Woodruff Electric Coop. Corp. v. Ark. Public Service Comm.
Docket: 5-2388
Court: Supreme Court of Arkansas; November 6, 1961; Arkansas; State Supreme Court
In 1957, the Arkansas Power and Light Company (Power Company) took over territory previously assigned to the Woodruff Electric Cooperative Corporation (Woodruff), leading to ongoing litigation involving multiple parties: Woodruff, the Power Company, the city of Forrest City (City), the Arkansas State Electric Cooperative (State Electric), and the Arkansas Public Service Commission (Commission). Woodruff, established in 1937 under Act 342, was authorized to operate in rural areas, defined as regions outside cities with populations over 2,500.
In 1948, the City leased its power plant to the Power Company, effective only after the completion of a new power unit outside the City limits. By 1951, the Power Company began operating the City’s plant. In 1953, the Commission allocated 120 acres of land, referred to as the 'area,' to Woodruff, located near its warehouse and bisected by a highway. In 1956, the City annexed part of this area to attract an out-of-state industry, Yale Towne, which required that the Power Company provide electricity. This annexation resulted in Woodruff losing a portion of its allocated territory and nine customers.
On March 21, 1957, Woodruff filed a complaint with the Commission against the Power Company under Act 85 of 1955. The City and State Electric intervened, but the Commission ruled against Woodruff, citing that Section 3 of Act 85 barred relief. Woodruff and State Electric appealed this decision to the Circuit Court, which upheld the Commission's ruling. They now appeal to a higher court, focusing on the construction of Section 3 of Act 85. Meanwhile, the Power Company and the City contest the constitutionality of the act. The legal precedent from the case of Farmers Electric Cooperative Corporation v. Arkansas Power Light Company is relevant, where it was held that when a city annexes territory, the serving utility is obligated to provide service without compensating the cooperative for the loss of territory.
The General Assembly did not anticipate the conflict arising from Act 342 during its consideration, leading to an “awkward situation.” Act 85 of 1955 addresses this by providing relief to cooperatives deprived of territory they developed. The interpretation of Act 85 remains consistent regardless of the extent of deprivation. Act 85 amends Act 342, clarifying that a corporation cannot be ousted from serving a rural area unless specified by the amended Act. Woodruff has been assigned its territory by the Arkansas Public Service Commission and can be ousted under specific conditions outlined in Act 85. If a rural area served by a cooperative becomes part of a municipality with existing electric service, members lose their membership and service rights from the cooperative. The Commission is tasked with enforcing the Act and ensuring adequate compensation for the loss of territory and property to the cooperative, although the specifics of compensation are not currently an issue for the Court. While Woodruff should be compensated for its territory loss, the appellees argue that provisions of Act 85 offer no benefit due to Section 3, which protects municipalities' rights to operate electric facilities within their limits, overriding any restrictions from the Acts.
Appellees argue that the Power Company is merely a lessee of the City, which owns the power plant, claiming this makes the City the real party in interest and not liable for compensation under the disputed section. However, the conclusion drawn is that the interpretation of this section by appellees is incorrect. Act 85 is intended to remedy previous injustices and should be liberally construed to fulfill this purpose. The rivalry between cooperatives and public utilities necessitates state regulation, which is facilitated through territorial allocations by the Commission. The conflict at hand concerns the right to serve a specific territory, which the Power Company has been granted, regardless of its lease arrangement with the City. This right is considered a privilege regulated by the State, distinct from ownership of property.
The provisions of Act 85 aim to provide relief to Woodruff, and it is determined that the City previously held rights under section 3 but voluntarily relinquished them. The City retains most rights under the lease, except for the right to operate the plant, which it transferred to the Power Company with Commission approval. Section 3 serves to protect the City's right to own and operate electric plants but does not prevent the City from leasing or selling that right. Moreover, since it has been established that Woodruff is entitled to compensation, the measure of such compensation is not yet addressed, as that determination was not made by the Commission. Appellees also argue that Act 85 is unconstitutional on the grounds that only a court, not the Commission, can assess damages.
The act permits damage assessment only if Woodruff intends to sell property, a situation that has not yet arisen and may never occur. Woodruff is currently seeking a territory exchange, which diminishes the likelihood of the Court needing to adjudicate the Commission's constitutional right to assess damages. Act 103 of 1957 ensures cooperatives are not ousted from rural service. The Commission possesses the discretion to adjust territory as necessary for administering the act's provisions, as supported by precedent in Southwestern Gas, Electric Co. v. City of Hatfield. The Power Company claims rights through its lease with the City, arguing that Act 85 cannot constitutionally strip these rights. However, if the Commission acts under Act 85, the Power Company will not lose anything of value exceeding what it gained, and it was aware of the State's authority to allocate territory when entering its lease. The trial court's judgment is reversed, and the case is remanded to the Commission for further proceedings. Dissenting opinions were noted from Harris, C. J., and Robinson, J.
