Property devaluation caused by fear of electromagnetic fields: Using damages to encourage utilities to act efficiently

New York University Law Review

Volumn 71, Issue 5, 1996, Pages 1386-1409

  Thiemann, Robyn L ^a  

^a NONE

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EID: 1542426067     PISSN: 00287881     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (123)

1. Electric utility companies may avoid using their power of eminent domain by first negotiating with the individual landowners affected by the power lines. This hypothetical assumes that any such negotiations have failed.
2. When an electric utility condemns property for a power line, it must pay the property owner "just compensation" for both the land taken and any loss in value to the remaining land. See infra text accompanying notes 33-37.
3. In addition to her challenge of the condemnation award, Hilda may assert that she should be compensated for "cancerphobia," a term used by courts and commentators to describe the emotional distress caused by the fear of developing cancer. See Dr. Sharlene A. McEvoy, Double-Edged Sword of Damocles: Utility Companies' Liability for Diminution of Property Values Due to Electromagnetic Fields, 23 Real Est. L.J. 109, 112 n.18 (1994) (describing "cancerphobia" as "a phobic reaction or apprehension . . . due to fear of contracting cancer in the future"). A full discussion of such a claim is beyond the scope of this Note. This Note deals primarily with compensating the landowner for all property devaluation and forcing the utility company to engage in an efficiency analysis. Cancerphobia is relevant to this consideration only because it fuels the decline in value of property near power lines.
4. See, e.g., San Diego Gas & Elec. Co. v. Daley, 253 Cal. Rptr. 144, 151-52 (Ct. App. 1988) (applying majority rule).
5. This Note assumes that the public utility is functioning as a state-sanctioned monopoly. Recently, the public utility commissions in several states, including New York, California, Massachusetts, Maine, and New Hampshire, have approved plans providing for direct competition in the utility market by 1998. See James Dao, Plan Approved to Let Power Users Pick Suppliers of Their Electricity, N.Y. Times, May 17,1996, at B1. The plan advocated in this Note will be unnecessary in such situations because competition presumably will force utilities to make efficient decisions. However, it most likely will take many years for the electric utility industry to become fully subject to competition. See Benjamin A. Holden, Con Edison, Other New York Utilities Expected to Seek Gradual Deregulation, Wall St. J., Oct. 1, 1996, at C16 (noting that Con Edison proposed "opening up only about 1% of its electric revenues to competition in 1998" and that full phase-in will take 6 to 10 years).
6. This Note assumes that the public utility is functioning as a state-sanctioned monopoly. Recently, the public utility commissions in several states, including New York, California, Massachusetts, Maine, and New Hampshire, have approved plans providing for direct competition in the utility market by 1998. See James Dao, Plan Approved to Let Power Users Pick Suppliers of Their Electricity, N.Y. Times, May 17,1996, at B1. The plan advocated in this Note will be unnecessary in such situations because competition presumably will force utilities to make efficient decisions. However, it most likely will take many years for the electric utility industry to become fully subject to competition. See Benjamin A. Holden, Con Edison, Other New York Utilities Expected to Seek Gradual Deregulation, Wall St. J., Oct. 1, 1996, at C16 (noting that Con Edison proposed "opening up only about 1% of its electric revenues to competition in 1998" and that full phase-in will take 6 to 10 years).
7. See infra text accompanying notes 53-62.
8. To be eligible for increased rates, utilities must show that their expenditures are "reasonable." Charles F. Phillips, Jr., The Regulation of Public Utilities 258 (1993). For this reason, utilities are deterred from offering extraordinary condemnation payments or automatically agreeing to increase payments when challenged by homeowners.
9. Some have argued that denial of cost recovery by public utility commissions will not affect utility behavior. For an outline of this argument and this Note's response, see infra Part II.B.2.c.
10. See Christopher A. Wilson, Note, Power Line EMF: A Proposed State Utility Regulatory Response, 10 J. Contemp. Health L. & Pol'y 469, 469 n.1 (1993).
11. See id.
12. Id.
13. See id.
14. See Sean T. Murray, Note, Comparative Approaches to the Regulation of Electromagnetic Fields in the Workplace, 5 Transnat'l L. & Contemp. Probs. 177, 178 (1995); see also Eileen N. Abt, Coping with the Risk of Cancer in Children Living Near Power Lines, 5 Risk: Health, Safety & Env't 65, 67 (1994) (citing existence of 350,000 miles of transmission lines and two million miles of distribution lines); Thomas E. Riley & Steven L. Vollins, Electromagnetic Field Property Damage Claims: Why Class Actions Are Not Appropriate, Inside Litig., Jan. 1994, at 23 ("There are enough overhead high-voltage transmission lines in the United States to stretch back and forth between New York and Los Angeles more than 200 times.").
15. See Sean T. Murray, Note, Comparative Approaches to the Regulation of Electromagnetic Fields in the Workplace, 5 Transnat'l L. & Contemp. Probs. 177, 178 (1995); see also Eileen N. Abt, Coping with the Risk of Cancer in Children Living Near Power Lines, 5 Risk: Health, Safety & Env't 65, 67 (1994) (citing existence of 350,000 miles of transmission lines and two million miles of distribution lines); Thomas E. Riley & Steven L. Vollins, Electromagnetic Field Property Damage Claims: Why Class Actions Are Not Appropriate, Inside Litig., Jan. 1994, at 23 ("There are enough overhead high-voltage transmission lines in the United States to stretch back and forth between New York and Los Angeles more than 200 times.").
16. See Sean T. Murray, Note, Comparative Approaches to the Regulation of Electromagnetic Fields in the Workplace, 5 Transnat'l L. & Contemp. Probs. 177, 178 (1995); see also Eileen N. Abt, Coping with the Risk of Cancer in Children Living Near Power Lines, 5 Risk: Health, Safety & Env't 65, 67 (1994) (citing existence of 350,000 miles of transmission lines and two million miles of distribution lines); Thomas E. Riley & Steven L. Vollins, Electromagnetic Field Property Damage Claims: Why Class Actions Are Not Appropriate, Inside Litig., Jan. 1994, at 23 ("There are enough overhead high-voltage transmission lines in the United States to stretch back and forth between New York and Los Angeles more than 200 times.").
17. See Cindy Sage & Joseph G. Johns, Electromagnetic Radiation: A Case for Relevance in Real Estate Transactions and Eminent Domain, 20 Real Est. L.J. 193, 194 (1991).
18. See Kenneth R. Foster, Weak Magnetic Fields: A Cancer Connection?, in Phantom Risk: Scientific Inference and the Law 47, 47 (Kenneth R. Foster et al. eds., 1993); John Weiss, Note, The Power Line Controversy: Legal Responses to Potential Electromagnetic Field Health Hazards, 15 Colum. J. Envtl. L. 359, 361 (1990); Wilson, supra note 9, at 473.
19. See Kenneth R. Foster, Weak Magnetic Fields: A Cancer Connection?, in Phantom Risk: Scientific Inference and the Law 47, 47 (Kenneth R. Foster et al. eds., 1993); John Weiss, Note, The Power Line Controversy: Legal Responses to Potential Electromagnetic Field Health Hazards, 15 Colum. J. Envtl. L. 359, 361 (1990); Wilson, supra note 9, at 473.
20. See C. Michelle Depew, Comment, Challenging the Fields: The Case for Electromagnetic Field Injury Tort Remedies Against Utilities, 56 U. Pitt. L. Rev. 441, 446 (1994). The strongest electric fields are associated with power lines. See Foster, supra note 15, at 48-49 fig. 3.1. Power lines can emit electric fields 100 to 1000 times stronger than those generated within a foot of home appliances, and up to 10,000 times stronger than those extending a foot or more away from home appliances. See id.
21. See Depew, supra note 16, at 446.
22. Id. at 446-47.
23. See generally Foster, supra note 15, at 51-65, 75-76 (surveying opinions of researchers).
24. For an exhaustive bibliography cataloguing the various review articles, consensus and group reports, and individual studies relating to the health effects of EMFs, see id. at 79-85.
25. See id. at 68-70. Critics contend that focusing solely on occupational title or power-line proximity fails to take into account EMFs generated by home appliances (i.e., microwaves, hair dryers, and electric blankets). See id.
26. See id. at 65-68.
27. See id. at 51-65, 75-76 (outlining procedures and results of major studies on health effects of EMFs); see also Margo R. Stoffel, Comment, Electromagnetic Fields and Cancer: A Legitimate Cause of Action or a Result of Media Influenced Fear?, 21 Ohio N.U. L. Rev. 551, 551 (1994) ("The major problem is that although there are a number of studies linking adverse health effects to EMF[s], there are an equal number of studies that do exactly the opposite.").
28. See Matthew G. Parisi, Cancerphobia: The Fear and the Decision, N.Y. St. B.J., Mar./Apr. 1995, at 30, 33 ("[A] causal relation is difficult to make due to the lack of consistency among published studies and the absence of an accepted biological explanation for such a relation."); Rufus C. Young, Jr. & Craig S. Gunther, Electromagnetic Fields: Invisible Hazard?, C930 ALI-ABA 189, 193 (1994), available in Westlaw, ALI-ABA database ("[E]xisting evidence is insufficient to provide a basis for concluding with certainty that adverse health effects will in fact result from exposure to EMF radiation . . . ."); Sherry Young, Regulatory and Judicial Responses to the Possibility of Biological Hazards from Electromagnetic Fields Generated by Power Lines, 36 Vill. L. Rev. 129, 150 (1991) ("At present, the scientific evidence regarding the possibility of adverse biological effects from exposure to power-frequency fields . . . is inconclusive."); Lara M. Vukelic, Note, A Prudent Regulatory Response to the Potential Health Hazards of Electromagnetic Fields, 19 Wm. & Mary Envtl. L. & Pol'y Rev. 105, 108-113 (1994) (noting conflicting results of studies investigating health risks posed by EMFs); Wilson, supra note 9, at 474 ("[M]ost of the studies and experiments to date are inconclusive in determining whether there is a definite link between EMF[s] and certain diseases."); John Simpson, $10 Billion a Year Could End EMF Exposure, Panel Told, Pub. Util. Fort., May 15, 1993, at 45, 45-46 (reporting that scientists were years away from definitive answers to question of EMFs' effects).
29. See Matthew G. Parisi, Cancerphobia: The Fear and the Decision, N.Y. St. B.J., Mar./Apr. 1995, at 30, 33 ("[A] causal relation is difficult to make due to the lack of consistency among published studies and the absence of an accepted biological explanation for such a relation."); Rufus C. Young, Jr. & Craig S. Gunther, Electromagnetic Fields: Invisible Hazard?, C930 ALI-ABA 189, 193 (1994), available in Westlaw, ALI-ABA database ("[E]xisting evidence is insufficient to provide a basis for concluding with certainty that adverse health effects will in fact result from exposure to EMF radiation . . . ."); Sherry Young, Regulatory and Judicial Responses to the Possibility of Biological Hazards from Electromagnetic Fields Generated by Power Lines, 36 Vill. L. Rev. 129, 150 (1991) ("At present, the scientific evidence regarding the possibility of adverse biological effects from exposure to power-frequency fields . . . is inconclusive."); Lara M. Vukelic, Note, A Prudent Regulatory Response to the Potential Health Hazards of Electromagnetic Fields, 19 Wm. & Mary Envtl. L. & Pol'y Rev. 105, 108-113 (1994) (noting conflicting results of studies investigating health risks posed by EMFs); Wilson, supra note 9, at 474 ("[M]ost of the studies and experiments to date are inconclusive in determining whether there is a definite link between EMF[s] and certain diseases."); John Simpson, $10 Billion a Year Could End EMF Exposure, Panel Told, Pub. Util. Fort., May 15, 1993, at 45, 45-46 (reporting that scientists were years away from definitive answers to question of EMFs' effects).
30. See Matthew G. Parisi, Cancerphobia: The Fear and the Decision, N.Y. St. B.J., Mar./Apr. 1995, at 30, 33 ("[A] causal relation is difficult to make due to the lack of consistency among published studies and the absence of an accepted biological explanation for such a relation."); Rufus C. Young, Jr. & Craig S. Gunther, Electromagnetic Fields: Invisible Hazard?, C930 ALI-ABA 189, 193 (1994), available in Westlaw, ALI-ABA database ("[E]xisting evidence is insufficient to provide a basis for concluding with certainty that adverse health effects will in fact result from exposure to EMF radiation . . . ."); Sherry Young, Regulatory and Judicial Responses to the Possibility of Biological Hazards from Electromagnetic Fields Generated by Power Lines, 36 Vill. L. Rev. 129, 150 (1991) ("At present, the scientific evidence regarding the possibility of adverse biological effects from exposure to power-frequency fields . . . is inconclusive."); Lara M. Vukelic, Note, A Prudent Regulatory Response to the Potential Health Hazards of Electromagnetic Fields, 19 Wm. & Mary Envtl. L. & Pol'y Rev. 105, 108-113 (1994) (noting conflicting results of studies investigating health risks posed by EMFs); Wilson, supra note 9, at 474 ("[M]ost of the studies and experiments to date are inconclusive in determining whether there is a definite link between EMF[s] and certain diseases."); John Simpson, $10 Billion a Year Could End EMF Exposure, Panel Told, Pub. Util. Fort., May 15, 1993, at 45, 45-46 (reporting that scientists were years away from definitive answers to question of EMFs' effects).
31. See Matthew G. Parisi, Cancerphobia: The Fear and the Decision, N.Y. St. B.J., Mar./Apr. 1995, at 30, 33 ("[A] causal relation is difficult to make due to the lack of consistency among published studies and the absence of an accepted biological explanation for such a relation."); Rufus C. Young, Jr. & Craig S. Gunther, Electromagnetic Fields: Invisible Hazard?, C930 ALI-ABA 189, 193 (1994), available in Westlaw, ALI-ABA database ("[E]xisting evidence is insufficient to provide a basis for concluding with certainty that adverse health effects will in fact result from exposure to EMF radiation . . . ."); Sherry Young, Regulatory and Judicial Responses to the Possibility of Biological Hazards from Electromagnetic Fields Generated by Power Lines, 36 Vill. L. Rev. 129, 150 (1991) ("At present, the scientific evidence regarding the possibility of adverse biological effects from exposure to power-frequency fields . . . is inconclusive."); Lara M. Vukelic, Note, A Prudent Regulatory Response to the Potential Health Hazards of Electromagnetic Fields, 19 Wm. & Mary Envtl. L. & Pol'y Rev. 105, 108-113 (1994) (noting conflicting results of studies investigating health risks posed by EMFs); Wilson, supra note 9, at 474 ("[M]ost of the studies and experiments to date are inconclusive in determining whether there is a definite link between EMF[s] and certain diseases."); John Simpson, $10 Billion a Year Could End EMF Exposure, Panel Told, Pub. Util. Fort., May 15, 1993, at 45, 45-46 (reporting that scientists were years away from definitive answers to question of EMFs' effects).
32. See Matthew G. Parisi, Cancerphobia: The Fear and the Decision, N.Y. St. B.J., Mar./Apr. 1995, at 30, 33 ("[A] causal relation is difficult to make due to the lack of consistency among published studies and the absence of an accepted biological explanation for such a relation."); Rufus C. Young, Jr. & Craig S. Gunther, Electromagnetic Fields: Invisible Hazard?, C930 ALI-ABA 189, 193 (1994), available in Westlaw, ALI-ABA database ("[E]xisting evidence is insufficient to provide a basis for concluding with certainty that adverse health effects will in fact result from exposure to EMF radiation . . . ."); Sherry Young, Regulatory and Judicial Responses to the Possibility of Biological Hazards from Electromagnetic Fields Generated by Power Lines, 36 Vill. L. Rev. 129, 150 (1991) ("At present, the scientific evidence regarding the possibility of adverse biological effects from exposure to power-frequency fields . . . is inconclusive."); Lara M. Vukelic, Note, A Prudent Regulatory Response to the Potential Health Hazards of Electromagnetic Fields, 19 Wm. & Mary Envtl. L. & Pol'y Rev. 105, 108-113 (1994) (noting conflicting results of studies investigating health risks posed by EMFs); Wilson, supra note 9, at 474 ("[M]ost of the studies and experiments to date are inconclusive in determining whether there is a definite link between EMF[s] and certain diseases."); John Simpson, $10 Billion a Year Could End EMF Exposure, Panel Told, Pub. Util. Fort., May 15, 1993, at 45, 45-46 (reporting that scientists were years away from definitive answers to question of EMFs' effects).
33. See generally Peter F. Colwell, Power Lines and Land Value, 5 J. Real Est. Res. 117, 126 (1990) (concluding that "proximity to a power line is associated with diminished selling prices"); Lita Furby et al., Electric Power Transmission Lines, Property Values, and Compensation, 27 J. Envtl. Mgmt. 69, 72-78 (1988) (reviewing empirical studies regarding effect of transmission lines on property values); Elizabeth Thomas & Jill Hanson Reinmuth, EMFs: The Newest Real Estate Hobgoblin?, Prob. & Prop., Nov./Dec. 1993, at 19, 20 ("Public fears of the potential health hazards of human exposure to EMFs generated by power lines frequently affect the marketability of property near power lines."); Jay Romano, Warning to Sellers: Let the Buyer Be Aware, N.Y. Times, Sept. 1, 1996, § 9, at 1 (noting that power lines "greatly affect real estate values").
34. See generally Peter F. Colwell, Power Lines and Land Value, 5 J. Real Est. Res. 117, 126 (1990) (concluding that "proximity to a power line is associated with diminished selling prices"); Lita Furby et al., Electric Power Transmission Lines, Property Values, and Compensation, 27 J. Envtl. Mgmt. 69, 72-78 (1988) (reviewing empirical studies regarding effect of transmission lines on property values); Elizabeth Thomas & Jill Hanson Reinmuth, EMFs: The Newest Real Estate Hobgoblin?, Prob. & Prop., Nov./Dec. 1993, at 19, 20 ("Public fears of the potential health hazards of human exposure to EMFs generated by power lines frequently affect the marketability of property near power lines."); Jay Romano, Warning to Sellers: Let the Buyer Be Aware, N.Y. Times, Sept. 1, 1996, § 9, at 1 (noting that power lines "greatly affect real estate values").
35. See generally Peter F. Colwell, Power Lines and Land Value, 5 J. Real Est. Res. 117, 126 (1990) (concluding that "proximity to a power line is associated with diminished selling prices"); Lita Furby et al., Electric Power Transmission Lines, Property Values, and Compensation, 27 J. Envtl. Mgmt. 69, 72-78 (1988) (reviewing empirical studies regarding effect of transmission lines on property values); Elizabeth Thomas & Jill Hanson Reinmuth, EMFs: The Newest Real Estate Hobgoblin?, Prob. & Prop., Nov./Dec. 1993, at 19, 20 ("Public fears of the potential health hazards of human exposure to EMFs generated by power lines frequently affect the marketability of property near power lines."); Jay Romano, Warning to Sellers: Let the Buyer Be Aware, N.Y. Times, Sept. 1, 1996, § 9, at 1 (noting that power lines "greatly affect real estate values").
36. See generally Peter F. Colwell, Power Lines and Land Value, 5 J. Real Est. Res. 117, 126 (1990) (concluding that "proximity to a power line is associated with diminished selling prices"); Lita Furby et al., Electric Power Transmission Lines, Property Values, and Compensation, 27 J. Envtl. Mgmt. 69, 72-78 (1988) (reviewing empirical studies regarding effect of transmission lines on property values); Elizabeth Thomas & Jill Hanson Reinmuth, EMFs: The Newest Real Estate Hobgoblin?, Prob. & Prop., Nov./Dec. 1993, at 19, 20 ("Public fears of the potential health hazards of human exposure to EMFs generated by power lines frequently affect the marketability of property near power lines."); Jay Romano, Warning to Sellers: Let the Buyer Be Aware, N.Y. Times, Sept. 1, 1996, § 9, at 1 (noting that power lines "greatly affect real estate values").
37. See Sharon Tomecek, EMFs: Charged with Controversy, Real Est. Today, Nov./Dec. 1992, at 18, 20 (reporting experiences of Illinois real estate broker).
38. See Alix M. Freedman, Power Lines Short Circuit Sales, Homeowners Claim, Wall St. J., Dec. 8, 1993, at B1 (reporting appraiser's 1993 study). Although the unsightliness of the power line and loss of view may account for some of this decline in value, fear of EMFs emanating from the power lines also has an effect. See Furby et al., supra note 25, at 71 (listing fear of adverse health effects as one reason individuals may pay less for property).
39. See Tomecek, supra note 26, at 20 (citing broker's estimation).
40. See Phillips, supra note 7, at 120.
41. See id. at 119-20.
42. Id. at 120. The power of eminent domain is usually reserved to the government. Nevertheless, state legislatures have conferred this power upon utilities to enhance their ability to acquire land and thus to provide better and cheaper service to their customers. See id.
43. See, e.g., Kan. Stat. Ann. § 12-895 (1991) (authorizing condemnation of property for electric power lines); N.C. Gen. Stat. § 40A-3 (1984) (same).
44. See Peggi A. Whitmore, Note, Property Owners in Condemnation Actions May Receive Compensation for Diminution in Value to Their Property Caused by Public Perception: City of Santa Fe v. Komis, 24 N.M. L. Rev. 535, 536 (1994) ("The Fifth Amendment of the U.S. Constitution . . . provide[s] for 'just compensation' for those whose private property is taken for public use.").
45. See id. ("An obvious taking occurs when the Government condemns private property for its own use, but a taking also occurs when a condemnation case causes a significant diminution in the value of neighboring land." (citing Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 413 (1922))). Although there is no set formula to determine whether a taking has occurred, courts generally consider "the character of the governmental action including economic impact -particularly the extent to which the action substantially interferes with property owners' 'reasonable investment-backed expectations.'" Linda J. Orel, Perceived Risks of EMFs and Landowner Compensation, 6 Risk: Health, Safety & Env't 79, 81 (1995) (citing Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 120 (1978)). A question may exist of whether diminution in value of land is a taking. The case law relevant to this Note assumes that such diminution in value constitutes a taking; therefore, this Note will proceed under the same assumption.
46. "Fair market value" is denned as "the amount of money which, as of the date of valuation, an informed and knowledgeable purchaser willing, but not obligated, to buy property would pay to an informed and knowledgeable owner willing, but not obliged, to sell it . . . [taking into consideration] all uses for which the land is suited and might be applied." Julius L. Sackman, 4 Nichols On Eminent Domain, § 12.02[1], at 12-75 (rev. 3d ed. 1996) (footnote omitted).
47. See 4A id. § 14.02[1].
48. Loss of view, loss of aesthetics, and loss of land use often form the basis for consequential damages. See, e.g., La Plata Elec. Ass'n v. Cummins, 728 P.2d 696, 700 (Colo. 1986) (en banc) (awarding landowner compensation for diminution of property value resulting from unsightliness of power line); Central Illl. Pub. Serv. Co. v. Westervelt, 367 N.E.2d 661, 663 (Ill. 1977) (deeming unsightliness of power line relevant in determining damages).
49. See, e.g., Criscuola v. Power Auth., 621 N.E.2d 1195, 1195 (N.Y. 1993) (plaintiffs claimed that "public's perception of a health risk from exposure to electromagnetic emissions from power lines negatively impact[ed] upon the market value of their property").
50. See, e.g., Ryan v. Kansas Power & Light Co., 815 P.2d 528, 531-32 (Kan. 1991) (upholding recovery for loss in property value resulting from public's fear of EMFs); Criscuola, 621 N.E.2d at 1195 (same).
51. This Part will discuss cases arising in the direct-condemnation context. Plaintiffs also have asserted claims for "inverse condemnation," which occurs when the proximity of a power line decreases property values although none of the plaintiff's property is physically taken for the erection of the power line. A full discussion of such claims is outside the scope of this Note.
52. See, e.g., Ryan, 815 P.2d at 532 (applying majority rule and affirming jury award that included compensation for reduction in property value resulting from public's fear). The two federal appellate courts that have considered the issue adhere to the majority rule. Additionally, of approximately 10 lower jurisdictions that have dealt with this issue, 7 of them adhere to the majority rule. See infra note 44.
53. See, e.g., Alabama Power Co. v. Keystone Lime Co., 67 So. 833, 837 (Ala. 1914) (denying landowner's claim for compensation because the law "cannot allow any compensation on account of any claimed depreciation of such remaining land which is due to the mere fears of some of the people"). The minority rule was last applied in 1962, before the controversy over EMFs began. See Central Ill. Light Co. v. Nierstheimer, 185 N.E.2d 841 (Ill. 1962). With the progression of scientific knowledge and the proliferation of studies on the effects of power-line-frequency EMFs, it is doubtful that courts in jurisdictions previously applying the minority rule would continue to do so. In fact, Florida recently abandoned the minority rule in favor of the majority position. See Florida Power & Light Co. v. Jennings, 518 So. 2d 895, 899 (Fla. 1987). Accordingly, the minority rule does not merit significant discussion.
54. See, e.g., Dunlap v. Loup River Pub. Power Dist., 284 N.W. 742, 745 (Neb. 1939) (holding that if fear was "reasonable, not speculative [or] ill-defined," the resulting property devaluation would be compensable). The intermediate rule was applied most recently in 1989. The jurisdiction applying it at that time, however, has since adopted the majority rule. See Criscuola, 621 N.E.2d at 1196-97. Prior to its application in 1989, the intermediate rule was articulated in Willsey v. Kansas City Power & Light, 631 P.2d 268 (Kan. 1981). However, there is some question of whether the Willsey court indeed adopted the intermediate rule. See Ryan, 815 P.2d at 533 ("[T]he Court of Appeals [in Willsey] found admission of testimony concerning fear in the marketplace was proper without definitively deciding whether it was adopting the intermediate rule or the [majority] rule."). Nonetheless, this jurisdiction recently explicitly adopted the majority rule. See id. at 534-35. At best, the intermediate rule's status as a rule governing compensation is uncertain. In addition to the questionable status of this rule, there are independent reasons to reject the intermediate rule and its reasonableness requirement as a rule governing compensation. See infra notes 45-47 and accompanying text.
55. See, e.g., United States ex rel. T.V.A. v. Easement & Right of Way, 405 F.2d 305, 309 (6th Cir. 1968) (noting that public fear of high voltage lines may offset market value and should be compensable); United States ex rel. T.V.A. v. Robertson, 354 F.2d 877, 881 (5th Cir. 1966) (finding it proper to consider diminution of value resulting from public's fear of power lines); Selective Resources v. Superior Court, 700 P.2d 849, 852 (Ariz. Ct. App. 1984) (determining that evidence of alleged health hazards was highly relevant to assessing damages); San Diego Gas & Elec. Co. v. Daley, 253 Cal. Rptr. 144,151-52 (Ct. App. 1988) (finding just compensation could include damages associated with public fear of EMFs); Ryan, 815 P.2d at 534-35 (holding evidence of fear in marketplace admissible on question of decline in property value); Jennings, 518 So. 2d at 898 ("[T]he impact of public fear on the market value of the property is admissible without independent proof of the reasonableness of the fear."); Louisiana Power & Light Co. v. Mobley, 482 So. 2d 706, 714 (La. Ct. App. 1985) ("[F]ear [of power-line effects] is certainly a factor which may be considered in fixing damages."); Criscuola, 621 N.E.2d at 1196 (holding that landowners could recover based on public's fear of health risks, regardless of whether fear was reasonable); Basin Elec. Power Coop., Inc. v. Cutler, 217 N.W.2d 798, 800 (S.D. 1974) (stating that witnesses may testify to conjectural damages such as danger of fire from high voltage power lines).
56. See Parisi, supra note 24, at 36 ("A reasonableness requirement subjects the trier of fact to a scientific and medical battle between parties relying on inconclusive studies being undertaken in an attempt to determine whether there is a causal connection between electromagnetic field exposure and disease.").
57. See supra notes 19-24.
58. Indeed, it is precisely the lack of a definitive answer regarding the risk of living near power lines that fuels the public's fear and results in the decline in property value. By definition, then, in the current circumstances, the public's fear cannot be reasonable or unreasonable - it is simply a response to this uncertainty. The majority rule accounts for this by removing the reasonableness requirement altogether.
59. For a detailed analysis of the effects of uncertainty on property values, see generally David Zachary Kaufman, Comment, Efficient Compensation for Lost Market Value Due to Fear of Electric Transmission Lines, 12 Geo. Mason U. L. Rev. 711, 732-34 (1990).
60. We can look at other market examples to see the same effect in the face of uncertainty. For instance, insurance companies increase premiums to compensate for a particular kind of uncertainty called ambiguity. See W. Kip Viscusi, The Risky Business of Insurance Pricing, 7 J. Risk & Uncertainty 117, 118-20 (1993). When an insurance company faces this kind of uncertainty, it will increase the price of the policy to compensate for the additional risk. See Howard Kunreuther & Robin M. Hogarth, How Does Ambiguity Affect Insurance Decisions?, in Contributions to Insurance Economics 307, 321 (Georges Dionne ed., 1992) ("A principal conclusion emerging from surveys of actuaries and underwriters is that they will add an ambiguity premium in pricing a given risk whenever there is uncertainty regarding either the probability or losses."). The effect of uncertainty is reflected in investment strategy as well. Investors demand high returns on risky investments. See Zvi Bodie et al., Essentials of Investments 114 (2d ed. 1995). The "risk premium" (the amount of expected return in excess of the amount that could be earned on risk-free securities) must be sufficiently high to justify the risk taken by the investor. See id. at 113-14. In other words, investors require compensation for uncertainty about the actual rate of return in the form of higher expected returns. The real estate market, by requiring some form of compensation to face the uncertainty associated with the health effects of EMFs, is acting just as any other market does in the face of uncertainty.
61. We can look at other market examples to see the same effect in the face of uncertainty. For instance, insurance companies increase premiums to compensate for a particular kind of uncertainty called ambiguity. See W. Kip Viscusi, The Risky Business of Insurance Pricing, 7 J. Risk & Uncertainty 117, 118-20 (1993). When an insurance company faces this kind of uncertainty, it will increase the price of the policy to compensate for the additional risk. See Howard Kunreuther & Robin M. Hogarth, How Does Ambiguity Affect Insurance Decisions?, in Contributions to Insurance Economics 307, 321 (Georges Dionne ed., 1992) ("A principal conclusion emerging from surveys of actuaries and underwriters is that they will add an ambiguity premium in pricing a given risk whenever there is uncertainty regarding either the probability or losses."). The effect of uncertainty is reflected in investment strategy as well. Investors demand high returns on risky investments. See Zvi Bodie et al., Essentials of Investments 114 (2d ed. 1995). The "risk premium" (the amount of expected return in excess of the amount that could be earned on risk-free securities) must be sufficiently high to justify the risk taken by the investor. See id. at 113-14. In other words, investors require compensation for uncertainty about the actual rate of return in the form of higher expected returns. The real estate market, by requiring some form of compensation to face the uncertainty associated with the health effects of EMFs, is acting just as any other market does in the face of uncertainty.
62. We can look at other market examples to see the same effect in the face of uncertainty. For instance, insurance companies increase premiums to compensate for a particular kind of uncertainty called ambiguity. See W. Kip Viscusi, The Risky Business of Insurance Pricing, 7 J. Risk & Uncertainty 117, 118-20 (1993). When an insurance company faces this kind of uncertainty, it will increase the price of the policy to compensate for the additional risk. See Howard Kunreuther & Robin M. Hogarth, How Does Ambiguity Affect Insurance Decisions?, in Contributions to Insurance Economics 307, 321 (Georges Dionne ed., 1992) ("A principal conclusion emerging from surveys of actuaries and underwriters is that they will add an ambiguity premium in pricing a given risk whenever there is uncertainty regarding either the probability or losses."). The effect of uncertainty is reflected in investment strategy as well. Investors demand high returns on risky investments. See Zvi Bodie et al., Essentials of Investments 114 (2d ed. 1995). The "risk premium" (the amount of expected return in excess of the amount that could be earned on risk-free securities) must be sufficiently high to justify the risk taken by the investor. See id. at 113-14. In other words, investors require compensation for uncertainty about the actual rate of return in the form of higher expected returns. The real estate market, by requiring some form of compensation to face the uncertainty associated with the health effects of EMFs, is acting just as any other market does in the face of uncertainty.
63. Utilities are generally not subject to competition within their regions because the government regulates entry to the industry. When a utility is granted entry, it becomes a state-sanctioned monopoly, and the state protects the utility from competition. A monopolist would normally have the ability to set prices higher than it would if it were subject to competition. See Thomas D. Morgan, Economic Regulation of Business 213 (1976). Rate regulation purports to combat this possibility by attempting to set prices at a level close to those that would be realized in a competitive marketplace. See id.
64. See Robert S. Pindyck & Daniel L. Rubinfeld, Microeconomics 109 (3d ed. 1995) ("When demand is inelastic . . . the quantity demanded is relatively unresponsive to changes in price.").
65. All 50 states and the District of Columbia have public utility commissions with jurisdiction over electric utilities. See Phillips, supra note 7, at 133. Although their authority differs from jurisdiction to jurisdiction, most commissions have broad legislative grants of power, allowing for significant discretion. See id. at 147. Most importantly, the majority of commissions have the authority "to require prior authorization of rate changes, to suspend proposed rate changes, to prescribe interim rates and to initiate rate investigations." Id. at 136.
66. See Richard A. Posner, An Economic Analysis of Law 347 (4th ed. 1992).
67. See id.
68. See Lisa M. Bogardus, Recovery and Allocation of Electromagnetic Field Mitigation Costs in Electric Utility Rates, 62 Fordham L. Rev. 1705, 1725 (1994). "Operating costs" also include the legal fees incurred defending and challenging condemnation awards. See id.
69. [A "reasonable return" is] determined by multiplying the company's rate base - an estimate of the value of the capital assets used by the company to render the regulated service - by the company's reasonable rate of return. The latter is a weighted average of the long-term interest rate plus the rate of return to the equity shareholders that the agency considers appropriate in light of the risk of the investment and the rate of return enjoyed by shareholders in comparable firms. Posner, supra note 53, at 347.
70. See id. This entire process is represented by the following equation: R = O + (V-D)r, where R is the total revenue the utility may earn, O represents operating costs, V is the value of tangible and intangible property, D is accrued depreciation on tangible and reproducible property, and r is the allowed rate of return. See Phillips, supra note 7, at 177.
71. See Pindyck & Rubinfeld, supra note 51, at 305 (noting share of cost borne by consumers "depends on the shapes of the supply and demand curves, and in particular on the relative elasticities of supply and demand").
72. See Richard Craswell, Passing on the Costs of Legal Rules: Efficiency and Distribution in Buyer-Seller Relationships, 43 Stan. L. Rev. 361, 366-67 (1991) (examining the relationship between elasticity of demand and ability to pass on costs).
73. See id.
74. See id.
75. See Murray, supra note 13, at 183-84 (contrasting utility sector with private business sector regarding ability to pass on costs from EMF liability).
76. "Cost" is not necessarily equivalent to retail price. The term "cost" encompasses all of the costs associated with a product that would be borne by the consumer. For an example of the kinds of considerations that enter into the calculation of full cost, see Mark Geistfeld, The Political Economy of Neocontractual Proposals for Products Liability Reform, 72 Tex. L. Rev. 803, 809-10 (1994).
77. This assumes that consumers are perfectly informed and can make accurate determinations regarding the full cost associated with the product.
78. See Phillips, supra note 7, at 173 (noting that "regulation is a substitute for competition and should attempt to put the utility sector under the same restraints competition places on the industrial sector").
79. In fact, efficiency concerns motivate the just compensation requirement underlying the system of eminent domain. We require the government, or in this case a quasi-public entity, to pay just compensation to ensure that private property is taken only when it is efficient to do so. If a utility could take land without compensating the landowner, that power would likely be abused. See Posner, supra note 53, at 58 ("[The requirement of just compensation] prevents the government from overusing the taking power. If there were no such requirement, the government would have an incentive to substitute land for other inputs that were socially cheaper but more costly to the government."); William A. Fischel & Perry Shapiro, Takings, Insurance, and Michelman: Comments on Economic Interpretations of "Just Compensation" Law, 17 J. Legal Stud. 269, 269-70 (1988) ("The compensation requirement thus serves the dual purpose of offering a substantial measure of protection to private entitlements, while disciplining the power of the state, which would otherwise overexpand unless made to pay for the resources that it consumes.").
80. See Morgan, supra note 50, at 213 ("Realistically . . . regulation cannot reproduce the structure of incentives for quality, efficiency, or price which are created by competition.").
81. See Lee Loevinger, Regulation and Competition as Alternatives, 11 Antitrust Bull. 101, 125 (1966) ("The difficulty is that no regulatory agency can acquire or utilize effectively the range of data which influence a competitive market.").
82. See Phillips, supra note 7, at 258.
83. Although public utility commissions attempt to simulate the constraints of competition by requiring that expenditures be reasonable and necessary, see id., most commentators agree that this system fails to reproduce adequately the competitive environment. See Morgan, supra note 50, at 213.
84. See Young, supra note 24, at 180 (noting that "utility has little incentive to dispute the amount of money it must pay for a right of way since that cost will simply be passed on to ratepayers"). Admittedly, once a new rate is set, the utility has an incentive to minimize costs for that year in order to achieve the highest allowable rate of return. Yet in contrast to the normal market situation where price determines demand, utilities need not be concerned with the amount rates will increase due to the damage awards. Consumers' demand for electricity is inelastic - they will purchase it regardless of price. Thus, although the utility may have a short-term incentive to minimize costs, it does not face the same market constraints as other producers.
85. See Bogardus, supra note 55, at 1725 (noting that utilities can generally recover ancillary costs through increase of rates).
86. It has been suggested that denial of cost recovery by public utility commissions will not affect behavior. For an outline of this argument and this Note's response, see infra Part II.B.2.c.
87. For an in-depth consideration of this analysis, see infra text accompanying notes 94-100.
88. Utility commissions already have difficulty performing their current responsibilities. See Phillips, supra note 7, at 140. The regulatory process is time consuming and plagued with delays caused by the increasing volume and complexity of the work of the commissions, inadequate budgets, lack of defined standards and policies, ineffective personnel, and bureaucratic inertia. See id. at 879. Adding to the responsibilities of the commissions may only exacerbate these problems.
89. See Bogardus, supra note 55, at 1711-19 (examining different approaches). "Prudent avoidance" is defined as an approach that "look[s] systematically for strategies which can keep people out of 60 Hz fields arising from all sources but only adopt[s] those which look to be 'prudent' investments given their cost and our current level of scientific understanding about possible risks." Id. at 1712 (quoting Office of Technology Assessment, U.S. Congress, Biological Effects of Power Frequency Electric and Magnetic Fields - Background Paper, OTA-BP-E-53, at 77 (Washington, D.C., U.S. Gov't Printing Office, May 1989)). Some commentators have criticized these approaches. A moratorium on construction appears to be an overreaction to inconclusive evidence. See Vukelic, supra note 24, at 115 ("[P]utting moratoria on the construction of new lines . . . is premature and overaggressive."). Since a relationship between amount of exposure and effect has not been confirmed by the research currently available, EMF strength limits would be arbitrary. See Young, supra note 24, at 182 ("[F]ield strength limits are basically worthless. . . . [I]f there are any hazards associated with exposure to E[M]F fields, there is no reason to believe that field strengths within the regulatory limits are any safer than stronger or weaker fields."). The same objection applies to prudent-avoidance strategies; until we have more information, we do not know what we should be prudently avoiding. See Murray, supra note 13, at 208-09 (summarizing arguments against prudent-avoidance approach). Most commentators agree, however, that this strategy is the lesser of the possible evils. See, e.g., Vukelic, supra note 24, at 118 (determining that "prudent avoidance approach is the most logical response to the EMF problem, given current uncertainties").
90. See Bogardus, supra note 55, at 1722 (noting that these expenses are reviewed because utilities "pass these expenses directly on to ratepayers").
91. See Phillips, supra note 7, at 258 (noting that utilities cannot "spend freely and expect all expenditures to be included as allowable operating expenses"). Most public utility commissions have statutorily granted discretion in ascertaining which expenses may be included as operating costs. See, e.g., Tex. Rev. Civ. Stat. Ann. art. 1446c, § 41(c)(3) (West 1980) (authorizing public utility commission to "promulgate reasonable rules and regulations with respect to the allowance or disallowance of certain expenses for ratemaking purposes").
92. See Phillips, supra note 7, at 260 (noting that public utility commission may "refus[e] to permit a utility to charge a particular expense to operating expenses. In so doing, the expense is charged to investors.").
93. For the opposing view that cost internalization will not affect utility behavior, and this Note's response, see infra Part II.B.2.c.
94. 120 Pub. Util. Rep. 4th (PUR) 319 (Fla. Pub. Serv. Comm'n 1991).
95. See id. at 328.
96. Id.
97. A policy adopted by many public utility commissions also reflects this strategy. This policy requires utility companies and consumers to "share" the expense of bringing rate cases before the commissions as an incentive to minimize the time and expense dedicated to such cases. See, e.g., id. at 325-26 ("Commission policy is to remove unamortized rate case expense from working capital thus reducing rate base and the allowable return on that rate base. The objective of this policy is to effect a sharing of costs between ratepayers and stockholders . . . . This sharing of costs is supposed to provide an incentive for the Company to minimize rate case expenses." (citations omitted)).
98. Under this system, the utility will be unable to recover the cost of EMF-related damages. Direct damages from condemnation, as well as consequential damages that do not involve damages from EMFs, will continue to be classified as operating costs and will be eligible for recovery through increased rates.
99. For a review of tort theories that may be applicable in the EMF context, see Roy A. Torres, Causes of Action for EMF Harm, 5 Fordham Envtl. L.J. 403 (1994); Depew, supra note 16, at 449-56; Philip S. McCune, Note, The Power Line Health Controversy: Legal Problems and Proposals for Reform, 24 U. Mich. J.L. Ref. 429, 444-58 (1991).
100. For a review of tort theories that may be applicable in the EMF context, see Roy A. Torres, Causes of Action for EMF Harm, 5 Fordham Envtl. L.J. 403 (1994); Depew, supra note 16, at 449-56; Philip S. McCune, Note, The Power Line Health Controversy: Legal Problems and Proposals for Reform, 24 U. Mich. J.L. Ref. 429, 444-58 (1991).
101. See Depew, supra note 16, at 482 ("Traditional tort causes of action are not well suited to the EMF context.").
102. See Restatement (Second) of Torts § 822 (1977).
103. See Depew, supra note 16, at 455.
104. Martin v. Reynolds Metals Co., 342 P.2d 790, 792 (Or. 1959).
105. See id.
106. See Mark S. Atterberry, Comment, The Strict Liability of Power Companies for Cancer Caused by Electromagnetic Fields, 19 S. Ill. U. L.J. 359, 363 (1995) (noting that courts consider electricity a product only when utility has relinquished exclusive control).
107. In addition, strict products liability actions are not available when the only injury claimed is economic loss. See East River Steamship Corp. v. Transamerica Delaval, 476 U.S. 858, 876 (1986) (applying this principle in admiralty context).
108. See supra Part I.B.
109. This proposal assumes that public utility commissions will require utility companies to internalize the cost of studies to determine the effects of EMFs.
110. See Michael Freeman, The Courts and Electromagnetic Fields, Pub. Util. Fort., July 19, 1990, at 20, 21.
111. This may take 10 to 15 years. See id. at 22. If research reveals that EMFs cause no adverse health effects, a rational market will respond and property will no longer lose value due to fear of EMFs. On the other hand, if research establishes that EMFs are detrimental to one's health, then the utility potentially will be liable for significant property and personal injury damages. The burden of shouldering such costs might force the utility out of the industry. As electricity is a necessary and socially useful product, it would be unwise to force utilities to leave the industry. Therefore, once the uncertainty is resolved, the utility should be allowed to pass on costs associated with EMFs. If utilities become aware of any health effects associated with EMFs, they would be required to exercise reasonable care to protect the public from these effects. Taking reasonable care may require shielding or burying the wires, or reconfiguring the distribution of power to minimize EMFs. These measures require significant expenditures. The increased costs that may be associated with providing safe electricity are equivalent to the "safety premium" consumers pay for airbags in cars, shields on power saws, etc. Expecting the consumers to pay for such safety features, just as they do for other products, is justifiable.
112. See Bogardus, supra note 55, at 1726 ("Almost every utility spends some money on EMF research, both through membership in either electric trade organizations, such as the Edison Electric Institute (EEI) or the Electric Power Research Institute (EPRI), or as part of its own independent research.").
113. This analysis may present a free-rider problem. See Susan Rose-Ackerman, Market-Share Allocations in Tort Law: Strengths and Weaknesses, 19 J. Legal Stud. 739, 745 (1990) (discussing nature of free-rider problem). All electric companies use the same technology to produce and transmit electricity, and all power lines produce the same kind of EMFs. Thus, a company may choose not to fund research, believing that the other companies will address the problem. The "free-rider" company would reap the benefits of the research without having to pay for them. There is some evidence within the industry that this would not be the response. Almost every utility devotes some funding to EMF research, see Bogardus, supra note 55, at 1726, suggesting that a collective project is possible. In fact, many utilities have engaged in just this kind of cooperative endeavor - the largest percentage of funding for EMF research has come from the Electric Power Research Institute, an organization funded solely by utilities. See Weiss, supra note 15, at 383.
114. If the utility produces research that disproves the existence of harmful effects from EMFs, but the market does not respond by restoring property values to their previous levels, it means that there is something unsatisfactory about the research results. When the market is persuaded by the evidence, land values will go back up. Thus, we must assume that although "science cannot prove a negative," at some point the number and quality of the studies will assure the scientific community and the public that no significant risk exists. In a normal market situation, manufacturers might have an incentive to hide research results suggesting that EMFs are harmful. The structure outlined above, however, provides no such incentive to utilities. When the uncertainty is resolved, utilities should be eligible to pass EMF-related expenses on to consumers. Utilities, therefore, should have little interest, economically speaking, in the actual research results.
115. 488 U.S. 299 (1989).
116. See id. at 310-12, 310 n.7.
117. See Conference, Harvard Electricity Policy Group: Regulatory Decisionmaking Reform, 8 Admin. L.J. Am. U. 789, 833 (1995) (quoting Hon. Stephen Breyer describing cost-of-service ratemaking as "a terrible system," and "a system that does not work perfectly"); see also Phillips, supra note 7, at 382 (noting that people "'familiar with the actual practice of American rate regulation need no reminder about the uncertain relationship between the supposed 'principles' of rate-of-return determination . . . and the considerations that actually lead commissions to allow whatever rates of return they do allow in specific cases. . . . [S]ome of the decisions lead one to suspect that the commissions have first reached a conclusion as to reasonable revenue requirements in terms of dollars per annum and then have proceeded to translate these requirements into whatever combination of a rate base and a percentage rate of return will be likely to pass muster with the appellate courts or with public sentiment.'" (first alteration in original) (quoting James C. Bonbright, Principles of Public Utility Rates 281 (1961))).
118. See Conference, Harvard Electricity Policy Group: Regulatory Decisionmaking Reform, 8 Admin. L.J. Am. U. 789, 833 (1995) (quoting Hon. Stephen Breyer describing cost-of-service ratemaking as "a terrible system," and "a system that does not work perfectly"); see also Phillips, supra note 7, at 382 (noting that people "'familiar with the actual practice of American rate regulation need no reminder about the uncertain relationship between the supposed 'principles' of rate-of-return determination . . . and the considerations that actually lead commissions to allow whatever rates of return they do allow in specific cases. . . . [S]ome of the decisions lead one to suspect that the commissions have first reached a conclusion as to reasonable revenue requirements in terms of dollars per annum and then have proceeded to translate these requirements into whatever combination of a rate base and a percentage rate of return will be likely to pass muster with the appellate courts or with public sentiment.'" (first alteration in original) (quoting James C. Bonbright, Principles of Public Utility Rates 281 (1961))).
119. See supra notes 53-57 and accompanying text.
120. See, e.g., Morgan, supra note 50, at 214 ("'[C]ommissions have been hesitant to make future forecasts of consumer demand, often preferring instead to assume that the test period demand conditions will hold in the immediate future.'" (quoting C.F. Phillips, The Economics of Regulation 136-37 (1969))).
121. Bogardus, supra note 55, at 1726.
122. See Consolidated Edison Co., 1994 Annual Report 31 (1995) (reporting $734 million in net profits).
123. Notably, Con Edison believed that the threat of EMF-related damages was significant enough to be included in its annual report. See id. at 40 (noting that several scientific studies have shown that EMFs may present health risks, disclosing its status as defendant in several suits alleging property damage, and acknowledging that developments in legal or public policy doctrines may have adverse affects on company).