82-000202RP City Of Alachua, Et Al. vs. Public Service Commission Status: Closed DOAH Final Order on Friday, April 8, 1983.

Summary: Petitioner didn't show challenged rule constitutes invalid exercise of delegated legislative authority. Economic impact statement was corrected.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CITY OF ALACHUA, et al., )

)

Petitioner, )

)

vs. ) CASE NO. 82- 202RP

)

FLORIDA PUBLIC SERVICE )

COMMISSION, )

)

Respondent. )

_________________________________)

FINAL ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly

designated hearing officer, R. L. Caleen, Jr., held a formal hearing in this

case on March 8, 1983, in Tallahassee, Florida.

APPEARANCES

For Petitioners: Howard E. Adams, Esquire

Post Office Box 3985

Tallahassee, Florida 32303

For Respondent: Paul Sexton, Esquire

Florida Public Service Commission

101 East Gaines Street

Tallahassee, Florida

ISSUE

Whether respondent's proposed rule 25-6.100(7), Florida Administrative

Code, providing that electric utilities may collect municipal or county

franchise fees only from customers within the municipality or county levying the

fee, constitutes an invalid exercise of delegated legislative authority.

BACKGROUND

On January 29, 1982, petitioners City of Alachua, et al., 32 municipally

owned electric utilities ("Cities"), filed with the Division of Administrative

Bearings a petition challenging the validity of franchise fee rule amendments,

25-4.10, 25-6.100, 25-7.85, and 25-10.03, Florida Administrative Code, proposed

for adoption by respondent Florida Public Service Commission ("Commission").

Hearing was thereafter set for March 1, 1982.

On February 24, 1982, on the Cities' motion, Gainesville Regional Utilities

was dropped as a party-petitioner and the Cities were granted leave to amend

their initial petition.

On February 25, 1982, the Cities filed their amended petition challenging

the validity of the Commission's proposed franchise fee rules on four grounds:

(1) the rules are an attempt by the Commission to exercise jurisdiction over

municipal electric utilities' rates or rate-making power; (2) the rules fail to

set out the amended rule in full; (3) the rules violate the one subject

requirement of Section 120.54(8), Florida Statutes (1981), and (4) the attendant

economic impact statement is inadequate.

The parties' subsequent motion for an indefinite continuance was granted.

On September 13, 1982, the Commission's motion to sever proposed rules 25-4.10,

25-7.85, and 25-10.03 was granted, leaving rule 25-6.100(7)("the proposed rule")

as the only rule being challenged in this proceeding.

The facts are undisputed. On December 29, 1982, the parties filed a joint

motion to decide this case on the basis of stipulated facts, written memoranda,

and oral argument. The motion was granted. Thereafter, memoranda of law were

filed on February 10, 1983; oral argument was heard on March 8, 1983.

The parties' December 29, 1982, stipulation, which describes the relevant

rulemaking proceedings conducted by the Commission, is substantially set out

below. 1/

FINDINGS OF FACT

1. Notice of the proposed rule was published in the January 15, 1982,

issue of the Florida Administrative Weekly (" FAW"). 2/ The notice set forth

only the proposed amendment of the rule and did not publish the existing rule in

full.

2. At the time that the notice of proposed rulemaking was published, an

economic impact statement ( EIS) was made available by the Commission. 3/

3. A public hearing on the proposed rule was held before a member of the

Commission's staff on February 4, 1982. The Cities participated in the hearing

and, subsequent thereto, filed with the Commission their Motion to Dismiss or

Withdraw Proposed Rules. 4/ During the pendency of the rulemaking proceeding,

the Commission drafted and circulated a revised economic impact statement. The

Commission's staff member circulated to the participants of the rulemaking

proceeding a proposed final amendment of Rule 25-6.100 and the revised economic

impact statement, requesting comments thereon. 5/ Written comments were

received from various participants in the rulemaking. 6/ While the comments

addressed the substance of the proposed rule, none addressed the revised

economic impact statement.

4. The Commission staff presented a written recommendation to the

Commission on the proposed rule, which also included the participants' comments

and the revised economic impact statement. At its regularly scheduled Agenda

Conference of September 20, 1982 the Commission adopted the proposed rule

recommended by its staff, as well as the revised economic impact statement.

Order No. 11277 also denied the Cities' Motion to Dismiss or Withdraw Proposed

Rule. 7/ Filing of the proposed rule with the Secretary of State was withheld

pending a determination of validity by the Division of Administrative Hearings.

CONCLUSIONS OF LAW

I.

Jurisdiction and Standing

5. The Division of Administrative Hearings has jurisdiction over the

parties and subject matter of this proceeding. 120.54(4)(a), Fla.Stat. (1981).

6. The Cities, as owners of electric utilities, are "substantially

affected" by, and have standing to challenge, the proposed rule. The rule

regulates the way they may collect city or county franchise fees from their

customers. Their standing to initiate this proceeding has not been challenged

by the Commission.

II.

The Proposed Rule is Within

the Commission's Authority to Prescribe

Rate Structures for Municipal Electric Utilities

7. The proposed rule, in its final form, provides:

25-6.100 Customer Billing.

(7) Franchise Fees.

(a) When a municipality charges a

utility any franchise fee, the utility

may collect that fee only from its

customers receiving service within that

municipality. When a county charges a

utility any franchise fee, the utility may

collect that fee only from its customers

receiving service within that county.

(b) A utility may not incorporate any

franchise fee into its other rates for

service.

(c) For the purposes of this subsection,

the term "utility" shall mean any electric

utility, rural electric cooperative, or

municipal electric utility.

(d) This subsection shall not be construed

as granting a municipality or county the

authority to charge a franchise fee. This

subsection only specifies the method of

collection of a franchise fee, if a

municipality or county, having authority to

do so, charges a franchise fee.

In effect, this rule allows investor-owned, municipally-owned, and

cooperatively-owned electric utilities paying franchise fees to local government

to recoup those fees only from customers living within the franchised area.

This, the Cities contend, is an unlawful attempt by the Commission to exercise

jurisdiction over municipal electric utilities' rates. The Commission replies

that it is exercising rate structure jurisdiction, not rate making jurisdiction-

-a power which it does not have.

8. The Commission may regulate the rate structures of municipal electric

utilities, Section 366.04(2), Florida Statutes (1981), but lacks power to

regulate their rates. See, Amerson v. Jacksonville Electric Authority, 362

So.2d 433 (Fla. 1st DCA 1978). The question posed is whether a rule which

regulates collection of franchise fees is an exercise of power over the rates or

rate structures of electric utilities.

9. These terms were judicially construed in the City of Tallahassee v.

Mann, 411 So.2d 162 (Fla. 1981), at 163:

[t]here is a clear distinction between "rates"

and "rate structure" though the two concepts

are related. "Rates" refers to the dollar

amount charged for a particular service or an

established amount of consumption.

"Rate structure" refers to the classification

system used in justifying different rates.

10. Contrary to the Cities' contention, the proposed rule regulates rate

structure, not rates. It does not affect the dollar amount charged for a

particular service or amount of consumption. Franchise fees are set by local

government. Utilities decide how much, if any, of these fees will be passed on

to their customers as cost. The proposed rule simply establishes a

classification system which justifies different rates. It establishes two

classes of customers.

11. One class is located within a city or county charging electric

utilities a franchise fee; from this class of customers, the utility may recoup

all or part of its franchise fee costs. The other class consists of customers

living outside the boundaries of the franchise fee charging city or county;

these customers cannot be required to pay for any part of the franchise fee

costs. Thus, when a utility passes on its franchise fee costs, its customers'

rates will differ, depending on whether the customers are located within or

without the boundaries of the government levying the franchise fee. The

proposed rule, therefore, is derived from and does not exceed the Commission's

explicit power to regulate rate structures of municipal electric utilities.

III.

The Proposed Rule Encompasses

One Subject and Sets Out Existing

Sections of the Rules to Be Amended

12. The Cities contend that the proposed rule violates Section 120.54(8),

Florida Statutes (1981), by containing more than one subject and by failing to

set out fully the rule being amended. Section 120.54(8) provides:

Each rule adopted shall contain only one

subject . . . No rule shall be amended

by reference only. Amendments shall set

out the amended rule in full in the same

manner as required by the constitution

for laws.

13. These requirements for the adoption of rules are analagous to the

requirements for the enactment of laws. Article 3, Section 6 of the Florida

Constitution (1968) provides:

Section 6. Laws.--Every law shall

embrace but one subject and matter

properly connected therewith, and the

subject shall be briefly expressed in

the title . . . No law shall be revised

or amended by reference to its title only.

Laws to revise or amend shall set out in

full the revised or amended act, section,

subsection, or paragraph of a subsection. . .

The One-Subject Requirement

14. The constitutionally imposed one-subject requirement was discussed in

State v. Lee, 356 So.2d 276 (Fla. 1978) at 282:

The purpose of the constitutional prohibition

against a plurality of subjects

in a single legislative act is to prevent

a single enactment from becoming a "cloak"

for dissimilar legislation having no

necessary or appropriate connection with the

subject matter. E.g., Colonial Inv. Co.

v. Nolan, 100 Fla. 1349, 131 So. 178 (1930).

This constitutional provision, however, is

not designed to deter or impede legislation

by requiring laws to be unnecessarily

restrictive in their scope and operation.

See State ex rel. X- Cel Stores, Inc. v. Lee,

122 Fla. 685, 166 So. 568 (1936). This Court

has consistently held that wide latitude must

be accorded the legislature in the enactment

of laws, and this Court will strike down a

statute only when there is a plain violation

of the constitutional requirement that each

enactment be limited to a single subject

which is briefly expressed in the title.

Farabee v. Board of Trustees, 254 So.2d 1

(Fla. 1971); Rouleau v. Avrach, 233 So.2d

1 (Fla. 1969)

The subject of a law is that which is

expressed in the title, Rouleau, supra,

at 4; Ex parte Knight, 52 Fla. 144, 41

So. 786 (1906), and it may be as broad

as the legislature chooses provided

the matters included in the law have

a natural and logical connection. Board

of Public Instruction of Broward County

v. Doran, 224 So.2d 693 (Fla. 1969)

15. The proposed rule amends existing Rule 25-6.100, titled, Customer

Billing, by adding a new subsection (7), titled, Franchise Fees. Existing

subsections (1) through (5) specify the manner in which investor-owned utilities

may bill their customers. Subsection (6) requires that they apply uniform

billing practices to all customers on the same rate schedule. The proposed

rule, subsection (7), establishes a classification system for billing customers

of all electric utilities for franchise fees levied by local government. The

proposed rule embraces but one subject: the manner in which utilities may bill

their customers for franchise fee costs. The subject of the rule which it

amends is Customer Billing. The proposed rule is naturally and logically

related to that subject.

16. In their posthearing brief, the Cities urge that the manner of

franchise fee collection is a substantive requirement which would far better be

included in ratemaking rules or in other portions of the Florida Administrative

Code (petitioner's Memorandum of Law, p. 10). While the Commission could have

placed the proposed rule elsewhere in the Florida Administrative Code, its

choice to include it as part of the existing Customer Billing rule was a

permissible one.

17. The courts accord the legislature wide latitude and will strike down

only plain violations of the single-subject rule. State v. Lee, supra, at 282.

Similar latitude should be granted administrative agencies when they exercise

their quasi-legislative rulemaking function. Cf. Agrico v. State Department of

Environmental Regulation, 365 So.2d 759, 762 (Fla. 1st DCA 1978). It is

concluded, therefore, that the proposed rule does not violate the one subject

requirement of Section 120.54(8).

The Requirement to Set Out an Amended Rule in Full

18. Section 120.54(8), supra, requires that rule amendments be set out in

full in the same manner as required by the constitution for laws. See, Art.

III, 6, Fla. Const. (1968). The constitutional requirement is satisfied "[ i]f

the statutory enactment is complete and intelligible in itself without reference

to the act it purports to amend . . . ." Lipe v. City of Miami, 141 So.2d 738,

743 (Fla. 1962). Also, see, Auto Owners Insurance Co. v. Hillsborough Aviation

Authority, 153 So.2d 722, 725 Fla. 1963):

If the statutory enactment is complete and

intelligible in itself, without the necessity

of referring to the books to relate

it to the amended statute in order to

ascertain the meaning of the Amendment,

then Article III, Section 16, supra, is

satisfied. On the other hand, if the

amendatory enactment is not a complete,

coherent and intelligible act, or if it

necessitates separate research and analysis

of the statute which is being amended, it

does not meet the requirements of Article

III, Section 16, supra.

This constitutional requirement was designed

. . . to prevent the enactment of amendatory

statutes in terms so blind that the

legislators themselves are sometimes deceived

concerning their effect and the public fails

to become advised of the changes made in the

law because of difficulty in making the

necessary examination and comparison. Deltona Corp. v. Florida

Public Service Commission, 220 So.2d 905, 908 ( Fla.l969). Section 120.54 (8)

must be given like effect.

19. Here, the Commission failed to set out in full the existing rule, Rule

25-6.100(A)-(6), which the proposed rule amends. However, when measured by the

standards enunciated in Lipe, supra, and Auto Owners, supra, it is evident that

the Commission's action satisfies Section 120.94(8). The proposed rule

(amendment) is complete, coherent, and intelligible in itself, without reference

to the rule which it purports to amend; separate research and analysis of the

amended rule is uncalled for.

IV.

The Commission's Economic

Impact Statement is Adequate

20. One step in rulemaking is the preparation of an economic impact

statement (" EIS"). The EIS must include an estimate of the cost to the agency

of implementing the proposed rule, an estimate of the cost or economic benefit

to all affected persons, an estimate of the impact of the proposed action on

competition, and a detailed statement of the data and methodology used in

preparing these estimates. 120.54(2)(a), Fla.Stat. (1981). Thoughtful and

detailed preparation of the EIS is required. Department of Health and

Rehabilitative Services v. Framat Realty, Inc., 407 So.2d 238, 242 (Fla. 1st DCA

1981). The EIS serves to "promote agency introspection in administrative

rulemaking. . .[to direct] agency attention to certain key considerations and. .

.[facilitate] informed decision making." Florida-Texas Freight, Inc. v. Bawkins,

379 So.2d. 944 ( Fla.1979).

21. A proposed rule, however, is not invalid simply because the attendant

EIS is facially deficient or fails to address each of the factors required by

the statute. Texas-Freight, Inc., supra, at 946; Plantation Residents'

Association, Inc. v. School Board of Broward County, 424 So.2d. 879, 881 Fla.

1st DCA 1982):

Such a standard would add a transparent

technicality to the rulemaking process

and would exalt form over substance. Id.

22. Even the complete absence of an EIS may be harmless error if it is

shown that the proposed rule will have no economic impact or that the agency

fully considered asserted economic factors and impacts. Division of Workers

Compensation, Department of Labor and Employment Security v. McKee, 413

So.2d.805,806 (Fla. 1st DCA 1982). To prevail, the challenging party must show

that the proceedings were rendered unfair or incorrect by an inadequate EIS,

Plantation Residents' Association, supra; otherwise, the deficiency will be

considered harmless error. Id; Florida-Texas Freight, Inc. supra; Polk v. School

Board of Polk County, 373 So.2d. 960 (Fla. 2nd DCA 1979) at 962 ("The

preparation of an economic impact statement is a procedural aspect of an

agency's rulemaking authority. . . .Even though an agency has committed a

procedural error, we must affirm the agency's action unless the error rendered

the ruling unfair or incorrect.")

23. In the instant case, the Commission prepared one EIS, then another,

before it adopted the proposed rule. The first EIS, dated October 28, 1981, was

prepared when the proposed rule, in its original form, was proposed for

adoption. The Cities argue that this EIS is facially invalid because (1) it

fails to describe the economic effects of the proposed rule on municipal

electric utilities, and (2) it fails to specify, in sufficient detail, the

methodology used in its preparation. No extrinsic evidence was presented to

prove its inadequacy.

24. The first alleged defect lacks merit, since the EIS implicitly

describes the effects of the proposed rule on municipal electric utilities:

Electric . . . .utilities currently

follow the practice of confining franchise

fee collection to the area in which it is

assessed. No substantial changes are

expected for these companies. 8/

25. But the second alleged defect has merit. The EIS fails to describe in

detail the data and method used in its preparation. The description which it

provides lacks detail and is, obviously, incomplete:

Data on the telephone industry was

supplied by the Communications

Department

Id. No mention is made of the method or data used in estimating the impacts on

electric utilities.

26. The Commission's staff, apparently recognizing this deficiency,

prepared a second (or revised) EIS on July 16, 1982. This revised EIS was

circulated to affected persons, including municipally-owned electric utilities,

for their comments prior to its submittal to the Commission, and prior to the

Commission's adoption of the proposed rule on September 20, 1982. No comments

were received concerning the revised EIS--a detailed document which specifically

addresses each factor listed by the statute. Its adequacy is not challenged

here. The Cities simply contend that the second EIS cannot, as a matter of law,

cure any defects in the first.

27. This contention also lacks merit. The Commission's revision of the

original EIS convincingly shows that it engaged in the very introspection which

the statute encourages. Prior to adoption of the proposed rule, it turned its

attention to, and affirmatively considered, the relevant economic factors and

impacts. Division of Workers Compensation, Department of Labor and Employment

Security, supra.

28. Furthermore, no showing has been made that the Commission's inadequate

description of methodology used in Preparing its first EIS was prejudicial to

the Cities or rendered the Commission's action unfair or incorrect. Plantation

Residents' Association, supra. The defect in the first EIS, later cured, must

therefore be considered harmless error. Id. Accordingly, it is concluded that

the Commission's EIS, as subsequently revised, is adequate and satisfies the

requirements of Section 120.54(2).

Based on the foregoing, it is

ORDERED:

That the Commission's proposed rule 25-6.100 (7) constitutes a valid

exercise of delegated legislative authority, and that the Cities' amended

petition seeking to invalidate the proposed rule is DENIED.

DONE and ORDERED this 8th day of April, 1983, in Tallahassee, Florida.

___________________________________

R. L. CALEEN, JR.

Hearing Officer

Division of Administrative Hearings

The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 8th day of April, 1983.

ENDNOTES

1/ Exhibits appended to the stipulation, which are referred to in the findings

of fact, are incorporated as though fully set out herein.

2/ See Appendix A to Joint Notion for Disposition of Amended Petition on

Stipulated Facts.

3/ See Appendix B to Joint Motion for Disposition of Amended Petition on

Stipulated Facts.

4/ See Appendix C to Joint Motion for Disposition of Amended Petition on

Stipulated Facts.

5/ See Appendix E to Joint Motion for Disposition of Amended Petition on

Stipulated Facts.

6/ See Appendix F to Joint Motion for Disposition of Amended Petition on

Stipulated Facts.

7/ See Appendix G to Joint Motion for Disposition of Amended Petition on

Stipulated Facts.

8/ See Appendix B to Joint Motion for Disposition of amended Petition on

Stipulated Facts.

COPIES FURNISHED:

Howard E. Adams, Esquire

P. O. Box 3985

Tallahassee, Florida 32303

Paul Sexton, Esquire

Florida Public Service

Commission

101 East Gaines Street

Tallahassee, Florida

Liz Cloud, Chief

Bureau of Administrative Code

1802 Capitol Building

Tallahassee, Florida 32301

Carroll Webb

Executive Director

Administrative Procedures

Committee

120 Holland Building

Tallahassee, Florida 32301

Steve Tribble, Clerk

Florida Public Service Commission

101 East Gaines Street

Tallahassee, Florida 32301