20070831Answer to reconsideration petition.pdf

McDevitt & Miller LLP
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Chas. F. McDevitt
Dean J. (Joe) Miller
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August 31 , 2007
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Jean Jewell, Secretary
Idaho Public Utilities Commission
472 W. Washington St.
Boise, Idaho 83720
Re: Case No. UWI-06-
Dear Ms. Jewell:
Enclosed for filing in the above matter please find the original and seven (7) copies of United
Water Idaho Inc.' s Answer to Petition for Reconsideration.
An additional copy of the document and this letter is included for return to me with your file
stamp thereon.
Very Truly Yours
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DJM/hh
Attach.
ORIGINAL
Dean J. Miller (ISB No. 1968)
McDEVITT & MILLER LLP
420 West Bannock Street
O. BOX 2564-83701
Boise, Idaho 83702
Tel: [phone]
Fax: [phone]
Joe (g) mcdevitt- miller .com
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF UNITED WATER IDAHO INC., TO
AMEND AND REVISE CERTIFICATE OF
CONVENIENCE AND NECESSITY NO 143
ANSWER TO PETITION FOR
RECONSIDERATION
CASE NO. UWI-O6-
COMES NOW United Water Idaho Inc.
, ("
United Water ), pursuant to RP 331.05, and
Answers the City of Eagle s Petition to Reconsider dated August 24, 2007 , as follows, to wit:
INTRODUCTION AND STANDARD OF REVIEW
On August 3 , 2007, the Commission entered its Order No. 30367 (the "Order ) approving
United Water s Application to Amend its Certificate of Public Convenience and Necessity to
provide water service to the Trailhead Community ("Trailhead"
On August 24, 2007 , the City filed a Petition to Reconsider ("Petition ). The Petition
advances two arguments:
The needs of Trailhead are undefined and the Commission did not analyze the capability
of United Water to serve the undefined needs. (Petition, Pg. 3);
The Commission improperly engaged in a legal determination of the City s authority to
provide service. (Petition Pg. 3).
ANSWER TO PETITION FOR RECONSIDERATION -
A Petition for Reconsideration must set forth "specifically the ground or grounds why the
petitioner contends that the order.. .is unreasonable, unlawful, erroneous or not in conformity
with the law . The Petition must contain a
.. .
statement of the nature and quantity of evidence or
argument the petitioner will offer if reconsideration is granted." (RP 331.01).
The City s first argument presents a factual issue of whether the Order is "unreasonable
or "erroneous" and the City s second argument presents a legal issue of whether the Order is
unlawful" or "not in conformity with law." As will be demonstrated herein, the Order is both
reasonable and in conformity with law. Consequently, the Petition should be denied.
ARGUMENT
The Order Assessed the Needs of Trailhead and the Abilitv of United Water to Meet Them
The City s argument that the Commission "did not analyze the capability of the regulated
utility, United Water, to serve clearly defined needs of the development" (Petition Pg. 3), ignores
the plain text of the Order. The Order recites:
This Commission finds that United Water has adequately planned for and has a fully
integrated water system with sufficient and multiple sources of supply and is capable of
providing safe and reliable water service to the 520 acres of Trailhead Community
property located north of Homer Road and outside the City of Eagle s area of impact
boundary. Tr. pp. 22, 24, 61 , 62 , 126. Under the Company s existing line
extension rules, we find that the cost of additional facilities required to serve Trailhead
will be contributed by the developer without refund. Tr. pp. 22 , 23. Any booster stations
and storage reservoirs that may be required will be constructed pursuant to a Special
Facilities Agreement and a developer advance with related refund eligibility. Tr. pp. 84-
86. We find that service to Trailhead by United Water will be in the public interest and
that the same can be provided without adversely affecting the Company s other water
customers
" .
ANSWER TO PETITION FOR RECONSIDERATION -
Based on the record developed at hearing, the Commission made factual findings
necessary to approve United Water s Application. As set forth above the Commission found:
United Water has adequately planned for and has a fully integrated water system with
sufficient and multiple sources of supply and is capable of providing safe and reliable
water service to the 520 acres of the Trailhead Community;
The cost of the additional facilities required to serve Trailhead will be contributed by the
developer without refund;
. Any booster stations and storage reservoirs that may be required will be constructed
pursuant to a Special Facilities Agreement;
Service to Trailhead can be provided without adversely affecting the Company s other
customers.
In light of the Order s specific factual findings, the City s contention that the
Commission did not analyze United Water s ability to serve is unsupported.
The Order s Findin2s Are Supported bv Substantial Evidence
If the City s "failure to analyze" argument is more in the nature of a contention that the
Order s findings are not supported by substantial evidence that, too, is unavailing.
The Order s finding that United Water has sufficient source of supply is supported by the
testimony of Scott Rhead, United Water s Director of Engineering:
Q. Does United Water have a comprehensive approach for planning to meet future
demands?
A. Yes. United Water prepares a Water System Master Plan ("Plan ) which is updated
approximately every five years. The most current version is for the period 2005-2010.
The Plan projects likely demand over a multi-year period and identifies source of supply
resources necessary to meet the demand. The numbers of customers to be added by the
Trailhead development over time are within the planning parameters of the Plan.
ANSWER TO PETITION FOR RECONSIDERATION -
Q. Based on the foregoing discussion, in your professional opinion, does United Water
have adequate source of supply resources to serve the Trailhead development?
A. Yes. In my professional opinion United Water has adequate source of supply
resources to serve the Trailhead development. As the numbers of customers within the
Trailhead development grows over time, that growth is within the growth levels projected
by the Plan." Tr. Pg. 84. See also Tr. Pgs. 22 84.
Testimony provided by Gregory P. Wyatt, United Water s General Manager, supports the
Order s finding that the cost of mainline extensions will be born by the developer without
refund:
Q. Will United Water s existing ratepayers be in anyway burdened by United Water
service to the Trailhead Development?
A. No. As explained in Mr. Rhead's testimony, the additional facilities required to serve
the development consist of extension of a 12 inch mainline from United Water s existing
transmission main through rights of way along Eagle Road. Under United Water s Rules
and Regulations Governing Water Main Extensions the cost of this mainline will be
contributed by the developer without refund from United Water." Tr. Pg. 22.
The Order s finding that booster stations and storage reservoirs will be funded through
Commission approved Special Facilities Agreements is supported by Mr. Rhead's Testimony:
Q. Please describe the cost of responsibility for booster and storage facilities.
A. Under United Water s Rules and Regulations these can be considered Special
Facilities and the developer will be required to execute a Special Facilities Agreement
("SF A"). The standard terms ofthe Commission-approved SFA require the developer to
advance the cost of construction and related costs. The developer becomes eligible for
refunds as customers are connected and are providing new revenue to support the
investment. In this way, United Water s other customers are insulated from speculative
risk." Tr. Pg. 85-86.
Mr. Wyatt s testimony and the Staff Comments also support the Order s finding that
service can be provided to Trailhead without adversely affecting the Company s other water
customers:
Q. Does the Commission Staff agree with this assessment (that other customers will not
be burdened)?
ANSWER TO PETITION FOR RECONSIDERATION -
A. I believe so. In its written Comments filed June 1 , 2006 , Staff said:
United Water is also capable of serving the development. As long as United Water
follows its established line extension rules, other customers of United Water should not
be adversely affected by the addition of Trailhead". (Staff Comments , pg. 3)." Tr. Pg.
23).
It is well settled that the Supreme Court will not overturn Commission findings that are
supported by substantial evidence. Grindstone Butte Mut. Canal Company v. Idaho Public
Utilities Commission 102 Idaho 175 627 P.2d 804 (1981). As demonstrated above, the Order
findings clearly satisfy that test.
While the Commission Mav Not Exercise Judicial "Powers" It Mav Exercise the Judicial
Function" of Determinin2 What the Law Is
The Petition argues that "The Commission does not have the authority pursuant to Title
61 to rule on the jurisdictional powers of another governmental entity." (Petition Pg. 4). The
Petition cites a number of Idaho Supreme Court cases referencing the well-known rule that the
Commission is a creature of statute and exercises only those powers conferred by the legislature.
(Petition Pg. 4-5). As discussed below, these cases and the general rule for which they stand do
not address the question presented here, which is the ability of the Commission to determine
what the law is.
In answering that question, a review of a series of Supreme Court decisions decided
shortly after the enactment of the Public Utilities Law is instructive. In these cases , the
Commission sought to regulate companies-mostly water companies-that appeared to be
providing public utility service. The companies resisted regulation and argued the Commission
did not have the authority to determine their legal status as public utilities because, the
Neil v. Public Utilities Commission 32 Idaho 44, 178 P. 281 (1919); Humbird Lumber Company v. Idaho Public
Utilities Commission 32 Idaho 80, 178 P. 284 (1919); Natatorium Company v. Erb, 34 Idaho 209, 200 P. 348
(1921).
ANSWER TO PETITION FOR RECONSIDERATION -
companies claimed, to do so would be to exercise a judicial function that was solely the province
of courts. To resolve these cases, the Court drew a distinction between "judicial functions" and
judicial powers" and held that while the Commission can not exercise judicial powers-
awarding damages or issuing injunctions-the Commission can exercise judicial functions of
ascertaining the law and the legal status of parties that come before the Commission. As the
Court stated in Natatorium Co. v. Erb:
Conceding that the question of whether plaintiff is a public utility is a judicial question
and must be determined as such by a court of competent jurisdiction, nevertheless the
commission, in exercising the powers conferred upon it by the legislature, must
necessarily pass upon its own jurisdiction in the first instance, and in doing so it exercises
a judicial function, but not a judicial power. While its decision is not a final adjudication
of the question of jurisdiction, yet in every case before the Public Utilities Commission, it
must in the first instance determine from the evidence before it whether the utility with
which it is seeking to deal is a public utility, for unless it be a public utility, the
commission is without any jurisdiction over it whatsoever, and this determination can
only be made by the exercise of judicial functions.
Judicial functions may be exercised by bodies possessing no judicial power whatever
34 Idaho at 209.
Since the time of these early cases, it has become well-settled that while the Commission
is not a court with the ability to exercise judicial powers, the Commission may exercise judicial
functions of ascertaining the law and determining the legal status of parties that come before it.
See
g.
McNeal v. Idaho Public Utilities Commission 2006 Idaho 31844 (2006).
Further, it should be remembered that the City, of its own volition, intervened in this
proceeding, claiming it was ready willing and able to serve Trailhead. (See Testimony of Vem
Brewer: "The City can serve this amount and can do so immediately. Based on consideration of
the facts outlined in my testimony, I believe it is in the public interest to allow the City to serve
this area." Tr. Pg. 238). It is inconsistent for the City to say, on one hand, it is able to serve, but
on the other, to assert the Commission has no authority to examine its legal ability to serve.
ANSWER TO PETITION FOR RECONSIDERA nON -
Order No. 30367 Correctly Ascertained the Limits of Municipal Authority
At the outset, it is important to clarify what this case is not about. It does not involve a
contract or agreement between a willing landowner and a city to provide water service outside
municipal boundaries. The question presented here is whether a city may compel an unwilling
landowner outside its boundaries to accept water service from the city.
The cases cited in the City s Petition2 all relate to circumstances involving contractual
relations between a city and a willing extra-territorial landowner. The only Idaho case cited in
the Petition Albee v. Judy, involved the city s obligations after the city purchased a water
company outside the city boundary that was regulated by the Commission. Whatever may be the
law governing relations between consenting extra-territorial landowners and a city, it is
inapplicable to the circumstance presented here, in which the city seeks to thrust itself upon an
unwilling landowner.
Firmly adopted in Idaho law is a principle known as Dillon s Rule, which is a limitation
on municipal authorities. The Rule, endorsed in numerous Supreme Court cases is:
It is a general and undisputed proposition of law that a municipal corporation possesses
and can exercise the following powers, and no others: First, those granted in express
words; second, those necessarily or fairly implied in or incident to the powers expressly
granted; third, those essential to the accomplishment of the declared objects and purposes
of the corporation, not simply convenient, but indispensable. Any fair, reasonable
substantial doubt concerning the existence of power is resolved by the courts against the
corporation, and the power is denied. II 0
Bryant v. City of Idaho Falls, 78 Idaho 313
303 P.2d (1956), See Also, City of Grangeville v. Haskins 116 Idaho 535, 777P.2d 1208
(1989).
Allen s Creek Properties, Inc. v. City of Clearwater 679 So. 1172 (Fla. 1996), Fairway Manor v. Board of
Comr 521 N.2d 818 (1988), Albee v. Judy, 136 Idaho 226 31 P3d 248 (2001)
ANSWER TO PETITION FOR RECONSIDERATION -
A corollary to Dillon s Rule is Art. VII sec 2 ofthe Idaho Constitution which limits a
City s authorities to within its municipal boundaries:
Any county or incorporated city or town may make and enforce within its limits all
such local, policy, sanitary and other regulations as are not in conflict with its charter or
with the general laws." (Emphasis added).
Reading Dillon s Rule in conjunction with the separate sovereignty provisions of Art. VII
sec. 2, the Idaho Supreme Court has frequently invalidated City s attempts to exercise extra-
territorial powers. For example in City of Boise v. Bench Sewer District 116 Idaho 25 , 773 P.
642 (1989), the court invalidated a Boise City Municipal Ordinance that attempted to collect
sewer connection fees from residents outside the city. "A municipal ordinance must be confined
to the jurisdiction of the governmental body that enacting it. Here, as we have explained, the
ordinance as applied to the District residents is in excess of the City s municipal jurisdiction
Id. at 116 Idaho 34.
Because, as discussed above, a city has no inherent powers other than that conferred by
statute, a city s authority to operate a water system must have a statutory basis. Idaho Code 50-
323 is the source of municipal authority to operate water systems. It provides:
Cities are hereby empowered to establish, create, develop, maintain and operate domestic
water systems; provide for domestic water from wells, streams, water sheds or any other
source; provide for storage, treatment and transmission of the same to the inhabitants of
the city; and to do all things necessary to protect the source of water from contamination.
(Emphasis Added).
The phrase "to the inhabitants of the city" serves to make Idaho Code 50-323 consistent
with the separate sovereignty provision of the Idaho Constitution-it limits the City s authority
to operate a water system to within its municipal boundaries.
ANSWER TO PETITION FOR RECONSIDERATION -
The Petition (Pg. 6) calls the Commission s attention to a portion of Idaho Code 50-222
dealing with annexations. Idaho Code 50-222(4) provides in part
, "
Consent (to annexation) shall
be implied for the area of all lands connected to a water.. . system operated by a City. . ." The
Petition asserts that from this code section a power to provide extra-territorial water service may
be implied. Decisions of the Idaho Supreme Court, however, hold that the concept of implied
powers is narrowly construed. For example, in City of Grangeville v. Haskin 116 Idaho 535, 777
2d 1208 (1989) the Court held that while a city had the power to collect charges for water
service, that power did not carry with it an implied power to impose liens for unpaid charges.
The Court said:
This Court has repeatedly held that municipalities may exercise only those powers
granted to them or necessarily implied from the powers granted. , Caesar v. State
101 Idaho 158, 160,610 P.2d 517 (1980); Hendricks v. City ofNampa 93 Idaho 95, 98
456 P.2d 262. If there is a fair, reasonable, substantial doubt as to the existence of a
power, the doubt must be resolved against the city. Bryant v. City of Idaho Falls
Idaho 313 , 320, 303 P.2d 672 (1956); Oregon Short Line Railroad Co. v. Village of
Chubbuck 83 Idaho 62 357 P.2d 1101 (1960). This is especially true where the city
is exercising proprietary functions instead of governmental functions. The operation of a
water system, a sewer system and a garbage collection service by the city is a proprietary
function, not a governmental function. Schmidt v. Village of Kimberly, 74 Idaho 48
256 P.2d 515 (1953).
In light of the express limitation of Idaho Code 50-323 , limiting the provision of water
service to the inhabitants of the city, it cannot be said that Idaho Code 50-222(4) creates, by
implication, a power to compel an unwilling landowner outside the municipal boundary to accept
water service.
The adoption of a Comprehensive Plan within an approved Area of Impact does not
change this result. Idaho s Local Land Use Planning Act, Idaho Code 67-6501 et. Seq.
authorizes the creation of Areas of Impact (Idaho Code 67-6526)3 and the adoption of
67-6526 AREAS OF CITY IMPACT -- NEGOTIATION PROCEDURE.
ANSWER TO PETITION FOR RECONSIDERATION -
Comprehensive Plans within those areas (Idaho Code 67-6508). The creation of an Area of
Impact and adoption of a Comprehensive Plan do not, however, authorize a city to exercise
municipal powers or authorities within the Area of Impact.
This was made clear by the Idaho Supreme Court in Blaha v. Board of Ada County
Commissioners 134 Idaho 770, 9P.3d 1236 (2000). There, the Ada County Commissioners
approved a plat located within the City of Eagle s Area of Impact. Neighbors who objected to
the approval appealed, claiming approval of the City was also required. The Court held that
creation of the Area of Impact did not create any right of the City to exercise approval authority
within the area and that its role was only advisory to the county:
Beyond the corporate limits of a city, the county has jurisdiction by statute to accept and
approve subdivision plats. See LC. 9 50-1308.(fn8) For the City of Eagle to be allowed to
(a) The governing board of each county and each city therein shall adopt by ordinance following the notice and
hearing procedures provided in section 67-6509, Idaho Code, a map identifying an area of city impact within the
unincorporated area of the county. A separate ordinance providing for application of plans and ordinances for the
area of city impact shall be adopted. Subject to the provisions of section 50-222, Idaho Code, an area of city impact
must be established before a city may annex adjacent territory. This separate ordinance shall provide for one (1) of
the following:
(1) Application of the city plan and ordinances adopted under this chapter to the area of city impact; or
(2) Application of the county plan and ordinances adopted under this chapter to the area of city impact; or
(3) Application of any mutually agreed upon plan and ordinances adopted under this chapter to the area of city
impact.
Areas of city impact, together with plan and ordinance requirements, may cross county boundaries by agreement
of the city and county concerned if the city is within three (3) miles of the adjoining county.
67-6508 PLANNING DUTIES.
It shall be the duty of the planning or planning and zoning commission to conduct a comprehensive planning
process designed to prepare, implement, and review and update a comprehensive plan, hereafter referred to as the
plan. The plan shall include all land within the jurisdiction of the governing board. The plan shall consider previous
and existing conditions, trends, desirable goals and objectives, or desirable future situations for each planning
component. The plan with maps, charts, and reports shall be based on the following components as they may apply
to land use regulations and actions unless the plan specifies reasons why a particular component is unneeded.
ANSWER TO PETITION FOR RECONSIDERATION -
exercise co-equal jurisdiction with Ada County in the impact area lying beyond the city
limits would not only be in conflict with the statute but also inconsistent with
constitutional limitations placed on a city s powers. Article XII, ~ 2 of the Idaho
Constitution provides that any county or incorporated city or town may make and
enforce, within its limits, all such local police, sanitary and other regulations as are not in
conflict with its charter or with the general laws. This Court has held that the power of
cities and counties only exists within the sovereign boundaries of the cities and the
counties respectively. See Clyde Hess Distributing Co. v. Bonneville County, 69 Idaho
505 210 P.2d 798 (1949) (valid county regulation enforceable so far as territory
embraced in county was concerned, exclusive of municipalities where the regulation was
without force and effect); Boise City v. Blaser 98 Idaho 789 572 P.2d 892 (1977) (To
give effect to a county permit within city limits would be to violate the separate
sovereignty provisions of Idaho Const., art. XII, ~ 2.
);
Hobbs v. Abrams, 104 Idaho 205
657 P.2d 1073 (1983) (ordinance or regulation must be confined to the limits of the
governmental body enacting the same). Therefore, any reading of the implementing
ordinances granting the City the power to restrict development in the impact area by
denying approval of a subdivision application made to the County would be an
extraterritorial exercise of jurisdiction by the City and an infringement on the
constitutional right of the County. 134 Idaho at 777.
The Blaha decision makes it clear that within an Area of Impact, a city may plan for the
future and it may provide advice to the county. It may not, however, exercise municipal
authorities or provide municipal services.
In this case, the evidence established that the Trailhead development is outside the City
Area of Impact, although the City desired to expand the Area of Impact to include the
development. Even if that were accomplished it would not, as demonstrated above, authorize the
provision of water service.
The Petition Should be Denied
As discussed in this Answer, the Order s necessary findings for approval of United
Water s Application are supported by substantial evidence. The Commission did not exceed its
authority in determining the scope ofthe City s authorities. The Commission correctly assessed
the scope of the City s authorities.
ANSWER TO PETITION FOR RECONSIDERATION -
The City s Petition concludes with a request that the Commission ".if necessary hold an
evidentiary hearing on the issue of whether United Water could serve Trailhead based on the
needs and demands of Trailhead". As discussed above, the Commission has already made
record-based findings on this issue. And, the Petition does not contain a statement of the "nature
and quantity of evidence the petitioner would offer if reconsideration is granted " as required by
RP 331.01.
The request for hearing and the Petition should be denied.
DATED this2a.Lday of August, 2007
Respectfully Submitted
UNITED WATER ill AH 0 IN
Dean J. Mill
Attorney for United Water Idaho Inc.
ANSWER TO PETITION FOR RECONSIDERATION -
CERTIFICATE OF SERVICE
I hereby certify that on the '5l~ay of August, 2007, I caused to be served, via the
methodes) indicated below, true and correct copies of the foregoing document, upon:
Jean Jewell, Secretary Hand Delivered
Idaho Public Utilities Commission S. Mail
472 West Washington Street Fax
O. Box 83720 Fed. Express
Boise, ID 83720-0074 Email
ewell
(g)
uc.state.id.
Bruce M. Smith Hand Delivered
MOORE SMITH BUXTON & TURCKE S. Mail
225 N. 9th Street, Suite 420 Fax
Boise, ID 83702 Fed. Express
Email
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McDEVIIT & MILLER, LLP
ANSWER TO PETITION FOR RECONSIDERATION -