Petition for Writ of Certiorari — Black Hills Power & Light Co. v. Weinberger

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Inu The

Supreme Court of the Unjty

@ctober Term, 1986 Le

BLACK HILLS POWER AND

LIGHT COMPANY, a South Dakota corporation,

and SOUTH DAKOTA PUBLIC UTILITIES

COMMISSION and the STATE OF SOUTH DAKOTA,

Petitioners

vs.

CASPAR W. WEINBERGER, et al.,

Respondents

On Writ of Certiorari to the

United States Court of Appeals

For the Eighth Circuit

PETITION FOR WRIT OF CERTIORARI

RoGER A. TELLINGHUISEN

Attorney General of the State of South Dakota

Mary VANDERPAN (attorney of record)

General Counsel for South Dakota Public Utilities Commission

500 East Capitol

Pierre, South Dakota 57501

Attorneys for Petitioner Public Utilities

Commission and State of South Dakota

(605) 773-3202

Davip E. Morri.u (attorney of record)

MorriL_ & BROWN

P. O. Box 8108

Rapid City, South Dakota 57709-8108

Attorney for Petitioner Black Hills Power

and Light Company

(605) 348-7516

Pandick Technologies, Inc., Chicago @ (312) 236-0200

QUESTION PRESENTED FOR REVIEW

Is state authorized regulation of electric utility service

to Department of Defense facilities both on and off federal

enclaves by state public utility regulatory commissions in

conflict with federal law and regulations, including the

Federal Power Act, the Public Utilities Regulatory Policies

Act, regulations in force since 1974 requiring armed ser-

vices procurement officers to comply with state regula-

tion and a 1986 Congressional Act which prohibits the

use of federal funds to implement or enforce new rules

which would have required federal agencies to ignore state

regulation?

PARTIES TO THE PROCEEDING

1. Black Hills Power and Light Company, Petitioner

(Black Hills); 2. South Dakota Public Utilities Commission

and the State of South Dakota, Petitioner (PUC); 3. Caspar

W. Weinberger as Secretary of the Department of Defense,

Respondent; 4. The Department of Defense, an agency of

the United States of America, Respondent; 5. Richard D.

Rasmussen as Contracting Officer for Ellsworth Air Force

Base, Respondent; 6. Heartland Consumers Power District,

a subdivision of the State of South Dakota, Respondent

(Heartland); and 7. West River Electric Association, Inc.,

a South Dakota rural electric cooperative, Respondent

(WREA).

TABLE OF CONTENTS

Page

QUESTION PRESENTED FOR REVIEW ...... i

PARTIES TO THE PROCEEDING ........... i

TABLE OF AUTHORITIES ................ iii

OFFICIAL AND UNOFFICIAL REPORTS OF

EEE « 6.4:040 0400 Shenae eee 1

JURISDICTIONAL GROUNDS.............. 2

CITATIONS TO PERTINENT AUTHORITY .... 2

STATEMENT OF THE CASE AND FACTS..... 4

ARGUMENT FOR ALLOWANCE OF WRIT .... 7

I. This is an important question of federal law

which should be settled by this Court ..... 7

Il. Conflict with previous opinions ......... 11

A. Conflict with other Court opinion regard-

ing procurement regulations ........ 11

B. Conflict with previous federal enclave

PTT eer ee ee 17

lil

TABLE OF AUTHORITIES

Constitution and Statutes:

United States Constitution

PST Te Pee ee eee eee 3

United States Code

Se re ere ee ae ee 7

ag hb 5 6 6 46d do 0 866 eo 8 5

ES eae 5

ay kk eh eo koe 8 4 oa 6 6 08 8 8 5

he a ak a es 4 60s e's oe 2

I ee ee 3,17

Public Law 99-591 § 620, 100 Stat. 3341-333..... 2,8

Public Law 99-591 § 9111, 100 Stat. 3341-120 ... 3,8

Public Utilities Regulatory Policies Act of 1978 .. 7

Code of Federal Regulations

Armed Services Procurement Regulations Sup-

plement No. 5, incorporated at 48

ES i sg eno 6 6 9 0 8 6 4 0.9 0 3, 12,

Federal Register

51 Fed. Reg. 16988-16991 (May 7,1986).... 2,8

Other Federal Law and Regulations

Air Force FAR Supplement § 8.304-91: 8.304-

See 2, 7-8,

H.R. Report No. 99-723, § 620 at 80, 99th

Ee 9,10

Cases: Page

Adams v. United States, 219 U.S. 312 (1943) .... 17

Andrus v. Shell Oil Company, 446 U.S. 657

ere re rn 1 ee a 10

Arkansas Power and Light Company v. Arkansas

Public Service Commission, 330 S.W. 2d 51,

cert denied 362 U.S. 975 (1960) ........... 13

Black Hills Power and Light Company v. Caspar

W. Weinberger, et al., 808 F.2d 665

Se ls EY 3 Ws oN ek ees ee os ee 2

Hicks v. Miranda, 422 U.S. 332 (197F)......... 13

Mandel v. Bradley, 432 U.S. 173 (1977) ........ 13

Paul v. United States, 371 U.S. 245 (1963)...... 18

Re Souris River Telephone Mutual Aid

Corporation, 24 P.U.R. 3d 84 (1958) ........ 13

United States v. State Corporation Commission of

Virginia., 345 F. Supp. 843 (1972), aff’d

mem. 409 U.S. 1094 (1973) .............. 11, 12,

United States v. State Corporation Commission

of Virginia, Jurisdictional Statement, In the

Supreme Court of the United States,

Se Te 6 6 oe oc deka ek ee caw 13, 15

United States v. State Corporation Commission of

Virginia, Motion to Dismiss or Affirm, In the

Supreme Court of the United States,

Se CU ree eT eT eT eee eee 16,17

_—————

No.

Iu The

Supreme Court of the United States

@®ctober Term, 1986

BLACK HILLS POWER AND

LIGHT COMPANY, a South Dakota corporation,

and SOUTH DAKOTA PUBLIC UTILITIES

COMMISSION and the STATE OF SOUTH DAKOTA,

Petitioners

v8.

CASPAR W. WEINBERGER, et al.,

Respondents

On Writ of Certiorari to the

United States Court of Appeals

For the Eighth Circuit

PETITION FOR WRIT OF CERTIORARI

OFFICIAL AND UNOFFICIAL REPORTS

OF OPINIONS

Three tribunals have rendered opinions in this matter,

the South Dakota Public Utilities Commission, the United

States District Court for the District of South Dakota,

Western Division and the United States Court of Appeals

for the Eighth Circuit. Neither the Public Utilities

Commission opinion nor the United States District Court

opinion were reported. Both opinions are set forth ver-

batim in the Appendix. The United States Court of

Appeals for the Eighth Circuit opinion is reported at 808

F.2d 665 (8th Cir 1987).

JURISDICTIONAL GROUNDS

The judgment of the Eighth Circuit sought to be

reviewed in this matter is dated January 7, 1987 and is

filed on February 20, 1987. Black Hills and the PUC peti-

tioned for rehearing and suggested hearing in banc, both

of which were denied by the Eighth Circuit on February 4,

1987. Jurisdiction in this Court to review the judgment of

the United States Court of Appeals for the Eighth Circuit

is conferred on this Court by 28 U.S.C. 2101(c).

CITATIONS TO PERTINENT AUTHORITY

Following is a list of citations to pertinent authority,

the text of some of the authority being set out verbatim

in the Appendix pursuant to Supreme Court Rule 21.1(f)

because of the lengthy nature of the provisions:

1. Air Force FAR Supplement 8.304-91: 8.304-91

Competition. The contracting officer shall determine by

market survey if more than one supplier can furnish

needed public utility services for proposed procurements

prior to using other than competitive procedures. The

existence of franchised service territories established by

state or local governmental entities does not in and of it-

self restrict acquisition of public utility services to a sole

source. The contracting officer need not enter into a con-

tract with the state or locally franchised public utility sup-

plier simply because the supplier has obtained the local

franchise. The contracting officer should instead seek to

competitively acquire public utility services whenever pos-

sible.

2. 51 Fed. Reg. 16988-16991 (May 7, 1986) (reprinted

in Appendix)

3. P.L. 99-591 § 620, 100 Stat. 3341-333, (99th Cong.

Oct. 30, 1986): Sec. 620. None of the funds appropriated

or made available by this Act shall be used to imple-

ment or enforce the rule proposed on May 7, 1986 (51

Federal Register 16988-16991), or any other regulation

issued pursuant to statute requiring competitive bidding

for electricity, gas, or steam utility services acquired by

the Federal Government.

4. P.L. 99-591 §9111, 100 Stat. 3341-120 (99th

Cong. Oct. 30, 1986): Sec. 9111. None of the funds ap-

propriated or made available by this Act shall be used to

implement or enforce the rule proposed on May 7, 1986

(51 Fed. Reg. 16988-16991), or section 8.304-91 of the Air

Force FAR Supplement issued on June 24, 1985.

5. Arms Services Procurement Regulation Supplement

No. 5, dated as of October 1, 1974, incorporated at 48

C.F.R. § 208.3 (selected portions reprinted in Appendix)

6. U.S. Const. Art. 1, § 8, Cl. 17: To exercise exclusive

Legislation in all Cases whatsoever, over such District (not

exceeding ten Miles square) as may, by Cession of par-

ticular States, and the Acceptance of Congress, become

the Seat of the Government of the United States, and to

exercise like Authority over all Places purchased by the

Consent of the Legislature of the State in which the Same

shall be, for the Erection of Forts, Magazines, Arsenals,

dock-Yards, and other needful Buildings.

7. 40 U.S.C.S. § 255, 6th unnumbered paragraph (1978

Supp.): Notwithstanding any other provision of law, the

obtaining of exclusive jurisdiction in the United States

over lands or interests therein which have been or shall

hereafter be acquired by it shall not be required; but the

head or other authorized officer of any department or inde-

pendent establishment or agency of the Government may,

in such cases and at such times as he may deem desirable,

accept or secure from the State in which any lands or in-

terests therein under his immediate jurisdiction, custody,

or control are situated, consent to or cession of such juris-

diction, exclusive or partial, not theretofore obtained, over

any such lands or interests as he may deem desirable and

indicate acceptance of such jurisdiction on behalf of the

United States by filing a notice of such acceptance with

the Governor of such State or in such manner as may

be prescribed by the laws of the State where such lands

are situated. Unless and until the United States has ac-

cepted jurisdiction over lands hereafter to be acquired as

aforesaid, it shall be conclusively presumed that no such

jurisdiction has been accepted.

STATEMENT OF THE CASE AND FACTS

Statement of the Case

This action originated when Black Hills filed a com-

plaint against Heartland with the South Dakota PUC ask-

ing that the PUC enjoin Heartland from performing a

one year contract entered into with Ellsworth Air Force

Base (EAFB), a military installation of the Air Force

and Department of Defense, to provide overrun electric

power. Black Hills complained that Heartland did not

have authority to serve at retail outside of its bound-

aries and that Black Hills was entitled to serve EAFB un-

der the state regulatory law granting franchised areas for

retail service. The PUC conducted a three day evidentiary

hearing in which the United States through EAFB par-

ticipated. The PUC entered a decision and order, which

is reproduced in the Appendix, and found that electric ser-

vice to EAFB was service at retail and Heartland did not

have authority to serve EAFB. The PUC also ruled that

under applicable state law and the federal procurement

regulations governing utility acquisition, Supplement No.

5, which is reproduced in the Appendix, Black Hills was

entitled to be the sole supplier of electric service to EAFB

other than that furnished by the United States. EAFB

refused to comply with the PUC order. Black Hills then

brought an action in the United States District Court

for the District of South Dakota, Western Division, Civ.

No. 5031, to force EAFB and the applicable government

officers to comply with the PUC order. While this action

was pending, Heartland, WREA and the United States ap-

pealed from the PUC decision to the Sixth and Fourth

Judicial Circuit Courts of South Dakota. The United

States petitioned to remove those appeals to the United

States District Court in Civ. Nos. 85-4068 and 85-3015.

The United States also commenced a United States District

Court action against the PUC seeking an injunction in Civ.

No. 85-5064. All the foregoing cases were consolidated

with Black Hills’ action, Civ. No. 5031. The District Court

in Civ. No. 5931 denied Black Hills’ motion for summary

judgment in the consolidated action, granted the United

States’ motion to dismiss, dismissed as moot the two ap-

peals of the PUC decision and dismissed as redundant the

action brought by the United States seeking an injunction

against the PUC. Appeal was then taken to the United

States Court of Appeals for the Eighth Circuit. The PUC

as a named defendant in the original action cross appealed

but filed briefs in support of Black Hills’ position. The

Eighth Circuit’s opinion of January 7, 1987 affirmed the

District Court judgment. Judgment of the Eighth Circuit

was filed February 20, 1987. Black Hills’ and the PUC’s

petition for rehearing and in banc was denied on February

4, 1987.

Jurisdiction in the District Court action brought by

Black Hills in Civ. No. 5031 was invoked on the grounds

that the relief sought by Black Hills was in the nature of

mandamus against a federal officer or agency as provided

at 28 U.S.C. § 1361 and that there existed a question which

arose under federal statutes and regulations giving the

Court jurisdiction under 28 U.S.C. §1331. The action

brought by the United States against the PUC which was

consolidated with Black Hills’ action Civ. No. 85-5031 also

gave the Court further jurisdiction under 28 U.S.C. § 1345.

Statement of the Facts

In 1984 EAFB, a federal military installation located

in Meade and Pennington Counties in South Dakota, re-

quested proposals for electric service supplemental to that

being received by EAFB from Black Hills and the Western

Area Power Administration (WAPA). Black Hills has

served, and still does, a portion of EAFB, Renel Heights,

for many years, including electric service on March 21,

1975 the date on which the territory comprising EAFB

was divided by the PUC as assigned service areas between

Black Hills and WREA. Black Hills submitted the only

proposal it could legally make based upon rates as ap-

proved by the PUC. The one year contract for supplemen-

tal power was awarded to Heartland. The contract was

renewed for another year and in 1986 Basin Electric,

a rural electric generation and transmission cooperative

from North Dakota, was awarded a one year contract.

Black Hills protested the awarding of the contract to

Heartland contending that Heartland was not a qualified

bidder because it did not have statutory authority to supply

electric service to EAFB; that the sale to EAFB was a

sale at retail and Heartland had no power to sell at retail

beyond its district; and that Black Hills should be the sole

supplier of electric service to EAFB other than government

purchased electric power. Black Hills’ protest was denied

by EAFB’s contracting officer, the defendant Rasmussen.

Black Hills then filed a complaint against Heartland with

the PUC. After an evidentiary hearing, the PUC entered

a decision and order including findings of fact and conclu-

sions of law, finding among other things, that: (1) the sale

of electricity to EAFB was a retail sale; (2) Black Hills was

the only supplier other than the United States providing

electric service to EAFB on March 21, 1975, the date on

which South Dakota electric territory law granted electric

utilities the right to continue to serve existing customers;

and (3) only a portion, approximately 88% , of EAFB is a

federal enclave. Those portions of EAFB which are not

part of a federal enclave include the Skyway housing area,

Capehart housing area, part of the hospital, the security

gate and parts of the runway. The PUC also found that

Black Hills was able to serve EAFB by three different

methods.

ARGUMENT FOR ALLOWANCE OF WRIT

I. This is an important question of federal law

which should be settled by this Court.

In this case the Eighth Circuit decided an important

question of federal law which has not been but should

be settled by this Court. The Eighth Circuit effectively

destroyed the long standing state/federal dichotomy in the

area of regulation of electricity as evidenced by federal

statutes such as the Federal Power Act, 16 U.S.C. § 824

et seq., including the Public Utilities Regulatory Policies

Act of 1978 (PURPA). The cases relied upon by the Eighth

Circuit involved such things as the regulation of milk sales

and truck transportation services, not electric utility ser-

vice which is a heavily federal and state regulated area

with a long standing natural dichotomy in jurisdiction.

The importance of this question and Congressional

recognition of the federal/state dichotomy in the regula-

tion of electricity is recognized and evidenced by the

legislative history in the passage of the new legislation

referred to in the Question Presented above, House Joint

Resolution 738 (P.L.99-500, resubmitted and signed into

law by President Reagan on October 30, 1986 as Public

Law 99-591.) Certain sections of Public Law 99-591 were

promulgated as a result of proposed federal regulations

concerning the acquisition of utility services and a similar

Air Force supplemental regulation. After Black Hills had

commenced this action complaining to the PUC that EAFB

was not purchasing electricity from the state franchised

utility as required by applicable law, and a favorable rul-

ing by the PUC in favor of Black Hills, the Air Force

adopted without notice in the Federal Register section

8.304-91 of its regulations, which is reproduced, supra, and

the Department of the Defense and other agencies proposed

in the May 7, 1986 Federal Register 51 Fed. Reg. 16988-

16991, regulations, which are reproduced in the Appendix,

which would direct federal procurement officers not to

follow state utility franchise law in determining the ap-

plicable suppliers of electric utility services to military in-

stallations. As a result of the notice of the proposed regula-

tions in the Federal Register and the request for comments

thereon, the 99th Congress in the fall of 1986 passed the

following two laws as part of the Appropriations Bill, P.L.

99-591, the second one for the Department of Defense:

None of the funds appropriated or made available

by this Act shall be used to implement or en-

force the rule proposed on May 7, 1986 (51 Fed.

Reg. 16988-16991), or any other regulation issued

pursuant to statute requiring competitive bidding

for electricity, gas, or steam utility services ac-

quired by the Federal Government. Section 620

of HR 5294 adopted by reference by House Joint

Resolution 738, now § 620, Public Law 99-591, 100

Stat. 3341-333 (Oct. 30, 1986).

None of the funds appropriated or made available

by this Act shall be used to implement or enforce

the rule proposed on May 7, 1986 (51 Fed. Reg.

16988-16991), or Section 8.304-91 of the Air Force

FAR Supplement issued on June 24, 1985. Section

9108 of HR 5438 adopted by reference by House

Joint Resolution 738, now § 9111, Public Law 99-

591, 100 Stat. 3341-120, (Oct. 30, 1986).

The legislative history behind the passage of Public

Law 99-591 and the sections quoted above demonstrates

the importance of this question as follows:

The May 7, 1986 proposal raises serious problems

as well with respect to the fundamental regulatory

scheme which has applied for the last 50 years

to the sale and distribution of electricity. Under

the Federal Power Act of 1935 (16 U.S.C. § 824 et

seq.) and subsequent legislation such as the Public

Utility Regulatory Policies Act of 1978, Congress

has exerted exclusive jurisdiction over sales of

electricity for resale in interstate commerce while

at the same time expressly reserving to the states

authority to regulate the retail sale and distribu-

tion of electricity. H.R. Report No. 99-723, § 620

at 80, 99th Cong., 2d Sess. (1986).

The House of Representatives Report further recog-

nized that:

The autonomy of the states in this area has

historically been preserved by federal statute.

The proposed rules disregard state authority over

retail electric sales by directing federal contract-

ing officers to ignore state-created utility service

territories when procuring electric service. In ef-

fect the rule proposes to dismantle the current,

long established regulctory system by permit-

ting the Federal Government, the nation’s largest

single electricity consumer, to disregard the rules

governing all other participants in the heavily-

regulated market for retail electric service. H.R.

Report No. 99-723, 99th Cong., 2d Sess. § 620 at

80 (1986).

The Eighth Circuit’s opinion below allows the federal

government to do exactly what Congress was concerned

about in the passage of the provisions of Public Law 99-591

quoted above. The opinion concluded that notwithstand-

ing the above legislative history and legislation direct-

ing that regulations requiring competitive purchasing of

electric service not be followed, the Department of Defense

can ignore state franchised territory regulation and pur-

chase electricity competitively. The Eighth Circuit cor-

rectly asserted that the new legislation contained in P.L.

99-591 reaffirmed Supplement No. 5, in force since October

1, 1974, as the applicable law regarding the procurement

of electric utility service but determined that the supple-

ment did not advance petitioner’s position because of an

erroneous conclusion that Supplement No. 5 did not re-

quire the federal government to defer to state regulation.

That determination is inconsistent with the passage of

the new legislation and moreover blatantly ignores and

disregards the Congressional intent inherent in the pas-

sage of Public Law 99-591. The Eighth Circuit inter-

preted Supplement No. 5 as allowing competition in the

procurement of utility services just as the May 7, 1986

proposal and Air Force Supplement § 8.304-91 allow com-

petition. Congress, however, in passing Public Law 99-

591, prohibited the use of funds in the implementation of

the May 7, 1986 proposal or § 8.304-91 of the Air Force

Supplement. The only intent that can be ascribed to the

passage of Public Law 99-591 is that Congress is inter-

preting the federal law and federal regulations including

Supplement No. 5, as mandating the acquisition of utilities

services for the federal government from state franchised

utilities. Otherwise, the passage of the new legislation

would be meaningless. If it were Congress’ intent that

Supplement No. 5 could be construed to allow the competi-

tive procurement of electric services, why would Congress

pass Public Law 99-591? It is well established that subse-

quent legislation can provide meaning to previous legisla-

tion. See Andrus v. Shell Oil Company 446 U.S. 657, 665 n.

8 (1980) (“[WJhile arguments predicated upon subsequent

Congressional actions must be weighed with extreme care,

they should not be rejected out of hand as a source that

a court may consider in the search for legislative intent”).

That Congress intends that the federal government should

follow state franchise territory was made clear in the legis-

lative history of Public Law 99-591:

The Committee believes that the Federal

Government as an electric consumer should

abide by state franchise territory restrictions and

regulatory authority over retail electric rates and

service. §620 precludes the promulgation, im-

plementation, and enforcement of rules that would

permit the Federal Government to escape these

limitations. H. R. Report No. 99-723, 99th Cong.,

2d. Sess., § 620 at 80 (1986).

The effect, then, of the Eighth Circuit’s opinion is to

allow the Federal Government to ignore state franchise

territories in the acquisition of electric utility service in

direct violation of Congressional intent in the passage of

Public Law 99-591 as evidenced in the legislative history.

The opinions below have had a great impact in the

electric industry throughout the nation, have been highly

publicized and are being followed in every trade journal of

that industry. When the federal government can purchase

utility service competitively, but the individual household

cannot, the household subsidizes the federal government.

Nearly every consumer in the United States is affected by

this decision. In light of the new legislation and legisla-

tive history showing Congressional intent that the federal

government should not ignore state franchised utilities

when procuring electric service, and the importance of a

national policy regarding the procurement of utility ser-

vices by the federal government, it is evident that the ques-

tion decided by the Eighth Circuit is an important and sub-

stantial federal question and should be reviewed by this

Court.

Il. Conflict with previous opinions

A. Conflict with other Court opinion re-

garding procurement regulations.

The decision of the Eighth Circuit is in direct conflict

with a lower court opinion which was subsequently

affirmed without opinion by the United States Supreme

Court. In United States v. State Corporation Commission

of Virginia, 345 F. Supp. 843 (1972), affirmed without

opinion 409 U.S. 1094 (1973), the 3 judge panel United

States District Court for the Eastern District of Virginia

held that the Virginia State Corporation Commission could

regulate telephone service to the Pentagon, a federal

2 |

enclave.' The United States had argued that such regula-

tion would violate the Supremacy Clause of the United

States Constitution. The District Court disagreed based

in part on Armed Forces’ Procurement Regulations with

similar language to Supplement No. 5. The regulations

quoted in State Corporation Commission provided that:

In accordance with instructions contained

in Department of Defense directives ... the

Department of Defense generally procures com-

munication services...in accordance with tariff

— and tariff ‘rates established ... with

governmental bodies unless cause

for aa operational requirements dictate other-

wise. [emphasis in original]. Jd. at 847.

This language is strikingly similar to that contained

in Supplement No. 5 at S5-103.2(a): “The Department of

Defense procures utility services from industries which

are, to a greater or lesser extent, regulated by federal, state

and local regulatory bodies.” The 3 member panel District

Court stated that:

The Supreme Court has continued to require

a showing, in Supremacy cases, that the con-

stitutionally questioned state law or regulation

conflicts with federal statute or policy. [citations

omitted]...

We find no relevant Federal statute that conflicts

with the 1971 State Corporation Commission or-

der.

We find, furthermore, that there is no discern-

ible Federal policy relevant to procurement of

telephone services that would be offended by

enforcement of the Virginia State Corporation

Commission order as to the Government and in

fact, recognition of the Virginia tariff is, and has

1The fact that the Pentagon was a federal enclave is clear in

the government’s Jurisdictional Statement filed with the court

in the appeal from the District Court.

been, the Government policy. Jd. at 847.

This Court’s affirmance of the District Court judgment

at 409 U.S. 1094 is binding upon lower courts. “[Llower

courts are bound by summary decisions by this Court

‘until such time as the Court informs [them] that [they]

are not.’ Hicks v. Miranda, 422 U.S. 332, 344-45 (1975).

The District Court and the Eighth Circuit both ignored

State Corporation Commission and cited instead state cases

such as Re Souris River Telephone Mutual Aid Corporation,

24 P.U.R. 3d 84 (1958) and Arkansas Power and Light

Company v. Arkansas Public Service Commission, 330 S.W.

2d 51, cert denied 362 U.S. 975 (1960), both of which were

decided before the promulgation of Supplement No. 5. As

the Supreme Court in Hicks, supra, indicated, however,

the decision in State Corporation Commission was binding

‘on these lower courts.

Summary affirmances and dismissals for want of

a substantial federal question without doubt reject

the specific challenges presented in the statement

of jurisdiction and do leave undisturbed the judg-

ment appealed from. They do prevent lower courts

from coming to opposite conclusions on the precise

issues presented and necessarily decided by those

actions...

Mandel v. Bradley, 432 U.S. 173, 176 (1977).

In determining the precedential value then of a sum-

mary affirmance, the jurisdictional statement should be ex-

amined. See Mandel, supra, 432 U.S. at 180 (Brennan, J.,

concurring). The Question Presented in the Jurisdictional

Statement submitted by the Department of Justice on be-

half of the United States in State Corporation Commission

above is as follows:

Whether the State Corporation Commission of the

Commonwealth of Virginia has unconstitutionally

negated a federal contract and federal procure-

ment policy by requiring an increase in the rates

which the United States pays for telephone service

at the Pentagon and other military installations

in the Washington metropolitan area of northern

Virginia. Jurisdictional Statement, No. 72-723, p.

2, (1972).

In support of its argument that this Court should

reverse the District Court, the United States also argued

that:

In addition, Article I, §8, Cl. 17, of the

Constitution provides that ‘the Congress shall

have Power... To exercise exclusive Legislation

in all Cases whatsoever’ over the District of

Columbia and ‘to exercise like Authority over all

Places purchased by the consent of the Legislature

of the State in which the Same shall be, for

the Erection of Forts, Magazines, Arsenals, dock-

Yards, and other needful buildings.’ In Paul v.

United States, supra, 371 U.S. at 263, this Court

declared that ‘the grant of ‘exclusive’ legislative

power to Congress over enclaves that meet the

requirements of Art. I, §8, Cl. 17, by its own

weight, bars state regulation without specific con-

gressional action.’ This Court further stated (371

U.S. at 264) that the jurisdiction of the federal

government is also ‘exclusive’ when the govern-

ment acquires land for the purposes of Clause 17.

In addition, as the Court noted (371 U.S. at 265),

in giving the ‘consent’ to the goverment’s acquisi-

tion of land for purposes set forth in Clause 17, ‘a

State may condition its ‘consent’ upon its retention

of jurisdiction, over the lands consistent with the

federal use.

The application of the foregoing principles to the

federal reservation at the Pentagon was not devel-

oped in the record below although we believe that

point was preserved (Motion to amend complaint.

Transcript of Proceedings of May 19, 1972, page

27). The statutes and public records, however, in-

dicate that the federal government has ‘exclusive’

jurisdiction over the Pentagon that precludes any

state regulation of telephone rate service there,

because Virginia gave its ‘consent’ to the federal

government’s acquisition of the Pentagon for land

for Clause 17 purposes without any reservation of

jurisdiction to enact such regulations...

In view of the foregoing, we suggest that, as in

Paul v. United States, supra, 371 U.S. at 245, if

the Court should find that our contentions based

on the Supremacy Clause do not suffice to re-

quire the relief sought, it would be appropriate to

remand the case to the District Court to develop

the facts pertinent to this additional constitutional

issue. Jurisdictional Statement 13-15.

It is evident then that this Court was presented in

State Corporation Commission the enclave issue in con-

junction with federal procurement regulations which are

strikingly similar to those involved here contained in

Supplement No. 5. The communication regulations in-

volved in State Corporation Commission as they existed at

the time of the appeal provided in 22-1003 Policy as fol-

lows:

[T]he Department of Defense generally procures

communication services of the kind offered

by common carriers, including equipment and

facilities incidental to those services, from com-

mon carriers in accordance with tariff provisions,

and at tariff rates established with the Federal

Communications Commission (FCC) or with other

appropriate governmental regulatory bodies un-

less cause for operational requirements dictate

otherwise.

Supplement No. 5 provides similarly at S5-103.2(a)

that: “The Department of Defense procures utility services

from industries which are, to a greater or lesser extent,

regulated by Federal, state and local regulatory bodies.”

Under 22-1005 Sources for Communication Services of

the procurement regulations involved in State Corporation

Commission, it is provided that:

(a) Generally communication services shall be

procured from the communication common carrier

authorized by the appropriate regulatory body to

operate within the service area in which the ser-

vices are required.

(b) Although normally only one carrier is

authorized to provide a specific type of service in

any given location, there are locations at which

no single communication common carrier has the

exclusive right to provide the required service.

When this is the case and more than one common

carrier is authorized and can provide the required

service, the procurement shall be made from the

source offering the lowest cost to the Government,

if practicable...

United States v. State Corporation Commission of Virginia,

Motion to Dismiss cr Affirm, No. 72-723 Appendix A, p.4-

5 (1972).

This language in the telecommunications procure-

ment regulations is nearly identical to that contained in

Supplement No. 5 at S5-104.1(a):

Although in most instances utility service sup-

pliers operate in franchise territory, competition

may nevertheless exist - for example, where more

than one supplier is franchised for a given loca-

tion, or where more than one supplier is able to

provide service at a given location but no sup-

plier has yet been franchised for that location.

Therefore, when the location of a new military in-

stallation has been determined and the procure-

ment of utility services is authorized, the contract-

ing activity shall determine whether more than

one supplier can provide the service. Where com-

petition exists, proposals shall be solicited from all

potential suppliers...

Accordingly, it is evident that this Court has already

made a decision in the State Corporation Commission case

on the issue of whether the enclave clause would bar state

regulation of the federal government when federal procure-

ment regulations show a federal policy of compliance with

state law regarding the procurement of services. As the

attorney for appellees said in their Motion to Dismiss the

United States’ appeal in State Corporation Commission:

aie j

Here we have a purchase of telephone service

pursuant to a clearly defined and universally

employed Federal policy fully consistent with

State law. The Federal policy being applicable,

the new issue of ‘exclusive’ jursidiction now raised

by the Government can have no effect on this case.

Motion to Dismiss or Affirm, No. 72-723, p. 12

(1972).

The United States District Court for the District of

South Dakota and the Eighth Circuit, being bound by the

State Corporation Commission case, should have ruled that

the federal procurement regulations, Supplement No. 5,

evidenced a federal policy of compliance with state law

despite the fact that EAFB is a partial federal enclave un-

der the authority of State Corporate Commission. Because

the lower courts involved here did not make such a deci-

sion, their decisions are in conflict with a decision of this

Court.

B. Conflict with previous federal enclave

decisions.

The Eighth Circuit’s opinion is also in conflict with

previous decisions of this Court. The Eighth Circuit ex-

tended federal jurisdiction beyond the boundaries of a

federal enclave. As delineated in the statement of facts

above, only 88% of EAFB is on a federal enclave. As to the

other 12%, jurisdiction was never accepted by the federal

government pursuant to 40 U.S.C. §255. Under Adams v.

United States, 219 U.S. 312 (1943), the federal government

has no jurisdiction over that 12% of EAFB upon which it

did not give the notice required by 40 U.S.C. § 255. In

Adams, the Supreme Court construed 40 U.S.C. § 255 as a

prerequisite to the federal government’s acquisition of any

type of jurisdiction. The Court in discussing the statute

said that:

The Act [40 U.S.C.A. § 255] created a definite

method of acceptance of jurisdiction so that all per-

sons could know whether the government had ob-

tained ‘no jurisdiction at all, or partial jurisdic-

tion, or exclusive jurisdiction.’ .. .

The Department of Justice has abandoned the

view of jurisdiction which prompted the institu-

tion of this proceeding, and now advises us of its

view that concurrent jurisdiction can be acquired

only by the formal acceptance prescribed in the

Act ...Since the government had not accepted

jurisdiction in the manner required by the Act the

federal court had no jurisdiction of this proceeding.

Here, as set forth above, the federal government has

not noted acceptance of jurisdiction pursuant to the provi-

sions of 40 U.S.C. 255 on approximately 12% of EAFB.

That 12% includes Skyway Housing, Capehart Housing,

part of the hospital, the security gate and parts of the run-

way. In the absence of an acceptance of either partial or ex-

clusive jurisdiction, the United States’ possession of lands

is that of an ordinary proprietor. Paul v. United States,

371 U.S. 245, 264 (1963). Accordingly, it is evident that

as to the portion of EAFB that is not an enclave, the state

of South Dakota has jursidiction and Black Hills should be

entitled to serve those portions of EAFB, as the PUC has

determined that under South Dakota franchise territory

law, Black Hills is entitled to be the sole supplier.

WHEREFORE, your petitioners would respectfully re-

quest that this Court grant a writ of certiorari to review

the decision of the United States Court of Appeals for the

Eighth Circuit.

Respectfully Submitted,

RoGER A. TELLINGHUISEN

Attorney General of the State of South Dakota

MARY VANDERPAN (attorney of record)

General Counsel for South Dakota Public Utilities Commission

500 East Capitol

Pierre, South Dakota 57501

Attorneys for Petitioner Public Utilities

Commission and State of South Dakota

(605) 773-3202

Davip E. Morri.u (attorney of record)

MorriLt & BRowNn

P. O. Box 8108

Rapid City, South Dakota 57709-8108

Attorney for Petitioner Black Hills Power

and Light Company

(605) 348-7516

APPENDIX

TABLE OF CONTENTS

OF APPENDIX

Page

Opinion of the United States Court of Appeals for

the Eighth Circuit, filed January 7,1987 ...... la

Order of United States District Court, District of

South Dakota, Western Division, dated October 16,

a oe oe ge aN ha alg ne ite em ee eae 6% 23a

Opinion of United States District Court, District of

South Dakota, Western Division, dated October 16,

Ce ee Tee rE ee ee eT ee ee ee ee 25a

Decision and Order before the Public Utilities

Commission of the State of South Dakota, dated

SS ee ee ee ee 4la

Judgment of the United States Court of Appeals for

the Eighth Circuit, dated January 7,1987 ..... 57a

Order denying petition for rehearing of the United

States Court of Appeals for the Eighth Circuit,

Gabem Pemrwmety 4, BOR ww cece sees 58a

Armed Services Procurement Regulation Supple-

ment No. 5, dated October 1, 1974 (Selected

PTET CECE RE TTS TR eee ee 59a

Federal Register, Vol. 51, No. 88, pages

16988 through 16991, dated May 7,1986 ...... 67a

Iu The

United States Court of Appeals

Hor the Lighth Circuit

No. 85-5418

~—_

Black Hills Power and Light Company, A

South Dakota Corporation,

Appellant,

Caspar W. Weinberger, as Secretary of the

Department of Defense; Department of

Defense, an agency of the United States of

America; Richard D. Rasmussen, as con-

tracting officer for Elisworth Air Force

Base, a defense installation under the

control of the Department of Defense;

Heartland Consumers Power District, a

subdivision of the State of South Dakota;

West River Electric Association, Inc., a

South Dakota rural electric cooperative;

and the Public Utilities Commission, a

regulatory commission of the State of

South Dakota,

Appellees.

Black Hills Power and Light Company,

Appellant,

Heartland Consumers Power District,

Elisworth Air Force Base, United States

of America,

Appellees.

Black Hills Power and Light Company,

Appellant,

Heartland Consumers Power District,

Ellsworth Air Force Base, United States

of America,

Appellees. /

Appeal and _ Cross-

Appeal from the Uni-

ted States District

Court for the District

of South Dakota.

’

No. 85-5428

Black Hills Power and Light Company, A q

South Dakota Corporation, |

Appellee,

Caspar W. Weinberger, as Secretary of the

Department of Defense; Department of

Defense, an agency of the United States of

America; Richard D. Rasmussen, as con-

tracting officer for Ellsworth Air Force

Base, a defense installation under control

of the Department of Defense; Heartland

Consumers Power District, a subdivision

of the State of South Dakota; West River

Electric Association, Inc., a South Dakota

rural electric cooperative; and the Public Appeal and _ Cross-

Utilities Commission, a regulatory com- Appeal from the Uni-

mission of the State of South Dakota, » ted States District

Appellant. Court for the District

of South Dakota.

Black Hills Power and Light Company,

Heartland Consumers Power District,

Ellsworth Air Force Base; USA.

Black Hills Power and Light Company,

Heartland Consumers Power District,

Elisworth Air Force Base, United States

of America.

Submitted: June 9, 1986

Filed: January 7, 1987

Before JOHN R. GIBSON and MAGILL,

Circuit Judges, and REGAN,”

Senior District Judge.

JOHN R. GIBSON, Circuit Judge.

Black Hills Power and Light Company and the South

Dakota Public Utilities Commission appeal from a judg-

ment of the district court denying Black Hills’ motion

for a preliminary injunction and summary judgment and

granting the United States’ motion to dismiss. Appellants

seek to have a contract for electric power entered into

by Ellsworth Air Force Base and Heartland Consumers

Power District declared void, and an order entered requir-

ing Ellsworth to contract with Black Hills for the provi-

sion of such power. The central issue on appeal is whether

Ellsworth Air Force Base must follow the utility franchise

territories prescribed by South Dakota law in procuring its

electrical service. We conclude that Ellsworth is a federal

enclave under exclusive federal jurisdiction, that nothing

in federal procurement law directs the Ellsworth contract-

ing officials to follow state utility franchise law, and that

none of the legislation enacted by Congress while this case

was pending alters our analysis and decision. Therefore,

we affirm the decision of the district court.’

Ellsworth Air Force Base is a military installation of

the Department of Defense and is located in parts of Meade

and Pennington Counties, South Dakota. It occupies

4,856.76 acres, of which approximately 88% (4,261.57

acres) has been ceded by South Dakota to the exclusive

jurisdiction of the United States.

~ “The HONORABLE JOHN K. REGAN, Senior United States

District Judge for the Eastern District of Missouri, sitting by

designation.

1The Honorable Andrew W. Bogue, Senior United States

District Judge for the District of South Dakota, Western

Division.

Black Hills is a South Dakota electric utility regu-

lated by the South Dakota Public Utilities Commission. It

provides electric service to the Renel Heights housing area

located on Ellsworth’s main base. This service amounts to

approximately 5.3% of Ellsworth’s total electrical consump-

tion. Prior to 1984, the rest of the main base needs, over

94% of Ellsworth’s total electric consumption, were sup-

plieci by the Western Area Power Administration (WAPA),

an agency of the United States Department of Energy.

At two housing sites not connected to the main base,

ele:tricity is provided by West River Electric Association,

a South Dakota rural cooperative. West River’s service

provides only .6% of Ellsworth’s total needs. With the

exception of the Renel Heights housing area, all electri-

cal distribution, transmission, transformation, and street

lighting systems located on Ellsworth are owned, operated,

and maintained by the United States. The Renel Heights

electrical system is owned by Black Hills and is not com-

patible with the WAPA-owned electrical system.

In 1984 WAPA determined that it could no longer

supply all of Ellsworth’s main base needs; thus, Ellsworth

would have to contract with another supplier for the

additional power The United States solicited bids and

five suppliers, including Black Hills, submitted proposals.

Ellsworth chose the lowest bid, that of Heartland Con-

sumers Power District, a subdivision of the State of South

Dakota. Heartland’s proposal was $336,769.20 as com-

pared to Black Hills’ proposal of $614,381.19. The United

States and Heartland entered into a one-year contract in

October, 1984. On November 24, 1984, Black Hills filed a

complaint with the South Dakota Public Utilities Commis-

sion arguing, among other things, that Ellsworth Air Force

Base is located in Black Hills’ utility service territory, and

therefore Ellsworth is required to obtain electrical power

beyond that supplied by WAPA from Black Hills.”

2The Commission determined that because West River’s service

(Footnote continued on the following page)

After a three day evidentiary hearing and a personal

inspection of the Air Force base, the Commission issued

its decision. It held that it had jurisdiction to determine

who has the right to furnish electrical service to the base

because, first it has jurisdiction to determine retail service

areas of electric utilities, see S.D. Codified Laws Ann. §§49-

34A-42 to 49-34A-44 (1983), and, second, although it does

not have jurisdiction over the operations at Ellsworth, it

has jurisdiction over the utility companies to determine

who has the right to furnish the base with electricity. PUC

Decision at 8. In addition, since part of the base was not

ceded to the United States, that part is under the Commis-

sion’s jurisdiction, and “in order to control the delivery of

electric power and energy which is commingled and served

throughout the entire Base, it is necessary for the Com-

mission to control the whole.” Jd. Furthermore, the Com-

mission determined that it was not interfering with federal

jurisdiction because Congress has preempted regulation of

wholesale sales of power and has left regulation of retail

sales to the states. The Commission also decided that

the federal procurement regulations direct federal procure-

ment officers to abide by local franchise or service ter-

ritories. Thus, the Commission concluded that federal

law recognizes the Commission’s jurisdiction to determine

which electric utility has authority to deliver electric ser-

vice to the base. ,

After deciding that it had jurisdiction, the Commission

ruled that the sale of power to the United States is a

retail sale, and Ellsworth is located primarily in Black

Hills’ service area. It concluded that, under South Dakota

law, Black Hills is entitled to be the exclusive provider of

electric service to Ellsworth for use at the base. Jd. at 10.

2 (Continued)

area encompassed a portion of the base, it was also a party

to the proceedings. West River chose not to participate, but

instead simply filed a letter with the Commission stating its

position. As an appellee in the present case, West River adopts

the arguments of Heartland and the United States.

Because the 1984-85 contract was awarded to Heartland

as the lowest bidder, the Commission als.» discussed issues

pertaining solely to Heartland’s authority under state law

to provide electric service to the base. However, the one-

year contract beginning in October, 1986, was granted to

Basin Electric Power Cooperative, a North Dakota entity

that submitted a bid lower than Heartland’s. Because

the parties are requesting future injunctive relief rather

than money damages, the issues concerning Heartland’s

authority are now moot.

Heartland, the United States, and West River ap-

pealed the Commission’s decision to the South Dakota cir-

cuit courts, and the United States subsequently removed

this appeal to the United States district court. In addition,

Black Hills commenced an action for declaratory and in-

junctive relief, seeking to have the district court require

that the United States contract with Black Hills for the

provision of overrun power, and the United States brought

an action seeking to enjoin the Commission from prevent-

ing the United States from using competitive procedures.

The district court consolidated these four cases. Black Hills

Power & Light Co. v. Weinberger, Civ. 85-5031, 85-3015,

85-4068, 85-5064, slip op. at 2-4 (D.S.D. Oct. 16, 1985).

The court denied Black Hills’ motions for a preliminary

injunction and summary judgment and granted the United

States’ motion to dismiss. Slip op. at 15. The court dis-

missed as redundant the United States request for injunc-

tive relief. Jd. at 15-16.

The district court held that there was a conflict be-

tween state and federal law, and that the supremacy

clause, U.S. Const., art. VI, cl. 2, prevented the Commis-

sion from forcing the United States to contract with a

specified electric utility. Slip op. at 6-13. Additionally,

the court concluded that the Commission lacks jurisdiction

over Ellsworth Air Force Base because it is an exclusive

federal enclave. Jd. at 14. In the alternative, the district

court concluded that the South Dakota utility statutes do

not apply to the United States. Jd. at 14-15.

Congress has the power “[t]o exercise exclusive

Legislation ...over all Places purchased by the Consent

of the Legislature of the State in which the Same shall

be, for the Erection of Forts, Magazines, Arsenals, dock-

Yards, and other needful Buildings.” U.S. Const. art. I,

§ 8, cl. 17. The grant of “exclusive” legislative power to

Congress over federal enclaves, by its own weight, bars

state regulation without specific congressional approval.

Paul v. United States, 371 U.S. 245, 263 (1962). The im-

portance of distinguishing between jurisdiction on state-

owned land and on a federal enclave was articulated by the

Supreme Court in Pacific Coast Dairy , Inc. v. Department

of Agriculture of California, 318 U.S. 285 (1943). There, a

California milk dealer attempted to prevent the California

Department of Agriculture from revoking his license for

selling milk to the War Department (now Department of

Defense) at less than the minimum price fixed by state

law. The sale and delivery took place on Moffett Field,

federally-owned land, and the Court held that that alone

precluded state regulation of the sale, even in the absence

of conflicting federal regulation. 318 U.S. at 294. The

Court distinguished Pacific Coast Dairy from Penn Dairies,

Inc. v. Milk Control Commission of Pennsylvania, 318 U.S.

261 (1943), decided the same day, in which the same state

milk control law was held applicable to War Department

contracts that were made on land owned by Pennsylvania,

and therefore within Pennsylvania’s jurisdiction and con-

trol. Id. at 295. The Court held that the distinction be-

tween regulation on federal land and on state land was not

a technical one, but was necessary to preserve the balance

between national and state power and honor Congress’ ex-

clusive jurisdiction under the Constitutional. Jd. at 295-

96.

It is undisputed that 88% of the Air Force base, in-

cluding all of the main operational facilities, was ceded

to the United States, part in 1945, part in 1950, and

the remainder in 1953. PUC Decision at 4 (referring to

Black Hills Exhibit 15F). South Dakota reserved only the

right to serve criminal and civil process; it surrendered all

other jurisdiction. When there is a transfer of sovereignty,

state law adopted after the transfer is without force in the

enclave. Pacific Coast Dairy, 318 U.S. at 294.

In seeking bids for power in excess of its WAPA alloca-

tion, the United States specified that the point of delivery

and metering is to be the federally-owned substation lo-

cated on the base in territory owned by the United States.

The electric power delivered to this substation is com-

mingled with the power provided by WAPA and served

throughout the entire base. South Dakota’s division of

the State into franchised utility areas and its authoriza-

tion to the Commission to regulate electric service based

on those assigned service areas was made long after it

lost jurisdiction over the territory.* Thus, South Dakota

had no authority to include the federal enclave in its as-

signed service territories for the purpose of exerting control

over sales of electric service that are consummated within

federal territory.

The Commission justifies regulating the United States’

ability to use competitive bidding to obtain electrical ser-

vice by stating the following:

While the Commission herein does not attempt to

exercise any jurisdiction over the United States

through its operations through Ellsworth at the

Base, the Commission does exert its jurisdiction

over Black Hills, Heart'and and West River in

determining who has the right to furnish electric

service to the Base. Even if that part of the Base

which was ceded to the United States is not within

the jurisdiction of the Commission, that part of the

3The Commission was first granted the authority to estab-

lish assigned service areas in 1965. 1965 S. D. Laws 254, §14

(current version at S.D. Codified Laws Ann. §49-34A-44). The

Commission did not establish the territorial boundaries that en-

compass Ellsworth Air Force Base until 1976. PUC Decision and

Order, F-3103 (July 1,1976).

— 9a

Base which was not ceded to the United States is

under the Commission’s jurisdiction, and in order

to control the delivery of electric power and energy

which is commingled and served throughout the

entire Base, it is necessary for the Commission to

control the whole.

PUC Decision at 8.

We reject this analysis. First, as the district court noted,

the Commission cannot avoid a clear constitutional barrier

to state regulation of the enclave by claiming that it is

only exercising jurisdiction over the supplier. The same

argument failed in Pacific Coast Dairy, supra, where the

Court rejected the lower Court’s determination that the

state statute regulates only the purchasing, handling, and

processing of milk within California and not the actual sale

on Moffett Field. 318 U.S. at 295 . It was clear to the

Supreme Court, as it is to us in this case, that the state was

simply attempting to regulate sales on federal territory in-

directly where it had no authority to do so directly. Cf.

United States v. Georgia Public Service Commission, 371

U.S. 285 (1963) (Georgia Public Service Commission could

not revoke certificates of carriers for contracting at rates

other than those prescribed by Commission where state

law conflicted with federal procurement policy); Paul v.

United States, supra (California could not sue milk sup-

pliers whose bids on a contract with United States or at

a price below the state minimum when state regulation

conflicted with federal procurement policy); Leslie Miller,

Inc. v. Arkansas, 352 U.S. 187 (1956) (State could not apply

its license requirement to building contractor who con-

tracted with the United States where requirement would

frustrate federal policy).‘

“While these cases discuss conflicting state and federal regula-

tion in the context of the supremacy clause, their analysis is

equally applicable to state regulation that interferes with ex-

clusive federal jurisdiction under the enclave clause. They il-

lustrate that a state cannot diminish the constitutional authority

of the United States government by regulating the parties with

whom it may contract.

10a

This court also finds unpersuasive the assertion that

the Commission may exercise jurisdiction over all of the

federal territory because approximately 12% of the Air

Force base is-on land that has not been ceded to the United

States. As previously stated, the point of delivery and

metering for the overrun electricity is a substation owned

by the United States, through WAPA, and is located on

land that has been ceded to the United States. The over-

run power is commingled with that supplied by WAPA and

may or may not be distributed to the buildings in non-

federally owned territory. Some of this overrun electrical

power, either that provided by WAPA or that provided by

the electric utility with whom the United States contracts,

may be used in areas that are within the ceded territory.

Likewise, some of the power supplied by WAPA, a federal

agency over which the Commission admittedly has no juris-

diction, see PUC Decision at 8-9, may serve the area that

is within the State’s jurisdiction. Once the power is com-

mingled at the point of delivery, it is impossible to deter-

mine what portion of the base is served by WAPA and what

portion is served by the private utility. We believe that

exclusive federal jurisdiction over eighty-eight percent of

the base need not be surrendered because of the possibility

that the purchase and distribution of electricity within the

enclave may affect the need for electricity on the small sec-

tion of the base that is still within South Dakota’s jurisdic-

tion. These effects are not enough to allow the Commission

to regulate transactions that take place exclusively within

the enclave. Cf. United States v. State Tax Commission of

Mississippi, 412 U.S. 363 (1973)) (twenty-first amendment

confers no power on a state to regulate importation of al-

cohol into a military base on exclusive federal territory

even if liquor sold there is for use and consumption on

state-owned land). —

The facts indicate that the purpose behind the State’s

regulation of service territories, the “prevention of un-

necessary duplication of electric facilities,” PUC Decision

’

lla

at 8, would be best served if the United States had juris-

diction over the procurement and distribution of electric

service for the entire base. As previously stated, with the

exception of the Renel Heights housing area, the United

States owns, operates and maintains the entire Ellsworth

electrical system. In addition, the Commission admits that

it has no jurisdiction to restrict the amount of electrical

service generated by the United States through WAPA,

and that WAPA could serve even the non-ceded portions of

the base. Jd. at 8-9. In fact, until 1984, when the demand

for power at Ellsworth exceeded its WAPA allocation, the

Commission did not control the power that was delivered

to the non-ceded portion of the base. Thus, the rationale

that the Commission’s lack of authority to control the flow

of power to the state-owned territory will result in un-

necessary duplication of electric facilities is without logic.

However, we need not extend the jurisdiction of the United

States beyond the borders of the federally-owned territory

in order to hold that South Dakota has no jurisdiction to

prevent the United States from using competitive bidding

to purchase electric service for delivery within the enclave.

Black Hills and the Commission assert that state juris-

diction is permissible because there is no interference

with the jurisdiction asserted by the federal government.

However, the cases cited by appellants do not support

their position regarding state jurisdiction or regulation

within a federal enclave. Appellants argue that Howard

v. Commissioners of the Sinking Fund, 344 U.S. 624

(1953), provides authority for the Commission’s division

of Ellsworth into assigned service areas. In Howard, the

Supreme Court allowed the City of Louisville to annex

certain territory, embracing a Naval Ordnance plant that

had been acquired by the United States. The Court held

that it was permissible for the State to include the piant

within the boundaries of the city, as “[a] state may con-

form its municipal structures to its own plan, so long

as the state does not interfere with the exercise of juris-

ts |

12a

diction within the federal area by the United States.” Id.

at 626-27 (emphasis added). Thus, Howard does nothing

to alter the exercise of exclusive federal jurisdiction over

federally-owned territory. The Court determined in that

case that including the enclave within the city’s bound-

aries did nothing to affect the use or disposition of the

property by the United States. Jd. at 627. However, by

ordering the United States to contract with a particular

utility based on an assigned service area, the South Dakota

Public Utilities Commission has directly interfered with

the United States’control over the provision of electrical

service within the base. Similarly, the other cases cited by

Appellants all involve instances in which the state regula-

tion only generally affected federal property, and in no way

placed any restrictions on the ability of the United States

to enter into contracts regarding the use of the federally-

owned property. See, United States v. City of Bellevue,

474 F.2d 473 (8th Cir.), cert. denied, 414 U.S. 827 (1973)

(City may annex Air Force base to the extent permitted

by Congress); Bartsch v. Washington Metropolitan Area

Transit Commission, 357 F.2d 923 (4th Cir. 1966) (per

curiam) (Washington, D.C. Commission had jurisdiction to

set taxicab rates to and from Washington National Airport,

a federal enclave).

In two factually similar cases, it was recognized

that state regulation of utility service to federal instal-

lations intrudes upon the exercise of exclusive federal

jurisdiction. In Re Souris River Telephone Mutual Aid

Corporation, 24 Pub. Util. Rep. 3d (PUR) 84 (1958),

the North Dakota Public Sevice Commission held that

it had no power to grant or deny a certificate to con-

struct telephone facilities on a federally owned Air Force

base where jurisdiction and control of the land had

been transferred to the federal government. Jd. at

86. Likewise, in Arkansas Power and Light Company v.

Arkansas Public Service Commission, 231 Ark. 142, 330

S.W.2d 51, cert. denied, 362 U.S. 975 (1960), the Arkansas

13a

Supreme Court recognized that allowing the State Public

Service Commission to designate, based on specified service

areas, the utility from which the United States govern-

ment must purchase electricity would interfere with car-

rying out the operations of the Air Force base. Jd. at 144-

148, 330 S.W.2d at 52-54. In that case, because the United

States had not acquired jurisdiction over the land on which

the Air Force base was located, the Arkansas court based

its decision on actual conflict between state and federal

regulation. Here we are dealing with a federal enclave,

and the United States has exclusive jurisdiction even ab-

sent such conflict. Paul, 371 U.S. at 263-64.

Black Hills and the Commission argue strenuously

that even if this is federally-owned territory, Congress

has taken specific action mandating that federal procure-

ment officers follow state utility franchise law in pur-

chasing electricity. See Paul, 371 U.S. at 245. In sub-

stance, appellants argue that even if the federal govern-

ment has exclusive jurisdiction over the enclave, federal

law specifically defers to state utilities franchise law and

prevents Ellsworth from procuring services through com-

petitive bidding. After carefully examining the relevant

federal law, we must reject this argument.

Federal procurement law is specifically designed to en-

sure “active competition so that the United States may

receive the most advantageous contract.” Paul, 371 US.

at 253. The authority to procure public utility services for

the military has been delegated by the General Services

Administration (GSA) to the Secretary of Defense. See 15

Fed. Reg. 8227 (Dec. 1, 1950) (adopted as amended at 41

C.F.R. §101-33.002). The “Statement of Understanding ”

between the GSA and the Department of Defense provides

that:

The basic purpose of the agreements and proce-

dures outlined herein relating to utility services

l4a

is that all these services shall be procured or

provided at the minimum practical total cost to the

government.

Id. (emphasis added).

The statutes and regulations applicable when the

United States solicited bids in 1984~—as well as the recent

amendments under the Competition in Contracting Act of

1984, Pub. L. No. 98-369, 98 Stat. 1175 (relevant portions

codified in scattered sections of 10 U.S.C. and 41 U.S.C.),

applicable at the time of the two subsequent procure-

ment decisions® — do not mandate that federal officers fol-

low state utility franchise law in procuring electrical ser-

vice. Quite the opposite is true. The Federal Acquisition

Regulation makes clear that the general rule is the promo-

tion of “full and open competition in soliciting offers and

awarding Government contracts.” 48 C.F.R. §6.101 (1985)

(citing 10 U.S.C. §2304 (Supp. III 1985)). The procuring

agency must use competitive procedures unless the agency,

in exercising its discretion, determines that competition

does not exist. If the procurement official determines that

competition does not exist, the regulations permit him to

depart from standard competitive procedures. However,

there is nothing in the regulations that require him to do

SO.

One example of when an agency may depart from us-

ing competitive procedures is when there is only one avail-

able source:

The head of an agency may use procedures other than

5 An appellate court must apply the law in effect at the time

it renders its decision. Bradley v. Richmond School Board, 416

U.S. 696, 711 (1974) (quoting Thorpe v. Housing Authority of the

City of Durham, 393 U.S. 268, 281 (1969)). Thus, we must con-

sider the Competition in Contracting Act as applicable law. This

is particularly appropriate since this case is one for injunctive

relief—an order requiring the government to purchase electrical

service for Ellsworth from Black Hills.

15a

competition only when -

(1) the property or services needed by the agency

are available from only one responsible source and

no other type of property or services will satisty

the needs of the agency.

10 U.S.C. §2304(c)(1); see also 48 C.F.R. 6.302-1(a)(2).

The term “responsible source” is defined at 41 U.S.C. §403

(Supp. III 1985).° It includes a number of relevant fac-

tors to be considered by the procuring agency, one of

which is whether the prospective contractor “is otherwise

qualified and eligible to receive an award under applicable

laws and regulation.” See id. §403(8)(G). Black Hills

argues that “[s]tate electric law is applicable law” and

that these regulations “strengthen the argument that the

Department of Defense should follow state law in the

procurement of utility services.” Black Hills Brief at 39,

41. The statute’s reference to “applicable law,” however,

does not change the discretionary nature of determin-

ing whether more than one responsible source exists and

whether competitive procedures should be departed from.

It is relevant that in the Paul case, supra, the Supreme

Court examined almost identical language in a federal

6This section provides: the term “responsible source” means

a prospective contractor who — (A) has adequate financial

resources to perform the contract or the ability to obtain such

resources; (B) is able to comply with the required or proposed

delivery or performance schedule, taking into consideration all

existing commercial and Government business commitments;

record of integrity and business ethics; (E) has the necessary

organization, experience, accounting and operational controls,

and technical skills, or the ability to obtain such organization,

experience, controls, and skills; (F) has the necessary produc-

tion, construction, and technical equipment and facilities, or the

ability to obtain such equipment and facilities; and (G) is other-

wise qualified and eligible to receive an award under applicable

laws and regulations.

16a

procurement provision and held that it did not require the

procurement official to follow state law:

(TJhe references to rates or prices “fixed by law

or regulation” are merely minor collateral accom-

modations to those situations where, within the

limits of the Regulation and the 1962 Act, the

federal procurement official decides that the prac-

tical way to obtain the supplies or services is by

following the state price-fixing or rate-fixing sys-

tem.

371 U.S. at 260-61.

Thus, the determination of whether competition exists is

not one to be made based on South Dakota utility franchise

law, but instead is within the sound discretion of the Air

Force.

Uniform policy for the procurement of utility ser-

vices by the Department of Defense is provided by Armed

Services Procurement Regulation Supplement No. 5. See

48 C.F.R. §208.3 (1985). Contrary to the assertions of the

Commission and Black Hills, Supplement No. 5 does not

amount to specific congressional action directing the Air

Force to follow state utility service areas in purchasing

electricity. While Supplement No. 5 describes instances

in which competition may not be possible because of the

existence of state franchise areas, it includes no directive

to Department of Defense agencies to surrender their dis-

cretion in determining the the existence of competition in

order to secure a contract for the government “at the min-

imum practical total cost ***.” 15 Fed. Reg. 8227 (Dec.

1, 1950).

Appellants rely quite heavily on the language in

paragraph S5-104.1, entitled “Determination as to the

Existence of Competition,” which states:

(a) Although in most instances utility service sup-

pliers operate in franchised territory, competition

may nevertheless exist—for example, where more

than one supplier is franchised for a given loca-

17a

tion, or where more than one supplier is able to

provide service at a given location but no sup-

plier has yet been franchised for that location.

Therefore, when the location of a new military in-

stallation has been determined and the procure-

ment of utility services is authorized, the contract-

ing activity shall determine whether more than

one supplier can provide the service. Where com-

petition exists, proposals shall be solicited from all

potential suppliers. Even where one of the com-

peting potential suppliers has entered into a GSA

area contract, proposals shall be solicited to deter-

mine definitely which of the suppliers offers more

advantageous competing services under the par-

ticular circumstances.

(b) Similarly, where an existing installation is be-

ing served by one supplier, and either another

prospective supplier requests an opportunity to

furnish the service or the Department concerned

becomes aware of another potential supplier, the

Department shall determine whether more than

one supplier can provide the service. Where com-

petition is found to exist, competitive solicita-

tion of proposals shall be initiated at whatever

time is considered to be most advantageous to the

Government.

The district court correctly determined that this section

applies only to new military installations or existing in-

stallations being served by only one supplier. Slip op.

at 11. Ellsworth is neither a new installation nor is

it supplied electricity only by Black Hills. To the con-

trary, the majority of its power is provided by WAPA

through the WAPA .«...ued system. Even in those instances

where paragraph S5-104.1 does apply, the main concern is

whether competition exists as a practical matter. While

state franchise territories may indicate that competition is

not possible, their existence does not preclude the United

States from making this determination. In the present

case, the United States owns the electrical system that

serves over 94% of the Air Force base. The Ellsworth

18a

contracting officer determined that a number of potential

suppliers could distribute energy through the federally-

owned lines without duplication of transmission facilities.

Having determined that competition exists, Supplement

No. 5 mandates that “proposals shall be solicited from all

potential suppliers.” 9S5-104.1(a). Thus, the actions of the

Air Force in seeking competitive bidding for the overrun

electricity were clearly authorized by the relevant procure-

ment statutes and regulations.’

III.

Finally, we must address the controversy surround-

ing Section 8.304-91 of the Air Force Federal Acquisition

Regulation Supplement issued on June 24, 1985, the

proposed rule of May 7, 1986, and subsequent congres-

sional legislation preventing enforcement or implementa-

tion of either of these new regulations.®

7 Appellants’ reliance on the Public Utility Regulatory Policies

Act of 1978, 16 U.S.C. §§2601-2645 (1982), is misplaced. That

Act simply indicates that the federal government has not

preempted state regulation of electric utilities that provide retail

service. Although the Act recognizes that states may continue

to regulate the operations of utility suppliers within the state, it

does not permit state regulations to displace federal jurisdiction

on a federally-owed enclave. Nor does it alter federal procure-

ment law. See, e.g., United States v. Georgia Public Service

Commission, 371 U.S. 285 (1963), (although state generally regu-

lates shipping rates by intrastate carriers, regulations must give

way in light of conflicting federal procurement policy).

8The addition to the Air Force Federal Acquisition Regulation

Supplement, section 8.304-91, provides:

The contracting officer shall determine by market sur-

vey if more than one supplier can furnish needed public

utility services for proposed procurements prior to us-

ing other than competitive procedures. The existence of

(Footnote continued on the following page)

19a

The Air Force regulation was issued by the

Department of the Air Force as an internal procurement

management instruction and was not published in the

Federal Register.? The May 7, 1986 proposed rule was

proposed jointly by the Department of Defense, GSA, and

NASA. Both the proposed rule and the Air Force regulation

make clear that contracting officers must acquire utility

services competitively, and the existence of state or local

franchise service territories may not be used as a basis for

deeming the acquisition of utilities to be a “sole source”

exception to the normal competition requirements. This

is a departure from previous regulations in that it takes

away the discretion of the federal agencies: they must, in

8 (Continued)

franchised service territories established by state or

local governmental entities does not in and of itself

restrict acquisition of public utility services to a sole

source. The contracting officer need not enter into a con-

tract with the state or locally franchised public utility

supplier simply because the supplier has obtained the

local franchise. The contracting officer should instead

seek to competitively acquire public utility services

whenever possible.

Likewise, the relevant part of the May 7, 1986 proposed rule

states: 41.104 Acquisition Policy *** (b) The existence of

franchised service territories is not a justification for the acquisi-

tion of utility services on a “Sole Source”basis (see 6.302-1). * * *

(d) The contracting officer shall acquire utility services by con-

tract * * * whether or not rates or conditions of service are fixed

by a Federal, State, or other regulatory body. 51 Fed. Reg. 16989

(1986) (to be codified at 48 C.F.R. pt. 41) (proposed May 7, 1986).

°In their briefs, appellants argue that this regulation was

not timely issued under section 2752 of the Competition in

Contracting Act of 1984, Pub. L. No. 98-369, 98 Stat. 1203

(referenced in 41 U.S.C. §403 note), and that it was a substantive

change that should have been published in the Federal Register.

In light of the subsequent congressional legislation prohibiting

the regulation’s enforcement or implementation, we need not ad-

dress this question.

’

20a

every case, use competitive procedures.

The district court referred to the proposed rule in

its opinion and intimated that although it did not apply

retroactively to the 1984 procurement, it appeared to moot

Black Hills’ claim for any future injuctive relief. Slip op.

at 12. Since the district court opinion was issued, however,

Congress has adopted legislation that prevents any of

the funds appropriated for the Department of Defense

in 1987 to be used to implement or enforce either the

proposed rule or Section 8.304-91 of the Air Force FAR

Supplement. Act of Oct. 18, 1986, Pub. L. No. 99-500

(enacting into law H.R.J. Res. 738, 99th Cong., 2d Sess.

(1986) (making continuing appropriations for the fiscal

year 1987)). Furthermore, the Conference Committee has

directed the Department of Defense “not to implement ad-

ditional changes affecting the purchase of utilities until

after they have been formally presented to and approved

by the Committee on Appropriations of the House and

Senate.” 132 Cong. Rec. H10728 (daily ed. Oct. 15, 1986).

’ Responding to the “sigificant policy issues” raised by the

proposed rule, the Department of Defense, GSA, and NASA

stated that a final rule on the acquisition of utility services

would not be promulgated until those issues are resolved.

51 Fed. Reg. 36970 (Oct. 16, 1986). They issued a final rule

amending FAR Section 8.300 to read:

This subpart prescribes policies and procedures for

the acquisition of utility services. Agency policies

and procedures predating the effective date of the

Federal Acquisition Regulation (FAR) may con-

tinue to be used. However, any new or changed

policies or procedures must be approved in ad-

vance by the appropriate FAR council.

Id. at 36971.

Appellants contend that this new congressional legis-

lation and the amendment to FAR reaffirm Supplement

No. 5 as the applicable law in procuring utility services.

While this is a correct assertion, it does not advance their

2la

position. We have already determined that Supplement

No. 5 does not require the federal government to defer

to a state’s regulation of franchise territories; nothing in

the new legislation changes this. The reports accompany-

ing the legislation indicate concern over a general procure-

ment policy that would require federal contracting officers

to “ignore state-created utility service territories.” S. Rep.

No. 406, 99th Cong., 2d Sess., §618, at 68 (1986); H.R. Rep.

No. 723, 99th Cong., 2d Sess., 620, at 79 (1986). The Senate

report states the following:

The Committee has adopted this section to protect

utility customers from the burden of increased

rates that inevitably would result if federal

facilities abandon local utility systems. Utility

systems have built necessary capacity under

State-created obligations to serve all customers,

including federal facilities, within their service

territories. As a general rule, under state law only

one utility is authorized to provide retail utility

service within its service territory. The proposal

has serious legal, technical, and economic reper-

cussions. The committee intends that this provi-

sion avoid these detrimental consequences.

S. Rep. No. 406, 99th Cong., 2d Sess. §618, at 68 (1986).

This statement indicates that Congress was concerned with

a particular situation: one in which a federal facility

that obtains all of its electricity from a single utility

switches suppliers and abandons a local utility system that

has already built the necessary capacity. In the present

case, however, the general rule that “only one utility is

authorized to provide retail utility service” does not apply.

Both WAPA and Black Hills provide service to the main

base.?°

10 The parties have strongly disputed whether the sale of over-

run power to Ellsworth is a sale at retail or wholesale. The

(Footnote continued on the following page)

22a

Ellsworth is not abandoning the Black Hills facilities,

but is making the most efficient use of the existing WAPA

distribution system.'? We do not believe that Congress in-

tended to prevent the use of competitive procedures in this

situation. Had Congress wanted to mandate that state

franchise law governs the determination of when a utility

is in a “sole source” position, it could easily have done so.

Congress has specifically provided that agencies may use

other than competitive procedures if a statute requires that

procurement be from a specified source. 10 U.S.C. §2304

(c)(5). However, Congress has never enacted a statute

requiring that the United States purchase utility service

from local franchise utilities. Finding nothing in federal

law that specifically directs such procurement, we cannot

order Ellsworth to contract with Black Hills for the over-

run electrical service to an exclusive federal enclave.

The judgment of the district court is affirmed.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS,

EIGHTH CIRCUIT.

10 (Continued)

Commission determined that, under South Dakota law, the sale

is at retail. The district court, however, did not reach that issue.

For our present purpose, it is relevant to note only that, whatever

label is given to the type of electric service being provided, the

electricity delivered by WAPA and by the supplier of the overrun

amounts is used for the same purposes. Thus, there is more

than one authorized utility providing the same service.

11The competitive bidding procedure for procuring overrun

power had no effect on Black Hills’ service to the Renel Heights

area. Black Hills continues to use its electrical system to provide

service to this housing area.

23a

UNITED STATES DISTRICT COURT

DISTRICT OF SOUTH DAKOTA

WESTERN DIVISION

FILED

October 16, 1985

WILLIAM F. CLAYTON

CLERK

arr

BLACK HILLS POWER & LIGHT

COMPANY, a South Dakota Corporation,

Plaintiff,

CASPAR W. WEINBERGER, et al,

Defendant.

BLACK HILLS POWER & LIGHT

COMPANY, a South Dakota Corporation,

Plaintiff,

HEARTLAND CONSUMERS POWER

DISTRICT, ELLSWORTH AIR FORCE

BASE: UNITED STATES OF AMERICA,

Defendants.

BLACK HILLS POWER & LIGHT

COMPANY, a South Dakota Corporation,

Plaintiff,

HEARTLAND CONSUMERS POWER

DISTRICT, ELLSWORTH AIR FORCE

BASE: UNITED STATES OF AMERICA,

Defendants.

UNITED STATES OF AMERICA,

Plaintiff,

THE PUBLIC UTILITIES COMMISSION OF

THE STATE OF SOUTH DAKOTA,

Defendant.

—

; CIV 85-5031

CIV 85-3015

ORDER

CIV 85-4068

CIV 85-5064

eS ee

24a

In accordance with this Court’s Memorandum Opinion,

it is hereby

ORDERED that in CIV 85-5031 Plaintiff Black Hills

Power & Light Company’s Motions for a Preliminary

Injunction and for Summary Judgment are denied.

Furthermore, it is hereby

ORDERED that in CIV 85-5031 Defendants’ Motion to

Dismiss is granted. It is also

ORDERED that CIV 85-3015 is hereby dismissed as

moot. Similarly, it is hereby

ORDERED that CIV 85-4068 is hereby dismissed as

moot. Finally, it is hereby

ORDERED intervenor Biack Hills Power & Light’s

Motion to Dismiss CIV 85-5064 be, and the same hereby

is, granted.

Dated this 16th day of October, 1985.

BY THE COURT:

ANDREW W. BoGUE

ANDREW W. BOGUE,

SENIOR JUDGE

ATTEST:

WILLIAM F. CLAYTON, CLERK

BY /s/ ALICE R. RAESLY DEPUTY

=> *

25a

UNITED STATES DISTRICT COURT

DISTRICT OF SOUTH DAKOTA

WESTERN DIVISION

FILED

October 16, 1985

WILLIAM F. CLAYTON

CLERK

BLACK HILLS POWER & LIGHT »

COMPANY, a South Dakota Corporation, CIV 85-5031

_ Plaintiff,

CASPAR W. WEINBERGER, et al,

Defendant.

BLACK HILLS POWER & LIGHT

COMPANY, a South Dakota Corporation,

Plaintiff. CIV 85-3015

HEARTLAND CONSUMERS POWER

DISTRICT, ELLSWORTH AIR FORCE

BASE: UNITED STATES OF AMERICA, MEMORANDUM

Defendants. OPINION

BLACK HILLS POWER & LIGHT

COMPANY, a South Dakota Corporation,

Plaintiff,

HEARTLAND CONSUMERS POWER CIV 85-4068

DISTRICT, ELLSWORTH AIR FORCE

BASE, and UNITED STATES OF

AMERICA,

Defendants.

UNITED STATES OF AMERICA,

Plaint, CIV 85-5064

THE PUBLIC UTILITIES COMMISSION OF

THE STATE OF SOUTH DAKOTA,

Defendant. /

26a

There are four consolidated cases before this Court on

various motions. The cases which have been consolidated

and the motions which have been made are as follows:

BLACK HILLS POWER & LIGHT CO. vs.

CASPAR W. WEINBERGER, ET AL-CIV 85-

5031

This action for declaratory and injunctive relief

was commenced by Planitiff Black Hills Power &

Light Company, a South Dakota Corporation (hereinafter

BHP&L) against Caspar W. Weinberger, as Secretary of

the Department of Defense, an agency of the United States

of America, Richard D. Rasmussen, as contracting officer

for Ellsworth Air Force Base (EAFB), a defense instal-

lation under the control of the Department of Defense,

Heartland Consumers Power District, a subdivision of

the State of South Dakota (hereinafter Heartland), West

River Electric Association, Inc., a South Dakota rural

electric cooperative, and the South Dakota Public Utilities

Commission (hereinafter PUC), a regulatory commission

of the State of South Dakota. Essentially, BHP&L seeks

to have this Court require the United States to contract

with BHP&L for the provision of overrun power to EAFB.

Additionally, BHP&L seeks to have this Court declare

the contract into which the United States and Heartland

entered void. The other specific relief sought by BHP&L

is set forth at pages 10 and 11 of its Complaint.

In this action BHP&L initially moved for a prelimi-

nary injuction. Subsequently, the United States moved

to dismiss this action pursuant to Federal Rule of Civil

Procedure 12. The rationale for the motion to dismiss is

set forth by the United States as follows:

...{TJhe grounds for this motion are that this

Court has no jurisdiction to order the the United

States to enter into a contract with Black Hills;

that plaintiffs action is barred by the Supremacy

Clause of the United States Constitution because

27a

the South Dakota Public Utilities Commission

cannot regulate the manner in which the United

States Government seeks to secure services for its

military installations, that the state may not regu-

late a federal enclave; and that there is no entitle-

ment to a contract with United States...

After the Government filed its Motion to Dismiss,

BHP&L moved for summary judgment in this action. In

this motion, BHP&L recites that “...the entire record

before the Public Utilities Commission of the State of

South Dakota wherein Plaintiff was granted the right to

serve electric service to Ellsworth Air Force Base and all

of the other files and briefs and pleadings are hereby in-

corporated by reference into this motion...” These three

motions are before the Court for resolution.

IN THE MATTER OF THE COMPLAINT

OF THE BLACK HILLS POWER & LIGHT

COMPANY AGAINST HEARTLAND CON-

SUMERS POWER DISTRICT WITH RE-

GARD TO ELECTRIC SERVICE TO ELLS-

WORTH AIR FORCE BASE NOTICE OF

APPEAL - CIV 85-3015

The PUC entered a Decision and Order on February 4,

1985 in which it held that EAFB was required to be served

by BHP&L. The United States, on behalf of EAFB, ap-

pealed that decision in the South Dakota Circuit Court,

Sixth Judicial Circuit, County of Hughes. The West River

Electric Association, Inc. also appealed the PUC decision

in the Circuit Court, Sixth Judicial Circuit, County of

Hughes. The United States subsequently removed this ap-

peal to the United States District Court for the District of

South Dakota, Central Division. This appeal was subse-

quently consolidated with CIV 85-5301, 85-4068 and CIV

85-5064 in this division.

There are no motions outstanding in this appeal.

28a

III.

IN THE MATTER OF THE COMPLAINT

OF BLACK HILLS POWER AND LIGHT

COMPANY AGAINST HEARTLAND CON-

SUMERS POWER DISTRICT WITH RE-

GARD TO ELECTRIC SERVICE TO ELLS-

WORTH AIR FORCE BASE.-CIV 85-4068

Heartland Consumers Power District appealed from

the February 4, 1985 PUC decision in the South Dakota

Circuit Court, Fourth Judicial Circuit, County of Lake.

The United States subsequently removed this appeal to

the United States District Court for the District of South

Dakota, Southern Division. This appeal was subsequently

consolidated with CIV 85-5031, CIV 85-3015 and CIV 85-

5064 in this division.

There are no motions outstanding in this appeal.

UNITED STATES OF AMERICA VS. THE

PUBLIC UTILITIES COMMISSION OF

THE STATE OF SOUTH DAKOTA - CIV

85-5064

The United States brought this action against the

PUC seeking declaratory and injunctive relief. Essentially,

the United States seeks to have this Court enjoin the

PUC “from preventing the United States from seeking the

most advantageous contract for the supply of electricity to

Ellsworth Air Force Base.” This action was subsequently

consolidated with CIV 85-5031 and CIV 85-3015 and CIV

85-4068. BHP&L moved to intervene in CIV 85-5064 and

also moved to dismiss CIV 85-5064.

BRIEF FACTUAL BACKGROUND

The record from the hearing before the PUC is

voluminous. The recitation of facts necessary for decisions

on the motions currently before the Court is, however, rela-

tively brief.

EAFB is a military installation of the Department of

29a

Defense which is located in parts of Meade and Pennington

Counties, South Dakota. Prior to 1984, the main

base electic power needs of EAFB were provided by the

Western Area Power Administration (hereinafter WAPA),

an agency of the United States Department of Energy.

BHP&L supplied and continues to supply electricity for

the Renel Heights housing area located on the base. In

1984 WAPA concluded that it was unable to provide all

of EAFB’s main base electrical needs. The United States

then sought to meet EAFB’s overrun needs for electricity

through the solicitation of proposals for the supplying of

these needs.

The United States received a total of five bids for the

supplying of EAFB’s additional electric needs. Amongst

the proposals was one from BHP&L. The contract was

awarded to the lowest bidder, Heartland. In October of

1984, Heartland and the United Stated then entered into a

one-year contract for the delivery of the overrun electricity.

BHP&L subsequently filed a protest with the EAFB

contracting officer in accordance with the Federal

Acquisition Regulations (FAR). Before a response to that

protest had been given, BHP&L filed a complaint with the

PUC. The PUC determined that another entity, the West

River Electric Association, was a party to the proceed-

ings on the complaint, together with Heartland, EAFB and

BHP&L. Hearings were held before the PUC in December,

1984 and January, 1985.

On February 4, 1985, the PUC issued its decision. The

PUC ruled that BHP&L “is the electric utility which is en-

titled to furnish, and from which Ellsworth shall acquire,

all of the electric power and energy needs of the United

States at that part of Ellsworth Air Force Base referred

to in these findings as the “Base” ...” The Decision of the

PUC then specified that nothing therein should be inter-

preted to preclude EAFB from obtaining power through

WAPA.

cca aaa

30a

The cases and appeals which are here consolidated

sprang up after this PUC Decision and Order were entered.

DECISION

The threshold question’ with which this Court must

deal is the Supremacy Clause issue. Article VI, Clause 2

of the United States Constitution provides that:

This Constitution, and the Laws of the United

States which shall be made in pursuance

thereof... shall be the supreme Law of the Land;

and the Judges in every state shall be bound

thereby, any thing in the constitution or laws of

any state to the contrary notwithstanding.

The Supreme Court has had numerous opportunities to

construe the Supremacy Clause. See, eg. Paul v.

United States, 371 U.S. 245, 253 (1963); Public Utilities

- Commission v. United States, 355 U.S. 534 (1958); United

States v. Georgia Public Service Commission, 371 U.S. 285

(1963) and Leslie Miller, Inc. v. Arkansas, 352 U.S. 187

(1956). This court has also had occasion to rule on the

Supremacy Clause. See e.g. Citizens & Landowners, etc.

v. Secretary, etc., 513 F.Supp. 257 (D.S.D. 1981), affirmed,

683 F.2d 1171 (8th Cir. 1982).

The test to be applied in Supremacy Clause cases was

reiterated by the Court of Appeals for the Eighth Circuit

in Citizens, supra. at 1178. Specifically, the Court stated:

...In Hancock v. Train, 426 U.S. 167, 178, 96

S.Ct. 2006, 2012, 48 L.Ed.2d 555 (1976), the

Supreme Court stated:

It is a seminal principle of our law “that

the constitution and the laws made in pursuance

thereof are supreme; that they control the con-

stitution and laws of the respective States, and

1 Numerov-> and voluminous briefs have been filed in this case.

The Court will not address every issue which has been raised

but, instead, will discuss those issues upon which its decision is

based and which it believes are dispositive.

3la

cannot be controlled by them.” M’Culloch v.

Maryland, 17 U.S. (4 Wheat.) 316, 426, 4 L.Ed.

579 (1819).

Accordingly, “the activities of the Federal Govern-

ment are free from regulation by any state.” Jd.

at 178, 96 S.Ct. at 2012, quoting Mayo v. United

States, 319 U.S. 441, 445, 63 S.Ct. 1137, 1139, 87

L.Ed. 1504 (1943) (footnote omitted).

Congress, of course, may choose to subject its in-

strumentalities or property to state regulation.

However,

[bJecause of the fundamental importance of the

principles shielding federal installations and

activities from regulation by the States, an

authorization of state regulation is found only

when and to the extent there is a “clear con-

gressional mandate,” “specific congressional ac-

tion” that makes this authorization of state

regulation “clear and unambiguous.” Hancock

v. Train, supra, 426 U.S. at 179, 96 S.Ct. at 2012

(footnotes omitted).

The parties disagree strenuously concerning the ex-

istence or non-existence of: (1) a conflict between the

federal law involved and the relevant state law and (2)

the presence or absence of a “clear congressional mandate”

concerning the allowance of state regulation of the Federal

Government’s acquisition of electric power on a federal

military installation.

In order to discern if a conflict exists and whether

Congress has spoken “clearly and unambiguously”, the

relevant federal law must be examined. The law which ap-

plies to the procurement of this electric service is set forth

at 10 U.S.C. § 2301 et. seg., as amended by the Competition

in Contracting Act of 1984, §§ 2721-27, 98 Stat. 1175, 1185-

95.?

2The amendments apply to solicitations for proposals after

March 31, 1985 and are therefore not at issue here.

32a

The Government contends that it negotiated the con-

tract under what was 10 U.S.C. §2304(g) which provides

that:

In all negotiated procurements in excess of

$25,000 in which rates or prices are not fixed

by law or regulation and in which time of

delivery will permit, proposals, including price,

shall be solicited from the maximum number of

qualified sources consistent with the nature and

requirements of the supplies or services to be

procured... ..

The Federal Acquistion Regulation which pertains to

the transaction in question is found at 48 CFR § 203.3,

Acquisition of Utility Services. That regulation states:

“See Supplement No. 5, Procurement of Utility Services.”

The meaning of certain provisions of Supplement No. 5 con-

stitutes the crux of the disagreement between the United

States, the WREA and Heartland on one side and BHP&L

and the PUC on the other side.

The PUC specifically found that EAFB “failed to follow

the provisions of Supplement No. 5, including S5-102, S5-

103.2(a), S5-104.1(a)(b).” (PUC Decision and Order, page

5, Finding of Fact 11). It is around these provisions that

the controversy continues to exist. Therefore, the relevant

positions of the Supplement will be set forth in their en-

tirety.

SF-102 General provides as follows:

SF-102 General. Utility suppliers may te

quasi-public service corporations, private con-

cerns, municipalities, associations, or coopera-

tives. They generally operate in a franchised

territory without competition, so they may fre-

quently be in a “sole source” position. Under

common law, however, public utilitites must

render service at reasonable rates and without

unjust discrimination. Furthermore, their opera-

tions, management, rates, and profits are usually

regulated by Federal, state, or local regulatory

bodies, but absence of a regulatory body does

Wiehe (ss At CRAG

33a

not necessarily mean a complete lack of con-

trol. Administrative remedies pursuant to ena-

bling statutes may be pursued or complaints may

be taken to a court of competent jurisdiction. In

instances where such remedies are to be taken,

authorization shall be obtained from the Chief of

Engineers for the Army; the Commander, Naval

Facilities Enginering Command for the Navy;

or Headquarters USAF (AF/LGPLA) for the Air

Force; the Executive Director of Procurement and

Production, for DSA; or their designees.

This provision is descriptive in nature and does not man-

date any particular action on the part of the United

States. Furthermore, a subsequent regulation, S5-103.2,

specifically enumerates the matters concerning which the

Department of Defense defers to state regulations.

S5-103.2 Procurement from Utility Suppliers.

(a) The Department of Defense procures utility

services from industries which are, to a greater or

lesser extent, regulated by Federal, state, and lo-

cal regulatory bodies. Notwithstanding the other

provisions of this Regulation, as to those matters

over which the appropriate regulatory body has

taken jurisdiction it is the policy of the Department

of Defense, as a matter of comity rather than

law, to comply with the current regulations, prac-

tices, and decisions of that body concerning ac-

counting practices, allowability of costs pricing,

and rates, subject to judicial appeal through the

normal channels. As to those matters concerning

which the regulatory body has not accepted juris-

diction or has not spoken, or for which there is

no appropriate regulatory body, the rules of the

Federal Power Commission and the general prac-

tices of the particular utilities industry as to ac-

counting practices, allowability of costs, pricing,

and rates shall be followed. This policy does not

extend to the regulations, practices, or decisions

of regulatory bodies whose decisions are not sub-

ject to judicial appeal, nor does it extend to those

agencies which are regulating utilites owned or

operated by the same Governmental entity which

34a

has established the regulatory body. (Emphasis

added.)

This Court simply cannot agree with the PUC’s finding

that the United States failed to follow the requirements

of S5-103.2. This subsection states that the United States

is deferring to “the appropriate regulatory body” concern-

ing “accounting practices, allowability of costs pricing and

rates.” The subsection goes no further.

The next subsection which the PUC found had been

violated by the United States is S5-103.3, Cost or Pricing

Data. That section provides as follows:

$5-103.3 Cost or Pricing Data.

Rates or preliminary estimates quoted by utility

suppliers for services for which the rates are es-

tablished by an effective, independent regulatory

body are considered “prices set by law or regula-

tion” even if the rate will not be formally es-

tablished until after the execution of the con-

tract. Accordingly, such utility suppliers are not

required under 3-807.3 to submit cost or pricing

data for such services prior to the awarding of

the contract. On the other hand, rates or prelimi-

nary estimates quoted by a utility supplier for ser-

vice for which the rates are not established by

an effective, independent regulatory body are not

considered “prices set by law or regulation” even

though the supplier itself may be subject to regula-

tion. The provisions of 3-807.3 which relate to the

“prices set by law or regulation” exception from

the requirement for the submission of cost or pric-

ing data shall be applied in accordance with the

above guidance; the provisions of 3-807.3 relating

to the other exceptions are not affected by this

paragraph.

This regulation does not address the issue of determining

whether there is more than one prospective supplier.

The last regulatory provision which the PUC found

that the United States has violated and about which con-

troversy has existed in this case is S5-104 Competitive

35a

Procurement of Utility Services.

S5-104 Competitive Procurement of Utility Services.

S5-104.1 Determination as to Existence of Competition.

(a) Although in most instances utility service sup-

: pliers operate in franchised territory, competition

may nevertheless exist — for example, where more

than one supplier is franchised for a given loca-

tion, or where more than one supplier is able to

provide service at a given location but no sup-

plier has yet been franchised for that location.

Therefore, when the location of a new military in-

stallation has been determined and the procurement

of utility services is authorized, the contracting ac- -

tivity shall determine whether more than one sup-

plier can provide the service. Where competition

exists, proposals shall be solicited from all poten-

tial suppliers. Even where one of the compet-

ing potential suppliers has entered into a GSA

area contract, proposals shall be solicited to deter-

mine definitely which of the suppliers offers more

advantageous competing services under the par-

ticular circumstances. (b) Similarly, where an ex-

isiting installation 1s being served by one supplier,

and either another prospective supplier requests an

opportunity to furnish the service or the Department

concerned becomes aware of another potential sup-

plier, the D partment shall determine whether more

than one supplier can provide the service. Where

competition is found to exist, competitive solicita-

tion of proposals shall be initiated at whatever

time is considered to be most advantageous to the

Government. (Emphasis added.)

On its face, this regulation only applies to (a) new military

installation or (b) existing military installations that are

only served by one supplier. Therefore, the regulation

simply does not apply to the case at bar.

This Court cannot find in these regulations the “clear

congressional mandate” for the state of South Dakota to

regulate the United States’ acquisition of utility services

on military bases. Absent such a clear congressional man-

36a

date, this Court cannot conclude that it was Congress’ in-

tention that the United States be forced to contract with

the electric utility specified by the PUC. The conflict be-

tween the PUC’s attempt to designate the supplier from

whom the United States must obtain service and the

Federal Government’s policy of competition is apparent.

After the initial briefing had been concluded in this

case, a subsequent round of briefing was prompted by the

addition to the Air Force Federal Acquisition Regulation

Supplement (AFFARS) which provides as follows:

8.304-91 Competition

The contracting officer shall determine by market

survey if more than one supplier can furnish

needed public utility services for proposed procure-

ments prior to using other than competitive pro-

cedures. The existence of franchised service ter-

ritories established by state or local governmental

entities does not in and of itself restrict acquisi-

tion of public utility services to a sole source. The

contracting officer need not enter into a contract

with the state or locally franchised public utility

supplier simply because the supplier has obtained

the local franchise. The contracting officer should

instead seek to competitively acquire public utility

services whenever possible.

There has been controversy concerning the federal govern-

ment’s observance of the necessary prerequisites for the

passage of this regulation. Even if the federal government

has not observed all the necessary prerequisites for the

passage of this regulation, which appears unlikely to this

Court, the Court concludes that such a regulation could

ultimately be enacted. Although this regulation would not

apply retroactively to a contract negotiated in the fall of

1984, it would appear to remove any and all possible doubt

that the government would be free to negotiate with whom

it wants, as it did with Heartland in the instant case, in the

future. As the Plaintiff in CIV 85-5031 has not sought any

money damages for damages arising from the October 1984

“eT Sect Me ibe e i car Ail lle Sis aie ea Bak BS Sots:

2 te eet Oe

37a

to October 1985 contract the federal government executed

with Heartland, the regulation would seem essentially to

moot BHP&L’s lawsuit.

The PUC and BHP&L have argued that even if this

Court should find that the PUC cannot regulate the United

States (which the PUC avers that it is not attempt-

ing to do), this Court should declare the contract be-

tween Heartland and the United States void because it is

Heartland which the PUC is regulating, not the United

States. If this argument were to prevail, it is difficult to im-

agine a case where the state could not regulate indirectly

(by reguiating the distributor or supplier) what, under the

Supremacy Clause, it is not permitted to regulate directly

(that is, the Federal Government). In Paul v. United

States, supra, (which was decided after Penn Dairies, Inc.

v. Milk Control Comm. of Pennsylvania, 318 U.S. 261, 63

S.Ct. 617, 87 L.Ed 748 (1943)) reference is made to the

California Director of Agriculture’s attempts to stop dis-

tributors from selling milk to the federal military installa-

tions at prices below the California established minimum

prices. The Director of Agriculture did not bring any action

against the United States but, instead, sought recourse

against the distributors. As the United States Supreme

court observed:

... While the federal procurement policy demands

competition, the California policy, as respects

milk, effectively eliminates competition. The

California policy defeats the command to federal

officers to procure supplies at the lowest cost to

the United States by having a state officer fix the

price on the basis of factors not specified in the

federal law. Moreover, when the supply contract

is negotiated because “it is impracticable to obtain

competition,” to use the statutory words, it is the

state agency, not the federal procurement officer

and the seller, that determines the price provi-

sions of the contract, if state policy prevails. The

collision between the federal policy of negotiated

prices and the state policy of regulated prices is as

38a

re nia cocci eal

clear and acute here as was the conflict between

federal negotiated rates and state regulated rates

in Public Utilities Comm. of State of California v.

United States, supra ... at 253.

For these reasons, the Court declines the invitation to

declare the contract between Heartland and the United

States void.

Somewhat similarly, it has been argued by the

Plaintiff that the allowance of the contract between

Heartland and the United States would afford Heartland

more power than has been granted to it by the State of

South Dakota. It is urged that such a result contravenes

the Tenth Amendment to the United States Constitution.

This Court agrees with the federal defendants’ response to

this particular argument.

Additionally, this Court concludes that the PUC lacks

jurisdiction over EAFB because it is an exclusive federal

enclave. See Article I, section 8, clause 17 of the United

States Constitution and SDCL 1-1-1. In construing the

relevant portion of the United States Constitution, the

United States Supreme Court has observed that “[tJhe

cases make clear that the grant of ‘exclusive’ legislative

power to Congress over enclaves that meet the require-

ments of Art. 1, §8, cl. 17, by its own weight, bars state

regulation without specific congressional action.” Paul v.

United States, supra, at 263.

Furthermore, even if this Court did not find the Paul

decision determinative on this issue, the Court would non-

etheless refuse to declare the contract void. SDCL 49-34A-

42 Electric Utility’s exclusive rights in assigned service area

-- Connecting facilities in another area is the statute un-

der which the PUC concluded that BHP&L has the right

to provide service at Ellsworth. That statute provides, in

pertinent part, as follows:

Each electric utility shall have the exclusive right

to provide electric service at retail at each and

every location where it is serving a customer as

39a

of March 21, 1975.... (Emphasis added.)

A customer is defined at SDCL 49-34A-1(3) as “... any

person contracting for or purchasing gas or eletric service

from a utility.”

The definition of person is:

“,..€a natural person, a partnership, a private cor-

poration, a public corporation, a municipality, an

association, a cooperative whether incorporated or

not, a joint stock association, a business trust, any

political subdivision or agency, or two or more per-

sons having joint or common interest.” SDCL 49-

34A-1(11).

BHP&L has argued strenuously for the proposition

that the United States is a person within the meaning of

this statute. The Court finds the argument and reasoning,

although detailed and thorough, unpersuasive. SDCL 2-

14-1, Words used in ordinary sense mandates what words

used in the South Dakota statutes should be given their or-

dinary meanings. The ordinary meaning of the word per-

son does not include the United States. Elsewhere in the

statutes pertaining to the regulation of electric utilities,

the United States was specifically mentioned (in addition

to “person”). The Supreme Court of Mexico declined to in-

clude the United States in the definition of “person” within

the meaning of their Public Utilities Act. Southern Union

Gas Co. v. New Mexico Pub. Ser. Comm’n, 482 P.2d 913

(N. M. 1971).

For the reasons set forth in this Memorandum

Opinion, BHP&L’s motions for a preliminary injunction

and for summary judgment in CIV 85-5031 will be denied.

The Federal Government’s motion to dismiss in CIV 85-

5031 will be granted. CIV 85-3015 and CIV 85-5064 are

rendered moot by this decision.

The only matter which now remains for this Court’s

resolution is intervenor BHP&L’s motion to dismiss in CIV

85-5064. The Court believes that CIV 85-5064 raises issues

which were put before this Court in the other actions. As a

40a

consequence, the action is unnecessary. BHP&L’s motion

to dismiss will be granted.

Dated this 16th day of October, 1985.

BY THE COURT

ANDREW W. BoGUE

ANDREW W. BOGUE

SENIOR JUDGE

cisi> BETIS an a tsetieet

4la

BEFORE THE PUBLIC UTILITIES COMMISSION

OF THE STATE OF SOUTH DAKOTA

IN THE MATTER OF THE

COMPLAINT OF BLACK

HILLS POWER AND LIGHT

COMPANY AGAINST HEART- ‘ilieaiinii

LAND CONSUMERS POWER > = AND ORDER

DISTRICT WITH REGARD (F - 3513)

TO ELECTRIC SERVICE TO

ELLSWORTH AIR FORCE

BASE. }

On the 29th day of November, 1984, Black Hills

Power and Light Company (“Black Hills”) filed a complaint

against Heartland Consumer Power District (“Heartland”)

with regard to Heartland delivering electric service to the

United States for use at its Department of Defense instal-

lation, Ellsworth Air Force Base, a military establishment

located in Meade and Pennington Counties, South Dakota.

Black Hills requested that Heartland be enjoined from

delivering electric service to the United States at Ellsworth

Air Force Base and that the Commission determine that

Black Hills is entitled to be the sole supplier of electric

service to Ellsworth Air Force Base, except for that electric

service furnished by the United States. Heartland filed

with this Commission an answer to the complaint request-

ing the Commission to dismiss the complaint claiming that

the Commission does not have jurisdiction over the subject

matter of the proceeding and that Heartland was within

its jurisdictional rights in delivering electric service to

Ellsworth Air Force Base in that it was a sale at wholesale

and not resale and that Black Hills is estopped from claim-

ing it is the sole supplier because it submitted a proposal

to Ellsworth to deliver electric service.

On the 29th day on November, 1984, the Commission

a a ee

42a

issued an order for and notice of hearing with Black

Hills’ complaint attached, and caused the order for and

notice of hearing to be delivered to Black Hills, Heartland,

Ellsworth and West River Electric Association (“West

River”). The Commission further ordered that Black Hills,

Heartland, Ellsworth and West River are parties to the

proceeding without the necessity of formal intervention.

The Commission issued an amended order for and notice

of hearing on December 10, 1984, and caused it to be

delivered to all parties to the proceedings. In the amended

order, the Commission found that it has jurisdiction over

the proceedings pursuant to SDCL 49-34A generally, in

SDCL 49-34A-4, 26, 27, 39, 42, 43, 44 and 59, specifically.

The Commission held a hearing on December 14 and

17, 1984 at Pierre, South Dakota, and on January 4,

1985 at Ellsworth Air Force Base, South Dakota. Black

Hills, Heartland and the United States through Ellsworth

directly participated in the proceedings and submitted

evidence and argument in support of their positions. West

River did not participate in the proceedings, but West

River was personally present at the hearing held at

Ellsworth Air Force Base, South Dakota. West River filed

a letter with the Commission after the evidentiary hearing

was closed stating West’s River’s position.

At the commencement of the hearing, Ellsworth orally

made a motion for the Commission to dismiss the com-

plaint on the grounds that the Commission lacks juris-

diction and the complaint failed to state a claim upon

which relief may be granted. The specific grounds of

Ellsworth’s motion to dismiss were that the State of South

Dakota has ceded jurisdiction of Ellsworth Air Force Base

to the United States in accordance with SDCL 1 —1 et seq.,

that the Commission has no jurisdiction because of federal

supremacy, that the State cannot interfere with federal

procurement policy, federal procurement policies were fol-

lowed and required competitive procurement, that Black

Hills lacks standing to raise the complaint under South

9 tah tant TEL Na

43a

Dakota law because it was not an affected utility, and that

the Commission has no jurisdiction over Heartland under

State law and that Heartland was under a duty to deliver

electric service to Ellsworth Air Force Base. Heartland

orally moved that the Commission dismiss the complaint

because it had no jurisdiction over the matter in hear-

ing, that Ellsworth Air Force Base has been ceded to the

exclusive jurisdiction of the United States, and that the

Commission has no jurisdiction over Heartland. Heartland

later in the proceeding moved to dismiss the complaint on

the grounds that the United States was not a party or cus-

tomer under SDCL 49-34A-34. The Commission reserved

rulings on the motions and received the evidence of all

parties.

On January 4, 1985, all members of the Public

Utilities Commission personally inspected Ellsworth Air

Force Base and observed the structures and use of electric

service being made on each side of the territorial boundary

between Black Hills and West River. The parties simul-

taneously filed briefs in this matter on January 25, 1985.

The Commission has carefully reviewed the record, the

evidence, testimony and the briefs. From the review of all

such evidence, arguments and inspection, the Commission

makes the following findings of fact and conclusions of law.

FINDINGS OF FACT

1. Black Hills. Black Hills Power and Light Company

(“Black Hills”) is an investor — owned electric utility en-

gaged in the generation, transmission, distribution and

sale of electric power and energy to the Black Hills area

of South Dakota in addition to service in the States of

Wyoming and Montana.

2. Heartland. Heartland Consumers Power District

(“Heartland”) is a public corporation and political subdivi-

sion of the State of South Dakota, formed as a consumers

power district under the provisions of SDCL ch. 49-35. The

44a

governmental district boundaries of Heartland are totally

contained within an area east of the Missouri River in the

State of South Dakota, and the nearest boundary thereof

is approximately 200 miles from Ellsworth Air Force Base.

The exact boundaries are shown by Black Hills’ Exhibit 10

which is made a part hereof by express reference.

3. West River. West River Electric Association (“West

River”) is a rural electric cooperative and a public utility

which renders electric service to customers in an area lo-

cated adjacent to and east of the service territory of Black

Hills.

4. Ellsworth. Ellsworth Air Force Base is a military

installation operated by the Department of Defense of the

United States located in parts of Meade and Pennington

Counties, South Dakota, east of Rapid City, South Daktoa.

The term “Ellsworth” when used herein shall refer to the

United States Government, a party to this proceeding.

5. Base. Ellsworth Air Force Base (“Base”) for the

purpose of this hearing shall be deemed to be that con-

tiguous territory being operated by Ellsworth as a defense

military establishment. That contiguous territory is shown

by various maps admitted into evidence herein. Those

maps which show the contiguous territory constituting the

Base, all of which are made a part hereof, include Black

Hills’ Exhibits 3 and 12. The Commission finds that the

Renel Heights housing area, the Skyway housing area, and

the Capehart 190 and Capehart 500 housing area are all

deemed to be a part of the Base. The four Nike sites located

a few miles north, south, east and west of the Base are not

contiguous and are not deemed to be a part of the Base for

the purposes herein.

6. Base areas ceded to United States. That part of the

Base the jurisdiction of which was ceded to the United

States pursuant to SDCL 1-1-1 et seg. is colored red,

green and blue on the map attached to Black Hills’ Exhibit

15F except for that parcel on which is written “no Juris”

Ge Te

45a

and the parcel which has a circled 61 thereon in Section

2, Township 2, Range 8, colored green. Those areas of

the Base on the map attached to Black Hills’ Exhibit 15F

which are not colored were not ceded to the United States

but remain under the jurisdiction of South Dakota.

7. Assigned Service Areas. The area occupied by the

Base was assigned as service area pursuant to SDCL 49-

34A-43 and 49-34A-44 to Black Hills and West River. That

area of the Base assigned as the service area of Black Hills

is all of that area south of the line and designated as Black

Hills’ Exhibit 3. The dividing line between the two service

areas is the east—west quarter section lines of Section 7 and

the west half of Section 8 of Township 2 North, Range 9

East and Section 12 of Township 2 North, Range 8 East, all

in Meade County, South Dakota. See Black Hills’ Exhibit

15F.

8. Electric Service to Base on March 21, 1975. On

March 21, 1975, electric service to the Base was be-

ing furnished by the Western Area Power Administration

(“WAPA”) and Black Hills, and WAPA and Black Hills

have continued to provide all of the electric service to the

Base from March 21, 1975 to this date, excluding the recent

contested Heartland deliveries.

9. Electric Service to Base at the Time This Action

Arose. Electric service to the Base at the time this action

arose was furnished by two suppliers, WAPA and Black

Hills. The Black Hills deliveries were made and are con-

tinuing to be made through its substation located in the

Renel Heights housing area of the Base and the WAPA

deliveries were made and are continuing to be made at a

WAPA substation located at the north part of the Base.

10. Ellsworth’s Need for Additional Electric

Service. Ellsworth has been obtaining electric service from

WAPA at a demand which has reached approximately

2,000 kilowatts in excess of the demand allowed and al-

located by WAPA for Ellsworth. See Black Hills’ Exhibit 5.

46a

11. Procedures to Meet Needs of Supplemental Electric

Service. In order to acquire supplemental electric service

and to cease overrunning the demand allocated by WAPA,

Ellsworth was required to follow the regulations contained

in the Department of Defense Document “Armed Services

Procurement Regulation Supplement No. 5, Procurement

of Utility Services”, Black Hills Exhibit 8. Ellsworth failed

to follow the provisions of Supplement No. 5, including S5-

102, S5-103.2 (a), S5-103.3 and 5104.1 (a)(b). Ellsworth

did not determine the existence of franchised electric ser-

vice areas to determine which electric utility was entitled

to serve the excess electric service requirements, but in-

stead requested proposals from several electric suppliers,

including Black Hills and Heartland, who could physically

cause the supplemental electric service to be delivered to

Ellsworth.

12. Black Hills and Heartland Submitted Proposals.

Black Hills and Heartland submitted proposals to

Ellsworth to serve the supplemental] power for the Base.

The Black Hills proposal priced the supplemental power

at the rate which has been previously approved by the

Commission. Black Hills’ rate was priced higher than the

price of the power proposed by Heartland.

13. Ellsworth Contracted with Heartland. Upon receiv-

ing said proposals, Ellsworth awarded a one year con-

tract to Heartland for Heartland to provide supplemental

electric service to Ellsworth for the Base in the amount to

satisfy Ellsworth’s needs in excess of its WAPA allocation.

14. Electrical Service to Base at This Time. Heartland

is now causing electric service to be delivered to the United

States, who in turn delivers the electric power and energy

to Ellsworth. At Ellsworth this electric power is com-

mingled with power and energy furnished by WAPA and

utilized by Ellsworth throughout the entire Base, includ-

ing service in the assigned service areas of both Black Hills

and West River and including those parts of the Base which

‘i

47a

have been ceded to the Unted States and which have not

been ceded to the United States. The Black Hills deliveries

are continuing to be made through its substation located

in the Renel Heights housing area of the Base. WAPA

deliveries are continuing to be made at a WAPA substation

located at the north part of the Base.

15. Location of Electric Power Use on Base. From the

evidence presented and from the personal inspection of the

Commission, the Commission finds that a majority of the

electric power and energy used on the Base is used in that

part of the Base which is a part of Black Hills’ assigned

service area.

16. Electric Service to Base is a Retail Sale. Electric

service delivered to the Base, whether it is from the

United States through WAPA, from Black Hills, or from

Heartland, is electric service furnished to the Base for ul-

timate consumption, and is not wholesale electric service

furnished by an electric utility to another electric utility

for resale. Ellsworth utilizes electric power and energy

for the purpose of constructing, operating and maintain-

ing a strategic air command military defense installation.

Accordingly, all uses of electricity on the Base are con-

nected either directly with that purpose or incidentally to

furnishing housing and services to personnel engaged in

the operation of the defense military installation. Any

exceptions to this finding would be an extremely small

consumption of electric power and thus would be inconse-

quential to the primary use of electric power and energy.

Any such use would be de minimis. According to the

evidence, the only non — federal use of electric power and

energy on the Base would be that of the Black Hills Federal

Credit Union and other small contractors consisting of

small specialty shops.

17. Appropriated Funds Versus Non -- appropriated

Funds Payment for Electric Power. During the last fiscal

year ending September 30, 1984, Ellsworth used ap-

48a

proximately 56, 403, 504 kilowatt hours of electricity to

serve the Base. Black Hills Exhibit 11 (page 3, grand to-

tal less West River and Ellsworth Nike sites). Ellsworth

allocated all “electric utility distributions” at a cost deter-

mined by Ellsworth to be for federal agencies. The one

exception was a contract numbered ELS-8 with Ellsworth

Air Force Base Credit Union which purchased only 116,080

kilowatt hours during fiscal year 1984, or only 0.2% of the

total electric energy use during the same fiscal year. See

Ellsworth Exhibit 9. The electric energy used on the Base

for fiscal year 1984 which was paid for by non—appropriated

funds was 3,741,739 kilowatts. Black Hills Exhibit 11

(page 1, total of B, less contract ELS-16 and ELS-17. This

is approximately 7% of the entire electric energy utilized

on the Base during the 1984 fiscal year. This leaves 93%

of electric energy being paid for by appropriated funds

from the United States Congress. Black Hills Exhibit 11:

Ellsworth Exhibits 9 and 21. °

18. Black Hills is Able to Provide Additional Electric

Service. According to the evidence, Black Hills is ready,

willing and able to provide additional electric service to

Ellsworth for use on the Base by three methods: (1) Black

Hills could connect additional portions of the facilities

within the Base to its present system and serve additional

load; (2) Black Hills could construct an additional substa-

tion and transmission facilities in order to serve other por-

tions of the Base; and (3) Black Hills could enter into an

agreement with WAPA wherein Black Hills delivers power

for WAPA loa*# at other locations and WAPA delivers

power for Black Hills to Ellsworth for use on the Base.

Black Hills was in the process of making arrangements

with WAPA at the time Ellsworth informed Black Hills

that Heartland would furnish Ellsworth additional re-

quirements. While Black Hills has not made an arrange-

ment with WAPA at this time, there is no evidence in

the record that Black Hills cannot make such an arrange-

ment with WAPA. Black Hills has similar arrangements

49a

with WAPA in delivering WAPA power allocated from an

eastern source to the South Dakota School of Mines and

Technology and the South Dakota Cement Plant in Rapid

City, South Dakota, on the west.

From these Findings of Fact, the Commission makes

the following conclusions of law.

CONCLUSIONS OF LAW

Defined Parties

Each of Black Hills, Heartland and West River is an

“electric utility” and “public utility” as defined, respec-

tively, at SDCL 49-34A-1 (7) and (12). Ellsworth is

not a city or a municipality, but is the United States

Government which operates a strategic air command

military establishment at the Base.

II.

Jurisdiction

(1) Commission jurisdiction over Black Hills,

Heartland and West River:

The Commission has jurisdiction over Black Hills,

Heartland and West River for the purpose of determining

customers at specific locations and service areas within

which each of said electric utilities are entitled to serve

under the provisions of SDCL 49-34A-42 through 49-34A-

44,

(2) Commission jurisdiction over Ellsworth:

While the Commission herein does not attempt to ex-

ercise any jurisdiction over the United States through its

operations through Ellsworth at the Base, the Commission

does exert its jurisdicition over Black Hills, Heartland and

West River in determining who has the right to furnish

electric service to the Base. Even if that part of the Base

which was ceded to the United States is under the United

States is not within the jurisdiction of the Commission,

50a

that part of the Base which was not ceded to the United

States is under the Commission’s jurisdiction, and in order

to control the delivery of electric power and energy which

is commingled and served throughout the entire Base, it is

necessary for the Commission to control the whole.

The Commission determines that the United States

Congress has preempted the regulation of the delivery

of electric service when it comes to wholesale sales un-

der the Federal Power Act. The United States, however,

has not preempted the entire scheme of the regulation of

the generation, transmission and distribution of electric

power and energy, and has left the regulation of retail

sales, service territories and retail rates under the jurisdic-

tion of the states. The prevention of unnecessary duplica-

tion of electric facilities is the primary goal of the regula-

tion of service territories as promulgated under SDCL 49-

34A. This regulation of service territories left to the states

would be unworkable if every federal installation within

the state, whether it is in a federally ceded enclave or not,

could obtain power from the electric supplier of its choice.

Further, the United States through its regulations

at 48 C.F.R. Chapter 2 which incorporates by reference

Armed Services Procurement Regulation Supplement No.

5 Procurement of Utility Service Dated October 1, 1974

(Black Hills’ Exhibit 8) specifically recognizes and agrees

to abide with local regulation of franchise or service ter-

ritories. The regulation clearly direct procurement officers

to ascertain the existence of franchised territories before

requesting proposals for competitive bids. From this the

Commission concludes that the United States recognizes

the Commission’s jurisdiction over this matter and further

concludes that the Commission has jurisdiction to deter-

mine which electric utility has authority to deliver electric

service to the Base.

(3) Commission’s jurisdiction over WAPA:

The Commission makes no attempt to exercise its

5la

jurisdiction over WAPA, an agency of the United States,

and has no jurisdiction to restrict the amount of electric

service generated by the United States through WAPA and

distributed for use by the United States at the Base.

Ii.

Black Hills is an Affected Utility

Black Hills is an affected utility under the provisions

of SDCL 49-34A-59 by the act of Heartland furnishing

electric service to Ellsworth. Accordingly, Black Hills had

the right to file a complaint thereunder concerning the

illegality of such service.

IV.

Electric Service to Base is Retail

The furnishing of electric power and energy to

Ellsworth for use on the Base constitutes “electric service”

within the meaning of SDCL 49-34A-1 (6) which is electric

service furnished to a customer (Ellsworth) for ultimate

consumption. Such service is not wholesale electric service

which is furnished by an electric utility to another electric

utility for resale. The United States through Ellsworth is

not an “electric utility” within the meaning of SDCL 49-

34A-1 (7) because it does not resell the electric service nor

provide electric service to or for the public. All electric

power and energy distributed by Ellsworth to operate the

Base is not for the public but is for the purposes of operat-

ing and maintaining a military establishment on behalf of

the United States. Ellsworth does cause small quantities

of electric power and energy to be sold to non-federal en-

tities, but these small amounts are only 0.2% of the whole.

Consequently, these small amounts are de minimis and not

significant in order to change the character of the electric

service being sold at retail. The allocation of costs of utility

service among federal agencies does not constitute a resale

within the meaning of SDCL 49-34A-1 (6).

52a

The Base is One Location

The Base is a contiguous parcel of land which has

been in existence before March 21, 1975, and is continuing

today as one “location” as referred to under the provisions

of SDCL 49-34A-42. The Base as one location constitutes

not only a contiguous parcel of land, but contains a com-

monality therein of purpose in the operation of a strategic

air command military establishment of the United States.

The Nike sites, while used as housing in conjunction with

the Base, are located within several miles of the Base and

are not contiguous. For that reason, the Nike sites con-

stitute separate locations within the meaning of SDCL 49-

34A-42. The Base as a location constitutes one customer,

Ellsworth.

VI.

Heartland Has No Authority To Serve Retail

Heartland is prohibited from serving electric service

to the Base for two reasons: (1) The sale of electric service

to the Base is a retail sale and Heartland does not have

authority to sell electric power and energy at retail out-

side of its jurisdictional boundaries under the provisions of

SDCL 49-37-3; and (2) Heartland was never assigned any

assigned service area as provided at SDCL 49-34A-43 and

49-34A-44. Accordingly, Heartland’s furnishing electric

service to Ellsworth for use at the Base is illegal and un-

authorized and in violation of the above-cited laws. Since

Heartland’s furnishing electric service to Ellsworth for use

at the Base is illegal, the contract between Heartland and

Ellsworth is void.

Vil.

The Base is a Location to be Served By

Black Hills

The base is one location under the provisions of SDCL

49-34A-42, and Ellsworth is a customer requiring electric

53a

service at said location. Since Black Hills was serving

the customer, Ellsworth, at this one location, the base, on

March 21, 1975, and since Black Hills has served the cus-

tomer at that location since March 21, 1975, Black Hills

is entitled to be the exclusive provider of electric service

to Ellsworth for use at the Base. The Commission has no

authority to restrict the United States through WAPA to

furnish electric power and energy produced by the United

States to a United States installation, Ellsworth; but, to

the extent that Ellsworth requires power in excess of that

power furnished by the United States through WAPA,

Ellsworth is required to obtain that electric power and

energy from Black Hills.

VIII.

Majority of Load in Black Hills’ Territory

Delivery of Black Hills’ electric power and energy

to the Base is in Black Hills’ assigned service area and

delivery of power by the United States through WAPA is

in West River’s assigned service area. As this Commission

has previously ruled in Jn Re Black Hills Power and Light

Company Against Butte Electric Cooperative, Docket F-

3281, December 4, 1978, the place of delivery is not the

determinative factor in determining the electric utility

entitled to serve a customer at a particular location.

Where one location crosses assigned service areas, the

Commission does consider significant where the majority

of a load of that customer at that location is utilized.

See O'Brien Cty, Rural Elect. v. State Com. Com’n, 352

NW2d 264 (Iowa 1984). Because of the lack of metering,

Ellsworth was unable to determine the amount of electric

power and energy now being used in Black Hills’ assigned

service area as opposed to West River’s assigned service

area. Ellsworth contends that after new facilities are con-

structed in the next several years that the majority of the

load will be utilized in West River’s assigned service area.

To evaluate where a majority of the load is utilized, the

Commission reviewed the evidence offered by the parties

54a

and made a personal inspection of the Base, both on the

ground and by helicopter. The Commission personally ob-

served that at this time a majority of the activity of the

Base requiring electric service appears to be Black Hills’

assigned service area. Therefore, the Commission con-

cludes that in addition to the reason that the Base is a

customer of Black Hills under SDCL 49-34A-42, that be-

cause the Base is one location and because the majority of

the load is in Black Hills’ assigned service area, that the

Base should be served by Black Hills solely, notwithstand-

ing the fact that a portion of the Base is in West River’s

assigned service area.

IX.

Large Load Exception

While West River did not participate in the proceed-

ings, it was given notice of the proceedings and did audit

a portion of the proceedings. West River contended after

the hearing was over that if Heartland were not allowed to

continue electric service to the Base that West River should

have the customer because of the large load exception set

forth at SDCL 49-34A-56. However, the Commission con-

cludes that Ellsworth is not a new customer and the Base is

not a new location which developed after March 21, 1975,

as referenced in SDCL 49-34A-56. Therefore, the large

load exception does not apply to the determination as to

what electric utility is entitled to furnish electric service

to the Base.

» a

Black Hills’ Submission of a Proposal Does

Not Operate as Estoppel

Black Hill’s submission of a proposal to Ellsworth set-

ting forth a rate previously approved by this Commission

does not estop Black Hills from asserting its position in this

proceeding. Neither Ellsworth, Heartland, nor West River

relied on any actions of Black Hills in submitting such

proposal to their detriment, nor was Black Hills dilatory

55a

in any way in asserting its position as soon as it became

aware of the need for supplemental power and Heartland’s

proposal to furnish electric service to the Base. None of the

facts of this case operate to estop Black Hills from being

entitled to its legal rights.

XI.

United States Cannot Enlarge Authority of

Subdivision of State Government

If the Commission did not enjoin Heartland from

furnishing electric service to the Base, the Commission

would be allowing the United States Government through

Ellsworth to enlarge the authority of a subdivision of state

government, Heartland. The Commissiom concludes that

such actions of the United States through Ellsworth is

in violation of the constitutionally reserved powers of the

states as provided by the Tenth Amendment to the United

States Constitution.

Continuity of Service

Although the contract between JHeartland and

Ellsworth is void due to its illegality, the Commission

recognizes the need for continuity of adequate and reli-

able service to Ellsworth for use at the Base until Black

Hills has arranged to supply the electrical power needs

of Ellsworth. Accordingly, Heartland may continue to

supply this electric power to Ellsworth untiil notification by

Black Hills to Heartland and Ellsworth thiat Black Hills is

prepared to supply the power to Ellsworth. It is therefore

ORDERED, that all motions of Ellsworth and

Heartland to dismiss the complaint be, andl they are hereby

denied; and it is

FURTHER ORDERED, that Black Hills Power and

Light Company, an electric utility, is the electric utility

which is entitled to furnish, and from which Ellsworth

shall acquire, all of the electric power amd energy needs

56a

of the United States at that part of Ellsworth Air Force

Base referred to in these findings as the “Base”; and it is

FURTHER ORDERED, that nothing in this order

shall be interpreted to restrict the United States from

using at the Base electric power and energy which is

generated by United States — owned facilities through its

agency, the Western Area Power Administration (WAPA);

and it is

FURTHER ORDERED, that to assure continuity of

service, Heartland Consumers Power District may con-

tinue furnishing electric power and energy to Ellsworth

for use at the Base until Black Hills is prepared to fur-

nish such electric power and energy and notifies Heartland

Consumers Power District and Ellsworth that Black Hills

is so prepared; and it is

FURTHER ORDERED, that when Black Hills notifies

Heartland Consumers Power District and Ellsworth that

all preparations are complete to serve Ellsworth, that

Heartland Consumers Power District shall at that time be

enjoined from furnishing any electric power and energy for

use by the United States at Ellsworth Air Force Base lo-

cated in Meade and Pennington Counties, South Dakota.

Dated at Pierre, South Dakota, this 4th day of

February, 1985.

BY ORDER OF THE COMMISSION:

KENNETH STOFFERAHN, Chairman

JEFF SOLEM, Commissioner

DENNIS EISNACH, Commissioner

(OFFICIAL SEAL)

57a

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

JUDGMENT

Filed

Feb. 20 1987

/s/ WILLIAM F. CLAYTON

clerk

Nos. 85 — 5418/5428SD

Black Hills Power and Light :

Company, etc.,

ar Appeals from the United

Appellant/Cross--Appellee, enemy we very seer

vs. for the District of

arene W. Weinberger, etc., et South Dakota.

a *9

Appellee/Cross--Appellant. J

These appeals from the United States District Court

were submitted on the record of the said district court,

briefs of the parties and were argued by counsel.

Upon consideration of the premises, it is hereby or-

dered and adjudged that the judgment of the district court

is affirmed in accordance with the opinion of this Court.

January 7, 1987

Cost of briefs of appellees’ Heartland Consumers

Power District, et al., for recovery from appellants;

$ 303.60.

Costs of biiefs of federal appellees for recovery from

appellants; $ 360.00.

A True Copy.

ATTEST: /s/ Ropert D. St. VRAIN

Clerk, U.S. Court of Appeals, Eighth Circuit.

MANDATE ISSUED 2/17/87

58a

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Nos. 85 — 5418/5428-SD

Black Hills Power and Light

Company, etc., ibe tam dtia Waa

e Uni

Appetit, States District Court

vs. for the District of

ee W. Weinberger, etc., et South Dakota.

al.,

Appellees. J

Appellants’ petition for rehearing en banc has been

considered by the Court and is denied.

Petition for rehearing by the panel is also denied.

February 4, 1987

Order Entered at the Direction of the Court:

/s/ RoBERT D. St. VRAIN

Clerk, United States Court of Appeals, Eighth Circuit

59a

ARMED SERVICES PROCUREMENT REGULATION

SUPPLEMENT NO. 5

PROCUREMENT OF UTILITY SERVICES

1 OCTOBER 1974

DEPARTM:iNT OF DEFENSE

60a

ARMED SERVICES PROCUREMENT REGULATION

SUPPLEMENT NO. 5

PROCUREMENT OF UTILITY SERVICES

FOREWORD

The Armed Services Procurement Regulation Supplement

No. 5 entitled “Procurement of Utility Services” is

issued by direction of the Assistant Secretary of Defense

(Installations and Logistics) pursuant to the authority con-

tained in Department of Defense Directive No. 4105.30,

dated March 11, 1959, and in Title 10, United States Code

2202.

This Supplement is issued pursuant to paragraph 1-103.6

for the guidance of Department of Defense personnel en-

gaged in the procurement and administration of contracts

for utility services; standby, emergency, exchange, and in-

terchange services; and all other operating arrangements

with utility suppliers. It prescribes uniform policy, proce-

dures, and contract formats applicable to procurement of

the several types of utility services from both public and

private sources.

This edition supersedes the Supplement No. 5 dated 1

September 1968. Its primary purpose is to incorporate

the various changes and additions approved by the ASPR

Committee and these are indicated by vertical lines in the

right hand margins.

Copies of the ASPR Supplement No. 5 may be obtained

by purchase from the Superintendent of Documents, U.S.

Government Printing Office, Washington, D.C. 20402.

6la

PROCUREMENT OF UTILITY SERVICES

(ASPR SUPPLEMENT NO. 5)

S5-000 Scope of Supplement. This Supplement con-

tains policy, procedures, and contract formats for the

procurement of utility services. For the purpose of this

Supplement communication services are not considered

utility services.

$5-001 Applicability.

(a) Except as provided in (b) below, this Supplement

is applicable to the direct purchase of utility services; the

procurement of standby, emergency, exchange, and inter-

change services; and all other operating arrangements

with utility suppliers.

(b) This Supplement is not applicable (i) to procure-

ments of rights in real property, procurement of public

utility facilities, or construction or maintenance of

Government-owned facilities; or (ii) when a General

Services Administration (GSA) area contract is adequate

to meet the requirements of the using activity, in which

case the procedures in Section V, Part 8, shall be followed.

Part 1-Policy

S5-101 Definitions.

S5-101.1 Utility services means services such as the

furnishing of electricity, gas, water, steam, and sewerage

that are available to the general public and performed by

governmental agencies or by private companies ordinarily

subject to governmental regulations. This also includes

other services such as snow removal and the removal or

disposal of garbage, rubbish, and trash, when the services

are performed by public agencies or utilities on a contrac-

tual basis and are subject to public regulation.

S5-101.2 Connection charge means a payment by the

Government for special or local facilities which are re-

quired in order to make connections with the nearest point

of supply and which are installed and owned by the utility

62a

supplier.

S5-101.3 Termination liability means a contingent

obligation to pay the unamortized portion of special or lo-

cal connecting facilities, installed and owned by the utility

supplier, in the event the Government terminates the con-

tract prior to expiration of its term.

S5-101.4 Multiple service locations means the various

locations or delivery points in the contractor’s service area

to which he provides service under a single contract.

S5-102 General. Utility suppliers may be quasi-public

service corporations, private concerns, municipalities, as-

sociations, or cooperatives. They generally operate in

a franchised territory without competition, so they may

frequently be in a “sole source” position. Under com-

mon law, however, public utilities must render service

at reasonable rates and without unjust discrimination.

Furthermore, their operations, management, rates, and

profits are usually regulated by Federal, state, or lo-

cal regulatory bodies, but absence of a regulatory body

does not necessarily mean a complete lack of control.

Administrative remedies pursuant to enabling statutes

may be pursued or complaints may be taken to a court of

competent jurisdiction. In instances where such remedies

are to be taken, authorization shall be obtained from

the Chief of Engineers for the Army; the Commander,

Naval Facilities Engineering Command for the Navy; or

Headquarters USAF (AF/LGPLA) for the Air Force; the

Executive Director of Procurement and Production, for

DSA; or their designees.

S5-103 Policy.

S5-103.1 Agreements With Other Government Agencies.

(a) In the procurement of utility services, first

preference is given to cross-servicing within the

Department of Defense or other Federal agencies, provided

procurement in this manner will not decrease military ef-

fectivenegs or result in higher cost to the Government.

63a

PROCUREMENT OF UTILITY SERVICES

(b) In procurement of utility services from the Federal

agencies, the authorization and procedures in Section V,

Part 7, are applicable.

1155) to secure utility service from another Federal agency.

Where continuing and complex service is involved, a writ-

ten agreement should be made, which may take the form

of an Interservice Support Agreement (DD Form 1144) or

a Memorandum of Understanding.

S5-103.2 Procurement from Utility Suppliers.

(a) The Department of Defense procures utility ser-

vices from industries which are, to a greater or lesser

extent, regulated by Federal, state, and local regulatory

bodies. Notwithstanding the other provisions of this

Regulation, as to those matters over which the appropriate

regulatory body has taken jurisdiction, it is the policy of

the Department of Defense, as a matter of comity rather

than law, to comply with the current regulations, practices,

and decisions of that body concerning accounting practices,

allowability of costs pricing, and rates, subject to judicial

appeal through the normal channels. As to those mat-

ters concerning which the regulatory body has not accepted

jurisdiction or has not spoken, or for which there is no ap-

propriate regulatory body, the rules of the Federal Power

Commission and the general practices of the particular

utilities industry as to accounting practices, allowability

of costs, pricing, and rates shall be followed. This policy

does not extend to the regulations, practices, or decisions of

regulatory bodies whose decisions are not subject to judi-

cial appeal, nor does it extend to those agencies which

are regulating utilities owned or operated by the same

Governmental entity which has established the regulatory

body.

(b) Except where procurement of utility services

without a formal contract is authorized by Part 2 of this

64a

Supplement, the formats in Part 2 shall normally be used.

However, because of the differences in public regulation

and practices in different areas, the terms and conditions

under which utility suppliers furnish service vary from

area to area. Flexibility in the use of contract formats

is therefore necessary. Accordingly, reasonable variations

from the formats and the general and technical provisions

in Part 2, except as provided in (c) below, are authorized in

accordance with S5-203(b). The Departments may use spe-

cial clauses and service specifications as necessary, when

authorized in accordance with S5-203.

POLICY

in paragraphs 8 through 21 of the General Provisions must

be authorized in accordance with 1-109.

(d) Similarly, when utilities services are being

procured outside the United States, its possessions, and

Puerto Rico, the formats and technical provisions in Part

2 may be varied in accordance with local practice, provided

approval is secured pursuant to S5-203.

(e) Contracts for utility services shall show on the

cover page (see S5-203.1) whether the premises are

Government-owned or leased, and, if leased, the lease in-

strument shall be identified thereon. If the utility service

is part of the lease consideration, no separate utility ser-

vice contract shall be made.

(f) Utility services for activities occupying property

controlled or operated by another Federal agency shall be

procured under separate utility contracts only if the ser-

vices are available from neither the GSA nor the operating

Federal agency.

S5-103.3 Cost or Pricing Data. Rates or prelimi-

nary estimates quoted by utility suppliers for service for

which the rates are established by an effective, indepen-

dent regulatory body are considered “prices set by law or

65a

regulation” even if the rate will not be formally established

until after the execution of the contract. Accordingly, such

utility suppliers are not required under 3-807.3 to submit

cost or pricing data for such services prior to the award-

ing of the contract. On the other hand, rates or prelimi-

nary estimates quoted by a utility supplier for service for

which the rates are not established by an effective, inde-

pendent regulatory body are not considered “prices set by

law or regulation” even though the supplier itself may be

subject to regulation. The provisions of 3-807.3 which re-

late to the “prices set by law or regulation” exception from

the requirement for the submission of cost or pricing data

shall be applied in accordance with the above guidance;

the provisions of 3-807.3 relating to the other exceptions

are not affected by this paragraph.

PROCUREMENT OF UTILITY SERVICES

S5-104 Competitive Procurement of Utility Services.

S5-104.1 Determination as to Existence of Competition.

(a) Although in most instances utility service sup-

pliers operate in franchised territory, competition may

nevertheless exist—for example, where more than one sup-

plier is franchised for a given location, or where more than

one supplier is able to provide service at a given location

but no supplier has yet been franchised for that location.

Therefore, when the location of a new military installa-

tion has been determined and the procurement of utility

services is authorized, the contracting activity shall deter-

mine whether more than one supplier can provide the ser-

vice. Where competition exists, proposals shall be solicited

from all potential suppliers. Even where one of the com-

peting potential suppliers has entered into a GSA area con-

tract, proposals shall be solicited to determine definitely

which of the suppliers offers more advantageous competing

services under the particular circumstances.

(b) Similarly, where an existing installation is being

served by one supplier, and either another prospective sup-

66a

plier requests an opportunity to furnish the service or the

Department concerned becomes aware of another potential

supplier, the Department shall determine whether more

than one supplier can provide the service. Where competi-

tion is found to exist, competitive solicitation of proposals

shall be initiated at whatever time is considered to be most

advantageous to the Government.

S$5-104.2 Solicitation of Proposals. In addition to the

applicable requirements of 3-501, requests for proposals

shall be in writing and shall contain such of the following

as are appropriate:

(i) a copy of the applicable contract format (see Part

2);

(ii) a requirement that offerors submit their es-

timated monthly costs to the Government for a

period of 12 consecutive months based on the es-

timated quantities, and the proposed rates and

charges based thereon;

67a

PROPOSED RULES

51 Sed. Reg. 16988-16991

(May 7, 1986)

PART 41-UTILITY SERVICES

41.000 Scope of part.

Subpart 41.1—Acquisition of Utility Services

41.1001 Definitions.

41.102 Applicat ‘lity.

41.1003 Statutory authority.

41.104 Acquisition policy.

41.1005 Acquiring utility services.

41.105-1 GSA assistance.

41.105-2 GSA areawide contracts.

41.105-3 Separate contracts.

41.10-5-4 Consolidated purchases, joint use,

or cross-services.

41.106 Post-contract review.

41.107 Guidelines and data for GSA

contract assistance and review.

41.106 Agency implementation.

41.108 Contract clauses.

Authority: 40 U.S.C. 486(c); 10 U.S.C. Chapter 137;

and 42 U.S.C. 2453(c).

41.000 Scope of part.

This part prescribes policies and procedures for the

economic and efficient acquisition of utility services

(excluding telecommunication services).

Subpart 41.1—Acquisition of Utility

Services

41.101 Definitions.

“Areawide contract,” as used in this subpart, means a

basic ordering agreement (see 16.703) entered into between

the General Services Administration (GSA), and a utility

service supplier to cover the utility service acquisitions by

68a

Federal agencies.

“Authorization,” as used in this subpart, means the

ordering document under an areawide contract issued by

an authorized contracting officer for the acquisition of the

required utility services (see 16.703(d)).

“Connection charge,” as used in this subpart, means

a payment to the utility supplier by the Government for

the installation of facilities which are required to make

connections to the nearest point of supply (see Termination

liability).

“Delegated agency,” as used in this subpart, means an

agency that has received a written delegation of authority

from GSA to contract for utility services.

“Separate contract,” as used in this subpart, means a

utility services contract to cover the acquisition of utility

services for a specific delivery point(s).

“Termination liability,” as used in this subpart, means

a contingent obligation to pay the unamortized costs of

connecting facilities, which are installed and owned by

the utility supplier. This obligation becomes operative in

the event the Federal Government terminates the contract

prior to the time required to satisfy the contingent obliga-

tion provisions of the contract (see Connection charge).

“Utility services,” as used in this subpart, means

the furnishing of services such as electricity, gas, water,

sewage, and steam. These services shall include but are

not limited to public utility services. The application

of utility service contracts to other services may be ap-

propriate when the contract is not subject to the Service

Contract Act of 1965 (see 37.107).

41.102 Applicability.

(a) Except as provided in paragraph (b) of this section,

this subpart applies to the acquisition of utility services,

including connection charges.

(b) This subpart does not apply to—

69a

(1) Utility services produced, distributed, or sold by a

Federal agency;

(2) Utility services (other than those required for ad-

ministrative purposes) obtained by purchase, exchange, or

otherwise by a Federal power or water marketing agency

incident to that agency’s marketing or distribution pro-

gram; or

(3) Cable television (CATV), nonfossil fuel energy

development, telecommunication services, and contracts

leading to beneficial construction for the Government.

41.103 Statutory authority.

(a) The Federal Property and Administrative Services

Act of 1949, as amended (40 U.S.C. 481), authorizes the

General Services Administration (GSA) to provide Federal

agencies with an economic and efficient system for the

management and acquisition of utility services. GSA has

statutory authority to enter into long-term contracts for

utility services for periods not to exceed a term of 10 years

(40 U.S.C. 481).

(b) The Department of Defense (DOD) has authority

to acquire utility services for military facilities (10 U.S.C.

2304 and 40 U.S.C. 474(3)) and to enter into long-term

contracts for energy and fuel for periods of up to 30 years

(10 U.S.C. 2394).

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.