Dansie v. Public Service Commission

The Utah Court of Appeals recently issued its ruling in the case of Jesse H. Dansie Family Trust v. Public Service Commission and Hi-Country Estates Homeowners Association. This case originates from a well lease agreement between the Dansie Trust's predecessor (Jesse Dansie) and Hi-Country's predecessor (Gerald Bagley/Foothills Water Company), in which Mr. Dansie agreed to allow Bagley's water system to be connected to his well for a period of 10 years. In exchange, Mr. Dansie was given a number of free residential hook-ups to the water system and the right to receive up to 12 million gallons of water per year, in perpetuity, at no cost. In 1985, Foothills applied to the Utah Public Service Commission ("PSC") to operate the water system as a public utility. The following year, the PSC held a hearing regarding rates for the water system, in which the PSC reviewed the well lease and found that it was "grossly unreasonable" and that it would be "unjust and unreasonable" to expect the water systems' active customers to bear the burden of the well lease. The PSC required Mr. Dansie and his family to pay pro-rata costs for water delivered to them.

In 1993, Hi-Country took over control of the water system, developed a new well, and disconnected the water system from the Dansie well. Hi-Country also disconnected the water lines to the Dansies due to the Dansies' refusal to pay the pro-rata costs of water delivery, as ordered by the PSC.  Thereafter, the PSC decertified Hi-Country as a public utility because Hi-Country was providing water service only to its members.

Following lengthy litigation and several appellate court rulings, it was ultimately held that the well lease was an enforceable contract. In 2011, the Utah Court of Appeals ruled that the Dansies were entitled to their contractual rights to free hook-ups and free water "unless the PSC intervenes and determines otherwise."

Following the 2011 decision, the Hi-Country water system was again brought under PSC jurisdiction, and Hi-Country filed for a new general rate case. The Dansies filed a petition to intervene, which was granted. The PSC held a rate hearing and issued an order in which it concluded--in a manner similar to its ruling in 1986--that the well lease was "void and unenforceable as against the public interest." The Dansies appealed the ruling to the Court of Appeals.

The Court of Appeals reviewed the issue of whether the PSC exceeded its jurisdiction when it concluded that the well lease was void and unenforceable. The Court noted that the PSC has been granted broad and sweeping jurisdiction to supervise and regulate public utilities in the state in order to protect the public interest. The Court also noted that the PSC has statutory authority to determine if a public utility contract is unjust, unreasonable, discriminatory, preferential, or in violation of any law, and that the PSC is at liberty to disregard such contracts altogether in they conflict with a reasonable rate determined by the PSC. The Court therefore concluded that the PSC did not exceed its jurisdiction, and declined to change the PSC's decision that the well lease is "unreasonable, unjust, and not in the public interest." Accordingly, the Court upheld the order of the PSC.

The attorneys at Smith Hartvigsen are pleased to have represented Hi-Country in this case.

To read the full opinion, click here.