Carroll Electric Cooperative Corp. v. City of Bentonville
Docket: 91-20
Court: Supreme Court of Arkansas; September 30, 1991; Arkansas; State Supreme Court
Statutory construction of Act 639 of 1989 is central to this appeal involving the City of Bentonville and Carroll Electric Cooperative (Cooperative). After Bentonville annexed territory where the Cooperative provided electricity, it sought to establish its own service in that area without acquiring the Cooperative’s physical infrastructure. Three customers requested disconnection from the Cooperative to receive electricity from the City. The Cooperative filed for injunctions against the City, claiming compensation for lost customers under Act 639.
The trial court initially granted a preliminary injunction but later dismissed the cases, ruling that Act 639 applies only when a city acquires physical property from a utility. The Cooperative contended this was erroneous, arguing the Act entitles them to compensation for lost customers. However, the appellate court affirmed the trial court’s decision.
Act 639 allows municipal corporations to acquire properties of electric utilities after providing six months' notice. Section 4 details compensation procedures for utilities whose properties are acquired, including payment based on the reproduction cost minus depreciation and costs for reintegrating their systems. If a utility does not supply wholesale power to the municipality, they must negotiate power contracts to compensate for customer losses for six months post-notification. If the municipality ceases to receive wholesale service within five years after acquisition, it is obligated to pay pro rata for the remainder of that period.
If an agreement under Section 4(B) is not reached within six months, the municipality is required to compensate the public utility for facilities, either by paying 230% of the gross revenues (excluding gross receipts taxes) from the previous twelve months or through a five-year payment plan at the prevailing AAA insured tax-exempt municipal bond interest rate. The Cooperative claims entitlement to compensation for the loss of customers without property acquisition by the City, but this interpretation misapplies the section's intent. Compensation provisions are activated only when a municipality acquires a utility's properties, which did not occur in this case; the Cooperative lost some customers to the City but still serves others in the annexed area. The Cooperative cites Woodruff Electric Cooperative Corp. v. Arkansas Public Service Commission, arguing for similar compensation due to customer loss during annexation. However, the Woodruff case involved different legal frameworks and facts, particularly the outdated Act 85, which has been replaced by Act 103, permitting cooperatives to continue serving annexed areas at comparable rates. Thus, under current law, the City must compensate the Cooperative only if it acquires its properties or facilities.
If the City does not acquire the Cooperative’s properties or facilities, Act 639 is not applicable, allowing the Cooperative to function as an alternative supplier. Consequently, both the City and the Cooperative can compete for customers under Act 103 of 1957. Since the City has not acquired any of the Cooperative's facilities, it is not required to compensate the Cooperative, which retains the right to compete for customers. The Cooperative referenced several cases during oral arguments, notably Delmarva Power & Light v. Seaford, where an electric utility claimed inverse condemnation due to customer shifts following a city annexation. Despite similarities to the current case, the ruling in Seaford is deemed inapplicable. The Cooperative has not raised any inverse condemnation claims, and both parties focused on Arkansas statutory and case law, which informed the trial court's decision. The appellate court affirms the trial judge's interpretation of Act 639, noting that while Act 103 of 1957 remains effective, it has been amended for other purposes.
