City of Holland v. Consumers Energy Company
866 N.W.2d 871
Mich. Ct. App.
2015
Check Treatment

CITY OF HOLLAND v CONSUMERS ENERGY COMPANY; CITY OF COLDWATER v CONSUMERS ENERGY COMPANY

Docket Nos. 315541 and 320181

Court of Appeals of Michigan

Decided January 6, 2015

308 Mich. App. 675

Submitted October 7, 2014, at Grand Rapids. Leave to appeal sought.

The city of Holland brought a declaratory judgment action in the Ottawa Circuit Court against Consumers Energy Company, contending that, as a municipal utility, it had the right to supply electric service to property in Park Township owned by the nonprofit corporation Benjamin‘s Hope. Consumers moved for summary disposition under MCR 2.116(C) (8) and (10), asserting that it had the right to supply electric service to the property because it had previously supplied electric service to the customer. Holland requested summary disposition under MCR 2.116(I)(2). The court, Edward R. Post, J., granted summary disposition in favor of Holland. Consumers appealed in Docket No. 315541.

The city of Coldwater brought a declaratory judgment action in the Branch Circuit Court against Consumers, contending that it had the right to provide electric service to property it had purchased in Coldwater Township. Consumers moved for summary disposition under MCR 2.116(C) (10), asserting that it had the right to supply electric service to the property because it had previously supplied electric service to the property. Coldwater also moved for summary disposition under MCR 2.116(C)(10), arguing that there was no existing electric service when it purchased the property. The court, Patrick W. O‘Grady, J., granted summary disposition in favor of Coldwater. Consumers appealed in Docket No. 320181. The Court of Appeals consolidated the appeals.

The Court of Appeals held:

  1. Under MCL 124.3(2), a municipal corporation shall not render electric delivery service for heat, power, or light to customers outside its corporate limits already receiving the service from another utility without the consent of the serving utility. The statutory language is in the present tense and, therefore, does not prohibit a municipal utility from providing electric service to customers who received electric service from another utility at a previous point in time. The word “customer” is not defined in MCL 124.3, but it is defined in a related statute, MCL 460.10y, which indicates that “customer” means the building or facilities served rather than the individual, association, partnership, corporation, governmental body, or other entity taking service. In Docket No. 315541, Consumers had provided temporary electric service to a construction trailer on the property in question, but when the contractor removed its trailer from the property, the contractor requested that Consumers remove its facilities from the property, which Consumers did. Benjamin‘s Hope subsequently requested that Holland provide permanent electric service to the new buildings it had constructed on the property. Because Consumers never provided service to the new buildings, those buildings were not existing customers of Consumers, and Holland was free to provide electric service to them without violating MCL 124.3. In Docket No. 320181, Coldwater sought to provide electric service to property it purchased in July 2011, which, at the time of purchase, contained a vacant pole barn with a service drop owned by Consumers, although the building did not have electric service provided to it at the time of purchase. Coldwater intended to remove the pole barn and build new facilities. Because there were no buildings presently receiving electric service from Consumers when Coldwater acquired the property, Coldwater could provide electric service to the property without violating MCL 124.3(2).
  2. Under Public Service Commission (PSC) Rule 411, Mich Admin Code, R 460.3411, the first utility serving a customer pursuant to the PSC‘s rules is entitled to serve the entire electric load on the premises of that customer even if another utility is closer to a portion of the customer‘s load. But under MCL 460.6(1), the PSC does not have jurisdiction to regulate municipal utilities, rendering Rule 411 inapplicable to municipal utilities unless the utility elects to operate in compliance with Rule 411 in accordance with MCL 460.10y(3). Rule 411, therefore, was not controlling in these cases. —which held that the right of first entitlement in Rule 411 extends to the entire premises initially served and is not extinguished when a customer is no longer present on the premises—was distinguishable from the facts at issue in both Docket No. 315541 and Docket No. 320181.

Trial court judgments affirmed in both Docket No. 315541 and Docket No. 320181.

SHAPIRO, J., concurring, stated that although the language interpreting Rule 411 in was sweeping, no matter the substantive interpretation of Rule 411, it cannot be enforced against a party that does not fall within the jurisdiction of the PSC. And the Legislature has not given the PSC jurisdiction over municipal power providers. With regard to MCL 124.3(2), the statute refers to customers already receiving the service, a construction that speaks to the present. Therefore, when a customer is not receiving service, it may contract with the provider of its choice even if there was some other entity that was the first utility to serve the premises.

  1. PUBLIC UTILITIES — ELECTRIC SERVICE — MUNICIPAL CORPORATIONS — EXISTING CUSTOMERS.

    Under MCL 124.3(2), a municipal corporation shall not render electric delivery service for heat, power, or light to customers outside its corporate limits already receiving the service from another utility without the consent of the serving utility; the statutory language does not prohibit a municipal utility from providing electric service to customers who received electric service from another utility at a previous point in time; as used in the statute, the word “customer” means the building or facilities served rather than the individual, association, partnership, corporation, governmental body, or other entity taking service.

  2. PUBLIC UTILITIES — ELECTRIC SERVICE — JURISDICTION OF THE PUBLIC SERVICE COMMISSION — MUNICIPAL UTILITIES.

    Under Public Service Commission (PSC) Rule 411, Mich Admin Code, R 460.3411, the first utility serving a customer pursuant to the PSC‘s rules is entitled to serve the entire electric load on the premises of that customer even if another utility is closer to a portion of the customer‘s load; Rule 411 is inapplicable to municipal utilities unless the utility elects to operate in compliance with it under MCL 460.10y(3).

Docket No. 315541:

Dickinson Wright PLLC (by Peter H. Ellsworth and Jeffery V. Stuckey) and Cunningham Dalman, PC (by Andrew J. Mulder and Randall S. Schipper), for the city of Holland.

Michael G. Wilson for Consumers Energy Company.

Amici Curiae:

Dykema Gossett PLLC (by Albert Ernst and Shaun Johnson) for the Michigan Electric Cooperative Association.

Bruce R. Maters and Michael Solo, Jr., for DTE Energy.

James A. Ault for the Michigan Electric and Gas Association.

Clark Hill PLC (by Roderick S. Coy) for the Association of Businesses Advocating Tariff Equity.

Docket No. 320181:

Dickinson Wright PLLC (by Peter H. Ellsworth and Jeffery V. Stuckey) for the city of Coldwater.

Michael G. Wilson for Consumers Energy Company.

Amici Curiae:

Clark Hill PLC (by Roderick S. Coy) for the Association of Businesses Advocating Tariff Equity.

Jim B. Weeks for the Michigan Municipal Electric Association.

Before: BORRELLO, P.J., and SERVITTO and SHAPIRO, JJ.

PER CURIAM. In Docket No. 315541, Consumers Energy Company appeals as of right the trial court‘s grant of summary disposition in favor of the city of Holland in a declaratory judgment action concerning Holland‘s right to provide electric service to a customer. In Docket No. 320181, Consumers Energy Company appeals as of right the trial court‘s grant of summary disposition in favor of the city of Coldwater in a declaratory judgment action concerning Coldwater‘s right to provide electric service to property that Coldwater recently purchased. We affirm in both cases.

DOCKET NO. 315541

Holland filed this declaratory action contending that under the Michigan Constitution and by statute, a municipal utility such as itself can supply light and power within and outside its corporate boundaries to any customer not already receiving the service from another utility. According to Holland, it obtained irrevocable franchises for the delivery of electric power to townships adjoining it, including Park Township. A nonprofit corporation, Benjamin‘s Hope, owned vacant property in Park Township. The property did not have electric service. Benjamin‘s Hope sought to build a nonprofit, tax-exempt structure on its property and sought to have Holland provide the electric power service for the building. According to Holland, defendant Consumers Energy Company has asserted that it has the exclusive right to serve the property, having served the property some years prior, and that Benjamin‘s Hope must receive electric power from Consumers pursuant to relevant statutory law. Holland, therefore, sought a declaration that it was authorized to provide electric service to Benjamin‘s Hope under the Michigan Constitution, its franchise agreement, statute, and the Holland city charter.

In lieu of an answer, Consumers filed a motion for summary disposition premised on MCR 2.116(C)(8) and (10). Consumers claimed that it had previously provided electric service to the customer at issue and was currently doing so and provided an affidavit and copies of electric bills to support its position. Consumers further asserted that the case of ; , already addressed, in Consumers’ favor, most of the issues raised in this case. Finally, Consumers asserted that the Michigan Public Service Commission (PSC) had primary jurisdiction of the claims in this case and that PSC Rule 4111 required holding in Consumers’ favor.

Holland responded that the only service Consumers provided was temporary and requested by a contractor hired by Benjamin‘s Hope. Consumers provided the electric service to a construction trailer temporarily located on the property. When the contractor removed its trailer from the property, it also requested that Consumers remove its facilities from the property, which Consumers did. Benjamin‘s Hope thereafter requested quotes from both Consumers and Holland for the provision of permanent electric services, which both provided. Benjamin‘s Hope chose Holland, as it was allowed to do, given that Consumers was not providing service to the property at that time. Holland further asserted that the PSC does not have jurisdiction over this matter and PSC Rule 411 does not apply to municipal utilities. Holland requested summary disposition in its own favor under MCR 2.116(I)(2).

The trial court granted Holland‘s motion for summary disposition and denied Consumers’ motion. The trial court opined that Holland is not subject to regulation by the PSC and that the customer that Holland began providing power to in April 2012 was not, and had not been, a Consumers’ customer, it having never before received power from another utility.

On appeal, Consumers first argues that Holland‘s provision of electric service to Benjamin‘s Hope clearly violated MCL 124.3 because Consumers had been providing service to the property at issue when Holland entered into a contract with Benjamin‘s Hope to provide service to the property. Consumers contends that the trial court‘s erroneous conclusion otherwise was based on the adoption of an illogical and incorrect definition of the word “customer” for purposes of MCL 124.3. We disagree.

“Issues of statutory interpretation are questions of law that this Court reviews de novo.” ; . We also review de novo a trial court‘s decision on a motion for summary disposition. See ; . A motion under MCR 2.116(C)(8) tests the legal sufficiency of the plaintiff‘s complaint by examining the pleadings alone. ; . All well-pleaded factual allegations are taken as true, as well as any reasonable inferences or conclusions that can be drawn from the allegations. ; . The motion should be granted only if the claims are so clearly unenforceable as a matter of law that no factual development could justify recovery. .

Summary disposition may be granted under MCR 2.116(C)(10) if the documentary evidence submitted by the parties, viewed in the light most favorable to the nonmoving party, shows that there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law. ; . Summary disposition may be granted in favor of an opposing party under MCR 2.116(I)(2) if there is no genuine issue of material fact and the opposing party is entitled to judgment as a matter of law. ; .

Benjamin‘s Hope acquired the property at issue in 2011. Neither party disputes that at the time of acquisition, there were no buildings on the property. Apparently, the prior owner demolished all buildings that had been on the property sometime in 2007. Accordingly, no electric power was being supplied to the parcel at the time of purchase, and for some time prior. Benjamin‘s Hope retained a contractor, CL Construction, to begin building what was to become a campus for autistic children. According to both parties, around August 2011, CL Construction requested that Consumers provide single-phase electric service to a construction trailer that CL Construction had temporarily placed on the property. CL Construction requested that Consumers send the electric bills to Benjamin‘s Hope. The first bill, sent to Benjamin‘s Hope, reflects that the service was for “Electric Temporary Service Overhead.” Consumers provided electric service to the construction trailer from September 2011, until April 13, 2012, when CL Construction removed its trailer from the property and requested that Consumers remove its facilities from the property. There is no dispute that Consumers mailed the monthly bills to Benjamin‘s Hope or that the bills were paid, although there is no indication in the record as to who paid the bills.

In January 2012, Benjamin‘s Hope requested quotes from both Consumers and Holland for permanent electric service. On the basis of the prices quoted, Benjamin‘s Hope signed a contract with Holland on January 25, 2012, for electric service. Consumers asserts that this was a violation of MCL 124.3(2) as it was providing electric service to the premises at the time Holland entered into a contract with Benjamin‘s Hope.

MCL 124.3 provides:

(1) A municipal corporation may contract for adequate consideration with a person or another municipal corporation to furnish to property outside the municipal corporate limits any lawful municipal service that it is furnishing to property within the municipal corporate limits. A municipal corporation may sell and deliver heat, power, and light in amounts as determined by the governing body of the utility, except for both of the following:

(a) Electric delivery service is limited to the area of any city, village, or township that was contiguous to the municipal corporation as of June 20, 1974, and to the area of any other city, village, or township being served by the municipal utility as of June 20, 1974.

(b) Retail sales of electric generation service are limited to the area of any city, village, or township that was contiguous to the municipal corporation as of June 20, 1974, and to the area of any other city, village, or township being served by the municipal utility as of June 20, 1974, unless the municipal corporation is in compliance with section 10y(4) of 1939 PA 3, MCL 460.10y.

(2) A municipal corporation shall not render electric delivery service for heat, power, or light to customers outside its corporate limits already receiving the service from another utility unless the serving utility consents in writing.

(3) As used in this section:

(a) “Electric delivery service” has the same meaning as “delivery service” under section 10y of 1939 PA 3, MCL 460.10y.

(b) “Electric generation service” means the sale of electric power and related ancillary services.

(c) “Person” means an individual, partnership, association, governmental entity, or other legal entity.

As indicated in MCL 124.3(2), Holland may not provide electric delivery service to customers “already receiving the service from another utility unless the serving utility consents in writing.” Notably, the phrase “already receiving” is in the present tense. “Already” is defined in The American Heritage Dictionary of the English Language (5th ed) as “[b]y this or a specified time[.]”2 “Receiving” is the present participle of the verb “receive,” which, in turn, is defined by the same source as “[t]o take or acquire (something given or offered); get or be given[.]” Id. When construing a statute, the Court‘s primary obligation is to ascertain the legislative intent that may be reasonably inferred from the words expressed in the statute. ; . If a statute specifically defines a term, the statutory definition is controlling. ; . When the Legislature fails to define a term, the intent may be determined by examining the language of the statute itself. ; .

Plain statutory language must be enforced as written. ; . This includes, without reservation, the Legislature‘s choice of tense. For example, in addressing a family court‘s subject matter jurisdiction, a panel of this Court concluded that the present tense language in MCL 712A.2(b)(2), granting jurisdiction over a juvenile “[w]hose home or environment, by reason of neglect, cruelty, drunkenness, criminality, or depravity . . . is an unfit place for the juvenile

to live in,” requires the trial court to examine the child‘s situation at the time the petition for jurisdiction was filed. ; .

In this case, employing the dictionary definitions and the relevant tense to the terms used in the statute, MCL 124.3(2) prohibits Holland from providing electric delivery service to customers presently taking or getting the service from another utility. The statute does not, however, prohibit Holland from providing electric delivery service to customers who “have received” or “had received” the service from another utility at some point in time.

MCL 124.3(3)(a) refers us to MCL 460.10y for the definition of “electric delivery service.” MCL 460.10y(12)(a), in turn, defines “delivery service” as “the providing of electric transmission or distribution to a retail customer.” As indicated by Consumers, neither MCL 124.3 nor MCL 460.10y(12)(a) makes a distinction between temporary or permanent electric service. Therefore, whether Consumers was providing temporary or permanent service is irrelevant. However, under the definition of “delivery service,” referred to in MCL 124.3 (and as defined in MCL 460.10y(12)(a)), Consumers must have been providing the service “to a retail customer.” This is an essential phrase, which leads us to our primary issue.

“Customer” is not defined in MCL 124.3. But, “customer” is defined in MCL 460.10y(2). MCL 460.10y(2) states, “For purposes of this subsection, ‘customer’ means the building or facilities served rather than the individual, association, partnership, corporation, governmental body, or any other entity taking service.” “Building” is not defined in this statute, nor is “facilities.” We therefore look to the dictionary for guidance.

We consult a lay dictionary when defining common words or phrases. ; .

“Building” is defined in The American Heritage Dictionary of the English Language (5th ed) as “[s]omething that is built, as for human habitation; a structure.” “Facilities” is the plural of “facility,” which is defined as something “designed to serve a particular function[.]” Id. Under the relevant definitions, the building or facility that Consumers was serving, i.e., the customer, was the CL Construction trailer. The buildings and facilities for which Benjamin‘s Hope contracted with Holland for electric service were not “customers” of Consumers. Consumers never provided service to those buildings, given that they did not previously exist, and Holland was free to provide electric service to them without violating MCL 124.3.

The limiting language, “[f]or purposes of this subsection . . . .” in MCL 460.10y(2) is acknowledged. However, because MCL 124.3(3)(a) refers us back to MCL 460.10y for the definition of “delivery service,” and the definition of “delivery service” in MCL 460.10y(12)(a) contains the word “customer,” it would make sense to look within that same statute for the definition of that essential word. The doctrine of noscitur a sociis, i.e., that “a word or phrase is given meaning by its context or setting,” assists us in reaching this conclusion. See ; (quotation marks and citation omitted). In addition, statutes that relate to the same matter are considered to be in pari materia. ; . “Statutes that address the same subject or share a common purpose are in pari materia and must be read together as a whole.” ; . “The general rule of in pari materia requires courts to examine a statute in the context of related statutes.” ; .

While Consumers argues that “customer” cannot be defined as an inanimate object, Consumers fails to recognize the fact that its own arguments are based on the same premise. Consumers’ principal argument is that because it first served the property—that being the land itself—Consumers could claim the property (an inanimate object) as its customer forever, no matter who owned it at any point in time thereafter and whether any buildings stood upon it and were receiving electric service.

The trial court appropriately determined that Holland could provide electric service to Benjamin‘s Hope without violating MCL 124.3.

Consumers next contends that the trial court erred by allowing Holland to provide electric service to Benjamin‘s Hope because Consumers was entitled to serve the property under PSC Rule 411(11) and . We again disagree.

MCL 460.6(1) provides, in relevant part:

The public service commission is vested with complete power and jurisdiction to regulate all public utilities in the state except a municipally owned utility, the owner of a renewable resource power production facility as provided in [MCL 460.6d] and except as otherwise restricted by law.

“Although broadly stated, § 6(1) is not a grant of specific power. It is merely an outline of the PSC‘s jurisdiction.” ; . Under the express language of § 6(1), the PSC has no jurisdiction over a municipally owned utility such as Holland. Lacking such jurisdic-tion, it cannot impose its rules upon Holland. That PSC rules are not intended to apply to municipally owned utilities is borne out by the language in the rules themselves.

Rule 411 [Mich Admin Code, R 460.3411] provides, in relevant part:

(1) As used in this rule:

(a) “Customer” means the buildings and facilities served rather than the individual, association, partnership, or corporation served.

*

*

*

(2) Existing customers shall not transfer from one utility to another.

*

*

*

(11) The first utility serving a customer pursuant to these rules is entitled to serve the entire electric load on the premises of that customer even if another utility is closer to a portion of the customer‘s load.

According to Consumers, because it supplied electric service to the Benjamin‘s Hope property in 2004, 2006, 2008 and then again in 2011 to the CL Construction trailer (which qualified as a “customer“), it was the first utility serving the customer and thus was entitled to serve the entire electric load on the premises of that customer. However, PSC Rule 102(1)3 defines “utility” as “an electric company, whether private, corporate, or cooperative, that operates under the jurisdiction of the commission.” Again, a municipal utility does not, by statute, operate under the jurisdiction of the commission. Therefore, a municipal utility such as Holland would never, under Rule 102, meet the definition of

utility and would, accordingly, never be the first utility to serve a customer. Clearly, Rule 411 was not intended to apply to municipal utilities such as Holland.

The Michigan Legislature also specifically stated as much, giving municipally owned utilities the option of complying with Rule 411 if the utility provides service to customers outside its municipal boundaries (as in this case). MCL 460.10y(3) provides:

With respect to any electric utility regarding delivery service to customers located outside of the municipal boundaries of the municipality that owns the utility, a governing body of a municipally owned utility may elect to operate in compliance with R 460.3411 of the Michigan administrative code, as in effect on June 5, 2000. However, compliance with R 460.3411(13) of the Michigan administrative code is not required for the municipally owned utility.

Given this statute, Rule 411 is inapplicable.

Consumers contends that the holding in , requires a different conclusion. However, that case is factually distinguishable. First and foremost, the plaintiff, Great Wolf Lodge of Traverse City, contracted with Cherryland Electric Cooperative to provide electric service to property where it intended to build a water park resort. Cherryland had provided electric service to the farm buildings located on the property when the plaintiff purchased it. While the plaintiff sought bids from competing electric companies and later indicated that Cherryland coerced it into contracting for electric services to avoid construction delay, the fact remains that the plaintiff did enter into a three-year contract to have Cherryland provide electric services to its newly constructed buildings. A rate dispute followed, two years after which the plaintiff sought a declaratory ruling that it could receive electric service from whatever provider it chose. In this case, by contrast, Benjamin‘s Hope did not enter into a contract with Consumers for electric service, receive the service for two years, and then seek to switch providers. Instead, a contractor, CL Construction, contacted Consumers and requested temporary service to its construction trailer located on the Benjamin‘s Hope property during construction. True, the contractor asked that the bills be sent to Benjamin‘s Hope, but there is no evidence that there was a contract for services or that the trailer was anything other than a temporary structure owned by a third party.

In addition, was an appeal of a PSC decision. A party aggrieved by a PSC order must show by clear and satisfactory evidence that the PSC‘s order is unlawful or unreasonable. MCL 462.26(8). A final order of the PSC must be authorized by law and, if a hearing is required, supported by competent, material, and substantial evidence on the whole record. Const 1963, art 6, § 28. A reviewing court gives due deference to the PSC‘s administrative expertise, and is not to substitute its judgment for that of the PSC. ; . The Court‘s review in was thus deferential and limited and it reinstated the PSC decision, whereas our review here is de novo. We are not so limited.

Next, the Court in , stated:

Rule 411(11) grants the utility first serving buildings or facilities on an undivided piece of real property the right to serve the entire electric load on that property. The right attaches at the moment the first utility serves “a customer” and applies to the entire “premises” on which those buildings and facilities sit. The later destruction of all buildings on the property or division of the property by a

public road, street, or alley does not extinguish or otherwise limit the right. This conclusion is consistent with the rule‘s purpose of avoiding unnecessary duplication of electrical facilities.

In this case, it could be argued that there would be no unnecessary duplication of electric facilities because it appears both utilities currently stand ready and able to provide the required service. It is Consumers, in fact, that quoted Benjamin‘s Hope with a $35,000 installation charge for service when Holland quoted no up-front installation charge for electric service.

Finally, there was no dispute that the PSC had jurisdiction over the dispute because Cherryland was a public utility and the disagreement was between the property owner—who sought and received service and submitted to the jurisdiction of the PSC—and the public utility concerning a rate. MCL 460.58 provides that the PSC is to investigate a complaint by a customer that a rate or regulation by a public utility is unjust, inaccurate, or improper. In contrast, the dispute in this case is between a public utility and a municipal utility. The Court in , opined:

Given that Cherryland is entitled to the benefit of the first entitlement in Rule 411(11), it is irrelevant that TCLP [the utility from which Great Wolf wished to receive service] is a municipal corporation not subject to PSC regulation. Rule 411(11) both grants and limits rights. It grants a right of first entitlement to Cherryland while limiting the right of the owner of the premises to contract with another provider for electric service. Plaintiff put that limitation directly at issue by seeking a declaratory ruling that it is free to contract for electric service with any electricity provider.

Again, it is of utmost importance that the parties before the PSC and then before the Court were a plaintiff who was receiving or going to receive service and a public utility. The Court‘s note that Rule 411 limits the rights of the owner of the premises has no bearing on the case at hand where the owner of the premises is not a party to the dispute. We are not called on to determine the rights of the premises owner. Rule 411 may well limit the rights of the premises owner, but it does not limit the rights of a municipal utility such as Holland because the PSC has no jurisdiction over municipal utilities. The Court implicitly acknowledged the distinction:

Assuming arguendo that MCL 124.3 does not restrict TCLP from contracting with plaintiff to provide electric service, Rule 411(11) restricts plaintiff from seeking that service from any entity other than Cherryland. Plaintiff may not circumvent the limitation of Rule 411(11) by attempting to receive service from a municipal corporation not subject to PSC regulation. Thus, MCL 124.3 has no application to the instant dispute. [.]

Incidentally, MCL 124.3 would have precluded TCLP, a municipal utility, from contracting with Great Wolf Lodge, because Great Wolf Lodge was undeniably receiving service from Cherryland, under its contract with them, for over two years. But the point to be gleaned from the Supreme Court‘s decision in is this: even if MCL 124.3 did not so restrict a municipal utility, Rule 411 would still have restricted Great Wolf Lodge because it, as an owner of premises who had service first provided by a public utility, could have its rights limited by Rule 411. Because the instant dispute is between the municipal utility and a public utility, MCL 124.3 applies, but, as previously indicated, it does not restrict Holland from contracting with Benjamin‘s Hope to provide electric service. We there-fore affirm the trial court‘s ruling in Docket No. 315541.

DOCKET NO. 320181

The city of Coldwater filed this declaratory action contending that under the Michigan Constitution and by statute, a municipal utility such as itself can supply light and power within and outside its corporate boundaries to any customer not already receiving the service from another utility. Coldwater sought to provide electric service to a 6.2-acre parcel of land in Coldwater Township it purchased in July 2011 which, at that time, contained a vacant pole barn that had a service drop owned by Consumers attached to it but, according to Coldwater, had no service provided to it since before the time Coldwater purchased the parcel. Coldwater asserted that it intends to remove the pole barn and build new facilities and further intends to provide its own electric supply (through the Coldwater Board of Public Utilities) but that Consumers insists that it has the exclusive right to provide electric power to the property.

Consumers moved for summary disposition under MCR 2.116(C) (10)MCL 124.3 and PSC Rule 411.

Coldwater filed a countermotion for summary disposition in its own favor based on MCR 2.116(C)(10). Coldwater contended that electric service to the existing pole building had been discontinued before Coldwater‘s acquisition of the property such that there was no existing electric provider to the customer and that Coldwater‘s actions conformed to MCL 124.3. Coldwater further asserted that it was not required to operate in compliance with Rule 411 under MCL 460.10y and that the rule therefore had no applicability. Coldwater relied, in part, on the trial court‘s opinion in the Holland case.

The trial court granted summary disposition in favor of Coldwater. In its opinion, the court noted that municipally owned utilities are exempt from the power and jurisdiction of the PSC and that Coldwater, being both the owner of the premises and a municipal utility, was, as both an owner and provider, not subject to the power of the PSC. The trial court also noted that MCL 124.3 precludes a municipal electric service provider from providing service only if the customer is already receiving service from another provider and that there were no buildings or facilities receiving electric service at the time Coldwater purchased the parcel in question, nor had Coldwater ever received service from Consumers.

On appeal, Consumers argues that the trial court erred by creating an exception to the applicability of PSC Rule 411 on the basis that Coldwater was both a utility and the customer when Rule 411 allows for no such exception. Contrary to Consumers’ argument, the trial court did not hold that because the owner of the premises is a municipal utility it also cannot be regulated by the PSC in its capacity as a customer. It simply held, though its reasoning was inartfully worded, that if Coldwater were simply a premises owner and nothing more, would likely apply. However, that was not the factual scenario before the trial court. The trial court could not disregard that Coldwater was the municipally owned service provider that would be providing service to itself. Its status as a municipally owned utility had to be taken into consideration when determining whether Rule 411 applied. If Coldwater were not going to be providing the service to itself, the parties would likely not be before the court arguing whether Rule 411 applied. If Coldwater were simply the premises owner and Consumers and another public utility were involved, the application of Rule 411 would be a foregone conclusion.

However, as discussed earlier in this opinion with regard to Holland, Rule 411 does not apply to municipal utilities. Coldwater in this case is a municipally owned utility seeking to provide services to its own property. Its identity as a customer and a municipally owned utility are not separable. This is necessarily so, given that it cannot contract with itself to provide a service to itself.

As thoroughly discussed regarding Docket No. 315541, the PSC has no jurisdiction over municipally owned utilities4 and thus cannot impose its rules upon municipally owned utilities such as Coldwater. PSC Rule 102(1) defines “utility” as “an electric company, whether private, corporate, or cooperative, that operates under the jurisdiction of the commission” such that a municipally owned utility could never be the first to serve a premises under Rule 411, thus indicating that Rule 411 was never intended to apply to municipally owned utilities. And, MCL 460.10y gives municipally owned utilities the option of complying with Rule 411 if the utility provides service to customers outside its municipal boundaries (as in this case), clearly setting forth the Legislature‘s recognition that municipally owned utilities are not subject to Rule 411. The application of Rule 411 would be particularly odd in this circumstance given that Coldwater, which owns the

property, seeks to provide its own electric service to the property and the property at issue is set to contain an electric substation for Coldwater. The trial court did not err by holding Rule 411 inapplicable.

Consumers also asserts that the trial court erred in its interpretation of MCL 124.3 by concluding that there was no “customer” on the premises at issue in this case, given that when Coldwater purchased the property there was an existing customer that had been receiving electric service from Consumers for more than 20 years. We disagree.

MCL 124.3(2) provides that “[a] municipal corporation shall not render electric delivery service for heat, power, or light to customers outside its corporate limits already receiving the service from another utility unless the serving utility consents in writing.” As explained with regard to Docket No. 315541, MCL 124.3(2) would prohibit Coldwater from providing electric delivery service to customers presently receiving (taking) the service from another utility. MCL 124.3(3) refers us to MCL 460.10y for the definition of “electric delivery service.” MCL 460.10y(12)(a), in turn, defines “delivery service” as “the providing of electric transmission or distribution to a retail customer.” “Customer” is not defined in MCL 124.3. But “customer” is defined in MCL 460.10y. MCL 460.10y(2) states, “For purposes of this subsection, ‘customer’ means the building or facilities served rather than the individual, association, partnership, corporation, governmental body, or any other entity taking service.”

As indicated by Consumers, the definition of customer set forth in MCL 460.10y (2) is the same as the definition of “customer” set forth in Rule 411. Rule 411(1) [Mich Admin Code, R 460.3411(1)] provides, in relevant part:

As used in this rule:

(a) “Customer” means the buildings and facilities served rather than the individual, association, partnership, or corporation served.

However, Consumers contends that the definition of “customer” should be interpreted, for purposes of MCL 124.3, to mean the premises of the buildings and facilities served. Consumers bases this argument on Rule 411(11), which states, “The first utility serving a customer pursuant to these rules is entitled to serve the entire electric load on the premises of that customer even if another utility is closer to a portion of the customer‘s load.” This provision of Rule 411 does not expand the definition of “customer” in Rule 411(1)(a), let alone the definition in MCL 124.3. It is a separate provision that defines the scope of what the first utility may serve. It distinctly states that the utility may serve the premises of the customer—it does not include “premises” within the definition of “customer.”

The decision does not direct otherwise. Consumers states that after , the Rule 411 definition of “customer” is the premises of the buildings and facilities that existed at the time service was established. In context, what the Court actually stated was:

[It is] undisputed that Cherryland was the first utility to provide electric service to buildings and facilities on the Oleson farm. Once Cherryland did so, Rule 411(11) gave it the right to serve the entire electric load on the premises. That right was unaffected by subsequent changes in the “customer,” because the right extends to the “premises” of the “buildings and facilities” that existed at the time service was established. Later destruction of the buildings and facilities on the property did not extinguish that right. [.]

, therefore, was not defining “customer” for purposes of Rule 411 (and was not expanding the definition) but was explaining the parameters of Rule 411(11) and the rights therein.

Under both MCL 124.3 and Rule 411(1)(a), “customer” means the buildings and facilities served. “Building” is defined in The American Heritage Dictionary of the English Language (5th ed) as “[s]omething that is built, as for human habitation; a structure.” “Facilities” is the plural of “facility,” which is defined as something “designed to serve a particular function[.]” Id. Under the relevant definitions, there was no customer already receiving the service from Consumers. According to the evidence, Coldwater purchased the property at a public auction on July 21, 2011. The prior owner of the property had requested that electric service be discontinued to the property (which contained a pole barn) on June 28, 2011. Therefore, at the time Coldwater acquired the property and sought to demolish the pole barn and provide electric service to new buildings, there was no customer (buildings or facilities) already receiving (present tense) the service from Consumers. The trial court did not err in its interpretation of MCL 124.3, nor did it err in deciding there was no “customer” receiving service.

Consumers finally argues that the trial court misinterpreted or failed to apply Rule 411 as interpreted by the Michigan Supreme Court in , and thus erred by allowing Coldwater, a municipal utility, to provide electric service in this case. The same analysis of the case engaged upon and the conclusion reached in Docket No. 315541 apply in this case. The only distinguishing factor in this case is that the property owner and the municipally owned utility are one and the same. This would appear to still favor Coldwater, however, because these roles cannot be separated.

We affirm the trial court‘s grant of summary disposition in favor of Coldwater.

Affirmed.

BORRELLO, P.J., and SERVITTO, J., concurred.

SHAPIRO, J. (concurring). I concur.

There are two separate issues in this case. The initial question is whether Mich Admin Code, R 460.3411, i.e., Michigan Public Service Commission (PSC) Rule 411, as interpreted in ; , bars these plaintiff-municipalities from providing the challenged utility service. If we answer that question in the negative, then we must determine whether MCL 124.3(2) bars the plaintiffs from providing the service.

Defendant Consumers rightly observes that the substantive language in was sweeping and, in that case, it was of no consequence that the utility provider to which the premises owner sought to switch was a municipal power company rather than another PSC-regulated utility. However, the municipalities rightly point out that whatever the substantive interpretation of Rule 411, it cannot be enforced against a party that does not fall within the jurisdiction of the PSC. And the Legislature has not given the PSC jurisdiction over municipal power providers. See MCL 460.6(1) (“The public service commission is vested with complete power and jurisdiction to regulate all public utilities . . . except a municipally owned utility . . . .“). Therefore, I conclude that while Rule 411 bars a power provider from serving a premises previously served by another, the PSC may not order a municipal power provider to comply with Rule 411. In , this problem did not prevent the aggrieved utility from obtaining relief because the premises owner voluntarily subjected itself to the jurisdiction of the PSC and, accordingly, the PSC could order the premises owner to comply with Rule 411. That is not the case here. While it is unclear whether the Supreme Court considered the instant factual scenario when deciding , I do not see how this Court can require a party to comply with an administrative rule promulgated by an administrative body that does not have jurisdiction over it. Since an absence of jurisdiction trumps any substantive interpretation of Rule 411, I would not apply the rule in this case absent a clear directive to do so from the Supreme Court.

By contrast, there is no jurisdictional problem with application of MCL 124.3(2).1 However, the language of this statute differs significantly from that of Rule 411. Rule 411 speaks of “the first utility” to serve the premises, a concept that requires a view to the past and a determination of which utility was the first to provide service to the premises regardless of a later cessation of that service. MCL 124.3(2), on the other hand, speaks to “customers . . . already receiving the service,” a sentence construction that speaks to the present. Therefore, when a customer is not receiving service, it may contract with the provider of its choice even if there was some other entity that was the first utility to serve the premises.

The issues in this case are complex, but I believe the majority‘s conclusions are consistent with the intent of the Legislature and . To the degree they are not, the Legislature, the Supreme Court, or both may take appropriate action.

Notes

1
Mich Admin Code, R 460.3411. MCL 124.3(2) provides that “[a] municipal corporation shall not render electric delivery service for heat, power, or light to customers outside its corporate limits already receiving the service from another utility unless the serving utility consents in writing.”
2
“We consult a lay dictionary when defining common words or phrases that lack a unique legal meaning.” ; .
3
Mich Admin Code, R 460.3102(1).
4
See MCL 460.6.
Read the detailed case summary