DATE OF JUDGMENT: 12/12/95 TRIAL JUDGE: HON. TIMOTHY E. ERVIN COURT FROM WHICH APPEALED: TISHOMINGO COUNTY CHANCERY COURT
Before McMILLIN, P.j., Herring, And Hinkebein, JJ.
The opinion of the court was delivered by: Herring, J., For The Court:
NATURE OF THE CASE: CIVIL - OTHER
TRIAL COURT DISPOSITION: CHANCELLOR SET ASIDE DECISION OF MISSISSIPPI PUBLIC SERVICE COMMISSION
MOTION FOR REHEARING FILED:
¶1. The Mississippi Public Service Commission (MPSC) ruled on June 9, 1994 that the Tishomingo County Water District, Inc. had improperly spent grant funds and discriminated against Albert Shadburn and others when it failed to provide Shadburn and his neighbors with water service during construction of an upgraded water system in Tishomingo County. MPSC ruled that the Water District should provide water service to Shadburn within one hundred twenty days of its order. The Water District appealed to the Chancery Court of Tishomingo County, Mississippi, which reversed and set aside the Public Service Commission's order on December 12, 1995. Shadburn and MPSC now appeal to this Court. For the reasons set forth in this opinion, we affirm the decision of the chancery court.
¶2. Tishomingo County Water District, Inc. was created by the Board of Supervisors of Tishomingo County on June 3, 1991, for the purpose of providing water service to area residents, all in compliance with the provisions of Sections 19-5-151 through 19-5-207 , Mississippi Code of 1972. Prior to the formation of the Water District, a public hearing was duly noticed and held by the Supervisors to hear any protests from interested citizens in compliance with the statute. Receiving no protests, the Supervisors created the District and appointed its Board of Commissioners. According to the sketchy record before us, the Water District covered all of Tishomingo County outside its municipalities, but initially sought a more limited water service area from the MPSC. Neither the description of the boundaries of the Water District nor the certificate of public convenience and necessity or the description of the service area sought from the MPSC were included in the record for our inspection. *fn1
¶3. All parties agree that the Tishomingo County Water District was created because of health problems identified in 1990 by the Mississippi Department of Health in the Eastport-Snowden area of Tishomingo County. These health problems resulted in a moratorium on new customers or water meters to be installed by the Eastport-Snowden Water Association, Inc, a non-profit corporation, because of low water pressure. The potential for water contamination is created when water system pressure is low, when the water in the system's infrastructure is allowed to stand idle for a period of time, and when water in the system is not hydraulically subject to constant movement.
¶4. The Tishomingo County Water District was created by the County's Board of Supervisors when its predecessor, the Eastport-Snowden Water Association, acknowledged its inability to adequately serve its membership and relinquished its exclusive right to serve its members. Although the record is unclear, it is apparent that MPSC subsequently issued a new certificate of public convenience and necessity to the Tishomingo County Water District pursuant to Section 77-3-11 of the Mississippi Code, as amended, which empowered the District to provide exclusive water service to the inhabitants of the old Eastport-Snowden service area. *fn2
¶5. The sum of $800,000 was obtained from the Mississippi Economic Impact Authority by the new Water District to fund the upgrading of the old Eastport-Snowden water system. An additional $375,000 of "urgent needs" funding was also secured by the Water District from the Mississippi Department of Economic and Community Development. The plans for upgrading and improvements to the old water system were prepared by engineers working in conjunction with the State Health Department. It is noteworthy at this point that Shadburn's property, as well as the property of other landowners on Indian Creek Road, were never provided with water service by the old Eastport-Snowden Water Association prior to its dissolution, and they had no prospect of ever being provided with water service until the old water system could be ungraded and the moratorium on service to new customers set aside by the State Health Department.
¶6. An additional $575,000 was borrowed by the new Water District from the Farmer's Home Administration (FmHA), an executive agency of the United States, which was to be repaid over a period of thirty-five years. According to Shadburn, the FmHA funds were obtained in order to add additional customers to the water system. David Jourdan, the Chairman of the Board of Commissioners of the new Water District, agreed and stated that approximately seventy-five customers were added to the water system as a result of waterline extensions which were funded by FmHA loans. According to Jourdan, the addition of new customers and additional income to the District from new water users was desirable because it had the effect of lowering the water rates and the monthly obligation of existing water users to repay the FmHA loan.
¶7. As stated, the Water District, operating within FmHA and Mississippi Department of Health guidelines, added seventy-five new customers to the new water system. Fifty-two of these customers were located in a small portion of the state of Alabama which was cut off from the rest of that state when Pickwick Lake was constructed. According to the record, the only way to get to the rest of Alabama from that portion of Alabama cut off by Pickwick Lake was by air, boat, or by traveling out on the ground through Tishomingo County. According to the testimony, these customers also received electric power from Mississippi sources and many children from the area attended Mississippi schools.
¶8. According to Chairman Jourdan, the location of the new waterline extensions were chosen in order to reach large concentrations of potential customers and maximize the amount of additional income to the district received from water sales. Shadburn's property on Indian Creek Road was not selected for new water line extensions because of its sparse population, although Shadburn's property was located within the Water District's certificated service area. Shadburn claims that the Water District improperly ignored customers within its own exclusive service area when it extended its water lines to Alabama residents. The District, on the other hand, claims that it only expended FmHA loan funds in accordance with strict federal guidelines which required that consideration be given to maximizing the number of new customers so that adequate funds could be generated to repay the FmHA loan in a timely manner. Likewise, grant funds were expended and improvements were made to the old water system only in accord with Health Department directives so that its moratorium on new meter hook-ups could be withdrawn.
¶9. Albert Shadburn filed a complaint with the MPSC on August 2, 1993 and alleged that the Water District had ...