The Sacramento Municipal Utility District vowed to oppose a court decision giving investor-owned utilities access to muni service territory. “It’s an outrageous decision quite frankly,” Arlen Orchard, SMUD general counsel said. The Los Angeles Department of Water & Power and other public utilities say they’re planning to appeal the case to the state Supreme Court because they fear that the language in the ruling could put municipal utilities out of business. Orchard said October 7 that the muni was taking a proactive stance against a decision in the City of Los Angeles v. Tesoro Refining case. The California Public Utilities Commission assistant general counsel Harvey Morris said the ruling dealt with a unique set of facts. “It’s just a question of a unique situation, that’s all,” said Morris. On September 22, the Second Appellate District Court in Los Angeles ruled that the California Constitution--which allows cities and public utilities to provide service within their boundaries--does not provide an exclusive right. The ruling reversed an earlier decision by the Los Angeles County Superior Court. The case centers on a refinery that straddles the service territories of both the Los Angeles Department of Water & Power and Southern California Edison. Both utilities have been providing power to the refinery, which is located partially in the cities of L.A. and Carson. Although most of the refinery is powered by LADWP, the facility’s owner, Tesoro Refining, took action to have power delivered solely by Edison. Edison offers cheaper rates. In June 2008, the CPUC ordered Edison to provide the facility with its full electricity requirement. LADWP then sued Tesoro. During a trial, the court eventually ruled in favor of LADWP, but Tesoro won the appeal last month. The appellate court found that electricity’s a statewide matter, that the CPUC speaks for the state, and that any time there’s a conflict between a CPUC order and a local rule, ordinance, or city charter the CPUC order governs. “A city may not regulate matters over which the Legislature grants regulatory power to the [C]PUC,” the appellate court’s decision reads in part. “We conclude that the trial court was required to enter summary judgment in favor of Tesoro because neither the Constitution nor the charter prohibits Tesoro from buying power from Edison in Carson, transporting that power over the refinery’s internal wiring, and using that power within Los Angeles.” Orchard, who also serves as legal counsel for the California Municipal Utilities Association, suggested that the court’s decision could result in a CPUC power grab, in both senses of the term. “This isn’t a power grab,” Morris countered. “Arguably under the decision, because it’s written so broadly, it could apply to any customer. So, you could see the CPUC ordering PG&E to provide service to all state buildings in Sacramento as an example,” Orchard said. He added that because the CPUC also has eminent domain authority, it could order “condemnation of our facilities in order to do it,” he told the board. “It really does flip on its head about 135 years of practice, so obviously this is of great concern throughout the industry.” Orchard said that SMUD intends to file an amicus, or “friend of the court,” brief on the issue with the California Supreme Court by mid-November. In addition to Los Angeles, SMUD says that the League of Cities and various water agencies also will be contacted about possible participation in the brief. Beyond litigation, SMUD and other public power entities are looking at a possible legislative fix, Orchard said. Although the court’s decision is only limited to the Second Appellate District, consisting of Los Angeles and Ventura counties, Orchard warned it could set a dangerous precedent. “Those types of decisions are used for precedent when other courts look at it,” he said. That was also why he is seeking to have the decision overturned by the California Supreme Court.
