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CMP v. PUC
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MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 1999 ME 119
Docket: PUC-98-290
Argued: December 1, 1998
Decided : July 29, 1999
Panel: CLIFFORD, RUDMAN, DANA, and SAUFLEY, JJ.
CENTRAL MAINE POWER CO.
v.
PUBLIC UTILITIES COMMISSION
CLIFFORD, J.
[¶1] Central Maine Power Company (CMP) appeals the Public Utilities
Commission's promulgation of a rule (Commission Rule) requiring electric
transmission and distribution (T&D) facilities to file with the Commission
any educational materials the T&D facilities plan to distribute to the public
in regard to retail access to electricity generation services. CMP contends,
inter alia, that: (1) the Commission Rule regulates noncommercial core
speech; (2) the Commission Rule's section 6(B) pre-dissemination
submission requirement constitutes an unconstitutional prior restraint on
core speech; and (3) the Commission Rule's section 7 inclusion and
correction requirements constitute unconstitutional content-based
restrictions on core speech. Although we find no constitutional infirmity in
section 7 of the Commission Rule, we agree that the pre-dissemination
submission requirement of section 6(B) of the Commission Rule is an
unconstitutional prior restraint on core speech and accordingly, we vacate
that section of the Commission Rule.
I. RESTRUCTURING AND RETAIL ACCESS
[¶2] As have many other states, the Maine Legislature enacted
legislation restructuring the state's electricity industry. See P.L. 1997,
c. 316; see also 35-A M.R.S.A. §§ 3201-3217 (Supp. 1998). Beginning on
March 1, 2000, Maine citizens will have the right to purchase electricity
generation services from the competitive electricity generation provider of
their choice. See § 3202(1). Under the current system, Maine residents
purchase electricity from integrated, noncompetitive, regulated public
utilities. Pursuant to the recent legislation, these investor-owned electric
utilities are required to divest all assets relating to the generation of
electricity. See § 3204(1). They will maintain their transmission and
distribution assets, however, and will remain regulated as T&D facilities.
The independent electricity generation providers will be licensed by the
Commission, but otherwise will not be subject to regulation as public
utilities. See §§ 3202(2), 3203(1), (2), (5). After March 1, 2000, T&D
facilities "may not own, have a financial interest in or otherwise control
generation or generation-related assets[,]" except "to the extent that the
[C]ommission finds that ownership, interest or control is necessary for the
utility to perform its obligations as a transmission and distribution utility in
an efficient manner." See § 3204(5), (6).
[¶3] The deregulated system does contemplate affiliations between
competitive electricity generation providers and T&D facilities.{1} The
statute, however, does not permit a T&D facility to "engage in joint
advertising or marketing programs of any sort with its affiliated competitive
provider" or "promote or market any product or service offered by its
affiliated competitive provider." See § 3205(3)(J) (further prohibiting T&D
facilities from promoting affiliated competitive electricity providers in any
manner).
[¶4] The Legislature gave the Commission the express statutory
authority to oversee the transition to the new deregulated system. The
statute requires the Commission to establish rules regarding "consumer
protection standards and standards to protect and promote market
competition in order to protect retail consumers of electricity from fraud
and other unfair and deceptive business practices." See § 3203(6).
Particularly, the statute requires the Commission to adopt rules
implementing an education program to inform consumers about the
deregulation process. See § 3213(2).
[¶5] On November 3, 1997, the Commission issued a Notice of
Rulemaking that set out the proposed Rule establishing a consumer
education program, explained each section of the Rule, established a time
and place for a public hearing, and identified the procedure for public
comment. The notice stated that "the consumer education program is
designed to facilitate informed decision making by consumers and to
provide an objective and credible source of information to consumers." The
costs of education programs undertaken by T&D facilities pursuant to the
Commission guidelines may be recoverable through increases in current
electricity rates, see proposed Commission Rule § 6(A). In December, CMP
submitted comments to the proposed Commission Rule. CMP wrote,
"Although CMP is willing to work with the Commission to educate the public
on retail access issues, CMP is concerned by the substantial restraints that
the proposed rule would impose on an electric utility's First Amendment
rights to free speech."
[¶6] The Commission conducted a public hearing on the proposed
Rule on January 30, 1998. The Commission responded to some stated
concerns, provisionally adopted the Rule, and then submitted the Rule to
the Legislature for review and approval pursuant to
35-A M.R.S.A. § 3213(2)(C) and 5 M.R.S.A. §§ 8071-8074 (Pamph. 1998).
The Legislature authorized the final adoption of the Rule with only two
minor changes. See Resolves 1997, c. 99. CMP filed this appeal pursuant to
35-A M.R.S.A. § 1320 (1988).
[¶7] The following sections of the Commission Rule are the subject of
this appeal:
§ 6 UTILITY-SPONSORED EDUCATIONAL ACTIVITIES
A. Ratemaking Treatment. The costs of utility-sponsored
educational activities shall not be included in electric or
transmission and distribution utility rates unless the utility
demonstrates in a ratemaking proceeding that expenditures for
utility-sponsored educational activities are reasonable in amount,
reasonably effective, necessary and in the public interest.
B. Informational Filings. Electric and transmission and
distribution utilities shall file with the Commission, for
informational purposes only, any materials that are part of or
related to utility-sponsored educational activities. The materials
shall be filed, whenever possible, at least three weeks before the
commencement of the activity of which the materials are a part
or to which the materials relate.
C. Investigation. The Commission may investigate any
utility-sponsored educational activity if it finds after a summary
investigation that there are sufficient grounds to investigate
whether the activity is misleading, deceptive or inaccurate. If
after a public hearing, the Commission finds that the
utility-sponsored activity is misleading, deceptive or inaccurate,
it may by order require the utility to cease the activity and
provide corrections of that activity.
§ 7 DISSEMINATION OF INFORMATION
The Commission may require that electric and
transmission and distribution utilities disseminate information
produced as part of the Commission's consumer education
program. Information required to be disseminated by the utility
may include correction of any utility-sponsored education
activity to the extent such correction is required by the
Commission as a result of an investigation, undertaken pursuant
to section 6(C).
II. THE FIRST AMENDMENT RIGHT TO FREE SPEECH
[¶8] The First Amendment to the United States Constitution,
applicable to the states through the Due Process Clause of the Fourteenth
Amendment, provides that "Congress shall make no law . . . abridging the
freedom of speech, or of the press . . . ."{2} U.S. Const. amends. I, XIV; see
Cantwell v. Connecticut, 310 U.S. 296, 303 (1940). The United States
Supreme Court has interpreted the First Amendment as preventing
governments from proscribing speech or expressive conduct solely on the
basis of disapproval of the ideas expressed.{3} See R.A.V. v. City of St. Paul,
505 U.S. 377, 382 (1992). Freedom from content-based regulation,
however, is not absolute. Obscenity and speech tending to incite immediate
breach of the peace do not enjoy any First Amendment protection. See, e.g.,
Miller v. California, 413 U.S. 15, 23-24 (1973); Chaplinsky v. New
Hampshire, 315 U.S. 568, 571-72 (1942). Commercial speech is entitled to
a form of intermediate constitutional protection. See Central Hudson Gas &
Elec. Corp. v. Public Serv. Comm'n, 447 U.S. 557, 562-65 (1980). Only
"core speech" or "pure speech" is entitled to strict constitutional
protection.{4} See, e.g., R.A.V., 505 U.S. at 395.
A. COMMERCIAL SPEECH v. CORE SPEECH
[¶9] Commercial speech is "expression related solely to the economic
interests of the speaker and its audience," Central Hudson Gas & Elec.,
447 U.S. at 561, speech that relates to a particular product or service, see
Friedman v. Rogers, 440 U.S. 1, 10 (1979), or speech that "propose[s] a
commercial transaction," Board of Trustees of State Univ. v. Fox,
492 U.S. 469, 473-74 (1989) (quoting Virginia State Bd. of Pharmacy v.
Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 762 (1976)). On the
other hand, core speech, enjoying the fullest constitutional protection,
involves "discussions of candidates, structures and forms of government, the
manner in which government is operated or should be operated, and all
such matters relating to political processes[,]" Mills v. Alabama,
384 U.S. 214, 218-19 (1966), speech directed at educating the public, see
Thornhill v. Alabama, 310 U.S. 88, 95, 102 (1940), or more generally,
speech addressing "matters of public concern," id. at 101-02.
[¶10] Speech will not be characterized as commercial speech solely
because the speaker is a corporation. See First Nat'l Bank v. Bellotti,
435 U.S. 765, 777, 784 (1978). The First Amendment protects equally the
free speech rights of corporate persons and natural persons.{5} See id. The
identity of the source does not determine the level of protection the First
Amendment affords the speech. See id. Furthermore, speech does not
automatically lose any constitutional protection solely because it involves a
commercial subject. See Virginia State Bd. of Pharmacy, 425 U.S. at 761.
Commercial speech must be distinguished from core speech based on its
content. See id. Speech involving purely factual material of public interest
is fully protected by the First Amendment, even if the subject of the speech
is a commercial matter. See id. at 761-62.
[¶11] Because the Commission Rule at issue is directed at
"utility-sponsored educational activities," which by definition are designed
to educate consumers about retail access in a deregulated system, see
Commission Rule § 2(D), non-commercial core speech is what is being
regulated. The statute forbids T&D facilities from promoting an affiliated
competitive provider in any manner. See 35 M.R.S.A. § 3205(3)(J). To be
in compliance with the law, a T&D facility will merely educate the public
about the deregulated system and their future right to purchase electricity
generation services from competitive providers, and will not disseminate
educational materials directly implicating the facility's economic interests
or proposing a commercial transaction to the consumers who receive the
materials. Education about deregulation is a matter of state public concern.
That the subject matter of the educational materials is commercial does not
reduce its constitutional protection. See Virginia State Bd. of Pharmacy,
425 U.S. at 761. The Commission Rule essentially prohibits educational
materials from containing commercial speech.{6}
B. PRIOR RESTRAINTS ON CORE SPEECH
[¶12] The Supreme Court has explained that "[t]he freedom of speech
and of the press guaranteed by the Constitution embraces at the least the
liberty to discuss publicly and truthfully all matters of public concern
without previous restraint or fear of subsequent punishment." Thornhill,
310 U.S. at 101-02. The concept of prior restraint refers to "administrative
and judicial orders forbidding certain communications when issued in
advance of the time that such communications are to occur." Alexander v.
United States, 509 U.S. 544, 550 (1993) (quoting M. Nimmer, Nimmer on
Freedom of Speech § 4.03, 4-14 (1984)). Writing a dissent in Alexander,
Justice Kennedy stated, "In its simple, most blatant form, a prior restraint
is a law which requires submission of speech to an official who may grant or
deny permission to utter or publish it based upon its contents." Id. at 566;
see also Kingsley Books v. Brown, 354 U.S. 436, 441 (1957) (stating that
prior restraints must "be closely confined so as to preclude what may fairly
be deemed licensing or censorship").
[¶13] Because prior restraints have an immediate and irreversible
sanction of suppressing speech before it occurs, there is a heavy
presumption against their constitutional validity. See Nebraska Press Ass'n
v. Stuart, 427 U.S. 539, 559, 589 (1976) (Brennan, J. concurring);
Organization for a Better Austin v. Keefe, 402 U.S. 415, 419 (1971). Prior
restraints on speech can be unconstitutional, even if subsequent redress of
harm is not prohibited. See Near v. Minnesota ex rel. Olson,
283 U.S. 697, 714 (1931). Prior restraints are only upheld in exceptional
circumstances where the restraint prevents the disclosure of information
that would cause irreparable damage to the country in a time of war or would
incite violence, see id. at 716, or where, in the case of obscenity, procedural
safeguards are in place to "reduce the danger of suppressing constitutionally
protected speech," see Southeastern Promotions, Ltd. v. Conrad, 420 U.S.
546, 559 (1975).
[¶14] The Commission Rule's requirement that educational materials
be submitted to the Commission three weeks prior to dissemination
constitutes a prior restraint on core speech.{7} See Organization for a Better
Austin, 402 U.S. at 418-20 (invalidating order enjoining organization from
distributing leaflets in the town critical of local real estate agent as a prior
restraint on speech). Section 6(B) of the Commission Rule requires T&D
facilities to submit their education materials to the Commission "for
informational purposes only . . . whenever possible, at least three weeks . . ."
prior to disseminating the materials to the public. Presumably, the T&D
facility cannot disseminate the materials during this three week period.
Thus, although the Commission's restriction on the publication of the
materials is temporary, it nevertheless is a prior restraint on the utilities'
speech.
[¶15] Section 6(B) of the Commission Rule applies when a public
hearing is concluded within the three week period and the Commission
determines that corrections to the educational materials are warranted.
After receiving the materials, the Commission will conduct a summary
investigation to decide if a public hearing is needed to evaluate whether the
subject matter of the materials is appropriate for publication. See
Commission Rule § 6(C). If a public hearing is held and the Commission
determines that the materials are misleading, inaccurate, or deceptive, the
Commission will require the T&D facility to correct the portions of the
educational materials of which the Commission disapproves. Id. If the
hearing is completed within the three week period and changes are
necessary, the T&D facility will be required to correct its materials prior to
their initial dissemination.{8} As is contended in the amicus curiae brief, "In
effect, the [Commission] does not want any speech to go to consumers
regarding restructuring and retail access unless it is speech with which [it]
agrees."
[¶16] The Commission contends that the phrase "whenever possible"
precludes the Rule from being characterized as a prior restraint. Prior
restraints are prohibited because they have the effect of suppressing speech
before it occurs. See Nebraska Press Ass'n, 427 U.S. at 559, 589. The
"whenever possible" language will not alter that effect. CMP does not know
how the Commission will interpret the phrase "whenever possible." To
ensure it has complied with the Commission Rule, CMP must submit the
materials three weeks prior to the dissemination or justify its failure to do
so.
[¶17] The Commission further contends that section 6(B) does not
constitute a prior restraint because the Rule and the applicable statute do
not impose any sanctions for noncompliance and the Rule explicitly provides
that the submission is "for informational purposes only." That phrase does
not save the Commission Rule from being characterized as a prior restraint.
The Commission's comments to section 6(B) of the Rule, as the comments
appear in the Commission's order provisionally adopting the Rule, state:
The purpose of subsection 6(B) is to inform the Commission
prior to implementation of utility-sponsored educational
activities so that the Commission can work with the utility to
avoid inconsistent or contrary educational messages. We note
that although the provision does not require approval by the
Commission, we would expect the utility to cooperate with the
Commission in redrafting messages to avoid confusion to
consumers.
As CMP contends, because of the ongoing nature of the regulatory
relationship between T&D facilities and the Commission, the language of
section 6(B) of the Commission Rule, when combined with the language of
sections 6(C) and 7, is essentially the same as a requirement of Commission
approval. Although there is nothing to suggest that the Commission has or
will misuse its power in this area, coercion, persuasion and intimidation
could effectively suppress speech even though formal legal sanctions are not
available or are not utilized.{9} See Bantam Books, Inc. v. Sullivan,
372 U.S. 58, 66-67, 68-70 (1963) (prior restraint even though entity "'free'
to ignore the Commission's notices, in the sense that [its] refusal to
'cooperate' would have violated no law."). Section 6(B) of the Commission
Rule constitutes an unconstitutional prior restraint on core speech.{10}
C. CONTENT-BASED RESTRICTIONS ON CORE SPEECH
[¶18] Section 7 of the Commission Rule provides:
The Commission may require that electric and transmission and
distribution utilities disseminate information produced as part of
the Commission's consumer education program. Information
required to be disseminated by the utility may include
correction of any utility-sponsored education activity to the
extent such correction is required by the Commission as a result
of an investigation, undertaken pursuant to section 6(C).{11}
Requiring a T&D facility to include the Commission's consumer education
materials with its own education materials is a content-based restriction on
speech. Requiring a T&D facility to correct the content of its speech
likewise is a content-based restriction on speech. As the Supreme Court has
explained, mandating speech that a speaker otherwise would not make
necessarily alters the content of the speaker's speech. See Riley v. National
Fed'n of the Blind of N.C., Inc., 487 U.S. 781, 795 (1988). Content-based
restrictions on core speech, however, may be constitutional if the
restrictions are demonstrated to be narrowly tailored to serve a compelling
state interest. See R.A.V., 505 U.S. at 395-96; Hart v. Secretary of State,
1998 ME 189, ¶ 9, 715 A.2d 165, 167-68, cert. denied, sub nom. Hart v.
Gwadosky, 67 USLW 3524 (U.S. Me. Feb. 22, 1999) (No. 98-676).
1. THE INCLUSION REQUIREMENT
[¶19] Relying on the United States Supreme Court decision in Pacific
Gas and Electric Co. v. PUC, CMP contends that requiring T&D facilities to
include Commission educational materials with the materials they
disseminate to their customers is an unconstitutional content-based
restriction on non-commercial core speech. We disagree.
[¶20] In Pacific Gas, the Supreme Court struck down a California
Utility Commission requirement that a privately owned utility include in its
billing envelopes leaflets designed by a third party, outlining positions with
which the utility disagreed. See 475 U.S. at 5-7. The Supreme Court noted
that the California Commission's interest in fair and effective utility
regulation may be a compelling interest, but concluded that the California
Commission's inclusion requirement was not narrowly tailored to achieve
the Commission interests See id. at 19-20.
[¶21] Several significant differences between Pacific Gas and the facts
of this case, however, lead us to conclude that the requirements of the
Commission Rule are narrowly tailored to serve the Commission's
compelling interest. Like the California Commission in Pacific Gas, the
Commission has a compelling interest in ensuring that consumers get
information about deregulation of the electricity generation industry and
retail access that is objective, accurate, and comprehensive given the
potential for a high degree of customer confusion that can result from retail
competition. Unlike the materials at issue in Pacific Gas, however, the
subject matter of the material T&D facilities are forced to include within its
billing envelopes is narrowly prescribed. In Pacific Gas, the utility was
required to disseminate highly-opinionated political editorials of third
parties that the utility considered to be directly contrary to its interests.
See id. at 5-7. The materials that a T&D facility would be forced to include
in its billing envelopes would be objective descriptions of the deregulation of
the electricity generation industry and the retail access choices of
consumers. The Commission stated, in support of its adoption of the Rule,
"We do not expect that there will be major differences of opinion between
the Commission and utilities about the kind of fact-based information that is
at issue here." Furthermore, the materials will be generated by the body
with the authority to regulate utilities and with the legislative mandate to
develop educational program regarding deregulation, not independent third
parties. Finally, the alternative of directly mailing its education materials to
consumers would hinder the Commission's achievement of its interests,
because it would increase the possibility of consumers receiving differing
information from different sources. Thus, the Commission Rule's inclusion
requirement is narrowly tailored to serve the Commission's compelling
interest.
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