CITY OF LINCOLN, NEBRASKA, a municipal corporation, ET AL., APPELLANTS, v. NEBRASKA PUBLIC POWER DISTRICT ET AL., APPELLEES.
No. 39220
Supreme Court of Nebraska
March 28, 1974
216 N. W. 2d 722
CLINTON, J.
IN RE JOINT APPLICATION OF THE NEBRASKA PUBLIC POWER DISTRICT AND NORRIS PUBLIC POWER DISTRICT REQUESTING APPROVAL OF A JOINT APPLICATION OF WHOLESALE SERVICE AREA AGREEMENT NUMBER 3.
Barlow, Watson & Johnson and Crosby, Guenzel, Davis, Kessner & Kuester, for appellees.
Mattson, Ricketts, Davies, Stewart & Calkins, for amicus curiae.
Heard before WHITE, C. J., SPENCER, BOSLAUGH, McCOWN, NEWTON, and CLINTON, JJ., and HASTINGS, District Judge.
This is an appeal from an action of the Nebraska Power Review Board approving upon the joint application of the Nebraska Public Power District and Norris Public Power District an agreement between the two districts limiting the areas in which and the present and future customers to whom the respective districts would furnish electrical energy at wholesale. The agreement was entered into pursuant to the provisions of Laws 1971, L.B. 349, now sections
Under the terms of the agreement Nebraska promised to limit its wholesale service in Lancaster, Gage, Saline, Jefferson, and Thayer Counties to 31 specifically named municipal electric systems which include the three appellants. Norris agreed to limit its service to the named counties excluding the specifically named municipalities.
Four issues are presented on this appeal: (1) Whether L.B. 349 is unconstitutional and void because it violates Article X, section 3, of the Nebraska Constitution, and whether it is contrary to the public policy of Nebraska as expressed in other statutes. (2) Whether L.B. 349 is absolutely void because of inherent and irreconcilable conflicts in the statute. (3) Whether L.B. 349 is unconstitutional and void because it delegates legislative power to an administrative body without designating adequate standards governing the delegation. (4) The sufficiency of the evidence to sustain the findings of the board that the statutory criteria for approval of the agreement were met.
We hold the statutes constitutional and affirm the finding of the board.
L.B. 349 provides as follows: “All suppliers of electricity, including public power districts, public power and irrigation districts, municipalities, electric membership associations, and cooperatives, shall have authority to enter into written agreements with each other limiting the areas in which or the customers to whom a party to the agreement shall provide or sell electric
“No supplier shall offer, provide or sell electric energy at wholesale in areas or to customers in violation of any agreement entered into and approved by the Nebraska
Section 3 of the act amended section
Section 4 of the bill amended section
We treat the issues in the order in which we have listed them. (1) Article X, section 3, of the Constitution of Nebraska, provides in part as follows: “The Legislature may by law require all public utilities and common carriers to exchange business through physical connections, joint use, connected service, or otherwise.” The appellants’ argument for unconstitutionality based on the above provision is somewhat abstruse in that they combine it with contentions that L.B. 349 is contrary to public policy because section
We find the appellants’ position is not well taken for two reasons: (a) The constitutional provision in question is couched in permissive language. It authorizes the Legislature to act, but does not compel it. (b) The interwoven arguments founded upon alleged conflicting statements of public policy, policies against monopoly, and ambiguities concerning which no issue presently
(2) The appellants assert there are direct conflicts between the provisions of sections 1 and 2 of L.B. 349 which are not susceptible of resolution by construction and therefore the statute is void. They point to the provision of section 1 which states that the agreement between the suppliers to limit territory and customers shall not be binding upon other suppliers which are not parties to the agreement. It is claimed this conflicts with section 2 which says: “No supplier shall offer, provide or sell electric energy at wholesale in areas or to customers in violation of any agreement entered into and approved by the Nebraska Power Review Board pursuant to section 1 of this act (now
We do not believe there is any irreconcilable conflict between the two sections. It seems fairly apparent to us that the supplier referred to in section 2 is one who is a party to the agreement. One who is not a party to an agreement simply cannot violate it. The legislative discussion during the consideration of the bill confirms our construction. In construing a legislative act, if more than one reasonable construction is possible, that construction which sustains legislation will be adopted. Bodenstedt v. Rickers, 189 Neb. 407, 203 N. W. 2d 110.
(3) Appellants contend the statute is unconstitutional because it delegates legislative power to the board without providing for sufficiently clear standards to guide the exercise of the power. The substance of the pertinent portion of the statute in question is the following:
We do not construe the statute as authorizing the board to act in the absence of any evidence to support a finding that the statutory criteria of reliability of supply and reasonableness of cost have been met. The statute, section
There is another reason why it is clear the Legislature intended that the board must have evidence before it can act. The statute provides for an appeal to this court “in the same manner as appeals are taken from decisions of the State Railway Commission.”
We accordingly construe the statute to require that before the board can make the factual determinations required it must have before it evidence produced by its own investigations or otherwise that will support its fact findings.
Is the criteria of “reasonable cost” a sufficiently definite standard? In 1 Am. Jur. 2d, Administrative Law, § 118, p. 926, we find the following statement: “The policy of the lawmaking body and the standards to guide the administrative agency may be laid down in very broad and general terms which get precision from the technical knowledge or sense and experience of men and thereby become reasonably certain. The purpose of the statute, the requirements it imposes, and the context of a particular provision may show that the broad standard it establishes does not require a construction as comprehensive as the words alone permit and is not so vague and indefinite as to amount to a complete
The Legislature has heretofore delegated to administrative bodies the duty of determining “feasibility” of formation of public power districts and this court has approved the sufficiency of such a standard. State ex rel. Wright v. Lancaster County Rural P. P. Dist., 130 Neb. 677, 266 N. W. 591. In the present context the words “reasonable cost” acquire certainty from the “technical knowledge or sense and experience of men.” It may be that one element of cost of service, namely, return on rate base, may be determined somewhat differently in the case of a utility which is a creature of the Legislature than in the case of one which has stockholders to whom a return must be made. That difference, if it exists, would no doubt lie in the purpose for which the Legislature authorized creation of the utility and in the Legislature‘s policy statement as to rates. That question, of course, is not before us in this case, but we mention it simply because such a difference would not, in our opinion, make the standard of “reasonable cost” uncertain. It would merely require a somewhat different determination on one element of the cost of service. We hold that the statutory provision requiring determination by the board of whether the “proposed agreement or amendment can be reasonably expected to provide a reliable wholesale power supply at a reasonable cost for the area,” is a sufficiently definite standard to guide the board in the exercise of the delegated legislative power of determining the
(4) Does the evidence support the findings of the board that the agreement will provide the affected customers and area with “a reliable wholesale power supply at a reasonable cost“?
The board in this case did not make an investigation of its own, nor introduce any evidence into the record, nor take judicial notice of any fact. The evidence was introduced by the two districts which were parties to the agreement. The deputy general manager of Nebraska testified. He is an electrical engineer by profession and had been employed by Nebraska for 24 years in a number of capacities. He described in considerable detail the utility systems involved, including planned construction, and introduced supporting documentary evidence. He described the arrangements with various customers and potential customers and their energy sources, and gave as his own conclusion that reliable service would be supplied under the agreement.
He testified that Nebraska‘s rates are “a cost of service rate. In other words, the rate structure is so designed that it returns the full cost of the operating of the District.” He then rendered his opinion that the “area covered by this agreement can be provided reliable wholesale power at a reasonable cost.”
Representatives of the appellants, operating personnel rather than counsel, then cross-examined the witness. The cross-examination was, for the most part, directed to matters other than the question of “reasonable cost.”
The general manager of Norris testified. He had been the manager of the district since 1947. He stated that he had heard the Nebraska manager‘s testimony and agreed with it. He had taken part in the negotiations for the agreement. He then testified without further foundation: “Q In your opinion, Mr. Trussell, can the Norris District be reasonably expected to provide a reliable wholesale power supply at a reasonable cost for the wholesale service areas assigned to it in the application that is being heard? A Yes, it can. Q And, in your opinion, can Nebraska District be reasonably expected to provide a reliable wholesale power supply at a reasonable cost for the areas assigned to it in this Wholesale Service Area Agreement? A Yes.” Cross-examination of this witness did not relate to the question of reasonableness of cost nor the foundation for his opinion testimony.
Statements were then made by representatives of the three municipalities. The primary thrust of the statements was that they objected to the agreement solely because it prevented them from buying from Norris in the future should they ever desire to do so. One of these representatives had particular objection to an element in the rate structure in Nebraska referred to as the “blend eliminator.” One of these representatives testified that he was familiar with the Nebraska rate structure but not that of Norris. They introduced no evidence to contradict the conclusions of the witnesses for Nebraska and Norris.
This is a contested case within the meaning of Chapter
Although the opinion testimony of the two witnesses for the contracting parties, especially that of the Norris representative, was minimal on foundation, we cannot say that it was as a matter of law without probative value within the meaning of section
The League of Nebraska Municipalities has filed a brief amicus curiae in this case. That brief, as do those of the appellants, makes strong arguments attacking the wisdom of making municipalities “captive customers” of one power district rather than giving them the option if they wish to bargain with both. The power of the Legislature is plenary. As against the state the districts cannot invoke either the contract clause or the Fourteenth Amendment to the Constitution of the United States. City of O‘Neill v. Consumers Public Power Dist., supra; City of Trenton v. New Jersey, 262 U. S. 182, 43 S. Ct. 534, 67 L. Ed. 937, 29 A. L. R. 1471. The Legislature may any time it wishes undo what the districts have done and which has been approved by the board. The arguments must be directed to the Legislature and not to this court.
AFFIRMED.
SPENCER, J., dissenting.
I respectfully dissent from the majority opinion herein because I am convinced that a fair appraisal of the situation reveals the sole purpose of the agreement between Norris Public Power District and Nebraska Public Power District is to limit competition and institute a captive market. Such application of our statutes is contrary to public policy.
Section
Section
That is, the purpose of these statutes is not to avoid conflict in competition per se, but rather to avoid those particular sorts of conflict and competition which cause costly and unnecessary duplication of facilities and impede the settlement of rate disputes.
In order for any particular application of these statutes to accord with the public policy, it is necessary that such application conform to the purpose of these statutes outlined above. The public policy which serves as the underpinning for such anti-competition agreements is very limited. It is a carefully defined exception to the rule that agreements which limit competition are normally contrary to public policy. Obviously it follows that an application of these statutes which serves to destroy the normal competitive market system, while not furthering the announced purposes of these statutes, is void as contrary to our public policy. In most instances the general public is being adequately served before the implementation of the limiting agree-
A limiting agreement of this sort cannot be held to further the purposes declared by our Legislature unless there is evidence indicating that retention of the present form of service will result in costly and unnecessary duplication of facilities or impede settlement of rate disputes. In this case, the evidence is definitely otherwise. Diversity of sources, an ability to shop around, so to speak, becomes important to a municipality operating its own facility. Only by matching its particular consumption pattern with that of several suppliers can it be assured of the lowest possible cost per unit of power purchased. It is apparent that as each competing source of supply is eliminated the municipality faces a much more difficult task in minimizing the cost of electrical energy to its retail customers.
It is here argued that wholesale agreements actually hold down costs. This definitely is not true in the present situation. In Crete for example, Norris is not allowed to sell to, or buy from, the city even though its lines are already close by, and actually interconnected into the city through the NPPD system. These lines are a necessary length in the power grid rather than a duplication of facilities, and will be utilized whether Crete is able to purchase from Norris or not. It makes little sense to say there is a saving of money when the necessary facilities for purchasing a district‘s power are already in existence and are maintained by the district. It should be noted that this situation is not only common to the city of Crete, but is also found in many other municipalities throughout the state.
Many of the evils that led to the passage of antitrust legislation are present where public power districts have agreed to divide their service areas. Trade area agreements rarely have any purpose other than to suppress
I cannot agree with the majority opinion that there is evidence sufficient to sustain a finding that wholesale power can be supplied to the area at a reasonable cost. Representatives of both districts simply testified by way of conclusion that such would be the case. No sufficient showing was made to sustain that conclusion. The evidence offered in opposition was to the effect that the rates were different, and therefore would have an adverse or different effect, depending upon who the supplier was.
While it is true that an administrative agency can forego some of the stringencies of the rules of evidence, it is not true that it can entirely ignore them when the approval of the agreement is dependent upon a specific finding, and the parties fail to produce evidence to sustain that finding. In Midwest L. C. Co. v. Tri-State L. C. Co. (1967), 182 Neb. 41, 151 N. W. 2d 908, we said: “While an administrative agency may relax the strict rules of evidence in affording a full and fair hearing, it must in every instance require any action taken by it to be supported by competent and relevant evidence.”
In City of Schuyler v. Cornhusker P. P. Dist. (1967), 181 Neb. 704, 150 N. W. 2d 588, we held: “An order of the Nebraska Public Power Review Board which is not sustained by the evidence will be reversed.” See, also, Cornhusker P. P. Dist. v. Loup River P. P. Dist. (1969), 184 Neb. 789, 172 N. W. 2d 235.