MOONGATE WATER COMPANY, INC., а New Mexico Public Utility, Plaintiff-Petitioner, v. CITY OF LAS CRUCES, Defendant-Respondent.
Docket No. 33,182
IN THE SUPREME COURT OF THE STATE OF NEW MEXICO
May 9, 2013
Opinion Number: 2013-NMSC-018
Robert E. Robles, District Judge
ORIGINAL PROCEEDING ON CERTIORARI
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
OPINION
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 undеveloped 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 cоmpensation 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),
{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 damages as a result of the taking or inverse condemnation to the extent that damages could be proven. The district court held a trial on the issue of damages and ultimately concluded that Moongate had failed to prove damages; therefore, none were awarded.
{4} Moongate appealed to the Court of Appeals 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 court‘s finding that Mоongate 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 the PRC; (2) the only way thаt 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. Statutory 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 policy making 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
{8} However, with two exceptions, municipalities are not subject to the PUA. Morningstar Water Users Ass‘n v. N.M. Pub. Util. Comm‘n, 120 N.M. 579, 588, 904 P.2d 28, 37 (1995). The first exception that would bring a municipality under the PRC‘s authority is set forth in
{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 rendеring 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 such 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 municipalities not otherwise subject to the PUA when a municipality invades a certificated area. However, this section still does not resolve the problem in the present case, since Subsection C provides that “[f]or purposes of this section, ‘municipality’ means any municipality that has a population of more than two hundred thousand.”
{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 parity 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 agree with the Court of Appeals’ discussion of this particular statutory lаnguage. 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 arguеd that the municipality was encroaching on its service area and sought protection under the PUA by filing a complaint with the PRC. Id. at 582, 904 P.2d at 31. We held that the water users’ association could not invoke the protections set forth in
{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 nоt 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 resources.
The Court cites
B. LOSS OF AN ABSTRACT RIGHT TO SERVE IS NOT A COMPENSABLE TAKING
{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 exclusive service rights as against Las Cruces. We disagree with the district court‘s conclusion аnd 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 lаnd, 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] рroperty.” 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).
{20} The district court found that in at least some of the certificated area, “[a]t most, Moongate lost only a few potential residential water customers as a rеsult 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 production 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 assets 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, Moongate could have legitimately argued that its investment in those assеts 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 property that requires just compensation—it does not point tо any tangible asset that has been affected by Las Cruces’ actions. Therefore, we cannot conclude that Las Cruces has engaged in a taking, and we hold that in the absence of any proof of tangible loss—i.e., physical taking or stranded costs—a public utility is not entitled to just compensation when a municipality lawfully exercises its right to serve in the public utility‘s certificated area.
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
Topic Index for Moongate Water Co., Inc. v. City of Las Cruces, No. 33,182
APPEAL AND ERROR
Standard of Review
CONSTITUTIONAL LAW
Taking Without Compensation
GOVERNMENT
Municipalities
Regulatory Authority
Water and Waste Systems
PUBLIC UTILITIES AND COMMUNICATIONS
Public Utilities, General
STATUTES
Interpretation
Legislative Intent