The trial court held that plaintiffs are public utilities and therefore within the constitutional jurisdiction of the Public Service Commission over public utilities under Art. IV, § 21(B) of the Louisiana Constitution of 1974. LSA-R.S. 45:1163 was declared unconstitutional insofar as it allows electric cooperatives to exempt themselves from the jurisdiction of the Louisiana Public Service Commission. Plaintiffs' suit was dismissed, and plaintiffs have appealed.
In a separate judgment involving LSA-R.
Plaintiffs are rural electric cooperatives which were established under the Rural Electrification Administration (REA) as authorized by the Rural Electrification Act of 1936.
Ark. Elec. Coop. v. Ark. Pub. Serv. Comm'n, 461 U.S. 375, 103 S.Ct. 1905, 76 L.Ed.2d 1 (1983) decided that state regulation of electric cooperatives is not barred by the Supremacy and Commerce Clauses of the United States Constitution. Recognizing that the REA could pre-empt state regulation of rural power cooperatives, the United States Supreme Court decided that there is no express preemption. Refusing to draw a bright line between state regulation and unexercised federal power, the court applied a balancing test to find that state regulation of rates is permissible when there is only an incidental effect on interstate commerce. While a particular rate structure might unreasonably disturb the interstate market for electric power, thereby imposing an excessive burden on interstate commerce, the REA may otherwise operate within the constraints of a state regulatory system. Thus, absent compromise of an important federal interest, such as the ability of a cooperative to repay its loans, state regulation may be allowed.
Louisiana Power & L. Co. v. Louisiana Pub. Serv. Com'n, 250 La. 596, 197 So.2d 638, 643 (1967) decided that electric cooperatives were not public utilities per se because: (1) they were not in existence when Act 254 of 1936 defined public utilities; (2) they were specifically excepted from the jurisdiction and control of the Public Service Commission by LSA-R.S. 12:326; and (3) the cooperatives were not included in the definition of public utilities regulated by the Public Service Commission in Act 254 of 1936.
Central La. Elec. Co. v. Louisiana Pub. Serv. Com'n, 251 La. 532, 205 So.2d 389 (1967) held that the 1921 Constitution did not place all "public utilities" under the Public Service Commission. In deciding that an electric cooperative is not an "electric public utility" under that Constitution, the court noted that electric cooperatives were not in existence in 1921. The Central court concluded that Commission customer protection was not necessary in a cooperative operation.
In a later Central opinion authored by then Justice Barham,
Although electric cooperatives were not defined as "public utilities" in the Louisiana Constitution of 1921, that Constitution allowed the legislature to place them under the Commission's authority as "other public utilities." Hence, under the 1921 Constitution, the legislature had plenary power to place "other public utilities" under the authority of the Public Service Commission.
Nonprofit electric cooperatives have always been characterized as "Special Corporations"
In 1970, LSA-R.S. 45:121 was amended to include electric cooperatives in the definition of electric public utilities and LSA-R. S. 12:426 was amended to place electric cooperatives under the jurisdiction of the Public Service Commission. Thus, when the 1974 Constitution was adopted, the Public Service Commission had been exercising statutory control over electric cooperatives for four years. Dixie Electric Membership Cooperative v. Louisiana Public Service Commission, 509 So.2d 1002 (La.1987).
The Louisiana Constitution of 1974 went into effect at midnight on December 31, 1974 and delineated the jurisdiction of the Public Service Commission in Art. IV, § 21(B), which states that "the commission shall regulate all common carriers and public utilities and have such other regulatory authority as provided by law." Although electric cooperatives were statutory public utilities when the 1974 Constitution was adopted, Dixie did not decide whether they were "public utilities" under the 1974 Constitution. In fact, the majority in Dixie was careful to note that the decision was "... a resolution of the legal dispute which does not require a constitutional interpretation."
The 1974 constitutional debates indicate that the delegates did not intend to change the Commission's authority. The question then becomes whether the 1974 Constitution placed electric cooperatives under the Public Service Commission as "public utilities" or whether statutory implementation by the legislature was required to give the Commission "other regulatory authority as provided by law" over the cooperatives.
Nonprofit rural electric cooperatives are not public utilities in the broad sense of the term. The legislature recognized this in 1975 when it enacted LSA-R.S. 33:4170
Between September 8, 1978, and September 3, 1987, the Public Service Commission deferred to the legislative intent expressed in LSA-R.S. 45:1163 and other statutes. The Commission then decided to assert authority over the electric cooperatives. An order directing rate and service regulation of the electric cooperatives by the Public Service Commission was issued on September 3, 1987.
While rural electric cooperatives are a type of public utility in that they furnish a necessary public service, they are instrumentalities of the United States created by federal law and "something more than public utilities."
"Though REA regulation and supervision of cooperatives are, in many respects, far more comprehensive than those which the Federal Power Commission exercises over investor-owned utilities, there are certain areas, such as rate-making, where the cooperatives enjoy a freer hand. But it is in these areas that, by their structural nature, the cooperatives are effectively self-regulating. They are completely owned and controlled by their consumer-members, and only consumers can become members. They are nonprofit. Each member has a single vote in the affairs of the cooperative, and service is essentially limited to members. No officer receives a salary for his services and officers and directors are prohibited from engaging in any transactions with the cooperative from which they can earn any profit."
Between 1978 and 1987, the Louisiana Public Service Commission refrained from regulating the electric cooperatives, indicating acquiescence in the Legislature's interpretation of the Commission's authority. Central La. Elec. Co. v. Louisiana Pub. Serv. Com'n, 251 La. 532, 205 So.2d 389 (1967).
Although electric cooperatives have many of the characteristics of public utilities, they are special creations of federal law which come within the regulatory authority of the Public Service Commission only "according to law". Being self-regulated, democratic, and nonprofit, they are not the type of utility which necessarily requires Commission regulation. Salt River Project Agr. Dist. v. Federal Power Commission, 391 F.2d 470 (D.C.Cir.1968), cert. den. 393 U.S. 857, 89 S.Ct. 104, 21 L.Ed.2d 126.
Approximately one-half of the states impose state regulation on REAs in addition to their federal regulation. This indicates that the necessity of state regulation is a debatable proposition. According to the testimony and exhibits, federal regulation is extensive.
The drafters of the 1974 Louisiana Constitution intended to preserve the existing law whereby public utilities were automatically under the jurisdiction of the Public Service Commission and other utilities, such as the REAs, could be placed under the control of the Public Service Commission at the discretion of the Legislature. The debates indicate no substantive change was intended. The 1974 Constitution allows the Legislature to give the Public Service Commission regulatory authority in
Since nonprofit electric cooperatives are not public utilities as a matter of law, the legislature has authority to exempt those cooperatives from the authority of the Public Service Commission. The trial court erred in dismissing plaintiffs' suit for a declaratory judgment and injunctive relief and in holding that LSA-R.S. 45:1163 is unconstitutional. Plaintiffs have asked for declaratory judgments as to various statutes pertaining to them. The holding that the Louisiana Public Service Commission may regulate electric cooperatives only as authorized by the Legislature answers the fundamental question as to the Commission's constitutional authority and makes consideration of the separate provisions unnecessary. Likewise, the issuance of an injunction does not appear to be required, although plaintiffs' rights are reserved in this regard.
Not being "public utilities", plaintiffs are not liable for the attorneys' fees and expenses assessed under LSA-R.S. 45:1180.B.
For the foregoing reasons, the judgments of the trial court are reversed.
COLE, J., concurs to assign additional reasons.
DENNIS and CALOGERO, JJ., dissent with reasons.
LEMMON, J., dissents and assigns reasons.
LSA-R.S. 45:123 provides:
COLE, Justice, concurring.
I am in full agreement with the holding and rationale of Justice Watson's opinion. I write separately only to stress the substantial weight of authority which supports his conclusions.
At the outset, it should be noted the Public Service Commission (P.S.C.) asks us to "discover" a constitutional limitation on the legislature's otherwise plenary power. As we observed in Guillory v. Department of Transportation and Development: "It is a fundamental principle of judicial interpretation of state constitutional law that the legislature is supreme except when specifically restricted by the Constitution." 450 So.2d 1305 at 1308 (La.1984). (citations omitted). In addition, as we observed in Board of Directors of Louisiana Recovery District v. All Taxpayers, Property Owners and Citizens of the State of Louisiana, 529 So.2d 384 (La.1988):
Id. at 387-388 (citations omitted) (emphasis added). The P.S.C. has clearly failed to meet this heavy burden.
From the turbulent history of the debate in the Constitutional Convention surrounding Article IV, § 21(B), one consistent theme emerges: the desire of the delegates to maintain the constitutional status quo. Delegate (now Commissioner) Lambert, speaking in opposition to the Arnette amendment which would delete the phrase "as provided by law," said:
I ask you for a number of reasons to reject this amendment.
IX Records of the Louisiana Constitutional Convention of 1973: Convention Transcripts (Records) at 3008 (105th Days Proceedings; December 20, 1973). In an exchange with Arnette, Lambert added: "What the Committee was trying to do was retain the substantive law in that article." Id.
Even more instructive are several remarks of Delegate Juneau, whose amendment became the current Article IV, § 21(B). In explaining his amendment, he noted: "That is in basis what the present law is...." IX Records at 3346 (117th Days Proceedings; January 14, 1974); "What I'm saying, Woody, is I think that the law ought to be the same as it is today...." Id. at 3347; "[T]he amendment which I proposed is not to make any change whatsoever in the present authority and jurisdiction of the Public Service Commission. Whatever act you may have passed in the legislature relating to the Public Service Commission could be passed in 1975, 1976 or '77.... If you have authority in the legislature to pass an act relating to the Public Service Commission, whatever those acts are today, I think you would have the same authority under this amendment to pass that type of legislation." Id.; "[I]f you want to leave the law as it is today, then I ask you to adopt the amendment." Id. at 3349.
The extant balance of power between the P.S.C. and the Legislature which the delegates sought to preserve had been clearly defined, insofar as electric cooperatives were concerned, by our prior decisions under the analogous provisions of the 1921 constitution.
Against the weight of constitutional history, statutory and jurisprudential law, and the strong presumption of constitutionality
Accordingly, I respectfully concur.
DENNIS, Justice, dissenting.
I respectfully dissent.
The Constitutional Convention debates reflect disagreement among a handful of delegates, but the constitution provision itself signifies an unmistakable intention to vest the Public Service Commission with the constitutional power and the duty to regulate all "common carriers and public utilities" and the ability to receive regulatory authority over other entities as provided by law. The 1974 Constitution provision represents a marked shift in philosophy from the 1921 Constitution's public service commission section. Under the 1921 Constitution, the Commission was granted the constitutional power to regulate only the types of utilities specifically named (e.g., street railroads, interurban railroads, steamboats and other water craft, sleeping car, express, telephone, telegraph, gas, electric light, heat and power, water works....). The Legislature, on the other hand, was accorded the right to determine which other utilities should be placed under the Commission's authority. See Cent. La. Elec. v. Louisiana Public Service Commission, 251 La. 532, 205 So.2d 389 (1967).
The 1974 Constitution, by stating that the "Commission shall regulate all common carriers and public utilities and have such other regulatory authority as provided by law" adopted the prevailing viewpoint in public utilities law. The general rule is that, in the absence of a constitutional provision declaring particular businesses to be public utilities, the question of whether or not a given industry or service is a public utility depends on the nature of the business or service rendered. State Public Com. v. Monarch Refrigerating Co., 267 Ill. 528, 108 N.E. 716 (1915); Aberdeen Cable TV Service v. Aberdeen, 85 S.D. 57, 176 N.W.2d 738 (1970), cert. denied 400 U.S. 991, 91 S.Ct. 455, 27 L.Ed.2d 439. Accordingly, the question whether a particular company or service is a public utility is a judicial one which must be determined by a court of competent jurisdiction. Clear Creek Oil & Gas Co. v. Ft. Smith Spelter Co., 148 Ark. 260, 230 S.W. 897 (1921); Aberdeen Cable TV Service, Inc. v. Aberdeen, supra; Inland Empire Rural Electrification v. Dept. Pub. Serv. Wash, 199 Wn. 527, 92 P.2d 258 (1939); Natatorium Co. v. Erb, 34 Idaho 209, 200 P. 348 (1921); Clarksburg Light Co. v. Pub. Serv. Com., 84 W.Va. 638, 100 S.E. 551 (1919).
Thus the Legislature may not deprive the Public Service Commission of its constitutional power to regulate any public utility, but it may legislatively provide for or repeal the Commission's power to regulate other businesses or enterprises. The mere fact that an industry is affected with the public interest and may be regulated by the Legislature under the state's police power does not give that enterprise the character of a public utility. U.S. v. Cronenweth Dairy Co., 102 F.Supp. 364 (W.D.Pa.1951); Commonwealth, Pub. U. Com. v. WVCH Communications, Inc., 23 P.Commw.Ct. 292, 351 A.2d 328 (1976).
In short, it cannot be determined in a simplistic way whether the 1974 Constitution enhanced or diminished the power of the Public Service Commission. If the business or enterprise in question is determined by the courts to be a public utility because of its inherent characteristics, the Commission has the constitutional power to regulate it. If the business is not by nature a public utility, the Commission does not have such constitutional power, even if the enterprise is of a type listed in the 1921 Constitution, but the enterprise may be placed under the Commission's regulatory authority by law if it is a business affected with the public interest.
The majority opinion seems to base its decision on a confused mixture of two ideas: (1) The 1974 Constitution perpetuated
CALOGERO, Justice, dissenting.
At the time that the Louisiana Constitution of 1974 was adopted, electric cooperatives were statutorily defined as public utilities. La. R.S. 45:121 (1970); La. R.S. 12:246 (1970); Dixie Electric Membership Cooperative v. Louisiana Public Service Commission, 509 So.2d 1002, 1005 (La. 1987).
Article IV, Section 21(B) of the 1974 Constitution gives the Louisiana Public Service Commission exclusive authority to regulate all "public utilities." Because electric cooperatives were statutorily defined as public utilities at the time Art. IV, Sect. 21(B) was adopted, the only logical conclusion is that such cooperatives are covered by the constitutional provision and are subject to the regulatory jurisdiction of the Commission. See Dixie Electric Membership Coop., supra, 509 So.2d at 1007.
There is no contrary indication in the constitutional convention debates regarding Art. IV, Sec. 21(B). In fact, this constitutional provision was opposed by some delegates to the constitutional convention on the ground that it gave the Public Service Commission exclusive regulatory control over all public utilities and common carriers, and did not provide the Legislature with the discretionary power to modify the scope of the Commission's regulatory authority. See Rec. of 1973 Cons. Conv., Tr., Vol IX, p. 3346 (remarks of Mr. Juneau); p. 3347 (remarks of Messers. Juneau & Jenkins); p. 3349 (remarks of Messers. Derbes, Jenkins & DeBlieux). The constitutional provision passed in spite of this opposition. It is thus reasonable to conclude that the delegates understood that this provision would prohibit the Legislature from exempting any class or category of public utility from the Commission's jurisdiction. And, again, electric cooperatives were statutorily classified as public utilities at the time.
Therefore, I would affirm the trial court's ruling that La. R.S. 45:1163 is unconstitutional, to the extent that it attempts to divest the Commission of regulatory jurisdiction over the cooperatives.
For the foregoing reasons, I respectfully dissent.