Court Opinion

ID: 9855452
Source: CourtListenerOpinion
Date Created: 2023-09-24 06:25:05.110145+00
Date Added: 2024-06-11T09:35:46.765367
License: Public Domain

BISTLINE, Justice,
concurring and concurring in result.
I concur in the reasoning and result of the majority opinion, Parts I and II. As to the constitutional arguments contained in Part III, I concur only in the result, but not in the rationale or analysis of that section.
The majority totally mischaracterizes the critical point in Miles’ constitutional argument. Justice Johnson writes the following: “At the heart of the Miles’ attack is an assumption that ratepayers have a protected interest in the rates they pay to their utilities.” 116 Idaho at 643, 778 P.2d at *647765. “Miles argues that I.C. § 61-523 gives ratepayers a protected property interest.” 116 Idaho at 644, 778 P.2d at 766. “Our research has disclosed no case law that supports Miles proposition of an entitlement to the lowest possible rates.” 116 Idaho at 644, 778 P.2d at 766.
Miles’ brief in support of his petition for rehearing objected to the majority’s creation of this straw man:
Appellant has filed herewith a petition for rehearing. It is respectfully submitted that this Court has misconceived the interests which appellant claims are violated by the legislation in question. This Court was apparently unimpressed by the appellant’s constitutional attack upon the ‘Swan Falls’ legislation, because it believed that the appellant was contending that he (and all other ratepayers) was entitled to the ‘lowest possible electric rates.’ This mischaracterization of the appellant’s position led inevitably, and understandably, to the rejection of the constitutional claims.
It must be understood that the appellant contends only that:
(1) The appellant has a property interest in his own funds, whether they be his savings or his future earnings;
(2) The State of Idaho cannot require a ratepayer to pay his money to any utility unless he is given value in the form of service or other consideration; can it require a ratepayer to pay more than the services are reasonably worth;
(3) The Swan Falls legislation mandates that the PUC allow Idaho Power to charge its ratepayers for power which will not be provided when full subordination of water rights on the Snake River renders a substantia] portion of the present rate base useless; (this occurs because the PUC is prohibited from considering the reduction of usefulness of the hydro-electric plant resulting from Idaho Power’s agreement to subordinate (give away) a major portion of its Snake River water rights);
(4) Charging electrical rates on a non-existing rate base is functionally equivalent to charging for electrical service which is not furnished, since the diminished generating capacity must not be deducted from the rate base, pursuant to legislative mandate;
(5)In effect, the legislation takes appellants money without just compensation or due process of law, since the PUC is required to ignore reality in setting rates. The legislatively mandated arbitrarily high rates are a disguised purchase of the subordinated water rights from Idaho Power for the benefit of all taxpayers in general, and agricultural in-' terests in particular, which the ratepayers are paying for. What does this agreement come down to if not a purchase of water rights of Idaho Power to the Snake River? Idaho Power loses nothing by the Swan Falls agreement, since it can charge rates which include the lost water rights and the full former value of its hydro-electric plant forever.
Petitioner’s Brief in Support of Rehearing, pp. 2-4.
Stated succinctly the key issue unaddressed by the majority is this — if ratepayers can be required by this state’s legislature to pay a rate on a plant that is not used and useful, has an unconstitutional taking occurred?
I have no argument that the legislature, having created the Idaho Public Utilities Commission, may limit its jurisdiction and may define the relevant criteria for rate making. Unlike the majority, however, I recognize that despite the plenary power of the legislature over the IPUC, the legislature cannot act unconstitutionally even if in concert with, as here, the executive branch and a state-regulated monopoly. This point was well-stated in a recent opinion of our nation’s highest court:
It cannot seriously be contended that the Constitution prevents state legislatures from giving specific instructions to their utility commissions. We have never doubted that state legislatures are competent bodies to set utility rates. And the Pennsylvania PUC is essentially an administrative arm of the legislature. See, e.g., Barasch v. Pennsylvania PUC, 516 Pa. [142], at 171, 532 A.2d [325] at *648339 (‘The Commission is but an instrumentality of the state legislature for the performance of [rate making]’); Minnesota Rate Cases, 230 U.S. 352, 433, 33 S.Ct. 729, 754, 57 L.Ed. 1511 (1913) (‘The rate-making power is a legislative power and necessarily implies a range of legislative discretion’). We stated in Permian Basin [Area Rate coses] that the commission ‘must be free, within the limitations imposed by pertinent constitutional and statutory commands, to devise methods of regulation capable of equitably reconciling diverse and conflicting interest.’ 390 U.S. [747], at 767, 88 S.Ct. [1344], at 1360 [20 L.Ed.2d 312] (emphasis added). This is not to say that any system of ratemaking applied by a utilities commission, including the specific instructions it has received from its legislature, will necessarily be constitutional. But if the system fails to pass muster, it will not be because the legislature has performed part of the work.
Duquesne Light Co. v. Barasch, — U.S. -, 109 S.Ct. 609, 618-19, 102 L.Ed.2d 646 (1989) (emphasis added).
The legislature, nor any other branch of government, may not take private property for public use without paying just compensation. U.S. Const., 5th Amend.; Idaho Const., art. 1, § 14. See, State ex rel. Andrus v. Click, 97 Idaho 791, 554 P.2d 969 (1976).
However, the respondent’s brief on rehearing, authored by Chief Deputy Attorney General John McMahon, is persuasive of the likelihood that a “taking” has not occurred in this case. The $14 million figure advanced by Miles is derived from a study produced at the University of Idaho. This study was countered by another emanating from Boise State University. Each study is based upon' certain assumptions.
The Chief Deputy Attorney General’s brief points out that several key assumptions of the University of Idaho study may not be realistic:
The legislature had before it, essentially, a battle of experts regarding the likely impact of the Swan Falls Agreement. The Hamilton & Lyman (‘H & L’ study from the University of Idaho was countered by the McGrath study from Boise State University. The H & L study calculated $14 million in lost generation to ratepayers, based on its assumption that 195,000 new acres of farmland would come under irrigation by the year 2000.2
By contrast, the McGrath study before the legislature asserted:
In fact, new land will only be brought under irrigation if it is profitable to do so. If H & L’s assumption of low farm revenues and high farm costs until 2000 were to hold true, it is just as plausible to argue that net new entry might be zero. In that case, the economic benefits and costs of subordination disappear____
McGrath study, Appendix A, p. 15 (emphasis added).
A second area of contention between the experts before the legislature was the impact of any rate increase on consumption. The H & L study assumed that usage of electricity is ‘inelastic,’ i.e., that people consume the same amount regardless of price increases. The McGrath study severely criticized this assumption:
it was formerly assumed that the demand for electricity and other forms of energy was price inelastic. The experience of the past 10 or 15 years has taught us the inaccuracy of that assumption. Secondly, it is obvious that, whatever the price elasticity of the electricity demand is, it will be greater over the long-run, since the possibility of conservation or substitution grows over time.
McGrath, Appendix A at 4. McGrath’s study ran two different scenarios regard*649ing likely reactions to rate increases and concluded:
The main point illustrated by both Cases A and B is that if the long-run price elasticity of electricity demand in Idaho is something greater than 0, then H & L have seriously over-estimated both the cost of subordinating hydroelectric power water rights at Swan Falls and the rate increase necessary to cover replacement of new generation costs.
McGrath, Appendix A at 10 (emphasis added).
A final factor of critical importance in the battle of the experts before the Idaho Legislature was the cost of the power needed to replace the allegedly ‘lost generating capacity.’ H & L assumed in their 1983 study that the cost of replacement power would be 6.353 cents per kilowatt hour. R., p. 130. It was this number times the assumed lost generation of 224,100 million kilowatt hours of electricity that led to the estimated replacement cost of $14,237,000. Table 4-8, R., p. 131.
McGrath made the obvious point that Idaho Power was in a power surplus and ‘currently sells for resale about 31% of its total electric generation’ (not counting the Yalmy II unit, which was due to come on line the following year). McGrath, Appendix A at 16. The result, of course, was that Idaho Power’s avoided cost was significantly less than the 6.4 <t/kwh assumed by H & L in arriving at their $14 million number. In fact, by the 1985 legislative session, Idaho Power had filed to lower its avoided cost payment number and the PUC soon thereafter lowered the avoided cost number to 4.4 c/kwh. Commission Order No. 19673 (May 5, 1985).3
The point of this discussion is not to entice the Court into resolving disputed issues of material fact. Nor is it to ask the Court, in hindsight, to determine which of the experts had the better crystal ball.4 Rather, it is simply to place before the Court a small portion of the evidence that was weighed by the Idaho Legislature. That evidence dealt with such difficult issues as: the likelihood of future agricultural development; the methods of future irrigation (gravity vs. high lift); the per-acre water demand of different crops; the location along the river of likely development; the market for crops produced; the general health of the U.S. economy and its ability to control inflation; and federal policies on such matters as set-aside programs, commodity price support levels, tax incentives and the use of food as a weapon in international diplomacy. The Idaho Legislature weighed the information available to it and concluded that the Swan Falls Agreement ‘is in the public interest for all purposes ... ’ 1985 Idaho Sess. Laws, ch. 14, § 1, p. 20.
Respondent’s Brief on Rehearing, 38-41.
In addition, respondent’s brief details several benefits accruing to the rate payers as a result of the Swan Falls legislation:
The legislature was keenly aware of the interest of the ratepayers. It expressly stated that the agreement and legislation were an effort to resolve a controversy that put at risk ‘the availability of low-cost hydropower to the ratepayers.’ 1985 Idaho Sess. laws, ch. 14, § 1, p. 20 (emphasis added). The settlement, according to the legislature: *650balances all of the parties’ concerns and ensures that existing hydropowergenerating facilities will remain useful [and] that ratepayers will not be burdened with excessive costs ...
Id. (emphasis added). A careful reading of the legislative history demonstrates that the ratepayers received a current, concrete quid pro quo in exchange for the detriment they might suffer from diminished hydropower production under a series of speculative and hypothetical conditions that could possibly lead to future potential rate increases of $14 million.5
First, we must not forget the conditions that prevailed in 1985. Idaho Power Company had sued some 7,500 irrigators in an effort to carry out this Court’s decision that the trial court, on remand, determine whether the company had abandoned or forfeited its water rights or was otherwise estopped from asserting said rights. The result was the largest lawsuit in Idaho’s history. Its scope paralleled the Snake River adjudication itself, which the legislature had estimated would cost a total of $27,369,000. See Minutes, House Resources and Conservation Committee, January 17, 1985. Under traditional principles of ratemaking, legal expenses incurred by a utility in carrying out a court order or in an effort to protect its property, are a valid ratepayer expense. The legislature’s approval of the Swan Falls settlement put that cost where it belonged: on the owners of the affected water rights, not on the ratepayers of Idaho Power Company. In doing so, the legislature created an orderly Snake River adjudication process, thus allowing the money to be spent just once in a coordinated effort, not three times — once by Idaho Power, once by the 7,500 defendants, and once by the state itself as an interested party.
A second benefit to the ratepayers was the concession made by Idaho Power that ‘[t]he gain upon sale of a public utility’s water right used for the generation of electricity shall accrue to the benefit of the ratepayers.’ Idaho Code § 61-502B (Supp.1988). Testifying before the Senate Resources and Environment Committee on January 18, 1985, PUC Commissioner Richard High, as reported in committee minutes, stated:
This legislation I feel is extremely essential because in effect it clarifies the legal status of gains of sales and dedicates the benefits of these sales to the customers of the company rather than the shareholders of the company. It, in fact, sets the title of the water in the ratepayers rather than the shareholders. Whatever happens to the other bills, that one should pass.
Dedicating the gains from future water sales to ratepayers was a major concession since water rights do carry a high market value and because prior Idaho law apparently provided that such sales inure to the benefit of stockholders, not ratepayers. See, Boise Water Corp. v. Idaho Public Utilities Comm’n., 99 Idaho 158, 578 P.2d 1089 (1978) (gain on sale of real estate belongs to stockholders).6
*651A third issue identified by the legislature as a benefit to all ratepayers was resolution of the ‘controversy [that] has rendered the amount of the water available for hydropower uncertain ... ’ 1985 Idaho Sess.Laws, ch. 14, p. 20. It must be remembered that when the Swan Falls litigation commenced in 1977, Idaho Power sought permission from the PUC to institute an embargo on all major hookups upstream from Swan Falls. This rare exemption from a utility’s ‘duty to serve’ was authorized by PUC Order No. 14595, issued April 21, 1979. The resulting hardship primarily affected irrigators, but threatened large scale residential developments as well after commencement of the ‘7,500 lawsuit.’
A fourth benefit conferred upon the ratepayers was the imposition of a ‘public interest’ test upon all future water appropriations. Future water right applications must be measured against the public’s interest in the:
economic impact the proposed use would have upon electric utility rates in the state of Idaho, and the availability, foreseeability and cost of alternative energy sources to ameliorate such impact.
Idaho Code § 42-203C(l)(ii) (Supp.1988). Thus, for the first time in Idaho’s history, a forum was created in which the competing interests of irrigation and hydropower could be rationally weighed as to which better represents the beneficial use of water.
Yet another beneficiary of the new ‘public interest’ criterion, is the small family farmer. It is not clear whether Miles would rank this group among the co-conspirators who created the Swan Falls Agreement and legislation, or whether they would be ranked among fellow oppressed ratepayers. In any case, the ‘public interest’ criterion, for the first time, endorses ‘promotion of the family farming tradition’ in considering new rate appropriation applications. Idaho Code § 42 — 203C(2)(iii).
It must also be stressed, contrary to Miles’ assumption, that the ratepayers in 1985 were not on a plateau with no place to go but up. On the contrary, the utility’s ultimate nightmare had not yet been adjudicated. That nightmare — shared by alert ratepayers — was that the 1928 amendment to the water law provisions of the Idaho Constitution had never yet been construed by the Idaho Supreme Court. That amendment states that Idaho’s first-in-time-first-in-right constitutional water system is subject to the condition that ‘the state may regulate and-limit the use therefor for power purposes.’ Parties to the ‘7,500 lawsuit’ were prepared to argue that that language was self-enacting and should be construed to mean that the utility’s water rights were subject to a state power to ‘regulate and limit.’ Similarly, in an Amended Answer and Counter-claim, the argument was made that Idaho Power had waived and was estopped to assert its water rights against upstream irrigators. If any of these arguments had prevailed, the power company and its ratepayers would have had no protection at all.
The Swan Falls Agreement and accompanying legislation puts an end to all such uncertainty. As a matter of state policy, it raises the minimum stream flow at Swan Falls from 3,300 c.f.s. to 3,900/5,600 c.f .s., which will have ‘minimal effect on summer flows at Swan Falls.’ R., p. 89. This is good news for ratepayers. It is also good news for environmentalists, of which Mr. Miles is surely one. [Footnote omitted.] Henceforth, as a matter of state policy endorsed by both the Idaho Water Resources Board and the Idaho State Legislature, a much larger supply of water is guaranteed to flow through Hells Canyon and down the Columbia River, doing its part to aid Idaho’s anadromous fish runs.
Respondent’s Brief on Rehearing, 24-28.
With admitted high regard for the capabilities of the author of the foregoing, and *652being well aware of the research and study made in making that fair and dispassionate presentation, presently I am not persuaded that a “taking” has occurred as claimed. Therefore, I concur only in the result reached by the majority in its holding that the Swan Falls legislation survives constitutional scrutiny.

. Miles understands the derivation of the $14 million number in the H & L study. The number was not derived from an assumed draw-down of the river to 3,300 c.f.s. at the Murphy gage. (Miles Complaint, R., p. 7.) Instead, the H & L study calculates $14 million in lost generating capacity on the assumption that 195,000 acres of land will come under irrigation because of the Swan Falls Agreement.

. The avoided cost number now stands at 3.9 C/kwh, as set by Commission Order No; 21630 (December 2, 1987).

. In fact, McGrath had the better crystal ball. The number of acres in farm production has declined in Idaho each and every year since the Swan Falls Agreement was signed. In 1984, 14,700,00 acres were devoted to farming in Idaho. In 1985, the acreage dropped to 14,500,000. In 1986, the acreage dropped to 14,200,000. In 1987, the last year for which figures are published, the acreage dropped again to 13,800,000. See Idaho Department of Agriculture, 1988 Idaho Agricultural Statistics 10. The figures must, of course, be viewed with caution since they do not break out acreage between irrigated and non-irrigated land. Still, it is clear that the rapid development of new farmland that Hamilton and Lyman predicted would result from the Swan Falls Agreement has not come to pass.

. Miles mistakenly assumed the $14 million impact would be felt immediately upon passage of the Swan Falls legislation. Rather, the H & L study runs three different scenarios for timing of the additional 195,000 acres: (1) immediately, (2) by the year 1990, and (3) by the year 2000. See Table 4-8, R., p. 131. The Court may also take judicial notice of the fact that the Swan Falls legislation endorses a ‘staged development policy’ limiting proposed development to ‘twenty thousand (20,000) acres per year or eighty thousand (80,000) acres in any four (4) year period.’ Idaho Code § 42-203C. Under this ‘cap on agricultural development,’ Statement of Legislative Intent, 1985 Senate Journal, p. 60, development of 195,000 acres of new irrigated land could not occur until approximately 10 years after 1985, or until the year 1995 at the earliest,

. According to Miles’ rehearing brief, ‘Water rights are part of the rate base upon which Idaho Power earns a return,' and, again, ‘Present market value of the water right is a proper element to be taken into consideration in ascertaining value of water plant for rate-making purposes.' Reh.Br., p. 16 (emphasis in original). In fact, water rights are not part of an electric utility’s element in ascertaining plant value for rate-making purposes. As discussed in section II, supra, the cases Miles relies upon for his assertions to the contrary date back to the era when plants were ‘valued’ at their reproduction cost, For approximately the last 50 years, that stan*651dard has been replaced by ratemaking based on original-cost-Iess-depreciation. Since the utility stockholders pay nothing but a filing fee for the water right, the right does not show up as an asset on the company’s books and thus forms no part of the company’s rate base.