Pub. Util. Dist. No. 2 of Pac. Cnty., Mun. Corp. v. Comcast of Wash. Iv, Inc.

438 P.3d 1212

PUBLIC UTILITY DISTRICT NO. 2 OF PACIFIC COUNTY, a Washington municipal corporation, Respondent,

v.COMCAST OF WASHINGTON IV, INC., a Washington corporation; CenturyTel of Washington, Inc., a Washington corporation; and Falcon Community Ventures I, L.P., a California limited partnership, d/b/a Charter Communications, Appellants.

No. 77310-1-I

Court of Appeals of Washington, Division 1.

FILED: April 8, 2019

Eric Stahl, Davis Wright Tremaine LLP, 920 5th Ave. Ste. 3300, Seattle, WA, 98104-1610, John McGrory, Davis Wright Tremaine LLP, 1300 Sw Fifth Avenue, Suite 2400, Portland, OR, 97201, Timothy J. O'Connell, Stoel Rives LLP, 600 University St. Ste. 3600, Seattle, WA, 98101-3197, for Appellant.

Donald Stewart Cohen, James Edward Horne, Gordon, Thomas, Honeywell, Malanca, Pete, 600 University St. Ste. 2100, Seattle, WA, 98101-4185, for Respondent.

PUBLISHED OPINION

Dwyer, J.¶1 Pacific County Public Utility District No. 2 (District) permitted Comcast of Washington IV, Inc., CenturyTel of Washington, Inc., and Falcon Community Ventures I, L.P., d/b/a Charter Communications (collectively Companies) to attach their communications equipment to the District’s utility poles pursuant to written agreements. In 2007, the District instituted significant increases to the rates it charged the Companies to attach their equipment to the utility poles. The Companies refused to pay the increased rates, and also refused to remove their equipment from the District’s utility poles, leading the District to bring this lawsuit.

¶2 In 2008, our legislature amended the statute governing utility pole attachment rates, RCW 54.04.045, effective June 12, 2008. The amendment included a specific rate calculation formula, the result of which would yield a "just and reasonable" rate. RCW 54.04.045(3)(a)-(c). Whether the District’s revised rates complied with the amended statute became the central dispute of the case.

¶3 This is the second time that this matter has come before us on appeal. See Pub. Util. Dist. No. 2 of Pacific County v. Comcast of Wash. IV, Inc., 184 Wash. App. 24, 336 P.3d 65 (2014) (hereinafter PUD I ). In deciding the first appeal, we held that none of the parties correctly interpreted the statutory formula set forth by the amended statute because, instead of interpreting and applying the words of the statute, the parties attempted to shoehorn the statutory language into various preexisting formulas. We rejected this "closest to the pin" method of statutory interpretation, PUD I, 184 Wash. App. at 64, 336 P.3d 65, and remanded the matter for the parties to determine whether the District’s rate was in compliance with the formula as it is set forth by the words of the statute.

¶4 In the trial court—and now on appeal—the District and the Companies derived different mathematical formulas from the words of the statute. Furthermore, the parties also dispute the validity of various data and inputs that the District utilized when calculating the maximum permissible rate allowed by the statute. We are presented with two principal issues: (1) whether the District abused its discretion when calculating the data and inputs it utilized to calculate the maximum permissible rate pursuant to RCW 54.04.045(3), and (2) whether the trial court erred by accepting the District’s interpretation of the language set forth in RCW 54.04.045(3)(a). We affirm the trial court with respect to the District’s choice of data and inputs, but reverse the trial court’s interpretation of the language set forth in RCW 54.04.045(3)(a). However, because the trial court’s error in interpretation herein was harmless, we affirm the judgment.

I

¶5 The District is a consumer-owned utility organized as a municipal corporation pursuant to RCW 54.04.020. It provides electricity to customers in Pacific County. PUD I, 184 Wash. App. at 35, 336 P.3d 65. The District owns and maintains utility poles that it uses to provide its services, and to which it also permits third parties to attach communications equipment. PUD I, 184 Wash. App. at 35, 336 P.3d 65.

¶6 The Companies provide a variety of communication services to customers in Pacific County by attaching their communications equipment to the District’s utility poles. PUD I, 184 Wash. App. at 35, 336 P.3d 65. The Companies initially attached their equipment to the District’s utility poles pursuant to rental agreements assigned to them by previous communications providers in Pacific County. PUD I, 184 Wash. App. at 35, 336 P.3d 65. The assigned agreements date back to the 1970s and 1980s with respect to Comcast and Charter, and to the 1950s and 1960s with respect to CenturyTel. PUD I, 184 Wash. App. at 35, 336 P.3d 65.

¶7 Prior to 2007, the District’s annual pole attachment rates had remained fixed for 20 years at $ 8.00 per pole for telephone companies and $ 5.75 per pole for cable companies. PUD I, 184 Wash. App. at 36, 336 P.3d 65. In February 2006, the District informed the Companies that it intended to terminate the agreements and provide the companies a new pole attachment agreement and new pole attachment rates. PUD I, 184 Wash. App. at 36, 336 P.3d 65. The new rates would take effect on January 1, 2007. PUD I, 184 Wash. App. at 36, 336 P.3d 65.

¶8 To set its new rate, the District relied on a rate study, performed several years earlier, by EES Consulting, Inc. PUD I, 184 Wash. App. at 36, 336 P.3d 65. EES recommended that the District increase its rate to at least $ 20.65 per pole but preferably closer to $ 36.39 per pole. PUD I, 184 Wash. App. at 36, 336 P.3d 65. The study considered four different formulas for calculating the pole attachment rate: the United States Federal Communications Commission (FCC) Cable formula,¹ the FCC Telecom formula,² the American Public Power Association (APPA) formula,³ and the Washington PUD Association formula.⁴ PUD I, 184 Wash. App. at 36-37, 336 P.3d 65. After considering and discussing the results of the study with the District’s supervisors, the District’s general manager recommended to the District’s board of commissioners an annual rate of $ 19.70 per pole, to take effect at the start of 2008.⁵ PUD I, 184 Wash. App. at 37, 336 P.3d 65.

¶9 The board of commissioners held public hearings on the proposed rate increases on December 5, 2006 and December 19, 2006. PUD I, 184 Wash. App. at 38, 336 P.3d 65. Even though the Companies knew about the public hearings, they did not send any representatives to attend, nor did they request the agenda or minutes from the hearings. PUD I, 184 Wash. App. at 38, 336 P.3d 65. On January 2, 2007, the board of commissioners adopted Resolution No. 1256, which accepted the proposed rates. PUD I, 184 Wash. App. at 38, 336 P.3d 65.

¶10 Subsequently, the District sent new agreements, incorporating the new rates, to the Companies and other then-current licensees for signature, explaining that all licensees must either sign the new agreement and pay at the new rate or remove their equipment from the District’s utility poles. PUD I, 184 Wash. App. at 39, 336 P.3d 65. However, the Companies refused to sign the new agreement, declined to remove their equipment, and tendered payment only at the historical rates.⁶ Although the existing agreements between the District and the Companies permitted the District to remove the Companies’ equipment, the District chose not to exercise this right. PUD I, 184 Wash. App. at 40, 336 P.3d 65. Instead, the District filed complaints against the Companies alleging claims of breach of contract, trespass, and unjust enrichment and seeking a declaratory judgment, injunctive relief, and damages. PUD I, 184 Wash. App. at 40, 336 P.3d 65. The Companies counterclaimed and sought to enjoin the District from imposing terms in violation of RCW 54.04.045. PUD I, 184 Wash. App. at 40, 336 P.3d 65. The lawsuits were consolidated by agreement.

¶11 Meanwhile, in March 2008, the legislature amended RCW 54.04.045, with an effective date of June 12, 2008. LAWS OF 2008, ch. 197, § 1. The prior version of the statute required only that pole attachment rates charged by Washington Public Utility Districts be "just, reasonable, nondiscriminatory and sufficient." Former RCW 54.04.045(2) (1996). This prior version did not provide any specific formula for calculating an appropriate rate. The amendment, however, instituted the following specific formula, the result of which would constitute a "just and reasonable rate." RCW 54.04.045(3).

(3) A just and reasonable rate must be calculated as follows:

(a) One component of the rate shall consist of the additional costs of procuring and maintaining pole attachments, but may not exceed the actual capital and operating expenses of the locally regulated utility attributable to that portion of the pole, duct, or conduit used for the pole attachment, including a share of the required support and clearance space, in proportion to the space used for the pole attachment, as compared to all other uses made of the subject facilities and uses that remain available to the owner or owners of the subject facilities;

(b) The other component of the rate shall consist of the additional costs of procuring and maintaining pole attachments, but may not exceed the actual capital and operating expenses of the locally regulated utility attributable to the share, expressed in feet, of the required support and clearance space, divided equally among the locally regulated utility and all attaching licensees, in addition to the space used for the pole attachment, which sum is divided by the height of the pole; and

(c) The just and reasonable rate shall be computed by adding one-half of the rate component resulting from (a) of this subsection to one-half of the rate component resulting from (b) of this subsection.

RCW 54.04.045.

¶12 The legislature also included the following provision relating to subsection (3)(a):

For the purpose of establishing a rate under subsection (3)(a) of this section, the locally regulated utility may establish a

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