City Of Coralville, Iowa Vs. Iowa Utilities Board (Department Of Commerce) ( 2008 )


Menu:
  •                IN THE SUPREME COURT OF IOWA
    No. 17 / 07–0558
    Filed May 30, 2008
    CITY OF CORALVILLE, IOWA,
    Appellant,
    vs.
    IOWA UTILITIES BOARD
    (DEPARTMENT OF COMMERCE),
    Appellee,
    MIDAMERICAN ENERGY COMPANY, and
    CONSUMER ADVOCATE DIVISION OF
    THE DEPARTMENT OF JUSTICE,
    Appellees.
    Appeal from the Iowa District Court for Polk County, Robert B.
    Hanson, Judge.
    A city challenges an Iowa Utilities Board ruling affirming a public
    utility’s right under a tariff to include the costs of relocating power lines
    in the price charged to its customers for electricity. AFFIRMED.
    Ivan T. Webber, Ahlers & Cooney, P.C., Des Moines, for appellant.
    David J. Lynch, General Counsel, and Gary Stump, Assistant
    General Counsel, for appellee Iowa Utilities Board.
    Sheila K. Tipton of Belin Lamson McCormick Zumbach Flynn, P.C.,
    Des Moines, for interested party-appellee MidAmerican Energy Company.
    John R. Perkins and Ben A. Stead, Office of Consumer Advocate,
    for interested party-appellee Office of Consumer Advocate.
    2
    HECHT, Justice.
    In this case we examine the limits of a municipality’s home rule
    authority to control its right-of-way. On review of a decision of the Iowa
    Utilities Board, we conclude a tariff filed by a public utility does not
    conflict with an ordinance adopted by the City of Coralville so as to
    constitute a violation of the City’s home rule authority. We affirm.
    I.        Factual and Procedural Background.
    A controversy between MidAmerican Energy Company and the City
    of Coralville arose in January 2000, when the City notified MidAmerican
    of a plan to widen 1st Avenue in Coralville. The plan necessitated the
    relocation of MidAmerican’s overhead power lines.                   MidAmerican
    determined the lines should be placed underground, and claimed a tariff
    it had filed with the Iowa Utilities Board (IUB) permitted the company to
    charge the costs of “undergrounding” to the City. In City of Coralville v.
    MidAmerican Energy Co., Johnson Co. No. LACV61728 (Coralville I), the
    district court determined that although the tariff addressed the
    imposition of the costs of “undergrounding” on customers requesting a
    change of service, the City was not acting as a customer when it passed
    its undergrounding ordinance and undertook the road-widening project.
    The court concluded the City acted instead in its role as the owner of the
    right-of-way, and had authority, incident to its police power, to order the
    utility        to   move   wires   underground   “at   the   utility’s   expense.”
    MidAmerican did not appeal the judgment in Coralville I.
    In 2005, the City of Coralville determined the overhead power lines
    in a different location along Quarry Road and 7th Street should be placed
    underground to facilitate another public project. The City, relying on its
    ordinance requiring utilities to relocate at their expense equipment
    located in the City’s right-of-way, directed MidAmerican to place its
    3
    power lines at that location underground and refused MidAmerican’s
    request for reimbursement of the cost. MidAmerican acquiesced to the
    City’s undergrounding directive, but informed the City it reserved the
    right to recover from its customers in the City of Coralville the costs of
    relocating the wires in accordance with a tariff on file with the IUB.
    The relevant tariff became effective in 2003. It provides, in relevant
    part:
    Conversion of existing overhead facilities to underground or
    relocation of facilities will be allowed unless an engineering,
    operating, construction, safety or legal reason would make
    such installation inadvisable.
    The customer(s) requesting the conversion or relocation
    must pay a contribution. . . .
    If conversion is required by a governmental unit, the
    conversion cost will be charged to the governmental unit or
    to the Company’s customers in the governmental unit.1
    The City filed a petition in the district court seeking a declaration
    that the tariff was inapplicable and enjoining MidAmerican from
    assessing the tariff against Coralville residents.2 While that action was
    pending in the district court, MidAmerican filed a petition before the IUB
    seeking a declaration that the IUB had exclusive jurisdiction over the
    rates and tariffs charged by public utility companies, and requesting a
    determination that the City could not, through its ordinance, prevent the
    company from charging its customers for the costs of relocating its
    equipment.       The City intervened in the proceeding before the IUB,
    contending (1) the preclusive effect of the district court’s decision in
    1Thetariff relied upon by MidAmerican in Coralville I included identical language
    permitting the conversion costs to be “charged to the governmental unit or to the
    Company’s customers in the governmental unit.”
    2The district court’s decision addressing the declaratory judgment action is the
    subject of our opinion filed today in City of Coralville v. MidAmerican Energy, No. 06–
    1420, 
    2008 WL 2222234
    .
    4
    Coralville I barred MidAmerican’s plan to pass through the costs of
    undergrounding     to   its   Coralville   customers,    (2)   the   IUB   lacked
    jurisdiction “over a dispute that is not about rates and services but about
    use of [the City’s] right of way,” (3) the tariff violated the City’s home rule
    authority to control its right-of-way, and (4) the tariff violated provisions
    of the Iowa Constitution requiring uniform application of the state’s laws.
    The IUB issued a declaratory order rejecting the City’s preclusion
    argument on the ground the issue before the agency was different than
    the one addressed by the court in Coralville I.         The board’s order also
    rejected the City’s claim that the utility’s plan to charge the costs of the
    undergrounding to the City’s residents would violate the City’s home rule
    authority to control the right-of-way. The board further concluded the
    interpretation of the ordinance advanced by the City would infringe on
    the board’s “jurisdiction related to utility tariffs, cost recovery, and cost
    allocation,” reasoning if the City’s position were to prevail, “[c]ities across
    Iowa could impose all manner and types of costs on utilities, regardless
    of reason, and force ratepayers in other areas to pay the bill.”
    The City sought judicial review of the IUB’s declaratory order,
    contesting the IUB’s jurisdiction to limit a municipality’s control of its
    right-of-way and challenging the validity and constitutionality of the
    tariff. The district court affirmed the board’s exercise of jurisdiction and
    the validity of the tariff.      The court also rejected the City’s issue
    preclusion claim, and denied the City’s constitutional challenge.
    II.    Scope of Review.
    On appeal from judgment entered on judicial review of agency
    action, we review for errors at law.        Gaffney v. Dep’t of Employment
    Servs., 
    540 N.W.2d 430
    , 433 (Iowa 1995).          Where interpretation of a
    statute has clearly been vested in the agency’s discretion, we generally
    5
    defer to the agency’s interpretation, and may grant relief only if the
    agency’s interpretation is “irrational, illogical, or wholly unjustifiable.”
    Iowa Code § 17A.19(10)(l) (2005). If interpretation of the statute has not
    clearly been vested in the agency’s discretion, we afford no deference to
    the agency’s interpretation, and may substitute our own judgment for
    that of the agency.       
    Id. § 17A.19(10)(c),
    (11)(b); Auen v. Alcoholic
    Beverages Div. of the Iowa Dep’t of Commerce, 
    679 N.W.2d 586
    , 589–90
    (Iowa 2004). Interpretation of a statute has been clearly vested in the
    agency’s discretion where
    the precise language of the statute, its context, the purpose
    of the statute, and the practical considerations involved
    [indicate] that the legislature intended (or would have
    intended had it thought about the question) to delegate to
    the agency interpretive power with the binding force of law
    over the elaboration of the provision in question.
    Arthur E. Bonfield, Amendments to Iowa Administrative Procedure Act,
    Report on Selected Provisions to Iowa State Bar Association and Iowa
    State Government 68 (1998).
    The issue before the IUB involved the intersection between Iowa
    Code section 476.1, which grants to the IUB authority to regulate public
    utility rates and services, and section 364.2(4)(e), which grants to cities
    the power to regulate the use of their streets and public grounds.
    Consequently, the agency’s resolution of this matter necessitated an
    interpretation of the intended scope of these provisions.       The IUB has
    been granted “broad general powers to effect the purposes” of chapter
    476, which includes the authority to regulate public utility rates.        
    Id. § 476.2(1).
      The agency has clearly been vested with authority to
    interpret the “rates and services” provision of section 476.1, and we may
    therefore overturn its interpretation only if it is “irrational, illogical, or
    wholly unjustifiable.” 
    Id. § 17A.19(10)(l).
    The agency has not, however,
    6
    been vested with authority to interpret chapter 364, and we therefore
    review     its    interpretation   of   section   364.2(4)(e)   de   novo.   
    Id. § 17A.19(10)(c);
    Birchansky Real Estate, L.C. v. Iowa Dep’t of Pub. Health,
    State Health Facilities Council, 
    737 N.W.2d 134
    , 138 (Iowa 2007).
    We review de novo constitutional challenges to a statute. Wright v.
    Iowa Dep’t of Corr., 
    747 N.W.2d 213
    , 216 (Iowa 2008).
    III.       Discussion.
    A.         Issue Preclusion. The City contends the district court erred
    in concluding the holding in Coralville I did not preclude a finding in this
    case that MidAmerican could charge the cost of undergrounding to its
    Coralville customers.          We identified the four elements of an issue
    preclusion claim in Hunter v. City of Des Moines, 
    300 N.W.2d 121
    (Iowa
    1981):
    (1) the issue concluded must be identical; (2) the issue must
    have been raised and litigated in the prior action; (3) the
    issue must have been material and relevant to the
    disposition of the prior action; and (4) the determination
    made of the issue in the prior action must have been
    necessary and essential to the resulting 
    judgment. 300 N.W.2d at 123
    (citation omitted). The City’s issue preclusion claim
    fails to satisfy these elements.
    The City claims the issue of who must pay for the undergrounding
    was raised and decided in Coralville I, and that the issue raised in this
    case is identical.       This claim relies primarily on the district court’s
    statement in Coralville I that “[t]he central question in the case is
    whether the City of Coralville has authority to order a utility to move
    overhead utility service and place it underground at the utility’s expense.”
    (Emphasis added.) A careful reading of the court’s decision in Coralville
    I, however, discloses the court was not asked to decide, and did not
    decide, whether MidAmerican could pass the costs of undergrounding
    7
    through to its Coralville customers.      In fact, MidAmerican’s effort to
    recover the costs of undergrounding from its Coralville customers was
    not undertaken until after the district court determined in Coralville I
    that the City, as a governmental unit, should not bear the costs of the
    undergrounding.        We conclude the district court’s determination in
    Coralville I that undergrounding be undertaken “at the utility’s expense”
    must be read in its proper context: viz., as between the City and the
    utility, which party should bear the cost of the relocation of the utility’s
    wires.        The court was not called upon to decide whether, should
    MidAmerican rather than the City be required to bear the cost, the utility
    could pass that cost through to its Coralville customers under the
    prevailing tariff. Thus, the issue in Coralville I was clearly not identical
    to the issue decided in this case by the IUB. We therefore agree with the
    district court on this issue.
    B.     Authority of the IUB to Issue a Tariff Permitting a Utility
    to Recover Costs Incurred for the Relocation of Equipment. The City
    contends the tariff exceeded the IUB’s authority. In particular, the City
    asserts the tariff regulates and infringes illegally upon the City’s right to
    control its right-of-way.        See Iowa Code § 364.2(4)(e) (granting
    municipalities the right to “regulate the conditions required and the
    manner of use of the streets and public grounds of the city”). The tariff
    regulation goes far afield, the City contends, from the IUB’s legitimate
    authority to regulate the “rates and charges for public utility service.” 
    Id. § 476.1.
    We disagree. Coralville’s argument is precariously based on a
    perceived conflict between the City’s and the IUB’s authority to control
    the City’s right-of-way.      We now address the question whether the
    conflict perceived by the City is real or imagined.
    8
    The City has exercised its right to regulate the “conditions
    required” of its streets by enacting an ordinance, section 141.28, which
    provides:
    Upon written notification by the City, the registrant shall
    promptly and at its own expense remove and replace,
    relocate or otherwise adjust its equipment located in the
    right-of-way and restore the right-of-way to the same
    condition it was in prior to said removal or relocation.
    (Emphasis added.) The requirement that public utilities relocate at the
    City’s request equipment situated in the right-of-way can be reasonably
    understood as a regulation of the “conditions required” of the right-of-
    way. The types of equipment permitted and their location in the right-of-
    way are essential features of the City’s statutory authority to control the
    condition of the right-of-way.   In contrast, the italicized phrase “at its
    own expense” within the ordinance relates only to the means by which a
    utility elects to generate the funds required to pay for a relocation of its
    equipment. The manner in which a public utility chooses to allocate or
    recover such costs bears no factual or legal relationship to the City’s
    exercise of control over its right-of-way.     We therefore conclude the
    conflict perceived by the City between its ordinance and the tariff is
    nonexistent. The absence of an actual conflict between the tariff and the
    City’s authority to control its right-of-way dooms the claim that the IUB’s
    decision contravenes the City’s home rule authority.
    An ordinance is within a municipality’s home rule authority only if
    it is not inconsistent with a state statute.   Iowa Const. art. III, § 38A
    (stating a city may exercise its home rule authority only to the extent
    that its actions are “not inconsistent with the laws of the general
    assembly”); Iowa Code § 364.1 (same).          “A municipal ordinance is
    ‘inconsistent’ with a law of the General Assembly and, therefore,
    9
    preempted by it, when the ordinance prohibits an act permitted by a
    statute, or permits an act prohibited by a statute.”       Sioux City Police
    Officers’ Ass’n v. City of Sioux City, 
    495 N.W.2d 687
    , 694 (Iowa 1993)
    (citations omitted).   Prior to 1963, the Iowa Code authorized cities to
    regulate utility rates.   Davenport Water Co. v. Iowa State Commerce
    Comm’n, 
    190 N.W.2d 583
    , 590 (Iowa 1971) (superseded on other grounds
    by statute as stated in Interstate Power Co. v. Iowa State Commerce
    Comm’n, 
    463 N.W.2d 699
    , 702 (Iowa 1990)). That power is now vested
    exclusively in the IUB under chapter 476. 
    Id. Iowa Code
    section 476.1
    provides the IUB “shall regulate the rates and services of public utilities.”
    With the creation of the IUB, and the vesting of authority in that agency
    to regulate public utility rates, municipalities lost their authority to
    regulate such rates. Davenport Water 
    Co., 190 N.W.2d at 590
    ; see Sioux
    City Police Officers’ 
    Ass’n, 495 N.W.2d at 694
    (noting the legislature may
    impose limitations on municipalities’ power over local affairs). The City’s
    interpretation of the cost-allocation provision in section 141.28, if
    accepted, would have the effect of prohibiting MidAmerican from
    reflecting its costs of doing business through the appropriate adjustment
    of rates charged to its customers under a valid tariff. That interpretation
    of the ordinance cannot be reconciled with the legislature’s abrogation of
    municipal authority over public utility rates and the statutory grant of
    broad authority to the IUB to “regulate the rates and services of public
    utilities.” Sioux City Police Officers’ 
    Ass’n, 495 N.W.2d at 694
    (stating
    that “[i]f a statute and ordinance cannot be reconciled, the statute
    prevails”). We find no error in the board’s rejection of the City’s home
    rule argument.
    The City also challenges the IUB’s affirmation of the validity of the
    tariff, contending no rule or contested case specifically authorizes
    10
    utilities to recover from their customers costs incurred in equipment
    relocation. Iowa Code section 476.4 requires a public utility to file tariffs
    with the IUB “showing the rates and charges for its public utility
    services,” and requires the IUB to promulgate rules for the filing of
    tariffs. Based on this rulemaking authority, the IUB requires that “rates
    charged by an electric utility for providing electric service to each class of
    electric   consumers    shall    be   designed,   to   the   maximum   extent
    practicable, to reasonably reflect the costs of providing electric service to
    the class.” Iowa Admin. Code r. 199—20.10(2). These authorities amply
    support the board’s issuance of the subject tariff.             The cost of
    municipally mandated undergrounding is clearly a cost of providing
    service to MidAmerican’s customers, and may be reflected in the rates
    charged by MidAmerican. The tariff constituted a valid exercise of the
    broad authority vested in the IUB.
    C.     Constitutional Claims. Finally, the City contends the tariff
    regime under chapter 476 violates the uniformity requirements of
    article I, section 6 and article III, section 30 of the Iowa Constitution.
    Article I, section 6 provides:
    All laws of a general nature shall have a uniform operation;
    the General Assembly shall not grant to any citizen, or class
    of citizens, privileges or immunities, which, upon the same
    terms shall not equally belong to all citizens.
    Article III, section 30 contains a similar requirement that all laws be
    general and operate uniformly throughout the state. Iowa Const. art. III,
    § 30 (requiring that “where a general law can be made applicable, all laws
    shall be general, and of uniform operation throughout the state”). We
    have generally viewed these provisions of the Iowa Constitution as being
    similar in scope, import, and purpose to the equal protection provision of
    the Fourteenth Amendment to the federal Constitution. See Dickinson v.
    11
    Porter, 
    240 Iowa 393
    , 400, 
    35 N.W.2d 66
    , 71–72 (1949). But see Racing
    Ass’n of Cent. Iowa v. Fitzgerald, 
    675 N.W.2d 1
    , 4–5 (Iowa 2004) (noting
    that we may, in an appropriate case, adopt a different analytical
    framework under the state constitution).                 While we maintain our
    authority to adopt our own equal protection analysis under the Iowa
    Constitution, we see no basis for doing so in this case.3
    We review the City’s constitutional challenge to this economic
    legislation under the rational basis standard.              State v. Simmons, 
    714 N.W.2d 264
    , 277 (Iowa 2006).            Under this standard we will sustain a
    legislative classification if it is rationally related to a legitimate state
    interest. 
    Id. The City
    asserts the tariff system violates the Iowa uniformity
    clauses in two ways. First, the City contends that because MidAmerican
    is not the only public utility servicing Coralville, the Coralville residents
    who are not serviced by MidAmerican will receive the benefit of the
    undergrounding without bearing its costs. Assuming this to be true, we
    nonetheless find no violation of equal protection.
    The Iowa Constitution “requires ‘uniform operation throughout the
    State’, not uniformity of consequences resulting from such operation.”
    Cook v. Dewey, 
    233 Iowa 516
    , 519, 
    10 N.W.2d 8
    , 10 (1943). The City’s
    uniformity clause claim is in substance a misplaced argument for
    3
    The City urges us in this case to adopt an equal protection analysis different
    from the one routinely followed under the federal Equal Protection Clause. See Racing
    Ass’n of Cent. 
    Iowa, 675 N.W.2d at 5
    . Specifically, the City urges that the uniformity
    provisions in the Iowa Constitution require that all Iowa laws be geographically uniform,
    applying to all parts of the state. The City does not explain how its proposed
    “geographic uniformity” standard differs from the equal protection analysis undertaken
    in our previous decisions in which we discussed the Iowa uniformity clauses. See Cook
    v. Dewey, 
    233 Iowa 516
    , 519, 
    10 N.W.2d 8
    , 10 (1943) (noting the Iowa Constitution
    “requires ‘uniform operation throughout the State’, not uniformity of consequences
    resulting from such operation”). We therefore decline in this case to depart from our
    long-standing uniformity clause jurisprudence.
    12
    uniformity of consequences rather than uniformity of operation. Chapter
    476 and the regulations implementing it provide a uniform system for
    filing and approval of tariffs setting rates based on costs of the individual
    public utility. Iowa Code § 476.4 (“Every public utility shall file with the
    board tariffs showing the rates and charges for its public utility services
    . . . .”); Iowa Admin. Code r. 199—20.10(2) (requiring that public utility
    rates “reasonably reflect the costs of providing electric service to the
    class”).   All public utilities are required to file tariffs with the IUB
    reflecting the costs unique to their service area. Iowa Code § 476.4; Iowa
    Admin. Code r. 199—20.10(2); see Fleur de Lis Motor Inns, Inc. v. Bair,
    
    301 N.W.2d 685
    , 689 (Iowa 1981) (holding amendments to local option
    hotel-motel tax statute that did not single out certain classes or entities
    and applied equally to all municipalities were valid under the uniformity
    clauses “even though when applied they incidentally affect some entities
    differently due to differing fact situations”).    Dissimilar treatment of
    persons dissimilarly situated does not offend equal protection. In re Det.
    of Hennings, 
    744 N.W.2d 333
    , 339 (Iowa 2008).          Citizens serviced by
    different public utilities are not similarly situated, and consequently the
    City cannot sustain a constitutional challenge based on the fact that
    customers of different utilities may pay different rates.
    Finally, the City asserts the tariff system violates the uniformity
    clauses because other regulated, investor-owned utilities operating in the
    same area allegedly do not have tariffs on file permitting them to recover
    from their customers the costs of undergrounding. We need not engage
    in a constitutional analysis of this claim because the record does not
    support the factual contention upon which it purports to be based. The
    only other regulated, investor-owned utility mentioned in the record,
    Interstate Power and Light Company, has a similar tariff on file with the
    13
    IUB in which the utility reserves the right to recover from customers the
    costs of equipment relocation.    The district court correctly determined
    the tariff is not unconstitutional on its face or as applied by the IUB in
    this case.
    IV.    Conclusion.
    We conclude MidAmerican is not precluded from utilizing its valid
    tariff to recover from its Coralville customers the costs of relocating the
    company’s equipment in the City’s right-of-way.       We affirm the IUB’s
    determination that MidAmerican’s cost-recovery tariff was a valid
    exercise of the board’s authority which did not illegally infringe upon the
    City’s home rule authority to control its right-of-way.          Coralville’s
    constitutional claims against the tariff are without merit.
    AFFIRMED.
    All justices concur except Baker, J., who takes no part.