In re Ballmountain Dam

NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
that corrections may be made before this opinion goes to press.
 
 
                                No. 88-158
 
 
Petition of Ball Mountain                    Supreme Court
Dam Hydroelectric Project
                                             On Appeal from
                                             Public Service Board
 
                                             March Term, 1989
 
 
Richard H. Cowart, Chair
 
Jon S. Readnour of Carroll, George & Pratt, Rutland, for plaintiff-
  appellants
 
Donald L. Rushford and Morris L. Silver, Rutland, for defendant-appellee
  CVPS
 
James Volz, Montpelier, for defendant-appellee Department of Public Service
 
 
PRESENT:  Allen, C.J., Peck, Dooley and Morse, JJ., and Springer, D.J.,
          (Ret.), Specially Assigned
 
 
     MORSE, J.  Appellants are the towns of Londonderry, Windham, Wardsboro,
Newfane and Dummerston.  They appeal a decision by the Public Service Board
that, as a union municipal district, they do not possess the requisite
authority to finance, construct, own and operate a qualifying small power
production facility.  We affirm the Board's decision.
     Appellants propose to establish themselves as a union municipal
district under 24 V.S.A. Chapter 121 to create the Ball Mountain
Hydroelectric Project.  The proposed power generation project would be
located at the site of the existing Ball Mountain Dam on the West River in
Jamaica, Vermont.  The existing dam is currently managed by the United
States Army Corps of Engineers but has no present energy generation
capacity.  Appellants wish to sell the electrical power generated by the
Dam through the Vermont Power Exchange, Inc. (VPX) to retail electric
utility companies under Vermont Public Service Board Rule 4.100.
     The project would be a "qualifying small power production facility"
under the Public Utility Regulatory Policies Act of 1978 (PURPA), 16 U.S.C.
{ 791a-828c (1976 & Supp. V 1981), and would generally be exempt from state
regulation.  It must, nonetheless, receive approval from the Board for the
power purchase agreement to be executed with VPX. Pursuant to Board Rule
4.100, appellants signed a letter of intent with VPX and submitted the
proper applications for Board approval.  See Rule 4.104(A).
     The Board withheld approval of the project and concluded that "the
Applicant Towns are without authority to act as small power producers . . .
and that development of Ball Mountain Dam by the Towns under any scheme
other than as part of a regulated municipal utility is ultra vires."   
     The sole issue before us is whether appellants may, as a union
municipal district, finance, construct, own and operate a qualifying small
power production facility and sell power through the VPX to Vermont retail
electric utility companies.  The governing law is the General Municipal
Plant Enabling Act, 30 V.S.A. { 2902 which states in relevant part:
 
          [A] municipality [or union municipal district, see 24
          V.S.A. { 4866(7)] may buy and sell electric current for
          domestic use and for commercial purposes and construct,
          purchase or lease, and maintain and operate one or more
          plants for the manufacture, distribution, purchase and
          sale of . . . electricity for the use of such
          municipality and for the use of the residents of such
          municipality and for such other customers outside such
          municipality as the [public service] board may approve
          . . . .
Appellants, reading the "and's" as disjunctive rather than conjunctive,
argue that the plain meaning of { 2902 provides them with the requisite
authority because "an entity need not exercise all of its powers before it
can exercise any one."
     The law was intended to allow municipalities "to fulfill a public need
for electric service at economic rates."  Hastings v. Village of Stowe, 125
Vt. 227, 233, 214 A.2d 56, 61 (1965).  "The profit motive was not the
underlying purpose . . . of the General Municipal Plant Enabling Act."  Id.
at 233, 214 A.2d  at 61 (emphasis added).  A necessary subordinate purpose
is to allow municipalities to sell surplus power to nonresidents at a
profit.  See Valcour v. Village of Morrisville, 104 Vt. 119, 131-32, 158 A. 83, 86 (1932); Hastings, 125 Vt. at 235, 214 A.2d  at 62.  Thus, the Act
specifically authorizes municipalities to dispose of surplus power, if any,
to "other customers outside" the municipality.  30 V.S.A. { 2902(a)
(emphasis added).  The Act, therefore, does not provide for the exclusive
sale of electricity to customers outside the municipality.
     We have consistently adhered to the so-called Dillon's rule that "a
municipality has only those powers and functions specifically authorized by
the legislature, and such additional functions as may be incident,
subordinate or necessary to the exercise thereof."  Hinesburg Sand & Gravel
Co. v. Town of Hinesburg, 135 Vt. 484, 486, 380 A.2d 64, 66 (1977).
Dillon's rule calls for a strict construction of municipal function:  "[I]f
any fair, reasonable, substantial doubt exists concerning the question it
must be resolved against the [grant of power]."  Valcour, 104 Vt. at 130,
158 A.  at 86.
     In Hinesburg Sand & Gravel, we found that the sale to other
municipalities of seven-eighths of the gravel produced in the defendant's
gravel pit was not a power incidental to that granted by the legislature to
keep highways in repair.  135 Vt. at 486, 380 A.2d  at 66.  Instead,
defendant principally conducted a private business operation in direct
competition with plaintiff, a private corporation that sold sand and gravel
to the general public.  The defendant's activity was purportedly transacted
for a "'public purpose . . . [but in fact was] set up as a mere pretext to
conceal a private purpose' [and as such] was illegal."  Id. (quoting Bates
v. Bassett, 60 Vt. 530, 536, 15 A. 200, 202 (1888)).
     Appellants contend that in the area of public utility operation there
is clearly no legislative concern regarding municipal competition with
private companies.  We disagree.  The language of { 2902 suggests that the
legislature did not intend municipalities to generate and sell power to
customers outside their borders irrespective of the need for the power
within their borders.  Section 2902 requires a municipality in good faith to
serve "customers outside such municipality" only after it has served itself
and its residents.
     Appellants concede that they intend to sell the power they generate
only to VPX which, in turn, will sell it to Vermont retail electric utility
companies.  They have no intention of offering the power to the
municipalities themselves or their residents.  Accordingly, they pursue this
venture with a purely profitmaking motive to raise revenues for municipal
uses.  A "fair, reasonable, substantial doubt exists concerning the
question," and we cannot perform a legislative function and grant this
authority no matter how good a revenue raising and environmental idea we
find the Ball Mountain Hydroelectric Project to be.
     Affirmed.
 
 
 
                                        FOR THE COURT:
 
 
                                        __________________________________
                                        Associate Justice