20031103Final Order No 29359.pdf

Office of the Secretary
Service Date
November 3, 2003
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF UNITED WATER
IDAHO'S TARIFF ADVICE TO INCREASE
CUSTOMER RATES TO RECOVER THE CITY
OF BOISE'S 4% FRANCHISE FEE.
CASE NO. UWI-O3-
ORDER NO. 29359
In August 2003 United Water Idaho filed a tariff advice requesting a revision to its
Tariff Schedule 8. In Tariff Schedule No., Sheet lOB, United Water proposed to recover from
its customers the municipal franchise fee imposed by the City of Boise. More specifically, the
proposed tariff revision reflects an increase in the City of Boise s franchise fee from 3% to 4%.
The Company requested an effective date of October 1 , 2003.
At our August 18, 2003 public decision meeting, the Commission "approved" the
tariff revision as part of our Consent Agenda for the meeting. On September 12, 2003, the
Commission Staff asked the Commission to reconsider this matter and two issues in particular
one procedural and one substantive. First, should the Staff have recommended and should the
Commission have "approved" this tariff revision, or should the Commission have simply
accepted for filing" the revised tariff sheet. Second, Staff questioned whether ratepayers should
be obligated to pay the increased 1 % franchise fee.
Staff shared its concerns with representatives of United Water and the City of Boise.
On September 17, the Staff and United Water asked the Commission to postpone reconsideration
of this matter so that the parties could engage in further discussions and provide the Staff with
pertinent documents. Following these discussions, United Water and the City both submitted
letters responding to the Staffs substantive issue. The Commission took-up this matter at our
September 29 public decision meeting. Having reviewed the Staff s memorandum and the two
responses, we issue this Order.
THE COMMISSION'S PRIOR ACTION
On August 6, 2003 , United Water filed a tariff advice accompanied by "proposed
revision to United Water Idaho s Schedule 8, Sheet lOB." Tariff Advice Letter (emphasis
added). United's Tariff Sheet lOB sets forth the municipal franchise fees "imposed on the
Company by municipal corporations and billed separately by the Company to its customers
ORDER NO. 29359
within the corporate limits of a municipality.Schedule 8, Sheet lOB. The proposed tariff
revision reflects an increase in the City of Boise s franchise fee from 3% to 4%. On July 22
2003 , the City adopted Resolution No. 17692 to increase the franchise fee to 4% effective
October 1 , 2003. "(A)ccordingly, an effective date of this tariff change of October 1 , 2003 is
requested" by the Company. Tariff Advice Letter.
After reviewing the proposed tariff reVlSlon, the Staff prepared an ex parte
recommendation pursuant to procedural Rule 134., IDAPA 31.01.01.134.03. In its decision
memorandum, the Staff recommended that the tariff revision "be approved with an effective date
of October 1 , 2003 as proposed by the Company." This matter was subsequently placed on the
Commission s next decision meeting agenda as "Consent Agenda" item No.5. At the public
decision meeting of August 18, there was no discussion about any of the items on the Consent
Agenda. Subsequently, a vote was taken and the motion to approve the items on the Consent
Agenda - including the 4% franchise fee - was passed unanimously.
BACKGROUND
As mentioned above, the Staff has asked the Commission to review our actions
regarding United Water s Tariff Advice increasing the City s franchise fee from 3% to 4%. To
recover the franchise fee, United Water in turn charges its Boise customers the fee as a
surcharge.United Water and the City do not disagree with the Staffs recommendation
regarding the procedural issue. However, they do dispute the Staffs assertions that question the
validity of the 1 % increase in the franchise fee. To facilitate our review of the procedural and
substantive issues, the Staffs memorandum discussed the franchise fee statutes, the City s 1995
franchise fee Ordinance, a brief history of the City-United Water negotiations that preceded the
1995 Ordinance, and the Commission procedures for recording the franchise fees assessed by
municipalities.
A. The Franchise Fee Statute
In February 1995 , the Idaho Legislature considered a bill to regulate municipal
franchise fees and cap such fees at 3%. House Bill (HB) 329 was introduced in the State Affairs
Committee on February 28, 1995 and is codified at Idaho Code 99 50-329 and 50-329A. Among
other things, the title of the Bill stated that it was "to provide restrictions and limitations on (city)
franchise fees." 1995 Idaho Sess. Laws, Ch. 226. As noted in the "Statement of Purpose" which
accompanied HB 329
ORDER NO. 29359
This legislation limits the right of cities to impose franchise fees on electric
gas and water utilities. Currently many cities claim the right to impose fees
without limit for the franchises they grant to these utilities. This bill clarifies
that a city may assess a franchise fee which does not exceed one percent but
that no franchise fee may exceed that amount without the agreement of the
utility. . .. In no case shall franchise fees exceed three percent.
Statement of Purpose, HB 329 (1995) (emphasis added).
HB 329 amended Idaho Code 9 50-329 (Franchise Ordinances - Regulations) and
added a new Section 50-329A to the Code. In pertainent part, the new section provides:
50-329A. FRANCHISE ORDINANCES -- FEES. (1) This section applies to
franchises granted by cities to electric, natural gas and water public utilities
. . . which provide service to customers in Idaho and which shall also be
known as "public service providers for purposes of this section.
Notwithstanding any other provision of law to the contrary, cities may
include franchise fees in franchises granted to public service providers only
in accordance with the following terms and conditions
(a) Franchise fees assessed by cities upon a public service provider
shall not exceed one percent (1 %) of the public service provider s "gross
revenues" received within the city without the consent of the public service
provider or the approval of a majority of voters of the city voting on the
question at an election held in accordance with chapter 4, title 50, Idaho
Code. In no case shall the franchise fee exceed three percent (3%), unless
greater franchise fee is being paid under an existing franchise agreement, in
which case the franchise agreement may be renewed at up to the greater
percentage, with the consent of the public service provider or the approval of
a majority of voters of the city voting on the question at an election held in
accordance with chapter 4, title 50, Idaho Code. . . .
(b) Franchise fees shall be collected by the public service provider
from its customers within the city, by assessing the franchise fee percentage
on the amounts billed to customers for the sale, transmission and/or
distribution of electricity, natural gas or water by the public service provider
within the city. The franchise fee shall be separately itemized on the public
service provider s billings to customers.
(2) This section shall not affect franchise agreements which are
executed and agreed to by cities and public service providers with an
effective date prior to the effective date of this act.
Idaho Code 9 50-329A (emphasis added). The Minutes of the House State Affairs Committee
reflect that Boise City s representative "spoke in support of (HB 329), stating it is the result of
ORDER NO. 29359
compromise on both sides." Committee Minutes (Feb. 28, 1995); Senate Minutes (March 10
1995).
HB 329 also contained an emergency enactment clause. 1995 Sess. Laws Ch. 226, 9
3. Instead of becoming effective on July 1 pursuant to Idaho Code 9 67-510 and Article III, 9 22
of the Idaho Constitution, the Bill becomes effective when it is signed by the Governor. The Bill
passed both houses of the Legislature without a dissenting vote and was signed by the Governor
on March 20, 1995.
B. Boise s Franchise Ordinances
The City and United Water s predecessor Boise Water (hereinafter United Water)
entered into a franchise agreement in 1978 that set a 3% franchise fee payable to the City. This
franchise agreement was to expire on November 1 , 1993. In October 1993 the City and United
began negotiating a new franchise agreement. Because the existing franchise agreement would
soon expire on November 1 , the City passed Resolution No. 12508 extending the 1978 franchise
for 120 days, or to approximately March 1 , 1994.
In their continuing negotiations, the City initially considered increasing the 3%
franchise fee to 5%, but subsequently proposed a graduated increase "to 4% in 1994 and 5% in
1995. That (increase) would be in keeping with the approach used in raising the franchise fees
for the cable companies." City Engineer s memo dated Jan. 3 , 1994. United objected to the "
to 4% and the 4% to 5%" fee increases but the City insisted that the increases be included in the
franchise agreement. City Letter to United's Ben Heppler dated Sept. 19, 1994. As negotiations
continued, the City again extended the 1978 franchise agreement by Resolution to November 1
1994. Ordinance No. 5564 dated Aug. 23, 1994.
In a memo dated November 28, 1994, the City Engineer observed that the City and
United had reached "consensus" on most of the terms for a new franchise agreement. These
terms included a provision in Section 7 of the draft franchise ordinance to increase the fee to 4%
upon passage of a Council Resolution and a further increase to 5% "when at least two years have
elapsed at the 4% rate.City Engineer s Memo at pp. 1-2. Another negotiated term was the
length of the agreement. The 1978 franchise agreement was for 15 years but the City wanted a
shorter term and suggested 8 years. The Company requested 10 years. Id.
Despite these continuing negotiations, the City did not extend the franchise
agreement beyond November 1 , 1994. In the November 28 , 1994 memorandum and another
ORDER NO. 29359
memo dated January 10, 1995, the City Engineer states that the 1978 franchise fee was extended
to November 1 , 1994. Although there was no franchise agreement past November 1 , United
purportedly reported to the Staff that it collected the 3% franchise fee from customers.
With the general consensus on terms, the City unexpectedly determined that the
franchise was subject to the public bidding process. Accordingly, the City issued a public
request for bids for a non-exclusive water system franchise on February 23 , 1995. Bids were to
be returned no later than March 1 , 1995. The City s bid request anticipated that bid/ordinance
negotiations would take place on or about April 11 , 1995 and Council approval on April 18
1995.
In preparation for the bid, the City advised United in a letter dated February 24
1995, that the City would be willing to consider a longer term for the franchise agreement. The
City and Company subsequently settled on 21 years - presumably so that Capitol Water and
United Water s Franchise Agreements would both run until 2016. Attached to this letter was
another draft of the proposed franchise ordinance dated January 5 , 1995 that, for the first time
included language making the ordinance retroactive to November 1 , 1994. The draft indicated
the following changes (deletion by strike out and additions by underline):
Section 8. Duration and Acceptance of Franchise. This Franchise and the
rights, privileges and authority hereby granted will take effect and be in full
force and effect as of November 1, 1994 from and after final passage hereof
as pro'v'ided by law and shall continue in full force and effect for a term of
twenty-one (21)years. . . .
City Engineer Letter to Heppler dated Feb. 24, 1995 , Atch. p. 8. The City Engineer s copy of
this letter provided to the Staff also contains a handwritten, underlined notation that "law could
change.
The City and the utility were still negotiating when HB 329 was introduced in the
1995 Legislature. United submitted its bid to the City on February 28, 1995 - the same day that
HB 329 was introduced in the House State Affairs Committee. After nearly 15 months of
negotiations, the first reading of the franchise ordinance was scheduled for March 7, 1995.
On April 11 , 1995, the City of Boise passed Ordinance No. 5623 granting United
Water a nonexclusive franchise to operate within the City of Boise. The franchise fee schedule
is set out in Section 7. In pertinent part, this Section contains the consensus terms and requires
United Water to
ORDER NO. 29359
pay to the CITY during each month of this Franchise an amount equal to
three percent (3%) of the gross operating revenues during the preceding
month from the sale of water and water services within the corporate limits of
the CITY. The three percent franchise rate may be changed to four percent
(4%) upon passage of a resolution by the Boise City Council.The Boise City
Council may pass a second resolution during the term of this Franchise
Agreement raising the franchise rate to five percent (5%) provided twenty-
four (24) months have passed since passage of the prior resolution. Each
payment shall be made monthly to the Boise City Accounting Department
with payments due on
...
Ugust 1, November 1 , of each franchise yoar the 15th
of each month following each billing period. Such payments will be based
upon actual revenues as recorded on (United's) Records. This payment shall
be in addition to any other fee, tax or payment owed to the CITY; and shall
be in addition to any other permit fee or charges which (United) is obligated
to pay; pursuant to the provisions of ordinances and statutes now in existence
or hereinafter enacted.
Ordinance No. 5623 , 9 7 (underline emphasis added and strikeout language original).
Staff also asserted that other sections of the Ordinance are relevant to our review.
These additional sections are set out below.
Section 8. Duration and Acceptance of Franchise This Franchise and the
rights, privileges and authority hereby granted will be in full force and effect
as of November 1, 1994 and shall continue in full force and effect for a term
of twenty-one (21) years provided that within thirty (30) days after the date
of the passage of this Ordinance rUnitedl shall file with the City Clerk, its
unconditional acceptance of this franchise and promise to comply with and
abide by its provisions, terms and conditions. Such acceptance and promise
shall be in writing and duly executed and sworn to be or on behalf
(United) before a notary public or other officer authorized by law to
administer oaths. (United) shall pay all costs and expenses associated with
the publication of this Franchise Agreement Ordinance as required.
Section 12. Severability. The provisions of this Ordinance are hereby
declared separable and if any section, clause or phrase hereof is hereafter
declared invalid and unconstitutional, the same shall not affect the validity of
the remaining portions of this Ordinance.
Section 13. This Ordinance shall be in full force and effect after its passage,
approval and publication and retroactively to November 1, 1994
Ordinance No. 5623 , 99 8, 12-13 (emphasis added).
ORDER NO. 29359
To summarize the timeline of events, the twice-extended 1978 franchise Ordinance
expired on November 1 , 1994. Idaho Code 9 50-329A capping franchise fees at 3% became
effective on March 20, 1995. Finally, the new franchise fee Ordinance (retroactive to
November 1 , 1994) was passed by the City Council and approved by the Mayor on April 11
1995. Also on April 11 , the Council and Mayor approved Resolution No. 13326 that authorized
a summary of the franchise Ordinance to be published in the Idaho Statesman. Thus, the
franchise Ordinance was adopted by the City 22 days after the enactment of the 3% franchise fee
cap in Idaho Code 9 50-329A and was retroactive to November 1 , 1994 - the date when the last
extension to the 1978 franchise expired.
C. Commission Procedures to Record the Franchise Fees
After enactment of HB 329, Idaho Power Company submitted a tariff advice
containing necessary tariff revisions "to implement the recently enacted Legislation (H.B. 329).
Tariff Advice No. 95-03. More specifically, Idaho Power sought approval of a new tariff
Schedule 95 which would list the various franchise fees imposed by cities within Idaho Power
service area in Idaho. The Company s transmittal letter also asked for procedural guidance
regarding the implementation and collection of franchise fees. Although Idaho Code 9 50-
329A(I)(b) provides that the franchise fee shall be separately itemized on the utility customer
bill, the Company wanted to know whether franchise fees should be listed in the utility
tariffs/schedules. Typically, a utility may only charge those rates contained in its tariffs and
schedules approved by the Commission. Idaho Code 9 61-313.
On June 22, 1995, the Commission Staff recommended that utilities file tariffadvices
identifying the franchise fees imposed by each municipality. Although Idaho Code 9 50-329A is
self-executing," i., it specifies that a franchise fee will be individually listed on a customer
bill, the Commission Staff (and presumably the utilities) wanted to know which cities imposed
franchise fees and the amount of the fees. By including the franchise fee in the utility's tariffs
the utility s service representatives and the Staff could readily refer to the fee schedule when
answering inquiries about franchise fees. Recording the franchise fees would simply use the
existing tariff mechanism. As is the case with Title 62 tariffs/price lists, franchise fee tariffs
were to be "accepted for filing" to distinguish that the Commission was not actually approving
such fees.
ORDER NO. 29359
QUESTIONS PRESENTED
A. Procedural Issue-Approve " or "Acceptfor Filing
1. Staff.As previously mentioned, the Staff recommended that the Commission
reconsider its "approval" of the increase in the Boise City franchise fee. The Staff made two
recommendations. First, the Staff recommended that the Commission confirm that tariff advices
containing only franchise fees are not generally subject to the Commission s approval. Rather
than submit the franchise fee tariffs for approval, Staff should recommend that such tariff
advices be "accepted for filing." This would be consistent with the Commission s 1995 policy.
For example, when United Water s Schedule 8, Sheet lOB was revised to reflect the City of
Eagle s 1 % franchise fee effective May 15 , 2003 , the Commission noted that this tariff sheet was
accepted for filing.
Second, Staff suggested that the Commission clarify and/or correct its minutes from
the August 18 decision meeting to remove any doubt that it did not and does not approve of
franchise fees. As the Commission has often stated, accepting price lists or tariffs for filing is an
administerial function "that should not and does not imply Commission approval" of a specific
fee or rate. Order Nos. 25933 at 14; 27100 at 57; 28427 at 4-
2. United Water.United Water agreed with the Staffs recommendation that utility
tariff sheet "specifying franchise fees may be 'accepted for filing' rather than ' approved. ",
United Water Response at 1. The Company asserted that a municipal franchise fee "is not a rate
or charge for utility service that necessarily requires commission approval." Id. The Company
noted that filing franchise fees with the Commission provides useful information when the
Commission receives billing inquiries from utility customers. Both United Water and the City
recommended that the Company s tariff schedule be "accepted for filing.Id. at 3; City
Response at 2.
B. The Validity of the Franchise Ordinance
1. Staff.In reviewing United Water s Tariff Advice, Staff questioned the validity of
the City s franchise fee Ordinance. Staff suggested that the Commission consider initiating a
formal investigation to examine the increase in the franchise fee.l In analyzing the validity of
1 The Staff also questioned whether it was prudent for United Water to agree to the retroactive Ordinance after the
Legislature had passed Idaho Code ~ 50-329A limiting franchise fees to 3%. The Commission does not address the
merits of this second issue.
ORDER NO. 29359
the City s franchise fee Ordinance No. 5623, the Staff first examined whether the Ordinance is
exempt from the 3% cap in Idaho Code 9 50-329A. By its terms Idaho Code 9 50-329A states
that cities may impose a franchise fee "only in accordance with the following terms and
conditions: . . . In no case shall the franchise fee exceed three percent (3%). . . ." However, this
statute contains an exception clause in paragraph (2). Paragraph 2 states that this statute "shall
not affect franchise agreements which are executed and agreed to by cities and public service
providers with an effective date prior to the effective date of this" statute. Idaho Code 9 50-
329A(2).
Staff next examined the related question concerning the retroactivity of the franchise
Ordinance. Idaho Code 9 73-101 provides "No part of these compiled laws (i., the Idaho
Code) is retroactive, unless expressly so declared." Thus, in Idaho "a statute is not applied
retroactively unless there is 'clear legislative intent to that effect.'" Gailey v. Jerome County,
113 Idaho 430, 432, 745 P.2d 1051 1053 (1987) quoting City of Garden City v. City of Boise
104 Idaho 512, 515, 660 P.2d 1355, 1358 (1983). Courts in Idaho apply the same principles in
construing municipal ordinances as they do in the construction of statutes. Cunningham v. City
of Twin Falls 125 Idaho 776, 874 P.2d 587 (Ct. App. 1994). Thus, Staff questioned whether the
exception clause in Idaho Code 9 50-329A(2) represents clear legislative intent that cities may
enact franchise ordinances retroactively.
If Idaho Code 9 50-329A does not represent clear intent to allow retroactivity, Staff
next scrutinized whether other statutes might authorize the City to enact franchises retroactively.
Idaho Code 9 50-329 provides that "No ordinance granting the franchise in any city shall be
passed on the day of its introduction, nor for thirty (30) days thereafter. .
.. .. .
No franchise
shall be created or granted by the city council otherwise then by ordinance.This portion of
Section 50-329 was enacted and effective before the March 1995 amendments contained in HB
329.
Staff also asserted that Idaho Code 9 50-901 may be pertinent. This statute requires
all ordinances of a general nature, unless otherwise required law, shall, before they take effect
. . . (be published) in at least one (1) issue of the official newspaper of the city. . ..Staff
questioned how a franchise ordinance that cannot be passed until a minimum of 30 days after its
ORDER NO. 29359
introduction and cannot "take effect" until it is published, can be made effective retroactive to
November 1 , 1994.
Finally, the Staff questioned whether Article XI, 9 12 of the Idaho Constitution
prohibits the retroactive effect of the franchise fee Ordinance. This constitutional provision
provides that the Legislature "shall pass no law. . . which imposes on the people of any county
or municipal subdivision of the state, a new liability in respect to transactions or considerations
already passed." As previously mentioned, Staff reported that United Water disclosed that it
collected the 3% franchise fee between the period of November 1 , 1994 and the passage of the
Ordinance on April 11, 1995.
The Idaho Supreme Court addressed this constitutional provision in Butler v. City of
Blackfoot 98 Idaho 854, 574 P.2d 542 (1978). In that case, the City of Blackfoot attempted to
collect the expenses of various city improvements and beautification costs that arose prior to the
creation of a local improvement district (LID) as part of the LID costs. One argument presented
by the City was that these pre-LID costs may be appropriately included in the LID costs (and
ultimately collected from property owners) because the Legislature subsequently enacted a
Session Law that purportedly ratified and validated any previously defective LID assessments
against property owners. 1976 Sess. Law, Ch. 160, 9 3; Butler 98 Idaho at 858, 574 P.2d at 546.
In other words, the City claimed the Session Law "cured" or validated its attempt to collect the
pre-LID costs as part of the LID.
The Court held the Session Law that purportedly validated the collection of the
assessments, and specifically the costs prior to the creation ofthe LID, was prohibited by Article
, 9 12. 98 Idaho at 859, 574 P.2d at 547. The Court stated Article XI, 9 12 "not only prohibits
retroactive legislation in appropriate cases, but also prohibits the imposition of laws imposing
new pecuniary liability 'in respect to transactions or considerations already passed.
'"
Id. Staff
suggested the retroactivity of the City s Ordinance that imposed franchise fees for transactions
(United Water s bills) already passed and rendered might be prohibited by Article XI, 9 12.
2 In the City's Resolution No. 13326 approving the newspaper summary of the franchise fee Ordinance the Staff
noted that "Idaho Code 50-329 and 50-901 require that ordinances granting franchises be published in the Idaho
Statesman after approval by the Council and prior to taking effect.(Emphasis added). The summary of the
Ordinance states that the "effective date of the Ordinance is the date of its passage, approval and publication.
There is no mention in the summary that the Ordinance is retroactive.
ORDER NO. 29359
2. The City and United Water Responses The City characterized the Staff s
analysis as essentially inviting the Commission to review an eight-year old franchise Ordinance.
The City maintained that the Staff has not presented "a complete picture of the events giving rise
to the franchise agreement and the interplay of the franchise agreement with the passage of Idaho
Code Section 50-329A." City Response at 1. The City insisted that if the Commission were to
initiate an investigation the "legality of the legislative procedures followed in the passage of the
City s. . . franchise ordinance would be fully supported.Id.
United Water and the City also raised a more fundamental issue. They both argued
that the Commission is not the appropriate forum for deciding whether the Boise City Ordinance
is invalid. They asserted that the Commission is an entity with a limited jurisdiction and an
examination of the City s Ordinance would exercise judicial functions normally reserved for the
courts. United Water at 1; City at 1-2. Although United Water recognized that the Commission
is a quasi-judicial agency, it argued the Commission should refrain from construing the statutes
in the Idaho Municipal Code and exploring the laws of retroactivity. United Water stated while
the Staff Memorandum raises interesting questions on these topics, they are questions for a
court to decide, not the Commission." United Water at
In conclusion, both the City and United Water request the tariff advice be "accepted
for filing" and that the Commission "not express any opinion - favorable or unfavorable -
regarding the validity of the Boise City ordinance." United Water at
D ISCUSSI
We first address the procedural issue raised by the Staff. As the Staff noted, the
Commission usually does not "approve" franchise fees because these fees are established by
municipalities. Although the Commission does not approve franchise fees, we encourage
utilities to record franchise fees in an appropriate tariff schedule. Because franchise fees
routinely appear on utility bills pursuant to Idaho Code 9 50-329A, utility service representatives
and Staff members should be made aware of the various franchise fees enacted by municipalities.
Having a franchise fee delineated in a tariff schedule allows the Consumer Staff and the utility to
answer billing or franchise fee inquiries from customers.
Because the Commission does not establish franchise fees, we believe that it is
appropriate to mark these tariff schedules as "accepted for filing" to distinguish this
administrative activity from the Commission s "approval" of rates and charges pursuant to Idaho
ORDER NO. 29359
Code 9961-301, 61-502, 61-503, 61-622, and 61-623. As we have noted in other cases, price
lists or tariff schedules "accepted for filing" is an administrative function "that should not and
does not imply Commission approval" of a specific fee or rate. Order Nos. 25933 at 14; 27100
at 57; 28427 at 4-6. Consequently, the minutes of our August 18 public decision meeting shall
be modified to reflect that United Water s revision to its Schedule 8, Sheet lOB is "accepted for
filing" as conditioned below. United's Tariff Sheet lOB shall be effective on October 1 2003.
Turning to the substantive issue, we believe the Staff has raised significant questions
regarding the validity of the City s franchise fee and the 1 % increase. The Staff suggests that the
Commission initiate a formal inquiry into this matter. A formal investigation would allow us to
develop a record and allow interested parties to offer evidence and arguments. Although our
record is limited at this point, there are several observations that are appropriate.
First, it is clear from the plain reading of Idaho Code 9 50-329A and its legislative
history that the Legislature intended franchise fees not exceed 3% as the general rule. Our
recollection of circumstances surrounding passage of HB 329 was that several municipalities
were contemplating the implementation of franchise fees. In order to create a uniform franchise
structure, the Legislature passed 50-329A.Second, it is also apparent that the Legislature
intended this statute to become effective immediately by attaching an emergency clause to House
Bill 329. Finally, it also appears that the City s franchise fee Ordinance was intended to be
retroactive to the time when the 1978 franchise fee lapsed on November 1 , 1994. Thus, we are
confronted with two primary questions: (1) Does Idaho Code 9 50-329A or some other law
permit the City to make its franchise ordinance effective retroactively prior to the enactment of
HB 329; and (2) is the franchise fee ordinance unconstitutional pursuant to Article XI, Section
12?
Despite these intriguing questions, we decline to initiate an investigation into this
matter. Although the Public Utilities Law vests the Commission with authority to investigate
matters affecting utilities and enforce provisions of the constitution and statutes of this state
affecting public utilities, we find that the substantive issues presented here are best resolved by a
court rather than the Commission. Our decision here comports with the Supreme Court'
opinion in Alpert v. Boise Water Corporation 118 Idaho 136, 795 P.2d 295 (1990). In Alpert
several parties asserted that only the Commission has jurisdiction to determine "the validity of
franchise fees paid to the cities by the utilities which are eventually passed onto the consumers
ORDER NO. 29359
and ratepayers." 118 Idaho at 138 795 P.2d at 300. The Court rejected this argument and held
that these issues "are best resolved by the courts.Id. at 118 Idaho at 140 , 795 P.2d at 302.
Our decision to refrain from investigating the substantive issues raised by the Staff
does not resolve these questions. We believe these questions should be addressed and answered
by a court oflaw. Consequently, it is appropriate to direct United Water to initiate a case in a
court of competent jurisdiction to resolve these questions. Although we have accepted United
Water s tariff advice for filing, we put the Company on notice that the 1% increase effective
October 1 2003 is subject to refund if a court invalidates the Ordinance or franchise fee increase.
United Water shall provide the Commission with the Court's opinion within twelve (12) months
from the date of this Order. During this period, the Company shall maintain an accounting of the
1 % increase in the franchise fee.
ORDER
IT IS HEREBY ORDERED that United Water Idaho s Schedule No., Sheet lOB
that reflects an increase in the City of Boise s franchise fee from 3% to 4% is "accepted for
filing" effective October 1 2003 as conditioned in this Order.
IT IS FURTHER ORDERED that United Water seek a Court decision to determine
whether the City s Ordinance No. 5623 and the 1 % franchise fee increase are legally valid.
IT IS FURTHER ORDERED that the 1% increase is subject to refund by United
Water until such time as the Company provides the Commission with judicial confirmation
addressing the validity of the City s Ordinance and franchise fee increase. United Water shall
file a copy of the Court's opinion within twelve (12) months ofthe date of this Order. Ifa court
action is not initiated or a court invalidates the Ordinance or fee increase, the Commission shall
decide in a subsequent proceeding how the refund amount will be returned to customers.
THIS IS A FINAL ORDER. Any person interested in this Order (or in issues finally
decided by this Order) or in interlocutory Orders previously issued in this Case
No. UWI-03-1 may petition for reconsideration within twenty-one (21) days of the service
date of this Order with regard to any matter decided in this Order or in interlocutory Orders
previously issued in this Case No. UWI-03-1. Within seven (7) days after any person has
petitioned for reconsideration, any other person may cross-petition for reconsideration. See
Idaho Code 9 61-626.
ORDER NO. 29359
DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this
t-I..
(J
" ""'"
day of Oetaaef 2003.
PAUL KJELL ER, PRESIDENT
JJ~/
MARSHA H. SMITH, COMMISSIONER
ATTEST:
Je D. Jewell
Commission Secretary
vldlO:UWIWO301 dh
ORDER NO. 29359