UtiliCorp United Inc. v. Iowa Utilities Board

570 N.W.2d 451, 1997 Iowa Sup. LEXIS 331, 1997 WL 732147

• Court: Supreme Court of Iowa
• Decided: November 26, 1997
• Docket: 96-1399
• Status: Published

Opinions

HARRIS, Justice.

We are asked by certified questions¹ whether section 12 of 1996 Iowa Acts chapter 1196 (prohibiting nonutility use of equipment paid for by utility customers) violates various provisions of the Iowa Constitution. Finding no such violations, we answer all questions in the negative.

The bill in question, including its section 12, enacted by the 76th Iowa General Assembly, is referred to in the certified questions as Senate File 2370. Senate File 2370 is entitled:

An Act relating to energy efficiency programs, electric and gas public utility energy efficiency mandates, and the Iowa energy center and the center for global and regional environmental research and requiring the location of a principal office within the state and providing an effective date.

It is significant that all provisions in Senate File 2370 relate, to various provisions in Iowa Code chapter 476. The scope and purpose of Iowa Code chapter 476 is clear. Many times amended, it originated as 1963 Iowa Acts chapter 286, entitled:

An Act to authorize the Iowa state commerce commission [now the utilities board] to regulate the rates and services of public utilities, to define public utilities to include those engaged in the furnishing of electricity, gas, water or communications services to the public for compensation, and to provide for appeals from orders and decisions of the Iowa state commerce commission.

Code chapter 476 now contains more than 100 sections, divided into thirteen divisions. Senate File 2370 amended several of them, affecting different divisions of the Code chapter. See, e.g., 1996 Iowa Acts ch. 1196, § 7 (amending Iowa Code § 476.2) (location of utility’s principal office for Iowa operations); § 13 (amending Iowa Code § 476.83) (filing and processing written complaints). The section under challenge here, section 12 of Senate File 2370, amends Iowa Code section 476.78, entitled “Cross-subsidization prohibited.” This section has been in place as part of our public, utility chapter, for several years. Iowa. Code sections 476.71 through 476.83 (the subdivision of the public utility chapter subtitled “Public Utility Affiliates”) were added to the public utilities chapter by 1989 Iowa Acts chapter 103 to impose requirements on public utility affiliates in order to assure “that a public.utility should only provide nonutility services in a manner that minimizes the possibility of cross-subsidization or unfair competitive advantage.” 1989 Iowa Acts ch. 103, § 2 (codified at Iowa Code § 476.71 (1991)).

Prior to enactment of Senate File 2370, Iowa Code section 476.78 provided:

A rate-regulated gas or electric public utility shall- not directly or indirectly include any costs or expenses attributable to providing nonutility service in regulated rates or charges.

Section 12 adds in part:

Except for contracts existing as of July 1, 1996, a rate-regulated gas or electric public utility or its affiliates should not use vehicles, service tools and instruments, or employees, the costs, salaries, or benefits of which are recoverable in the regulated rates for electric service or gas service to install, service, or repair residential or commercial gas or electric heating,- ventilating, or air conditioning systems, or interior lighting systems and fixtures....

Plaintiff UtiliCorp United, Inc. (UtiliCorp), through its division Peoples Natural Gas, provides natural gas services to customers in Iowa. In the 1980s UtiliCorp began an appliance maintenance program it called “Service Guard.” Individual customers would contract with UtiliCorp for the program. For a monthly fee UtiliCorp would provide service to repair the customer’s furnace, water heater, stove; oven, or clothes dryer. For an additional fee UtiliCorp also provided repair services for air conditioners, clothes washers, and refrigerators.

The questions before us were certified in connection with a suit in federal court. Utili-Corp brought that action seeking a declaratory judgment that, among other things, section 12 of Senate File 2370 is unconstitutional because it violates various provisions of the Iowa Constitution. The questions will be addressed in the divisions that follow.

I. The first of the three certified questions' is two-fold. Does section 12 of Senate File 2370 violate the single-subject and title requirements of article III, section 29 of the Iowa Constitution?

General principles controlling our deferential consideration of challenges under this provision were summarized in State v. Mabry, 460 N.W.2d 472, 474 (Iowa 1990):

This provision [article III, section 29 of the Iowa Constitution] has four requirements. First, the act may have only one subject together with matters germane to it. Second, the title of the act must contain the subject matter of the act. Third, any subject not mentioned in the title is invalid. Last, an invalid subject in the act does not invalidate the remaining portions that are expressed in the title.

There are longstanding rules for determining whether an- act meets the constitutional mandate of article III, section 29. First and foremost, we construe “the [act] liberally in favor of its constitutionality.” Before we can say the act is invalid we must find that the act “encompass[es] two or more dissimilar or discordant subjects that have no reasonable connection or relation to each other.” Even if the “matters grouped as a single subject might more reasonably be classified as separate subjects, no violation occurs if these matters are nonetheless relevant to some single more broadly stated subject.”

So to pass constitutional muster the matters contained in the act must be germane. To be germane, “all matters treated [within the act] should fall under some one general idea and be so connected with or related to each other, either logically or in popular understanding, as to be part of ... one general subject.”

In addition to these rules, we use a “fairly debatable, test” to determine whether the enactment of a statute complies with the constitution. Under this test “[[legislation will not be held unconstitutional unless clearly, plainly and palpably so.” And “[i]f the constitutionality of an act is merely doubtful or fairly debatable, the courts will not interfere.” So “[i]t is only in extreme cases, where unconstitutionality appears beyond a reasonable doubt, that this court can or should act.”

(Citations omitted.)

This is certainly not an extreme case where unconstitutionality appears beyond a reasonable doubt. Indeed the challenge would cry out for rejection under a far less rigid test. No logrolling is involved. The act encompasses one general topic — public utilities — and amends nothing other than various provisions in the public utility chapter of the Code. It is not surprising, is in fact logical, that the legislature would consider the subject addressed in section 12 together with the other matters addressed throughout Senate File 2370. As previously mentioned, gas and electric public utilities had been prohibited generally from cross-subsidization by the same section since 1989. The public utility regulations chapter of the Code (chapter 476) was and remains an eminently logical place for a statute prohibiting cross-subsidization by a public utility. And the amendment to that prohibition — section 12— fits logically and neatly within the other sections of Senate File 2370. We therefore reject the single-subject challenge.

The title challenge is a related one. Long v. Board of Supervisors, 258 Iowa 1278, 1287, 142 N.W.2d 378, 383 (1966) (single subject and title requirements are independent but “closely related”). The title provision, in contrast with the single-subject provision, “was primarily directed at the legislative process” and intended primarily to prevent surprise and stealth. Id. Like other constitutional provisions, the title requirement is to “be given a liberal construction to permit one act to embrace all matters reasonably connected with the subject expressed in the title and not utterly incongruous thereto.” Motor Club v. Department of Transp., 265 N.W.2d 151, 153 (Iowa 1978). In Motor Club we went on to explain that

the title need not be an index or epitome of the act or its details. The subject of the bill need not be specifically and exactly expressed in the title. It is sufficient if all the provisions relate to the one subject indicated in the title and are parts of it or incidental to it or reasonably connected with it or in some reasonable sense auxiliary to the subject of the statute.

Id. (quoting State v. Talerico, 227 Iowa 1315, 1322, 290 N.W. 660, 663 (1940)). “The enactment is constitutionally valid as to the title unless matter utterly incongruous to the general subject of the statute is buried in the act.” Western Int’l v. Kirkpatrick, 396 N.W.2d 359, 365 (Iowa 1986).

Although few aspects of Senate File 2370 might be expected to precipitate widespread private debate, no citizen — certainly no legislator — should be surprised to find the subject of section 12 considered under the title of the act. UtiliCorp concedes in its brief that it developed its repair plan “in part to comply with its legal obligations under Iowa law to operate efficiently and economically.”

The title challenge also fails under the authorities we have discussed.

II. The second certified question was: Do the classifications contained in section 12 of Senate File 2370 violate the privileges and immunities clause of article I, section 6 of the Iowa Constitution?

This article provides that

[a]ll 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.

Under this provision the legislature must not act arbitrarily when it undertakes to classify citizens. John R. Grubb, Inc. v. Iowa Hous. Fin. Auth., 255 N.W.2d 89, 95 (Iowa 1977). We test privileges and immunities challenges by the traditional equal protection analysis. In re Chicago, Milwaukee, St. Paul & Pac. R.R., 334 N.W.2d 290, 294 (Iowa 1983). “Under that test the classification must be sustained unless it is patently arbitrary and bears no rational relationship to a legitimate governmental interest.” Lunday v. Vogelmann, 213 N.W.2d 904, 907 (Iowa 1973).

UtiliCorp contends section 12 arbitrarily classifies gas and electric public utilities. There are two parts to this contention, both wrong: (1) section 12 does not create a classification; and (2) such a classification would not be arbitrary.

As mentioned, Iowa Code section 476.78 has proscribed cross-subsidization by gas and electric utilities since 1989. Section 12 of Senate File 2370 created no classification; the challenged amendment merely elaborated on the existing proscription that already dealt only with gas and electric utilities. The elaboration (section 12) simply placed limitations on gas and electric utilities with respect to the sale, repair, or maintenance of certain equipment owned by its customers. These limitations were an attempt to place the utilities on.a level playing field with other Iowa contractors providing the same services. The legislature addressed a legitimate state interest when it attempted to level the playing field.

UtiliCorp is not singled out by Code section 476.78. Both before and after its challenged amendment, it has impacted alike on all public gas and electric companies, a group logically targeted for effecting energy efficiency. Energy efficiency is surely in the public interest. Only rate-regulated gas and electric utilities are required to file energy efficiency plans, so it is reasonable and legitimate that the legislature limit the activities of these classes of utilities. See Iowa S. Utils. Co. v. Iowa State Commerce Comm’n, 372 N.W.2d 274, 279 (Iowa 1985) (public policy and promoting energy conservation constitutes rational basis for classifying or distinguishing utilities).

Arguments on the subject often confuse the word “promote” in the phrase “promote a legitimate governmental interest.” It is axiomatic that determining the wisdom or effectiveness of legislation is not a judicial function. Section 12 promoted a legitimate governmental interest because, as we have said, energy efficiency is a legitimate governmental interest. And the legislature believed the amendment effected that goal. We think it undoubtedly related to it.

The privileges and immunities challenge also fails.

III. The third certified question was: Does section 12 of Senate File 2370 constitute a “special law,” in violation of article III, section 30 of the Iowa Constitution? This challenge rests on the same grounds that formed the basis for the privileges and immunities challenge rejected in the preceding provision. The parties agree that the test and analysis are the same. See John R. Grubb, Inc., 255 N.W.2d at 96. For the reasons previously discussed, we find no violation under this challenge.

The answer to each certified question is thus no.

CERTIFIED QUESTIONS ANSWERED.

All justices concur except SNELL, CARTER and LAVORATO, JJ., who dissent; and TERNUS, J., who dissents in part.

1 . The three questions were certified by United States District Court for Southern Iowa pursuant to Iowa Code chapter 684A and a local federal rule.