compete with a cooperative electric association for customers in an annexed area. Whenever a municipality which operates its own electric utility annexes an area served by a cooperative electric association, the municipality must provide the exclusive electric service to the new area. Under the statute, the cooperative electric association must withdraw after annexation and the municipality must compensate the association for a “taking.”
The principles governing this case are well established. Under Article V, Section 35, the Public Utilities Commission (PUC) may not regulate municipal utilities operating within municipal boundaries. Town of Holyoke v. Smith, 75 Colo. 286, 226 P. 158 (1924). See also maj. op. at 551 (“The PUC constitutionally has no jurisdiction over municipally owned utilities operating within their municipal boundaries ... ”). Article XXV, which grants power to the General Assembly to regulate public utilities and vests this power in the PUC, does not “give the General Assembly authority to regulate a municipally owned utility within the corporate limits of [a] municipality.” City and County of Denver v. Public Utilities Comm’n, 181 Colo. 38, 46, 507 P.2d 871, 875 (1973) (emphasis in original). “These jurisdictional limitations ... necessarily restrict the scope of rights that the PUC may grant to public utilities. The PUC, in short, cannot grant a publicly owned utility greater rights than are available under the Colorado Constitution.” Union Rural Electric Ass’n v. Town of Frederick, 670 P.2d 4, 8 (Colo.1983). Thus, it is outside the PUC’s jurisdiction to grant an exclusive certificate of public convenience and necessity to a public utility to serve within the area of a municipality that operates its own utility. See Frederick, 670 P.2d at 6 (“[T]he grant of the certificate of public convenience and necessity to [a rural electric association] to provide electric service within the certificated area operates only to preclude other similarly certificated public utilities within the PUC’s jurisdiction from interfering with [the rural electric association’s] right to provide service.”) (emphasis added). Based on these principles, we held in Frederick that a municipality’s provision of service through its municipally owned utility to new customers within an annexed area did not constitute a taking of a public utility’s right to serve the area. Frederick, 670 P.2d at 8-9.
To uphold the constitutionality of sections 40-9.5-201 to -207, the majority interprets Frederick to apply only to situations where a municipality that owns its own utility competes with a cooperative electric association for new customers within the limits of the municipality. Maj. op. at 551 -552. The majority finds that these “Frederick” situations are excepted from the statute; it holds that no taking occurs where a municipality annexes territory and competes with a cooperative for new customers in the annexed area. Maj. op. at 552. The majority then states that there is no taking under the statute where an annexing municipality competes for existing customers, so long as the municipality does not condemn any of the cooperative’s *559distribution facilities. Maj. op. at 552.1 Thus, under the majority’s analysis, competition by the annexing municipality, whether for new or existing customers, does not effect a taking under the statute.2 The majority then holds that a taking under the statute does occur where the annexing municipality excludes the cooperative from providing service to the annexed area. Maj. op. at 553. I cannot join the majority opinion because I see no statutory basis on which to construct the exceptions which permit the majority to save the statute. The statute does not state or imply that no taking occurs if the annexing municipality competes with the cooperative for customers. The statute mandates that the municipality provide exclusive service to customers in the annexed area.
The majority states that section 40-9.5-201 is ambiguous because it assumes a municipality operating its own utility will provide exclusive service within the annexed area but does not mandate exclusive service. Maj. op. at 552. The majority then attempts to resolve this ambiguity by reference to “the plain language of the statute,” upon which the majority relies to hold that the statute does not mandate immediate transfer of the cooperative’s customers and facilities upon annexation of the area. Maj. op. at 552-53. The language of the statute, however, mandates exclusive service by the municipality. Section 40-9.5-201 states, in relevant part:
[I]f a cooperative electric association has been granted an exclusive service territory that is within a municipality that operates an electric utility or within an area annexed by a municipality that operates an electric utility, the municipality has taken private property and shall pay just compensation for the electric distribution facilities and certificate of public convenience and necessity of the association located within the municipality.
(Emphasis added.) The language of this section does not distinguish between situations where an annexing municipality competes for customers and where an annexing municipality excludes the cooperative electric association. The statute simply requires an annexing municipality to compensate the cooperative electric association as specified in section 40-9.5-204(1). The statute thus contemplates that the annexing municipality will exclude the cooperative.3
The legislative history of the statute also reveals that the majority’s exceptions are unfounded. The legislature intended that, upon annexation, the annexing municipality would exclude the cooperative electric association and pay compensation as provided in the statute. H.B. 1131, as originally introduced, gave the annexing municipality the option either to purchase the electric distribution facilities and service rights of the cooperative electric association or to grant the cooperative a permit to operate within the municipality. H.B. 1131, 55th G.A., 2d Reg.Sess. §§ 40-9.5-201, 40-9.5-206 (Colo.1986). Thus, under H.B. 1131 as introduced, the municipality could elect not to serve the annexed area. The bill, however, was amended in House Committee to remove the permit option. 1 House Journal, 55th G.A., 2d Reg.Sess. 199-200, .202 (Colo.1986). This change reveals that the legislature intended to require the annexing municipality to serve the annexed area since the option of allowing the cooperative *560electric association to continue to serve the annexed area was deleted.
Other changes to H.B. 1131 also reveal that the legislature intended the municipality to provide exclusive service. The original bill stated that the annexing municipality “should” either purchase the cooperative’s rights and facilities or grant the cooperative an operating permit. H.B. 1131, 55th G.A., 2d Reg.Sess. § 40-9.5-201 (Colo. 1986). The House Committee changed that language to “shall” pay just compensation. 1 House Journal, 55th G.A., 2d Reg.Sess. 200 (Colo.1986). In addition, as first amended, H.B. 1131 provided for continued service by the cooperative electric association. The bill provided in relevant part:
Continued service by the cooperative electric association. If the municipality does not acquire the electric distribution facilities and service rights of the cooperative electric association, the cooperative electric association shall continue to serve within the municipality or the area annexed by the municipality under its certificate.
Id. at 202. The House deleted this section. Id. at 527. These changes again reflect the legislature’s intent that the municipality would not compete with the cooperative, but instead would provide exclusive service to the annexed area.
The Governor also specifically interpreted the statute as containing no exception for situations where the annexing municipality competes with the cooperative. The legislature passed H.B. 1131 over the Governor’s veto, and in his veto letter the Governor stated as follows:
H.B. 1131 attempts to reverse a 1983 Colorado Supreme Court ruling, the latest of several affirming the right of municipally-owned utilities to provide service to newly annexed areas. The legislative declaration that “the municipality has taken private property” is in direct conflict with the holding in Union Rural Electric Association v. Town of Frederick that “although an electric utility may be subject to a municipality’s power of eminent domain, competition by a municipality with a certificated public utility for new customers does not under these circumstances constitute a taking of property which requires compensation.”
1 House Journal, 55th G.A., 2d Reg.Sess. 1056-57 (Colo.1986). Thus, the Governor interpreted the statute as mandating that the annexing municipality exclude, rather than compete with, the cooperative electric association. The Governor interpreted the statute as overruling the holding of Frederick because the statute required that, upon annexation, the municipality automatically would compensate the cooperative.
In addition, as the majority acknowledges, both parties to this appeal treated the statute as mandating that the cooperative transfer its customers and facilities to the municipality upon the municipality’s notice of its intent to annex the cooperative’s service area. Maj. op. at 552. See also maj. op. at 556 n. 3 (again stating that both parties construed the statute as mandating exclusion and pointing out that Loveland assumed the obligation of serving the customers in the annexed area). It is worth noting that a manager of Poudre Valley Rural Electric Association, the plaintiff-appellee in this case, was instrumental in drafting H.B. 1131 and testified before the House Committee regarding the meaning of the bill. Hearings on H.B. 1131 Before the House Committee on Agriculture, Livestock and Natural Resources, 55th G.A., 2d Sess., Feb. 5, 1986. It therefore is not surprising that Poudre Valley’s understanding of the statute, as requiring the cooperative electric association to withdraw from the annexed area, was consistent with the drafting history of the bill as it passed through the legislative process.
Given that the language of the statute, the legislative history of the statute, the contemporary interpretation of the statute as evidenced in the Governor’s veto message, and the parties’ interpretation of the statute all indicate that the statute mandated that the municipality exclude the cooperative electric association from serving the annexed area, I cannot agree with the majority’s conclusion that the statute contains an exception for situations where the municipality competes with the cooperative. *561Instead, the statute mandates that the municipality displace the cooperative and provide exclusive service. Thus, the statute effectively attempts to overrule our constitutionally-based holding in Frederick and therefore the statute is unconstitutional.
For the foregoing reasons, I respectfully dissent.

. The majority specifically states that ‘‘[u]nder sections 40-9.5-201 to -207, Loveland and Pou-dre Valley could have competed for the same customers in the Hach Chemical and Collins Plating Additions and there would have been no taking_" Maj. op. at 553. Because there was one existing customer in each of the annexed areas at the time of annexation, I assume the majority means that the annexing municipality could compete for existing customers without effecting a taking under the statute.

. The majority makes this point more clear when it states that “[i]f the municipality is simply competing with the cooperative in the annexed area, the cooperative has no right to compensation:” Maj. op. at 553.

. See also § 40-9.5-203 C'[I]f a cooperative electric association ... has certificated service territory within an area annexed ... by a municipality which owns and operates an electric utility, the municipality shall pay just compensa-tion_”). This section also does not contain the exceptions the majority creates, and thus also mandates exclusion by the municipality.