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AGO Opinion 97045

Authority of Nebraska Public Power District to Provide Intrastate Telecommunications Services on a For-Hire Basis as a Contract Carrier
Opinion 97045

DATE: September 4, 1997

SUBJECT: Authority of Nebraska Public Power District to Provide Intrastate Telecommunications Services on a For-Hire Basis as a Contract Carrier.

REQUESTED BY: Lowell Johnson, Vice Chairman
Nebraska Public Service Commission

WRITTEN BY: Don Stenberg, Attorney General
L. Jay Bartel, Assistant Attorney General


On behalf of the Nebraska Public Service Commission

["Commission"], you have requested our opinion concerning the

authority of the Nebraska Public Power District ["NPPD"] to provide

certain telecommunications services on a for-hire basis as a

contract carrier. Previously, in Op. Att'y Gen. No. 96076

(November 25, 1996), the Commission requested our opinion

concerning the authority of NPPD to enter into an agreement to

provide access to its fiber optic telecommunications system to

Northeast Community College to allow Northeast to conduct video

conferencing with high schools in Sioux City and Wayne, Nebraska.

At that time, we concluded that, while Neb. Rev. Stat. § 70-625

(Supp. 1995) prohibited public power districts from "operat[ing] as

contract or common carriers engaged in furnishing communication

services for hire in Nebraska intrastate commerce", we had

insufficient factual information to enable us to conclude if NPPD

was, in fact, engaging in providing communication services for hire

under this arrangement. We further concluded that we did not have

sufficient factual information to determine whether NPPD was

offering "telecommunications service" necessitating the issuance of

a certificate of convenience and necessity under Neb. Rev. Stat. §

75-604(1) (Cum. Supp. 1995).


After receiving our opinion, the Commission initiated, on its

own motion, Application No. C-141/PI-18 to investigate whether NPPD

was offering intrastate telecommunications services subject to

Commission jurisdiction. Following a public hearing, the

Commission, on May 28, 1997. entered an Interim Order determining

that NPPD is providing telecommunications services on a for-hire

basis as a contract carrier. In that Order, the Commission

determined as follows:




1. The services which NPPD offers by interconnection to its

dark fiber for distance learning between Norfolk,

Nebraska, and South Sioux City, Nebraska, are

telecommunications services;




2. The services which NPPD offers the City of Norfolk for

intranet and internet access are also telecommunications

services;



3. The telecommunications services offered to Northeast

Community College and the City of Norfolk are both

offered by NPPD on a for-hire basis as a contract

carrier;


4. Service offerings such as those offered by NPPD fall

within the Commission's jurisdiction under Neb. Rev.

Stat. § 75-109 (1996); and


5. The services offered by NPPD are being offered in the

absence of any certificate of public convenience and

necessity.


In light of these findings, the Commission requests our

opinion as to whether NPPD has statutory authority to provide these

telecommunications services, and whether NPPD, if granted a

certificate of convenience and necessity, can continue to provide

these services under existing state law.



I. Statutory Authority of NPPD to Provide Telecommunications

Services.



NPPD is a utility "created and operate[d] by virtue of chapter

70, article 6, of the Nebraska Revised Statutes,. . . ." Omaha

Public Power Dist. v. Nebraska Dept. of Revenue, 248 Neb. 518, 520,

537 N.W.2d 312, 314 (1995). "NPPD operates an electric utility

system and generates, transmits, distributes, and sells electricity

within its chartered territory, which comprises 86 of Nebraska's 93

counties and portions of 5 other counties." Id. Pursuant to Neb.

Rev. Stat. § 70-602 (1996), NPPD is "a public corporation and

political subdivision" of the state.




Public power districts created pursuant to Chapter 70, article

6, are required to submit a petition seeking approval of the

Nebraska Power Review Board. Neb. Rev. Stat. § 70-603(1) (1996).

Neb. Rev. Stat. § 75-604 (1996), which sets forth the required

contents of the petition, provides, in subsection (1): "A district

may be organized to engage only in the electric light and power

business and the production and distribution of ethanol, only in

the business of owning and operating irrigation works, or in all of

such businesses."




Prior to its recent amendment by 1997 Neb. Laws, LB 660, § 1,

certain restrictions on the powers of public power districts were

contained in Neb. Rev. Stat. § 70-625 (1996). Specifically, § 70-

625 provided, in pertinent part:




In addition to the powers authorized by Chapter 70 and

specified in its petition for creation as amended, a

public power district may sell, lease, and service

satellite television descrambling or decoding devices,

satellite television programming, and equipment and

services associated with such devices and programming,

except that nothing in this section shall authorize

public power districts (1) to operate as contract or

common carriers engaged in furnishing communication

services for hire in Nebraska intrastate commerce, . . .

. (emphasis added).




The portion of LB 660 providing that public power districts

were not authorized "to operate as contract or common carriers

engaged in furnishing communication services for hire in Nebraska

intrastate commerce" was deleted from § 70-625 by 1997 Neb. Laws,

LB 660, § 1. The legislative history of LB 660 reveals the

Legislature deleted this explicit language prohibiting public power

districts from providing communication services for hire to comply

with § 101 of The Telecommunications Act of 1996, Pub. L. No. 104-

104, 110 Stat. 56 (1996) (to be codified at 47 U.S.C. § 253) [the

"Act"], which, in subsection (a), provides: "No state or local

statute or regulation, or other State or local legal requirement,

may prohibit or have the effect of prohibiting the ability of any

entity to provide any interstate or intrastate telecommunications

service." The Legislature determined the prohibition against

public power districts providing communication services for hire in

§ 70-625 was contrary to the language of § 253(a) of the Act

because it expressly barred public power districts from entering

into the field of providing telecommunications services. Floor

Debate on LB 660, 95th Leg., 1st Sess., 4250-51 (April 15, 1997)

(Statement of Sen. Kristensen).




While the specific language in § 70-625 prohibiting public

power districts from providing communication services for hire was

deleted by LB 660, this does not necessarily mean that NPPD

possesses statutory authority to provide intrastate

telecommunications services for hire on a contract basis. As

several members of the Legislature noted during debate on the bill,

the Legislature, by striking this express prohibition to comply

with § 253(a) of the federal Act, was not acting to authorize

public power districts to engage in furnishing telecommunications

service for hire. Floor Debate on LB 660, 95th Leg., 1st Sess.,

4254-55 (April 15, 1997) (Statement of Sen. Elmer); 4339 (April 15,

1997) (Statement of Sen. Tyson); 4353 (April 15, 1997) (Statements

of Sens. Bromm and Kristensen). The question which remains, then,

is whether public power districts such as NPPD are statutorily

authorized to engage in providing telecommunications services for

hire, even without the express prohibition previously contained in

§ 70-625.




Public power districts are, as previously noted, "public

corporation[s]" and "political subdivision[s]" of the State. Neb.

Rev. Stat. § 70-602 (1996). As "public corporations", public power

districts "are subject to the plenary control of the Legislature",

and, "[i]n the exercise of such power the Legislature may

authorize, limit, control, or even destroy such public

corporations,. . . ." Wittler v. Baumgartner, 180 Neb. 446, 451,

144 N.W.2d 62, 67 (1966). While public power districts are

authorized "to operate in a successful and profitable manner",

Blankenship v. Omaha Public Power Dist., 195 Neb. 170, 173, 237

N.W.2d 86, 88 (1976), the "public policy" underlying their creation

was "the concept of electrical energy being furnished to the

ultimate consumer at the lowest cost consistent with sound business

judgment." Custer Public Power Dist. v. Loup River Public Power

Dist., 162 Neb. 300, 313, 75 N.W.2d 619, 627 (1956).




Public power districts may be organized, or amend their

charters, by filing a petition seeking approval of the Nebraska

Power Review Board. Neb. Rev. Stat. § 70-603(1) (1996). Neb. Rev.

Stat. § 70-604 (1996), which governs the contents of the petition,

provides, in part: "A district may be organized to engage only in

the electric light and power business and the production and

distribution of ethanol, only in the business of owning and

operating irrigation works, or in all of such businesses;. . . ."

(emphasis added). The Nebraska Supreme Court has stated that

public power districts are "subject to the limitations, if any, of

their petition which becomes their charter." Schroll v. City of

Beatrice, 169 Neb. 162, 166, 98 N.W.2d 790, 793 (1959). In

Schroll, the Court also rejected the notion that a district may, by

implication, exercise powers not expressly conferred by the

statutes authorizing its creation and the petition creating its

charter. In that regard, the Court quoted with approval the

following passage from its earlier decision in State ex rel.

Johnson v. Consumers Public Power Dist., 143 Neb. 753, 769-70, 10

N.W.2d 784, 795 (1943):




It seems clear that an express proviso that a corporation

shall not do certain acts is no stronger than the failure

to give authority, express or implied, to do them, for

powers not granted either expressly or impliedly, are

impliedly prohibited.




169 Neb. at 170-71, 98 N.W.2d at 795.




Based on the foregoing, we conclude that NPPD, even with the

enactment of LB 660, § 1, removing the language in § 70-625

expressly prohibiting public power districts from engaging in

providing communication services for hire, still lacks authority to

engage in the business of providing telecommunications services for

hire. NPPD is "subject to the limitations" in the petition, and

any amendments, which operate as its charter to do business. Under

§ 70-604(1), a public power district may be organized to engage

only in specified business activities. These activities include:

(1) the electric light and power business; (2) the production and

distribution of ethanol; (3) the ownership and operation of

irrigation works; or (4) all of such businesses. Based on these

statutory limitations, neither NPPD (nor any other public power

district) is authorized by its petition (which operates as its

charter to do business) to provide telecommunications services for

hire. While § 70-625 continues to provide that a public power

district "shall have all the usual powers of a corporation for

public purposes", it provides that a district holds such powers

"[s]ubject to the limitations of the petition for its creation and

all amendments thereto,. . . ." As public power districts are

limited in the type of businesses in which they may engage, and are

not specifically authorized to engage in the business of providing

telecommunications services for hire, we conclude that public power

districts are not authorized to provide telecommunications services

for hire under existing Nebraska statutes.




II. Potential Preemptive Effect of § 101 of the Telecommunications

Act of 1996.




Having concluded that current Nebraska statutes do not

authorize public power districts organized under chapter 70,

article 6, including NPPD, to engage in providing

telecommunications services for hire, it becomes necessary to

consider whether this prohibition, arising from the Legislature's

determination to limit the authority of public power districts by

allowing them to engage in only specified business activities,

contravenes the broad prohibition under the Telecommunications Act

of 1996 against state statutes "prohibiting the ability of any

entity to provide any interstate or intrastate telecommunications

service." Telecommunications Act of 1996, § 101, (to be codified

at 47 U.S.C. § 253(a)).




The Supremacy Clause of the United States Constitution renders

void any state laws that "interfere with or are contrary to"

federal law. Hillsborough County v. Automated Medical

Laboratories, Inc., 471 U.S. 707, 712 (1985) (quoting Gibbons v.

Ogden, 9 Wheat. 1, 211 (1824)); U.S. Const. art. VI, cl. 2. The

crucial inquiry in preemption cases is whether Congress has

manifested an intent to preclude the challenged state statute or

regulation. Malone v. White Motor Corp., 435 U.S. 497 (1978). A

congressional intent to preempt may be explicitly expressed by

federal statute, or may be implicit in its structure and purpose.

Jones v. Rath Packing Co., 430 U.S. 519 (1977); see also Ray v.

Atlantic Richfield Co., 435 U.S. 151 (1978); Rice v. Santa Fe

Elevator Corp., 331 U.S. 218 (1947).




Section 253 (a) provides: "No state or local statute or

regulation, or other State or local legal requirement, may prohibit

or have the effect of prohibiting the ability of any entity to

provide any interstate or intrastate telecommunications service."

This broad language is indicative of an express Congressional

intent to preempt any state or local statutes, regulations, or

legal requirements that prohibit, or have the effect of

prohibiting, any entity from providing telecommunications services.

(emphasis added). At least one state district court has construed

§ 253(a) to expressly preempt state statutes prohibiting cities

from providing local telephone exchange service. Iowa Telephone

Ass'n v. City of Hawarden, No. 18320, (Iowa Dist. Ct. for Sioux

County) Ruling Re: Summary Judgment Motions Made by Both Plaintiff

and Defendant (December 11, 1996). The Court found that,

"assum[ing] without deciding that the Iowa noncompetition and/or

city utility laws act as the Plaintiff charges and prohibits entry

by cities into the local telephone arena, [ ] there is a complete

barrier to entry of the type envisioned by the 104th Congress and

is, therefore, preempted by the Telecommunications Act of 1996."

Id. at 7.




While the plain language of § 253(a) precluding state laws or

regulations that prohibit "any entity" from providing

telecommunications services is broad enough to preempt Nebraska's

statutory restrictions on public power districts, application of

this portion of the Act to require the State to allow its public

power districts to engage in an activity not permitted by state law

raises a serious question as to whether the statute, if construed

in this manner, impermissibly infringes on state sovereignty in

violation of the Tenth Amendment and principles of federalism. As

noted previously, public power districts are public corporations

and political subdivisions of the State, and are wholly creatures

of statute. As such, "the Legislature may authorize, limit,

control, or even destroy such public corporations,. . . ." Wittler

v. Baumgartner, 180 Neb. 446, 451, 144 N.W.2d 62, 27 (1966). The

question, then, is whether § 253(a), if construed to mandate that

the State act to permit its own political subdivisions

(specifically, public power districts) to provide

telecommunications services, an activity which these public

corporations have not been authorized to engage in by the

Legislature, is an impermissible encroachment by Congress on the

sovereign rights of the State secured by the United States

Constitution.




The United States Constitution "establishes a system of dual

sovereignty between the States and the Federal Government."

Gregory v. Ashcroft, 501 U.S. 452, 457 (1991).




The Constitution created a Federal Government of limited

powers. `The powers not delegated to the United States

by the Constitution, nor prohibited by it to the States,

are reserved to the States respectively, or to the

people.' U.S. Const., Amdt. 10. The States thus retain

substantial sovereign authority under our constitutional

system.




Id.




"While Congress has substantial powers to govern the Nation

directly, including in areas of intimate concern to the States, the

Constitution has never been understood to confer upon Congress the

ability to require the States to govern according to Congress'

instructions." New York v. United States, 505 U.S. 144, 162

(1992). "It is an essential attribute of the States' retained

sovereignty that they remain independent and autonomous within

their proper sphere of authority." Printz v. United States, 65

U.S.L.W. 4731, 4740 (June 27, 1997). "[T]he States retain

substantial sovereign powers under our constitutional scheme,

powers with which Congress does not readily interfere." Gregory v.

Ashcroft, 501 U.S. at 461.




The Court's Tenth Amendment jurisprudence has admittedly not

always followed a consistent course. E.g. Maryland v. Wirtz, 392

U.S. 183 (1968) (holding state schools and hospitals subject to the

Fair Labor Standards Act [FLSA]); National League of Cities v.

Usery, 426 U.S. 833 (1976) (holding state employers were not

subject to the FLSA, overruling Wirtz); Garcia v. San Antonio

Metropolitan Transit Authority, 469 U.S. 528 (1985) (holding state

employers were subject to the FLSA, overruling National League of

Cities). In National League of Cities, the Court held that the

Tenth Amendment protected the states from being regulated by

Congress in certain spheres, which it referred to as areas of the

states' "traditional governmental functions." 426 U.S. at 852. In

Garcia, the Court abandoned this approach, largely because of

difficulties in categorizing what activities constituted

"traditional [state] governmental functions". 469 U.S. at 546.

The Court indicated that limits on Congress' power in this regard

were not judicially enforceable, and that what limits the Tenth

Amendment may impose were "enforceable" only through the "political

process." Id. at 556. The Court reiterated this view in a later

case. South Carolina v. Baker, 485 U.S. 505, 512 (1988) (stating

that "Garcia left open the possibility that some extraordinary

defects in the national political process might render

congressional regulation of state activities invalid,. . . .").




More recently, however, the Court has found certain

Congressional acts to violate the Tenth Amendment. New York v.

United States, 505 U.S. 144 (1992) (holding "take title" provision

of Low-Level Radioactive Waste Policy Act, requiring states to

accept ownership of waste or regulate according to the instructions

of Congress, was outside Congress' enumerated powers and was

inconsistent with the Tenth Amendment.); Printz v. United States,

65 U.S.L.W. 4731 (June 27, 1997) (holding unconstitutional

provision of Brady Handgun Violence Prevention Act which the "chief

law enforcement officer" of all local jurisdictions to perform

background checks on handgun purchasers and related tasks.). And,

in Gregory v. Ashcroft, the Court construed the Age Discrimination

and Employment exception from the definition of covered "employees"

for "appointee[s] on the policymaking level" to apply to appointed

state court judges in order to "avoid a potential constitutional

problem." 501 U.S. at 464. The Court stated the Missouri

constitutional provision at issue, which established a mandatory

retirement age for state judges, went "beyond an area traditionally

regulated by the States", and involved "a decision of the most

fundamental sort for a sovereign entity." Id. at 460. The Court

noted that "the authority of the people of the States to determine

the qualifications of their most important government officials"

was "a power reserved to the States under the Tenth Amendment and

guaranteed to them by that provision of the Constitution under

which the United States `guarantee[s] to every State in the Union

a Republican Form of Government.' U.S. Const., Art. IV, § 4."

Gregory v. Ashcroft, 501 U.S. at 463.




Given that the ability of a state to establish the

qualifications of its governmental officials is recognized as a

vital attribute of its sovereignty, it could also be argued that

the ability of a state to create and define the powers of its

political subdivisions is also an important component of a state's

sovereign powers. If § 253(a) of the Act is, as we conclude it

must be, construed to require Nebraska to authorize public power

districts, political subdivisions created by the State, to engage

in providing telecommunications services, in spite of the State

Legislature's determination not to allow public power districts to

engage in such activity, then we believe that a serious question

exists as to whether application of § 253(a) in this manner

violates the State's sovereign rights under the Tenth Amendment.




In light of the question as to whether Congress could, by

enacting § 253(a), compel the States to authorize their own

political subdivisions to provide telecommunications services,

where state law does not permit these entities to engage in such

activity, without impermissibly encroaching on powers reserved to

the States under the Tenth Amendment, we cannot conclude that §

253(a) validly preempts Nebraska's statutory limits on the

authority of public power districts which have the effect of

precluding these districts from engaging in providing

telecommunications services. Only a court, or, perhaps, the

Federal Communications Commission, could declare that the

Legislature's determination to limit the authority of public power

districts has been validly preempted by Congress. In the absence

of such a decision, we cannot advise that Nebraska's public power

districts must be allowed to engage in providing telecommunications

services, in light of the absence of any authority to do so under

the statutes allowing for their creation and existence.




This does not mean that the Legislature, if it chooses to do

so, cannot amend the statutes governing the authority of public

power districts to allow these districts to engage in providing

telecommunications services. Furthermore, subsection (b) of § 253

allows broad state regulatory authority, providing: "Nothing in

this section shall affect the ability of a State to impose, on a

competitively neutral basis and consistent with section 254 of this

section [pertaining to universal service], requirements necessary

to preserve and advance universal service, protect the public

safety and welfare, ensure the continued quality of

telecommunications services, and safeguard the rights of

consumers."




Under the federal Act, the Legislature clearly has the power

to regulate public power districts to ensure that, if public power

districts are authorized by the Legislature to enter into the

business of providing telecommunications services, these important

goals are satisfied. For example, the Legislature could impose

"competitively-neutral" requirements on public power districts to

"protect consumers" and "ensure quality of service", such as: (1)

Require public power districts opting to provide telecommunications

services to structurally separate power-producing operations from

telecommunications operations; (2) Require districts to separately

allocate expenses between power-related and telecommunications

services, and to allocate capital investment costs for all shared

facilities and services; and (3) Subject a district's

telecommunications operations to the same regulations governing

privately-owned telecommunications carriers, including payment of

property, sales and use tax, and income tax, payment of all fees,

charges, and other assessments imposed on telecommunications

service providers, and mandate compliance with all regulations

governing telecommunications service providers. The question of

whether the statutes pertaining to public power districts, or other

political subdivisions, should be altered to address the provision

of telecommunications services by such entities, is a matter for

the Legislature to decide.




III. Issuance by the Commission to NPPD of a Certificate of

Convenience and Necessity.




You also ask whether NPPD, if granted a certificate of

convenience and necessity to act as a contract carrier of

telecommunications services for hire by the Commission, may

"continue to provide the services being offered under existing

state law."




Neb. Rev. Stat. § 75-604(1), as recently amended by 1997 Neb.

Laws, LB 660, § 3, provides:




Except as provided in section 86-805, no person, firm,

partnership, limited liability company, corporation,

cooperative, or association shall offer any

telecommunications service or shall construct any new

telecommunications facilities in or extend existing

telecommunications facilities into the territory of

another telecommunications company for the purpose of

providing any telecommunications service without first

making an application for and receiving from the

commission a certificate of convenience and necessity,

after due notice and hearing under the rules and

regulations of the commission.




While a certificate of convenience and necessity would, based

on the Commission's findings in its Interim Order, be required for

NPPD to continue to operate as a contract carrier providing

telecommunications service for hire, we believe that, based on the

absence of authority under Nebraska statutes for public power

districts to engage in such activity at the present time, the

Commission is precluded from issuing a certificate to NPPD. While

we recognize that a question exists as to whether the Nebraska

statutes barring NPPD from entering into the business of providing

telecommunications services may, if challenged, be found to be

preempted by § 253(a) of the Act (either by the FCC, pursuant to

§ 253(d), or a court), until such time as the operation of these

statutes is declared to violate the Act, and the Act is found not

to impermissibly infringe on the state's sovereign rights, the

Commission is without authority to ignore their effect by issuing

NPPD a certificate of convenience and necessity.




Very truly yours,




DON STENBERG

Attorney General






L. Jay Bartel

Assistant Attorney General