Arizona Water Company v. Arizona Corporation Commission – 3/13/2008

March 18, 2008

Arizona Court ofAppeals Division One Holds That the First-In-the-Field Doctrine Does Not Require the Arizona Corporation Commission to Award a CC&N to an Existing Utility Company Over a Start-Up Company.

Two water utility companies filed competing applications for a certificate of convenience and necessity (CC&N) to provide water service for a community in Pinal county.  An administrative law judge found the applications of “relatively equal merit.”  The Arizona Corporation Commission (the “Commission” or “ACC”) awarded the CC&N to Woodruff Water Company, a start-up company that had not previously provided service in Pinal county.  Plaintiff Arizona Water Company filed a complaint in superior court to modify or set aside the ACC order on the grounds that Plaintiff had a superior right to provide service to the area under the first-in-the-field doctrine (which entitles a utility able, willing, and holding a certificate of convenience and necessity to extend its service to new customers who reside in the field of the utility’s existing service area) and under a balancing of relevant factors.  The superior court affirmed the ACC decision, finding that the first-in-the-field doctrine did not apply, and that the Commission’s decision was neither unlawful nor unreasonable.  Plaintiff appealed.

The ArizonaAppeals Court affirmed and declined to adopt the first-in-the-field doctrine.  Although the Arizona Supreme Court’s opinion in Arizona Corporation Commission v. Fred Harvey Transportation Co., 95Ariz. 185, 388 P.2d 236 (1964), contains a statement apparently embracing the first-in-the-field doctrine, the statement was mere dictum and thus without precedential value.  As for the merits, the Court reasoned that adopting the first-in-the-field doctrine might be contrary to the public interest – the controlling factor in the ACC determination.  Moreover, an Arizona statute already provides certain rewards for existing public service corporations similar to those recognized by the first-in-the-field doctrine.  See A.R.S. § 40-281(B).  (Plaintiff did not assert preferential rights under the statute.)  The Court also agreed that the ACC’s balancing of relevant factors was neither arbitrary nor capricious, and thus within the Commission’s “wide discretion” in making its determination.    

Judge Timmer wrote the opinion; Judges Barker and Orozco concurred.