This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1996).




In the Matter of the Application

by the City of Rochester for an

Adjustment of its Service Area

Boundaries with People's

Cooperative Power Association, Inc.

Filed August 18, 1998


Amundson, Judge

Minnesota Public Utilities Commission

File No. E-132,229/SA-95-140

Kenneth R. Moen, Dunlap & Seeger, P.A., 206 South Broadway, Suite 505, P.O. Box 549, Rochester, MN 55903 (for relator People's Cooperative Power Association, Inc.)

Joseph F. Chase, O'Brien, Ehrick, Wolf, Deaner & Maus, 206 South Broadway, Suite 611, P.O. Box 698, Rochester, MN 55903 (for respondent City of Rochester)

Hubert H. Humphrey III, Attorney General, Megan J. Hertzler, Dennis D. Ahlers, Assistant Attorneys General, 700 North Central Life Tower, 445 Minnesota Street, St. Paul, MN 55101 (for respondent Minnesota Public Utilities Commission)

Considered and decided by Shumaker, Presiding Judge, Amundson, Judge, and Forsberg, Judge.*



Appellant utilities company transferred service rights to respondent city when areas became incorporated into the city. Appellant now challenges the Commissioner of Public Utilities's finding that the start date for the 10-year compensation period (for loss of service revenue) be the date of the interim transfer of service rights. Appellant argues that such a start date is unfair to it because the areas may not be developed for some time, and appellant would not earn compensation from usage. Appellant contends that the start date should be individualized to each area as each one is developed, or less desirably, but alternatively, the date when the permanent transfer is formalized.


In 1994-95, the respondent city of Rochester (city) annexed a number of areas. These areas received electrical services from appellant People's Cooperative Power Association (People's). The city petitioned respondent Minnesota Public Utilities Commission (commission) for a transfer of service rights to it. After the city and People's agreed to an interim transfer of service rights, the commission ordered that a contested case hearing be held on the matter of permanent transfer of service rights from People's to the city.

Prior to the contested case hearing, the commission, in what is referred to as the "498 docket," ordered an interim transfer of service rights and set up a 10-year compensation plan for People's. The compensation was set at $175,086, to reflect all changes in capital investment and depreciation prior to the date of transfer, as well as a mill rate of 11.0 per kilowatt hour of usage by future customers in the annexed areas. The compensation period was to begin on the date that permanent service rights were transferred.

Meanwhile, the city annexed additional areas, which raised the same issues regarding electrical service. The parties appeared before an administrative law judge (ALJ) to litigate the issues surrounding the second round of annexations (this matter is referred to as the "140 docket") and immediately began settlement discussions, which resulted in the stipulation of certain facts. Meanwhile, the parties petitioned for rehearing or reconsideration of the commission's 498 docket decision. The petitions were granted, and the commission revised its 498 docket decision on one issues of relevance to the instant case; it determined that the 10-year compensation period should begin on the date of the interim service transfer, rather than on the date of the permanent transfer of service rights.

Both parties appealed the commission's reconsidered 498 docket decision. The ALJ postponed its hearing on the 140 docket until this court decided the appeal of the commission's 498 docket decision. This court affirmed the commission's decision. In re Application by the City of Rochester for an Adjustment of Its Serv. Area Boundaries with People's Coop. Power Ass'n, 556 N.W.2d 611 (Minn. App. 1996), review denied (Minn. Feb. 26, 1997) (People's Coop. I).

When the 140 docket hearing began before the ALJ, People's chose only to litigate the issue of the start date of the compensation period. The ALJ recommended that the commission adopt the date of the interim transfer of services as the start date. The commission accepted the ALJ's recommendation in its subsequent order. This appeal followed.


The commission acts in either a quasi-legislative or a quasi-judicial capacity. Minn. Stat. § 216A.05, subd. 1 (1996). Quasi-legislative functions are described by statute as making such investigations and determinations, holding such hearings, prescribing such rules, and issuing such orders "with respect to the control and conduct of the businesses coming within its jurisdiction as the legislature itself might make." Id. Here, the commission's decision demonstrates that it was acting in a legislative capacity. See People's Coop. I, 556 N.W.2d at 615-16 (in deciding start date of compensation period, commission was acting in legislative role). In such cases, the reviewing court will affirm unless presented with "clear and convincing evidence that the decision exceeds the [commission's] statutory authority or is unjust, unreasonable, or discriminatory." Id at 613.

People's argues that the commission's decision to commence the compensation with the date of the interim transfer of service rights was unjust. It contends that the interim transfer start date is unfair because the annexed areas are undeveloped at this time and a large portion of the compensation package involves compensation by usage (the mill rate). Therefore, the earlier the compensation period starts, presumably the less People's will be compensated because development will likely increase the electrical usage over time. According to the commission, however, "maximizing (or minimizing) compensation is not the goal of the process."

Regarding compensation in such cases, the statute dictates: "The municipality acquiring the facilities shall pay to the electric utility formerly serving the area the appropriate value of its properties within the area * * *." Minn. Stat. § 216B.44 (1996). If the parties contest the terms of compensation, and an exchange of properties is not available,

the commission shall fix and determine the appropriate value of the property within the annexed area, and the transfer shall be made as directed by the commission. In making that determination the commission shall consider the original cost of the property, less depreciation, loss of revenue to the utility formerly serving the area, expenses resulting from integration of facilities, and other appropriate factors.


Here, the commission considered those factors in deciding People's' compensation plan. People's' argument is based on its disgruntlement with the potential amount of compensation of the mill rate, but the valid concerns guiding compensation are met in the commission's plan.

Moreover, People's Coop. I has strong precedential value. There, under virtually identical facts, this court found that there was not clear and convincing evidence that the commission's decision was unjust or unreasonable. People Coop. I, 556 N.W.2d at 616. We come to the same conclusion in the instant case.