MOONGATE WATER COMPANY, INC., a New Mexico Public Utility v. CITY OF LAS CRUCES
Docket No. 33,182
IN THE SUPREME COURT OF THE STATE OF NEW MEXICO
Filing Date: May 9, 2013
ORIGINAL PROCEEDING ON CERTIORARI, Robert E. Robles, District Judge
Plaintiff-Petitioner, v. Defendant-Respondent.
Tucker Law Firm, P.C.
Steven L. Tucker
Santa Fe, NM
William A. Walker, Jr., P.C.
William A. Walker, Jr.
Las Cruces, NM
for Petitioner
Keleher & McLeod, P.A.
W. Spencer Reid
Thomas C. Bird
Kurt Wihl
S. Charles Archuleta
Albuquerque, NM
Marcia B. Driggers
Las Cruces, NM
for Respondent
CHÁVEZ, Justice.
{1} The Public Regulation Commission (PRC) issued Moongate Water Company (Moongate) a certificate of public convenience and necessity (CCN) authorizing Moongate, as a public utility, to provide water to an area located outside the city limits of Las Cruces, New Mexico, which we shall label the “certificated area.” Las Cruces later annexed three undevelopеd tracts of land within Moongate‘s certificated area, and Las Cruces committed itself to provide water to this area despite Moongate‘s CCN. We address two questions in this appeal. First, does Moongate have a right to provide water within the certificated area to the exclusion of Las Cruces? Second, did Las Cruces engage in an unlawful taking of Moongate‘s property entitling Moongate to just compensation when Las Cruces chose to provide water within the certificated area? We answer the first question in the negative because Las Cruces is not subject to the Public Utilities Act (the PUA),
BACKGROUND
{2} In 1983 the PRC issued Moongate, as a public utility, a CCN that was extended in 1984, authorizing Moongate to provide water services in an area which at the time was outside the Las Cruces city limits. Las Cruces, a home-rule municipality, subsequently annexed three undeveloped tracts of land within Moongate‘s certificated area, subdivided the land, and committed itself to provide the subdivisions with municipal water service. Moongate filed a complaint against Las Cruces seeking (1) an injunction and declaratory judgment stating that Moongate was exclusively authorized to serve the three subdivisions, (2) compensation for inverse condemnation of its allegedly exсlusive right to serve the subdivisions, and (3) compensation for a regulatory taking of its alleged exclusive right to serve.
{3} Las Cruces filed a motion for summary judgment on all counts of the complaint, and Moongate filed a memorandum in opposition and cross-motion for summary judgment on the second and third counts (inverse condemnation and regulatory takings issues). The district court granted Moongate‘s motion on the second and third counts, and concluded that because Moongate‘s rights under the CCN were exclusive, Las Cruces was liable for
{4} Moongate appealed to the Court of Aрpeals on the issue of damages. Las Cruces appealed the district court‘s determination that Moongate‘s rights were exclusive and that there had been a taking. The Court of Appeals reversed the district court‘s determination that the CCN guaranteed Moongate exclusive service rights. Moongate Water Co. v. City of Las Cruces, 2012-NMCA-003, ¶ 2, 269 P.3d 1. The Court also concluded that the district court erred in granting summary judgment in Moongate‘s favor because the grant was based on the district сourt‘s finding that Moongate had exclusive service rights under its CCN. Id. ¶ 27. Moongate appealed to this Court and we granted certiorari. Moongate Water Co. v. Las Cruces, 2012-NMCERT-001, 291 P.3d 599.
{5} Moongate argues that (1) its CCN is a “valuable property right[]” and gives it the exclusive right to provide water in the certificated area, and although the PRC cannot regulate municipalities operating outside of the PUA such as Las Cruces, those municipalities cannot override the rights granted to public utilities by thе PRC; (2) the only way that an unregulated municipality may take over or invade a certificated area is to either submit to PRC regulation or effectuate a taking via the power of eminent domain; and (3) by invading Moongate‘s certificated area, Las Cruces has “damaged” Moongate‘s property, thereby effectuating a taking that requires just compensation.
DISCUSSION
{6} This case hinges on the interpretation of various statutes. Statutоry interpretation is an issue of law that we review de novo. Pub. Serv. Co. of N.M. v. N.M. Pub. Util. Comm‘n, 1999-NMSC-040, ¶ 14, 128 N.M. 309, 992 P.2d 860. When this Court construes statutes, “our charge is to determine and give effect to the Legislature‘s intent.” Marbob Energy Corp. v. N.M. Oil Conservation Comm‘n, 2009-NMSC-013, ¶ 9, 146 N.M. 24, 206 P.3d 135. In doing so, we employ canons of statutory construction, and look first to the plain meaning of the statute. Id. We give words their ordinary meaning, and if the statute is clear and unambiguous, we “refrain from further statutory interpretation.” Id. (internal quotation marks and citation omitted).
A. MOONGATE‘S CCN DOES NOT PREVENT LAS CRUCES FROM COMPETING WITH MOONGATE IN ITS CERTIFICATED AREA
{7} The PUA is “a comprehensive regulatory scheme granting the PRC the policymaking authority to plan and coordinate the activities of New Mexico public utilities.” Doña Ana Mut. Domestic Water Consumers Ass‘n v. N.M. Pub. Regulation Comm‘n, 2006-NMSC-032, ¶ 16, 140 N.M. 6, 139 P.3d 166. The PRC has the authority and responsibility to issue CCNs, which must be obtained by public utilities prior to any construction, operation, or extension of any public utility plant or system.
{9} Instead, municipalities are regulated under the provisions of
{10} If Las Cruces were subject to the PUA, the outcome would be clear.
Notwithstanding any other provision of the [PUA], or any provision of the Municipal Code, or any privilege granted under either act, if any municipality that has not elected to come within the terms of the [PUA] . . . constructs or extends or proposes to construct or extend its water or sewer line or system or water pumping station or reservoir into a geographical area described in a [CCN] granted by the [PRC] to a public utility rendering the same type of service, the [PRC], on complaint of the public utility claiming to be injuriously affected thereby, shall, after giving notice to the municipality and affording the municipality an opportunity for a hearing with respect to the issue of whether its water or sewer line, plant or system actually intrudes or will intrude into the area certificated to the public utility, determine whether suсh intrusion has occurred or will occur. If the [PRC] determines such an intrusion has occurred or will occur, the municipality owning or operating the water or sewer utility shall cease and desist from making such construction or extension in the absence of written consent of the public utility involved and approval of the [PRC].
This language clearly describes resolution of disputes between public utilities and
{11} Moongate argues that despite the plain meaning of
A rational basis exists to prohibit intrusion of municipal water or sewer facilities or service into areas in which a public utility furnishes regulated services until that municipality elects to come within the terms of the [PUA], in which event both systems will be brought into рarity of treatment with respect to the [PRC]‘s independent jurisdiction and power to prevent unreasonable interference between competing plants, lines and systems. Without such controls as provided by Section 62-9-1.1 NMSA 1978, the declared policy of the [PUA], the provision of reasonable and proper utility services at fair, just and reasonable rates and the general welfare, business and industry of the state may be frustrated.
{12} We аgree with the Court of Appeals’ discussion of this particular statutory language. See Moongate, 2012-NMCA-003, ¶¶ 18, 20-21. The Legislature expressed a desire to prohibit unreasonable municipal intrusion into territory that is already being served by public utilities, but it failed to enact any operative language, other than
{13} We addressed an analogous situation in Morningstar, 120 N.M. at 581, 904 P.2d at 30, when a municipality extended its water services into territory that had previously been exclusively served by a water users’ association. The water users’ association argued that the municipality was encroaching on its service area and sought protection under the PUA
{14} Moongate has called our attention to the Court of Appeals’ opinion in Fleming v. Town of Silver City, 1999-NMCA-149, ¶ 6, 128 N.M. 295, 992 P.2d 308, which states in dicta that
a municipal water system does not fall within the purview of the PUA except that the regulation of the PUA extends to prohibit a municipality from operating within the service area of a regulated public utility until the municipality exercises its option to subject itself to regulation under the PUA so that both it and the existing utility may be regulated to avoid unreasonable and unnecessary duplication of plant and rеsources.
The Court cites
{15} In short, Moongate‘s CCN grants it exclusive service rights only against utilities that are subject to the PRC‘s authority. Nothing in the PUA suggests that issuing a CCN should allow the PRC to restrict the actions of a municipal utility that would otherwise fall outside of its jurisdiction. We conclude that the PRC‘s authority extends only as far as its ability to regulate, and because it has no ability to regulate Las Cruces, a CCN issued by the PRC has no limiting effect on the city. See S. Union Gas Co. v. N.M. Pub. Util. Comm‘n, 1997-NMSC-056, ¶ 7, 124 N.M. 176, 947 P.2d 133 (“[T]he [PRC] cannot legitimately exercise jurisdiction over [a party] unless [that party] properly falls within the [PRC]‘s statutorily defined jurisdiction.“). The Court of Appeals’ dicta in Fleming is incorrect insofar as it suggests otherwise. Moongate‘s CCN does not prevent a municipality with a population of less than 200,000 from competing with Moongate in its certificated area. We therefore affirm the Court of Appeals to the extent that it сoncluded that “Moongate‘s CCN did not grant [it] exclusive service rights against [Las Cruces‘] water utility.” Moongate, 2012-NMCA-003, ¶ 24.
{16} We now address Moongate‘s regulatory taking claim. Even though Moongate‘s CCN does not prevent Las Cruces from providing service in the certificated area, this does not necessarily preclude the possibility that Las Cruces effectuated a taking in doing so. The district court granted summary judgment in favor of Moongate on the basis that its CCN gave it exсlusive service rights as against Las Cruces. We disagree with the district court‘s conclusion and hold that a taking can occur, even in the absence of a public utility‘s exclusive right to furnish water under a CCN, if the CCN holder can prove that it had established infrastructure and was already serving customers in the area interfered with by the municipality.
{17}
{18} A regulatory taking, which Moongate asserts occurred here, occurs when the government regulates the use of land, but does not condemn it, i.e., take title to the property. Manning v. Mining & Minerals Div., 2006-NMSC-027, ¶ 22, 140 N.M. 528, 144 P.3d 87. “The general rule is that a regulation which imposes a reasonable restriction on the use of private property will not constitute a ‘taking’ of that property if the regulation is (1) reasonably related to a proper purpose and (2) does not unreasonably deprive the property owner of all, or substantially all, of the beneficial use of his [or her] property.” Temple Baptist Church, Inc. v. City of Albuquerque, 98 N.M. 138, 144-45, 646 P.2d 565, 571-72 (1982). If a regulatory taking has occurred, an action lies for inverse condemnation. See Townsend v. State ex rel. State Highway Dep‘t, 117 N.M. 302, 304, 871 P.2d 958, 960 (1994) (action in inverse condemnation is the exclusive remedy when property is taken or damaged for public use by a governmental entity that has failed to pay just compensation or initiate condemnation proceedings).
{19} Municipalities have “the authority to condemn privately operated water . . . facilities for public use.” United Water N.M., Inc. v. N.M. Pub. Util. Comm‘n, 1996-NMSC-007, ¶ 23, 121 N.M. 272, 910 P.2d 906;
{20} The district court found that in at least some of the certificated area, “[a]t most, Moongate lost only a few potentiаl residential water customers as a result of the City‘s annexation . . . and agreement to provide water . . . utility service.” Additionally, the district court found that “Moongate had no infrastructure on any of the three tracts of land and no customers on any of the properties,” and it “had no ownership interest in any of the land[].” The district court also found that “Moongate had no physical assets in the areas in issue, and that no physical asset of any kind was taken by the City from Moongate.” Further, the district court found that “[i]t was undisputed that, absent significant infrastructure improvements, Moongate could not serve . . . the Dos Suenos subdivision,” and the developer had requested that Las Cruces provide utility services to the area. The district court also found that “Moongate has not incurred, and will not incur, any costs to serve the subject subdivisions.” Essentially, the district court found that any lost profits were speculative because they were based on a hypothetical future income stream.
{21} Since there can be no taking of exclusive service rights if the rights are not exclusive as to the party that has allegedly taken them, and the district court‘s findings of fact indicate that Moongate had no tangible assets on the certificated area, the City has not engaged in a taking. If Moongate had proved that it had invested in productiоn capacity to serve the area, built a plant or other infrastructure, and Las Cruces then took over service or began competing in the certificated area, this would be an entirely different issue, which might justify compensation under a stranded assets theory. Indeed, at oral argument, counsel for Las Cruces conceded that there would have been a taking if that had been the situation.
{22} We have defined stranded assеts or stranded costs “as those costs that . . . utilities currently are permitted to recover through their rates but whose recovery may be impeded or prevented by the advent of competition in the industry.” State ex rel. Sandel v. N.M. Pub. Util. Comm‘n, 1999-NMSC-019, ¶ 7, 127 N.M. 272, 980 P.2d 55 (internal quotation marks and citation omitted); see also City of Corpus Christi v. Pub. Util. Comm‘n of Tex., 51 S.W.3d 231, 238 (Tex. 2001) (“[S]tranded costs are investments in or the cost of tangible assets” that it is in the public interest for utilities to recover). For example, if Moongate had proven that Las Cruces’ actions rendered tangible assets worthless, Moongatе could have legitimately argued that its investment in those assets was compromised, and therefore it was entitled to compensation under a stranded assets theory. However, Moongate did not make that argument, and the district court‘s findings of fact and conclusions of law make it clear that Moongate failed to demonstrate any loss at all. Significantly, Moongate itself identifies the alleged “exclusive service rights” as the prоperty that requires just compensation—it
{23} Moongate cites case law from other jurisdictions to support the proposition that a municipality that invades a public utility‘s certificated area has taken property which requires just compensation. Although the authorities relied upon by Moongate are distinguishable, the reasoning and analyses in these cases were useful to this Court in reaching its conclusion. For example, in City of Jackson v. Creston Hills, Inc., 172 So. 2d 215, 217-18, 220 (Miss. 1965), the court held that the city of Jackson had engaged in a taking when it invaded certificated territory where a public utility had established infrastructure (“two deep wells, two submersible pumps, two pressure tanks, water mains, service lines and other sundry property“), id., and was already providing service to customers in the area. Notably, the court found error in the district court‘s decision to value the CCN separately for calculation of damages. Id.. Another example is Delmarva Power & Light Co. v. City of Seaford, 575 A.2d 1089, 1102-03 (Del. 1990), in whiсh the Supreme Court of Delaware held that the city of Seaford could not take customer accounts from a public utility unless just compensation was paid. The municipality began to provide service to two commercial customers which the public utility had served up to that point. Id.. Like City of Jackson, Delmarva supports the proposition that a municipality engages in a taking when actual (rather than potential) customers or infrastructure is invоlved. See Delmarva, 575 A.2d at 1103; City of Jackson, 172 So. 2d at 218. These cases, however, do not support that a taking has occurred when a right to serve has been compromised and no infrastructure or customers were involved.
CONCLUSION
{24} The district court erred in granting summary judgment in favor of Moongate. Therefore, we affirm the Court of Appeals to the extent that it determined that Moongate‘s CCN does not guarantee exclusive service rights against Las Cruces. We also conclude that the loss of an abstract right to serve, without tangible loss, is not compensable as a taking. We remand to the district court to enter judgment for Las Cruces.
{25} IT IS SO ORDERED.
EDWARD L. CHÁVEZ, Justice
WE CONCUR:
PETRA JIMENEZ MAES, Chief Justice
RICHARD C. BOSSON, Justice
CHARLES W. DANIELS, Justice
BARBARA J. VIGIL, Justice