20090313Vol I Oral Argument.pdf

OR1Gli~Al
-BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
I DAHO POWER COMPANY,
COMPLAINANT,
vs.
CASE NO.
IPC-E-08-20
GLENNS FERRY COGENERATION
PARTNERS, . LTD., a Colorado LimitedPartnership,
HEARING BEFORE
f'c=c:u::i,.::;0m("m
RES PONDENT .
w
::::-...Nen
e COMMISSIONER MACK A. REDFORD (Presiding)
COMMISSIONER MARSHA H. SMITH
COMM!SSIONER JIM D. KEMPTON
PLACE:Commission Hearing Room
472 West Washington Street
Boise, Idaho
DATE:March 3, 2009
VOLUME I - Pages 1 - 40
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I.I-.F~~POST OFFICE BOX 578
BOISE, IDAHO 83701
208-336-9208
HEDRICKeCOURT REPORTING
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1 APPEARANCES
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3 For the Complainant
Idaho Power Company:
BARTON L. KLINE, Esq.
Idaho Power Company
1221 West Idaho Street
Boise, Idaho 83702
-and-
JONES & SWARTZ, PLLC
by BRUCE C. JONES, Esq.
1673 West Shoreline Drive
Suite 200
Boise, Idaho 83701
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For the Respondent
Glenns Ferry CogenerationPartners, Ltd.:
RICHARDSON & 0' LEARY
by MOLLY O'LEARY, Esq.
515 North 27th Street
Boise, Idaho 8370210
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1 BOISE, IDAHO, TUESDAY, MARCH 3, 2009, 9:30 A.M.
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4 COMMISSIONER REDFORD: Okay, let's get started.
5 This is the Idaho Public Utilities Commission. All
6 Commissioners are in attendance. Today' s date is March 3rd,
7 2009. The hour is at nine-thirty o'clock a.m. This will be a
8 oral argument hearing in the matter of Idaho Power Company,
9 Complainant, versus Glenns Ferry Cogeneration Partners,
10 Limited, a Colorado limited partnership. And the oral argument
11 today is set for the purpose of determining whether the
12 Commission has jurisdiction to hear matters of contract between
13 the parties.
14 First, we'll take appearances. Molly.
15 MS. O'LEARY: Good morning, Commissioner Redford,
16 and Commissioners Kempton and Smith. Molly O'Leary of the law
17 firm Richardson and 0' Leary, representing Glenns Ferry
18 Cogeneration Partners, Limited.
19 COMMISSIONER REDFORD: Thank you.
20 MR. KLINE: Mr. Chairman, my name is Bart Kline.
21 I'm counsel for Idaho Power Company appearing here today.
Also appearing with me is Bruce Jones. Bruce is
23 with the firm of Jones and Swartz, and Mr. Jones will be
24 arguing on behalf of the Company today.
e 25 COMMISSIONER REDFORD: Thank you.
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1 And welcome, Mr. Jones.
2 MR. JONES: Thank you, Mr. Chairman.
3 COMMISSIONER REDFORD: Inasmuch as it i s Idaho
4 it's Glenns Ferry's motion, we'll hear from Ms. 0' Leary
5 first.
6 MS. 0' LEARY: Thank you, Commissioner. I will
7 make my opening remarks, and then I would request that I have
8 an opportunity for rebuttal following --
9 COMMISSIONER REDFORD: That would be
10 acceptable.
11 MS. 0' LEARY: -- Idaho Power's response.
12 Basically, what Glenns Ferry Cogeneration
13 Partners' argument is today is simply that, that it's been I
14 think well outlined in its briefing to date. Essentially, the
15 issue here is whether or not the Commission has jurisdiction to
16 settle contract disputes, interpret contracts, and enforce
17 contracts, essentially; and it is our position -- and I think
18 our position is well supported by prior Commission precedent
19 that the Commission does not have such jurisdiction.
20 The really sole support that has been proffered
21 by the other party for the Commission's jurisdiction to hear
22 this matter is based on language that was in the Agreement
23 itself that has been cited by both parties, but as the
24 Commission properly noted in its Order accepting that
25 Agreement, and I will quote:
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1 The Commission reminds the parties that
2 jurisdiction may not be conferred on the Commission by
3 contractual stipulation. The authority and jurisdiction of the
4 Commission is restricted to that expressly and by necessaLY
5 implication conferred upon it by enabling statutes. The nature
6 and extent of the Commission jurisdiction to resolve actual
7 disputes will be determined by the Commission on an individual,
8 case-by-case basis, notwithstanding Paragraph 21.1 of the
9 Agreement.
10 So, I think nothing has changed from that
11 observance by the Commission at the time that this Agreement
12 was first put into place. The -- Idaho Power has not cited any
13 enabling statutes that give the Commission jurisdiction in this
14 matter. It has instead simply recited back to the Agreement
15 itself.
16 And it has also made an argument to the effect
17 that the issues at stake in this contract are of some unique
18 nature and call on the Commission's unique expertise to resolve
19 the interpretation of the contract. Unfortunately, there is no
20 language in any enabling statute, whether that be State or
21 Federal, that gives the Commission that authority. And it
22 simply cannot enlarge its authority because of its unique
23 expertise. It's not that unique of a question in the first
24 part because it's fact based and can be determined from the
25 facts when that time comes. But, really, that is, as far as
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1 we can see, the only argument that has been proffered by Idaho
2 Power in support of its theory that this Commission does have
3 jurisdiction.
4 So we simply stand on our briefing at this point
5 and agree with the Commission in its earlier statements that
6 there is no such authority that can be conferred upon the
7 Commission by virtue of contract language alone.
8 Thank you.
9 COMMISSIONER REDFORD: Thank you.
10 Mr. Jones.
11 MR. JONES: Mr. Chairman, Commissioner Smith,
12 Commissioner Kempton, we are here today because Glenns Ferry
13 Cogeneration -- Glenns Ferry -- materially breached the Firm
14 Energy Sales Agreement -- the Agreement -- with Idaho Power by
15 failing to maintain its qualifying facility status under the
16 Public Utili ties Act -- Public Utili ties Regulatory Policy Act
17 of 1978 as required by the Agreement -- the Order of this
18 Commission approving the Agreement, Order No. 24674.
19 Glenns Ferry has not delivered electricity to
20 Idaho Power since October 24, 2007. Glenns Ferry has
21 permanently curtailed its energy deliveries to Idaho Power,
22 having lost its thermal host, Idaho Fresh- Pak, Inc. This
23 breach entitles Idaho Power to terminate the Agreement and
24 recover $11,151,480 for the ratepayers of Idaho pursuant to the
25 liquidated damages provision of the Agreement.
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1 The Motion to Dismiss for Lack of Subj ect Matter
2 Jurisdiction should be denied because the Commission does have
3 jurisdiction over this dispute. The Commission has
4 jurisdiction because this Agreement is a special contract under
5 PURPA conferring jurisdiction for the Commission to use its
6 special expertise in utility matters to resolve the unique
7 issues intertwined with the Commission i s various Orders
8 regarding PURPA contracts.
9 First, I will discuss the factual background of
10 this matter, and, second, I will discuss in detail why the
11 Commission does have jurisdiction.
12 On December 9, 1992, Idaho Power and Glenns Ferry
13 entered into the Firm Energy Sales Agreement under which Glenns
14 Ferry agreed to sell the energy generated by their cogeneration
15 electrical facility, a natural-gas-fired turbine generator
16 located at the Magic Valley potato processing facility in
17 Glenns Ferry, Idaho. The Commission approved the Agreement on
18 January 22, 1993, in Order No. 24674. The Agreement required
19 Glenns Ferry to be a, quote, qualifying facility, unquote,
20 under the Public Utilities Regulatory Policies Act of 1978
21 The Glenns Ferry proj ect is a cogeneration
22 facility that uses thermal energy such as heat or steam for
23 industrial commercial heating or cooling purposes. That is, it
24 is a requirement not only that they sell their electricity to
25 Idaho Power, but the by-product from that, either their heat or
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1 their other thermal energy, has to be sold to a host facility,
2 in this case Idaho Fresh-Pak.
3 In order to obtain the necessary qualifying
4 status, a cogeneration facility has to be certified as such by
5 the Federal Energy Regulatory Commission, which in part
6 requires Glenns Ferry Cogeneration to maintain a minimum ratio
7 of thermal energy output to be received by the thermal host,
8 Idaho Fresh-Pak. Both the Agreement and Order No. 2476 --
9 24674 require Glenns Ferry to maintain qualifying facility
10 status throughout the term of the Agreement. Paragraph 3.2 of
11 the Agreement mandates that the project maintain qualifying
12 facili ty status:
13 Seller warrants that prior to interconnection
14 with Idaho Power, the facility will be a qualifying facility as
15 that term is defined in 18 CFR Section 292.207.
16 And it goes on to say that after initial
17 qualification, that Glenns Ferry will be required to maintain
18 the status during the entire term of the Agreement; and,
19 significantly, the failure of Glenns Ferry to maintain
20 qualifying status will be a material breach of the Agreement.
21 As I have mentioned, the thermal host, Idaho
22 Fresh-Pak, apparently ceased business and Glenns Ferry
23 Cogeneration has lost its thermal host; as such, has failed to
24 maintain its qualifying facility status as required by
e 25 Paragraph 3.2 of the Agreement.
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e 1 The Agreement also contained the default
2 provision. Paragraph 7 of the second amendment to the
3 Agreement has a relatively standard default provision that says
4 if the party fails to perform the terms under the Agreement,
5 you have to give them written notice, and within 60 days the
6 defaulting party has to either cure or demonstrate to the other
7 party that the default can be cured wi thin a
8 commercially-reasonable time but not wi thin the 60-day
9 period.
10 Glenns Ferry failed to deliver energy to Idaho
11 Power Company. It has lost its thermal host.
12 On May 23, 2008, Idaho Power served its Notice of
e 13 Defaul t. To this day, Glenns Ferry has neither cured the
14 default, nor made any effort to demonstrate to Idaho Power that
15 the default could be cured in a commercially-reasonable time.
16 Paragraph 21.3 of the Agreement provides that
17 Glenns Ferry shall pay liquidated damages in the event that
18 there is a permanent curtailment of its energy deliveries to
19 Idaho Power. As set forth in Paragraph 21.3, it is a
20 relatively straightforward calculation, and the damages, as we
21 mentioned, as of this date, not including interest, total
22 $11,151,480.
23 With that background, on October 16 of 2008,
24 Idaho Power filed its Petition for Declaratory Order and Formal
e 25 Complaint for Breach of Contract. It sought the following
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1 relief:
2 First, entry of Declaratory Order that Glenns
3 Ferry Cogeneration has defaulted under the Agreement, that
4 there has been a permanent curtailment of energy deliveries,
5 and that the Agreement is terminated.
6 Second, Idaho Power sought entry of Declaratory
7 Order stating that pursuant to Paragraph 21.3 of the Agreement,
8 that Idaho Power is entitled to an award of liquidated damages
9 and interest.
10 Now, in that context, the Commission does have
11 jurisdiction. Initially, I'll make an observation on the
12 standard of review for a Motion to Dismiss, and it's not really
13 any different than a Motion to Dismiss before the district
14 court or a Summary Judgment Motion.
15 The standard is in deciding the Motion, the
16 Commission must liberally construe all disputed facts in favor
17 of the nonmoving party -- that is, Idaho Power -- and all
18 reasonable inferences that can be drawn from the record will be
19 drawn in favor of the nonmoving party. And that's from Porter
20 V Bassett, 146 Idaho 399. Simply put, any factual allegations
21 that tend to establish jurisdiction must be resolved in favor
22 of Idaho Power.
23 Now, let's look at the law and the contract as to
24 the jurisdiction of the Commission. The Commission does have
25 jurisdiction over this dispute. Paragraph 7.3 provides for the
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1 continuing jurisdiction of the Commission over the Agreement.e 2 Paragraph 7.3 recognizes that the Agreement between Glenns
3 Ferry Cogeneration and Idaho Power is a special contract. As
4 such, the rate, terms, and conditions will be construed in
5 accordance with -- and goes on to cite several of the Afton
6 cases, as well as Section 210 of the Public Utilities
7 Regulatory Policies Act.
8 Paragraph 21.1 of the Agreement further provides
9 all disputes related to or arising under this Agreement,
10 including but not limited to the interpretation of the terms
11 and conditions of this Agreement, will be submitted to the
12 Commission for resolution.
e 13 Now, Ms. 0' Leary is right in one sense: While it
14 is true that the Order approving the Agreement, Order 247 --
15 24674, the Commission reminded the parties that jurisdiction
16 may not be conferred by contractual stipulation, the operative
17 language of jurisdiction is as follows:
18 The nature and extent of the Commission
19 jurisdiction to resolve actual disputes will be determined by
20 the Commission on an individual, case-by-case basis.
21 And that's what we have before us. I believe
22 that the statement in and of itself acknowledges that the
23 Commission has the jurisdiction to hear disputes related to the
24 Agreement and on a case-by-case basis.
e 25 What are the factors that the Commission should
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1 look to in deciding jurisdiction on a case-by-case basis? The
2 first one I would look at is the contract itself. The parties
3 contractually agreed that disputes relating to the Agreement
4 will be decided by the Commission.
5 When the Commission analyzes jurisdiction, I
6 think it must give substantial weight to Glenns Ferry's
7 Agreement to resolve disputes before this forum. For over 16
8 years, Glenns Ferry has agreed that the proper forum to resolve
9 disputes is the Commission. As recently as June 10th of 2008,
10 Glenns Ferry wrote to Idaho Power and stated:
11 We understand that our reading of the provisions
12 of the Firm Energy Sales Agreemènt may differ with Idaho
13 Power's and would be willing, under Section 21.1 of the FESA,
14 to take any resulting difference of opinion to the Idaho Public
15 Utilities Commission for resolution.
16 What has changed since June of this year that
17 warrants Glenns Ferry's change in position that the Commission
18 no longer has jurisdiction as they contractually agreed? That
19 has not been explained.
20 The second factor I would look at in determining
21 on a case-by-case basis whether the Commission has jurisdiction
22 is the unique expertise of the Commission. This contract is
23 not a, quote, normal contract with terms freely negotiated
24 between the parties. It is not a construction contract. It is
25 not an installment sales contract. It is a, quote, special
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e 1 contract, a creature of PURPA.
2 wi th the enactment of the Public Utili ties
3 Regulatory Policies Act in 1978, the Commission was charged
4 wi th the authority and duty to require the utili ties it
5 regulated to purchase power generated by the qualifiying
6 cogenerators or small power producers. PURPA was designed so
7 that the utilities were mandated to purchase power from
8 qualifying facilities whether they wanted to or not.
9 Under PURPA, the federal -- part of the federal
10 power -- historical federal power -- was delegated to the state
11 commissions, the state utility commissions, not the State
12 district courts, to have jurisdiction over these, quote,
e 13 special contracts. And I raise several rhetorical questions in
14 that regard.
15 First, does the Commission want the district
16 court to interpret Commission Orders, perhaps inconsistently
17 with the intent of the Commission? This case will present
18 issues of first impression in terms of the language, perhaps as
19 a security agreement. I can't discuss in detail all of the
20 defenses that will be raised because we haven't seen their
21 substanti ve Answer yet; we've seen the Motion to Dismiss. But
22 I would think that the Commission would have an interest in
23 resolving any of the disputes, the language which has its
24 genesis, the PURPA and the prior Orders of this Commission, not
e 25 only to interpret its own Orders, but to shape the future of
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1 its special contracts and to make sure those future contracts
2 are interpreted consistently with the Commission i s existing
3 Orders and any Orders that may come out of this proceeding.
4 Finally, it is the Commission that is uniquely
5 charged with protecting the ratepayers of Idaho, not the
6 district court, and as such, I think the Commission should
7 exercise its plenary power pursuant to PURPA and take this
8 dispute.
9 The next factor I would look at because it has
10 been discussed by both parties is the uniqueness of this
11 dispute, and, again, I think it goes to the nature of the
12 Agreement. It's certainly not the regular, run-of-the-mill
13 contract. It is the special contract pursuant to PURPA. It is
14 a creature of federal law and of the Orders of this Commission
15 interpreting that law and setting forth the some very
16 specific provisions on these special contracts.
17 In the Agreement between Glenns Ferry
18 Cogeneration and Idaho Power, two areas were recognized by the
19 Commission and the parties as being particularly unique. First
20 were the provisions of the Agreement that recognize the
21 integral role of the Commission that the Commission plays in QF
22 contracts and the continuing jurisdiction of over the
23 Agreement.
24 I guess I i m a tradi tionlist when it comes to
25 contract law. If you put a provision in the contract, it has
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1 to mean something, and in this instance, the parties put in the
2 contract, with the blessing, also the reservation of rights of
3 the Commission, that this was the proper forum for disputes
4 pertaining to the Agreement to be resolved. It is somewhat
5 unique in that the parties have already decided in advance and
6 have decided that this is the forum for resolving disputes.
7 The second area that I think is unique is the
8 securi ty provisions. Paragraph 4.1.11 of the Agreement
9 provided that Glenns Ferry Cogeneration would be liable to
10 Idaho Power for any permanent curtailment of energy deliveries.
11 21.3 of the Agreement imposed liability on Glenns Ferry for
12 permanent curtailment in whole or in part. And, consequently,
13 because of these two provisions, the Agreement had a security
14 provision which hopefully, but perhaps not entirely, has
15 provided adequate security for the $ 11 million. Again, I don't
16 know how that Glenns Ferry intends to defend this action, but
17 the security provision approved by the Commission, understood
18 by the Commission, may come into play when this case is decided
19 on the merits.
20 Now, let's look at the case law, and I don't
21 think the case law is nearly as clear as Ms. 0' Leary
22 represents. In fact, some of it I don't think is applicable at
23 all. And first of all, in their briefing they talk about the
24 Lemhi Telephone case and that entire line of cases, and clearly
25 under Idaho law, a normal contract should be over at the
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1 district court for interpretation, not before this court.
2 Nobody disputes that. The issue here, however, as I have said
3 throughout my argument, is this is not a normal contract, this
4 is a special contract, and, as such, the Lehmi Telephone line
5 case simply is not applicable to the situation before this
6 Commission and this dispute.
7 I think that this dispute is more akin and more
8 on point with the recent case of McNeal versus the IPUC, and
9 since it is the Commission's case I'm not going to spend a lot
10 of detail talking about it, but the supreme court did find that
11 it was the Commission that had the jurisdiction to interpret or
12 to order the enforcement of the arbitration clause of the
13 parties, and that's because it was based upon the fact of
14 federal law and a delegation of that federal law to the
15 commissions to resolve the disputes that were issued at
16 issue in McNeal, and that's how I view this case.
17 There is PURPA. PURPA has delegated to the
18 Commission certain authority under PURPA. The Commission has
19 indicated in its Orders approving that PURPA contract that it
20 will assume jurisdiction on a case-by-case basis, and this is a
21 situation, a special contract situation, where the Commission
22 should assume jurisdiction.
23 (Whereupon, Commissioner Smith left the
24 hear ing room.)
25 MR. JONES: It's -- in summing my argument up, I
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1 think it is clear that what we have before the Commission is a
2 special contract. It is a special contract that wouldn't even
3 exist but for PURPA and the subsequent Orders of this
4 Commission imposing certain requirements on these special
5 contracts. It is a dispute that should be I think determined
6 by the Commission because you are the body that has the
7 greatest expertise in interpreting your Orders.
8 And I will say as an aside, no respect (sic) to
9 our district judges, I have tried several of these cogeneration
10 cases before the district court, and while our district courts
11 certainly are qualified to interpret contract language, it's
12 something of being a fish out of water when you have to try a
13 case and not only do you have to try the contract, but you have
14 to try what has the Commission done in all of its previous
15 Orders and you're essentially making the district court or
16 attempting to make the district court an expertise in
17 Commission matters. And in terms of deficiency, in terms of
18 coherency, consistency , it is simply the best policy if the
19 Commission takes the jurisdiction and decides the dispute
20 pursuant to its own Orders, and wi thin its own jurisdiction.
21 Thank you.
22 COMMISSIONER REDFORD: Okay. I'm sorry, I think
23 I missed the lady in the back. Are you appearing for anyone?
24 MS. BINGHAM: No, I'm here with Mr. Jones. My
25 name is Joy Bingham.
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1 COMMISSIONER REDFORD: Oh, good. Thank you very
2 much and welcome to the hearing.
3 MS. BINGHAM: Thank you.
4 COMMISSIONER REDFORD: Ms. O'Leary, you have the
5 final say.
6 MS. 0' LEARY: I appreciate the fact that I have
7 the final say and I'll try to make the most of that. ! 1m going
8 to address Idaho Power's argument pretty much point by point
9 just so that we can contract my comments with their arguments.
10 We did hear a rather thorough review of the facts
11 leading up to where we are today. I guess my reaction to that
12 really is that we are not there yet. We are really at a point
13 where we're discussing a question of law, not a question of
14 fact. And I'm sure at some point in a different venue, forum,
15 we will have an opportunity to address those facts in detail.
16 Essentially, as I listened to Idaho Power's
17 argument, what I got from that was that they believe that
~18 because this Motion to Dismiss should be treated like one of
19 summary judgment and that all the facts that should be
20 construed in their favor, that is why they went through this
21 recitation of facts. And then they went on to say -- to list
22 what their disputed facts are in support of their Motion -- or,
23 in support of their opposition to our Motion, rather.
24 The very first fact that they led off with -- and
25 this is a key fact throughout their argument and I would
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1 caution that repetition of the fact does not make it more
2 weighty than it is -- so, the fact that they seem to be
3 relaying on over and over and again is that the contract itself
4 references the continuing jurisdiction of the Public Utili ties
5 Commission. And, again, as the Commission rightfully noted in
6 their Order approving this Agreement, that recitation, that
7 language alone, does not confer jurisdiction; that jurisdiction
8 must be found in the enabling statutes.
9 Then, they talk about that the Commission did, in
10 rej ecting the Motion that the contract itself could confer
11 jurisdiction upon the Commission, that the Commission did, in a
12 sense, carve out a potential area whereby it might consider
13 jurisdiction on a case-by-case basis. And that language
14 actually comes right out of the McNeal case from the Idaho
15 Supreme Court, so that really wasn't language that the
16 Commission carved out, it really is directly from the supreme
17 court Decision in McNeal versus McNeal -- or, McNeal versus the
18 PUC.
19 Then Idaho Power went into a recitation of the
20 facts or the issues that it believes support jurisdiction in
21 this instance based on the case-by-case basis language in the
22 Commission's initial Order. Again, top of the list was the
23 reference to the contract itself, the contract itself confers
24 jurisdiction. Again, that's sort of a circular argument. The
25 contract cannot confer jurisdiction, and no matter how many
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1 times you repeat the fact that it did confer jurisdiction that
2 does not change the fact that it cannot, in fact, confer
3 jurisdiction.
4 The next argument that was given was that of the
5 unique expertise of the PUC and that this is a special
6 contract. There are unique qualities about these types of
7 contracts, but nowhere has there been any law enacted either
8 federally or at the state level conferring jurisdiction over
9 these contracts because they are, quote/unquote, special. I
10 would actually argue that the district court is very capable of
11 handling contract disputes on a day-to-day basis. They handle
12 disputes of all kinds of natures and with special
13 circumstances, unique areas, some areas that they have never
14 addressed before, and they're quite qualified to look to the
15 body of law and the body of decisions that have gone before
16 them to draw on in order to make a decision in any area that
17 they have not touched on before. So, this is not that unique
18 and that special of an area.
19 And the argument was made that PURPA required the
20 utili ties to produce power from QFs whether they wanted to or
21 not. That -- I'm not really sure how that supports the idea
22 that on a case-by-case basis that fact then conferred
23 jurisdiction on the Commission. It may be that the utilities
24 don't like to purchase power and they wouldn i t do -- from
25 qualifying facilities or independent power producers -- and
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1 they would not do so but for PURPA, but that fact does not
2 support an argument for jurisdiction from the Commission.
3 And a statement was made that PURPA conferred
4 jurisdiction on the Commission, but there's been no citation to
5 an actual statement or an actual section of the law that
6 expressly conferred jurisdiction on the Commission. There is
7 no such section in PURPA. In fact, as was noted in our final
8 brief on this matter, the Commission in Idaho approves these
9 contracts really as a courtesy to the regulated utili ties in
10 order for them to have some confidence that the costs that
11 they i re incurring under these contracts are going to be
12 recovered from ratepayers. It i S really a safe harbor, if you
13 will, for the Utility, and it is done as a courtesy. The
14 Commission does not have any legally-mandated role in approving
15 the PURPA contracts entered into by Idaho Power, let alone in
16 interpreting or implementing the terms of the contracts.
17 Indeed, in some states such as Oregon, which is a neighboring
18 state to us, the Commission there actually refuses to approve
19 the PURPA contracts. So if it was a legally-mandated
20 jurisdiction under PURPA, then all states would be required to
21 approve these, and they're not. They're simply not required
22 to. It's not a question of federal law, nor is it a matter of
23 state law.
24 Then, the next argument that was made by Idaho
25 Power was actually in the form of a rhetorical question, and
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e 1 the question was does the Commission want the district court to
2 interpret this agreement. And then the answer that was offered
3 by Idaho Power in response to its own question was something
4 along the lines of, well, of course the Commission does not
5 want the district court to do this because there's, you know,
6 the parade of horribles: The opportunity for inconsistencies
7 in interpretation, et cetera.
8 And I really find it interesting that Idaho Power
9 would raise such an argument in support of jurisdiction by the
10 Commission, because I don't think it's in the Commission IS
11 authority to claim jurisdiction over a matter simply because it
12 would rather be the party that decided the matter than the
e 13 district court. I think the Commission thinking that the
14 district court isn't able or qualified or educated enough in an
15 area to handle a matter and that the Commission has more depth
16 of experience does not -- it's not a reason to confer
17 jurisdiction upon itself, and, in fact, would be looked upon by
18 the supreme court and the legislature who ultimately decides
19 these matters of jurisdiction through enabling statutes -- I
20 don't think it would be looked on very kindly that one
21 jurisdictional body decided to take jurisdiction from another
22 body because they didn i t think they could handle it.
23 And then the argument was made that the
24 Commission is uniquely, charged with protecting ratepayers.
e 25 Again, this gets back to the whole idea that the Commission's
20
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1 review of these agreements really is as a courtesy to Idaho
2 Power to protect it so that it can recover this expense from
3 the ratepayers rather than its investors. So, again, that is
4 not an argument in favor of jurisdiction.
5 Then we touched again on that the parties
6 recognize the PUC i S unique role and that the Commission
7 approved the contract, but, again, as Idaho Power did note in
8 its comments, the Commission approved the contract but with
9 specific reservations about this language that was included in
10 the contract regarding the Commission i s jurisdiction.
11 And then, lastly, Idaho Power did turn to case
12 law, which seems, to me, to be the whole essence of this
13 argument. This is a question of law and we do need to look to
14 case law. They spent some time dismissing the idea that Lemhi
15 Telephone and its subsequent cases has no application here at
16 all, and I think they make too much of the fact that this is a
17 special contract, it's different, it's not a UCC case. But,
18 again, the district courts handle unique contract matters on a
19 daily basis, and this is not that unique.
20 Finally, they talked about McNeal versus the
21 Commission, and, as Mr. Jones noted, the Commission here is
22 well aware of that case and I think understands the import of
23 that case quite well. In that case, the supreme court did say
24 that this Commission had jurisdiction to enforce an arbitration
25 clause in an interconnection agreement, and they found an
21
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1 exception to the Commission's jurisdiction -- limited
2 jurisdiction in that case -- specifically because of a federal
3 law that delegated that specific authority to the Public
4 Utilities Commission. That law is the 1996 Telecommunications
5 Act, and specifically, Section 252 (e). There is no such
6 statute in this case. There is no such provision in PURPA. .
7 There is a very specific reference in Section 252 (e), and,
8 again, it i s subsection (e):
9 These interconnection agreements must be approved
10 by a state commission. Approval required. Any interconnection
11 agreement adopted by negotiation or arbitration shall be
12 submi tted for approval to the state commission. A state
13 commission to which an agreement is submitted shall approve or
14 reject the agreement, with written findings as to any
15 deficiencies.
16 There is no such federal mandate in this
17 instance. This is very unique, very different from McNeal, and
18 not only does the Section 252 of the Telecommunications Act
19 specifically require the Commission to approve the
20 interconnection agreement that was at issue in the McNeal case,
21 there is also a state statute on point in the McNeal case and
22 that is Section 62-615, which specifically the Idaho
23 Legislature gave this Commission authority to implement the
24 1996 Telecommunications Act. The language is:
25 62-615. Authority to implement the
22
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ARGUMENT
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1 Telecommunications Act, suspension of obligations of rural
2 carriers, and promulgation of rules and procedures. Subsection
3 (1): The Commission shall have full power and authority to
4 implement the Federal Telecommunications Act of 1996,
5 including, but not limited to, the power to establish unbundled
6 network element charges in accordance with the Act.
7 So, we not only have a very express provision in
8 the federal statute in McNeal that conferred jurisdiction on
9 the PUC, but we also have a very specific statute from the
10 Idaho Code in which the legislature said, yes, Commission, you
11 shall have jurisdiction to -- as conferred under. So the Idaho
12 Legislature did, in fact, accept that jurisdiction and agree
13 that that jurisdiction applied. We have nothing like that in
14 this case, nothing at all.
15 in conclusion, Mr. Jones statedI would close
16 that the -- that really the issue here is, again, this is kind
17 of a unique kind of a contract, you have to have some
18 understanding of PURPA, but -- and that the district court
19 would really be a fish out of water in trying to interpret this
20 contract. I would say that that argument and some of the other
21 arguments made by Idaho Power in objection to our Motion to
22 Dismiss really are in the nature of policy arguments, and if,
23 in fact, Idaho Power believes that the jurisdiction of the
24 Commission should be expanded, perhaps it would be well advised
25 to approach the legislature with these policy arguments and see
23
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1 if it can actually enact a statute that would confer the
2 jurisdiction that Idaho Power seeks to confer on the Commission
3 via contractual language.
4 Thank you.
5 COMMISSIONER REDFORD: Thank you, Ms. O'Leary.
6 Do you have any questions, Mr. Kempton?
7 COMMISSIONER KEMPTON: Well, Mrs. 0' Leary, I
8 guess I have an observation and then a question, and that is,
9 in the delegation of responsibility to the Commission by the
10 legislature, for the most part, the delegation of authorities
11 is fairly broad based. There are some statutes that prohibit
12 the Commission from being involved in certain considerations.
13 And in that range between approval and disapproval, there's a
14 broad range of areas where I would suggest that the Commission
15 meant that they would look at these issues on a case-by-case
16 basis.
17 Do you have specific reference to any prohibitive
18 language in any statute, rule, or regulation that would
19 prohibi t the Commission from looking at the issue of
20 jurisdiction, and, as a matter of fact, assuming jurisdiction?
21 MS. 0' LEARY: Commissioner Kempton, I believe the
22 operati ve language in the Idaho Code is something to the effect
23 that the Commission has what jurisdiction is necessary to carry
24 out its role, and that it does not have any jurisdiction above
25 and beyond that. So -- and I believe it's reasonably
24
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1 necessary. I'm looking right now for that in my notes and I
2 can't put my finger on it. But I do believe that it does say
3 that the Commission has jurisdiction to carry out its role, but
4 only to the extent necessary to live up to the charges that
5 it's been provided for.
6 And, again, we have a lot of case law in which
7 the Idaho Supreme Court, which is ultimately charged with
8 defining what the statutes mean and what the legislators meant,
9 they have repeatedly said that this Commission does not have
10 jurisdiction beyond what it is specifically granted and that it
11 does not have jurisdiction over contract matters. And an
12 exception to that is the McNeal case, but as I have explained I
13 think thoroughly, that case is easily distinguishable from
14 these facts.
15 COMMISSIONER KEMPTON: So the only exhibits
16 you i re prepared to give us today are the ones that you have
17 explici tly stated today so far as far as authorities or citing
18 the supreme court cases that prohibit the Commission from being
19 involved in contract issues?
20 MS. O'LEARY: I'm sorry, can you repeat that
21 question?
22 COMMISSIONER KEMPTON: Do you have any other
23 exhibit, any other reference to case law that would support
24 your position that the supreme court has restricted the
25 Commission from issues of contract?
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ARGUMENT
1 MS. O'LEARY: I would simply defer to oure2briefing on this matter and the line of cases that flows from
3 Lemhi Telephone where the supreme court has made it quite clear
4 about the Commission's limited jurisdiction; and even in the
5 McNeal case where it did find limited -- a limited exception to
6 that line of cases, it saw fit to recite again the fact that
7 the Commission has limited jurisdiction. And but for that
8 provision in Section 252 (e) of the 1996 Telecommunications Act,
9 the supreme court would have found yet again that the
10 Commission did not have jurisdiction over the interconnection
11 agreement dispute other than that federally carved out
12 exception.
e 13 COMMISSIONER KEMPTON: Would you would you
14 agree that the Commission has a responsibility to oversee any
15 contract provision or particular contract provisions that may
16 directly affect ratepayers in terms of PURPA projects?
17 MS. O'LEARY: I -- I would state that the
18 Commission does have an obligation to ratepayers, and I think
19 the Commission chose to exercise that in approving the
20 contract, but, again, that was really more of an action for the
21 sake of Idaho Power. Idaho Power could enter into this
22 Agreement without the Commission's approval. It is really done
23 to protect Idaho Power and so that it can then ultimately be
24 assured that this action was reasonable and prudent and that it
e 25 can then be charged against the ratepayers.
26
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1 So -- so if a -- I guess I would ask you the
2 question, a rhetorical question in response: If the district
3 court is given the jurisdiction over this matter, is it your
4 posi tion that the district court would not -- would not be
5 concerned with interpreting the law correctly, following
6 whatever precedent that there is?
7 The contract is what was intended to protect the
8 ratepayers, and I think a district court can interpret the
9 contract just fine. I don't think that the district court
10 that the Commission is going to bring something different to
11 that interpretation that a district court cannot bring on its
12 own. So that, in and above itself, is not a reason for the
13 Commission to assume jurisdiction in this instance.
14 I don't see a compelling reason for the
15 Commission to assume jurisdiction. I do not see an argument
16 that the Commission has been granted that authority. I don't
17 see an argument why a district court cannot, in fact, interpret
18 this Agreement; why a district court cannot look at the
19 definition of a qualifying facility and determine whether or
20 not, in fact, Glenns Ferry is, in fact, a qualifying facility
21 under PURPA. I do not see that as a question of law that only
22 a public utili ties commission can determine. I think the
23 federal courts would be surprised to find out that they do not
24 have the expertise to determine such a question.
25 COMMISSIONER KEMPTON: Your words, not mine,
27
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1 Mrs. 0' Leary.
2 So there i s legislation that is before the
3 legislature currently that would suggest that the Commission,
4 in the interest of the ratepayers, the Company, and the credit
5 rating of the Company, would pre-approve, if you will,
6 contracts for the acquisition of resources, be they renewable
7 or not, be they capital investments or not, they can be leased
8 power, they can be certain contracts on market. They can
9 basically cover the whole range of authorities of Idaho Power
10 acquiring power to meet the needs of the ratepayers.
11 In doing the pre-approvals, there is no chance to
12 go back and renege on that. It's a part of the legislation
13 that once the decision is made, the Commission can't go back
14 and use its stare decisis responsibilities. It does not have
15 to follow stare decisis. It can actually -- right now we could
16 change our minds and more quickly than you can in case law, and
17 this would tend to stop that. It would tend to give the
18 utili ties more confidence and the market more confidence that
19 once a decision has been made by the Commission, that this
20 would go on to completion and then the building of this would
21 start as soon as the product was ready for delivery to the
22 ratepayers, which would require a significant responsibility of
23 the Commission and it would commence our jurisdiction. It's
24 not in the legislation to look at contracts.
25 How would we go about that if we in some way
28
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1 didn't have that kind of authority within the range of approval
2 and disapproval by law?
3 MS. 0 i LEARY: I guess my response to that is
4 really what we are focused on today is a question of contract
5 interpretation, not approval or disapproval. It's a contract
6 term. The contract term is what -- you know, whether or not
7 Glenns Ferry remains a qualifying facility under PURPA. That
8 is a contract interpretation question. Contract interpretation
9 questions are for the district court.
10 I did find, just as a follow-up to your earlier
11 question, the statute that I was looking for earlier: 61-501,
12 investment of authority. The Public Utilities Commission is
13 hereby vested with the power and jurisdiction to supervise and
14 regulate every Gublic utility in the state, and to do all
15 things necessary to carry out the spirit and intent of the
16 provisions of this act.
17 And that is the enabling statute for the
18 Commission. It narrowly circumscribes the Commission IS
19 authori ty. The express scope of the public utili ties law is
20 limited to the supervision and regulation of public utilities.
21 We do not have two public utilities before the
22 Commission in this matter, we have a public utilities
23 commission or, a public utility before the Commission in
24 this matter. There is no provision which -- there is no
25 provision in this law for the Commission to exercise contract
29
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1 interpretation. It really is limited to such authority as is
2 necessary to carry out the spirit and intent of the regulatory
3 authori ty over public utili ties, not over a third party that is
4 not a regulated entity.
5 COMMISSIONER KEMPTON: Thank you, Mrs. 0' Leary.
6 One last question:
7 Isn't the language that you have in your
8 Agreement, doesn't it specify that if either or one of the
9 parties is a regulated party?
10 MS. 0' LEARY: I am not certain about that. I do
11 not have that in front of me. Do you have a citation to that?
12 COMMISSIONER KEMPTON: I can probably find it
13 pretty quick.
14 I'll read the quote out of Article 22,
15 governmental authorization, in your contract: This Agreement
16 is subj ect to the jurisdiction of those governmental agencies
17 having control over either party or this Agreement. Over
18 either party or this Agreement.
19 MS. 0' LEARY: Well, I guess my response to that
20 would be that it says This Agreement is subj ect to the
21 jurisdiction of those governmental agencies having control over
22 either party or this Agreement, and the PUC has jurisdiction
23 over--
24 COMMISSIONER KEMPTON: One of the parties.
25 MS. 0' LEARY: -- Idaho Power but not over
30
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1 Glenns Ferry.
2 And, again, I think we're going back to the
3 argument that we had before, and that is that the -- as the
4 Commission noted in its original Order, the Agreement cannot,
5 in and of itself, confer jurisdiction.
6 COMMISSIONER KEMPTON: Except as examined on a
7 case-by-case basis?
8 MS. 0' LEARY: Except as defined on a case-by-case
9 basis, not -- I think the issue here isn't a contract can or
10 cannot confer jurisdiction except on a case-by-case basis. The
11 issue is a contract simply cannot confer jurisdiction. The
12 Commission will determine its jurisdiction on a case-by-case
13 basis. So it's not a contract can confer jurisdiction on a
14 case-by-case basis; a contract simply cannot. The Commission
15 will take under advisement each and every case and decide each
16 and every case that raises the issue of jurisdiction on the
17 basis of the facts and the law that apply in that instance.
18 COMMISSIONER KEMPTON: Very well put, and I
19 agree.
20 I don't have any more questions.
21 COMMISSIONER REDFORD: Thank you, Mr. Kempton.
22 All right, you previously stated that it's your
23 belief that the Commission has no authority over PURPA
24 contracts. Do you recall saying that?
25 MS. O'LEARY: I recall saying that it has not
31
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1 been required to assume enforcement and interpretation
2 authori ty over PURPA contracts contrary to Section 252 (e) of
3 the Telecommunications Act which specifically requires that
4 those contracts be approved by the State Commission, yes, I do
5 recall that.
6 COMMISSIONER REDFORD: So do you believe that the
7 Commission has the authority to review and approve contracts?
8 MS. O'LEARY: If it so chooses. It's not a
9 mandated authority.
10 COMMISSIONER REDFORD: You know, if it doesn't
11 choose to exercise that authority, then it's your opinion that
12 any tariff or avoided cost issues or threshold rates or
13 interconnection agreements, that the parties can just decide
14 what those are irrespective of what the Commission does?
15 MS. O'LEARY: I'm sorry, that the --
16 COMMISSIONER REDFORD: I'm just
17 MS. 0' LEARY: Idaho Power is, I believe -- and
18 it's a regulated utility. It has to follow certain rules and
19 parameters regarding what it does. One of the major
20 requirements that is of concern to it certainly, and of concern
21 to the Commission but I think from two different perspectives,
22 is the issue of whatever it does has to be reasonable and
23 prudent. If it's not reasonable and prudent, it's not going to
24 recover that cost in ratemaking. So that is the concern, I
25 believe, of Idaho Power in submitting these matters to the
32
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1 Commission for review and approval.
2 The Commission on its own, because of the charge
3 that it has been given by its enabling statute, its concern in
4 reviewing the Agreement is to make sure that the ratepayers are
5 protected in the terms of the Agreement.
6 COMMISSIONER REDFORD: Well, if we can just kind
7 of jump around and decide which ones we want to review, do you
8 have any thought about what rates and avoided costs and how it
9 impacts rates generally for all of, for instance, Idaho Power's
10 customers?
11 MS. 0' LEARY: If Idaho Power enters into an
12 Agreement that the Commission subsequently does not think was a
13 prudent decision on the Company's behalf, it will not allow
14 Idaho Power to recover the expense of that in its rates. Then,
15 Idaho Power is the one who suffers the consequence of that
16 decision.
17 COMMISSIONER REDFORD: It just seems to me,
18 Ms. 0' Leary, that if Idaho Power and a qualifying facility
19 enter into an Agreement that -- and if the Commission fails to
20 or doesn't believe it has jurisdiction to review the Agreement,
21 it seems to me that they can thumb their nose at us at any time
22 as far as reviewing or interpretation, and it just kind of
23 baffles me as to how you can come to the conclusion that
24 interconnection agreements or these PURPA contracts, that the
25 Commission doesn't have some authority to review and approve
33
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1 them.
2 MS. 0' LEARY: Again, Commissioner Redford, there
3 is a distinction between interconnection agreements and PURPA.
4 The interconnection agreements the Commission clearly has
5 authori ty to review, as was decided recently by the Idaho
6 Supreme Court in the McNeal decision. I don't think there's
7 any question of that.
8 I think the facts we have here are different. I
9 don't think we have a similar statute. In McNeal, we have both
10 a federal and a state statute. In this case we have neither.
11 The Commission -- ultimately, Idaho Power assumes the risk of
12 entering into any business agreement that this Commission would
13 subsequently decide was not reasonable and prudent.
14 COMMISSIONER REDFORD: You say subsequently
15 not--
16 MS. O'LEARY: At the time of a rate case when
17 they try to recover the cost of that business deal.
18 COMMISSIONER REDFORD: So it's only at a time of
19 a rate case that we would review these PURPA contracts?
20 MS. 0' LEARY: Well, you have decided to exercise
21 that authority in advance of a rate case, but, again, you are
22 not required to do that, either under Idaho law or under the
23 federal law, just as Oregon does not.
24 COMMISSIONER REDFORD: Well if we have the
25 authori ty and however we got it to approve a contract, doesn't
34
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1 it necessarily go along with it that we have the authority as
2 well to interpret what we i ve just approved?
3 MS. 0' LEARY: I believe the case law says that
4 that is not the case. There is a whole history of cases that
5 this Commission approved in the first instance and was not
6 deigned to have the authority to interpret the terms of
7 subsequent to that approval.
8 COMMISSIONER REDFORD: Okay. You have spoken
9 about several cases and you've -- where it possible, you
10 distinguished the cases from the facts in this case. I'd like
11 you to particularly look at McNeal versus Idaho Public
12 Utili ties Commission. And while I don i t see it noted in your
13 brief, this case, which references Lemhi Telephone, has said
14 that -- this court stated: Generally, construction and
15 enforcement of contract rights is a matter which lies in the
16 jurisdiction of the courts and not in the Public Utilities
17 Commission.
18 Then they go on to say: Questions of contract
19 interpretation and enforcement are normally the sole province
20 of the courts. Because of federal law, interconnection
21 agreements fall outside the norm.
22 How do you distinguish that language? Well, I
23 guess you would say we don't approve interconnection
24 agreements.
25 MS. O'LEARY: No. How we distinguish that,
35
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ARGUMENT
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1 Commissioner Redford, is that the sentence Because of federal
2 law, interconnection agreements fall outside the norm,
3 specifically references Section 252 (e) of the 1996
4 Telecommunications Act. That section of the Telecommunications
5 Act is the federal law that the supreme court was referencing.
6 We do not have a similar federal law in this instance.
7 COMMISSIONER REDFORD: And PURPA is not a federal
8 law?
9 MS. O'LEARY: PURPA is a federal law. There is
10 no section in PURPA that says, as I quoted earlier from 252 (e) ,
11 that any interconnection agreement adopted by negotiation or
12 arbitration shall be submitted for approval to the State
13 Commission.
14 There is no such language in PURPA. That is the
15 difference. The Idaho Supreme Court carved out a narrow
16 exception to its line of case law up to point of McNeal where
17 it found, based on Section 252 (e), that there was an exception
18 to the Commission's limited jurisdiction. Again, there is no
19 such law, no such language in PURPA; and, furthermore, as I
20 noted earlier, the language in Section 252 (e) is further
21 supported by the language in the Idaho Code that specifically
22 says whatever is in this law, you can do.
23 COMMISSIONER REDFORD: Well it's rather broad. I
24 mean, it talks about regulation.
25 MS. 0 i LEARY: 62-615 says: The Commission shall
36
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ARGUMENT
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1 have full power and authority to implement the Federal
2 Telecommunications Act of 1996.
3 There is no similar state statute referencing
4 PURPA.
5 COMMISSIONER REDFORD: And you were quoting
6 61-501?
7 MS. O'LEARY: No, 62-615.
8 COMMISSIONER REDFORD: What about 61-501?
9 MS. O'LEARY: 61-501. Let me find that again.
10 61-501 is the enabling statute for the Commission and it's
11 enti tled Investment of Authority:
12 The Public Utilities Commission is hereby vested
13 wi th power and jurisdiction to supervise and regulate every
14 public utility in the state.
15 COMMISSIONER REDFORD: And you don't think that
16 goes far enough down?
17 MS. O'LEARY: No, I do not.
18 COMMISSIONER REDFORD: Okay. Let me just see if
19 I have any other questions.
20 Do you have any case law -- not case law, but
21 statutory law, whether federal or state, that indicates that
22 the Commission does not have any authority over these
23 agreements?
24 MS. 0' LEARY: I cannot cite to a state statute
25 directly on point off of the top of my head. I believe it's
37
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ARGUMENT
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1 the standard is that you are not to exercise jurisdiction which
2 you have not expressly been given, and then --
3 COMMISSIONER REDFORD: Well, I won't belabor
4 MS. 0' LEARY: I'd have to go to a line of cases
5 that support that, but I believe that that is the rule of
6 construction or the rule of law is that an entity does not have
7 jurisdiction that it has not been given by enabling statute.
8 So you have to find the express authority rather than doing the
9 reverse argument saying, well, it doesn't say we can't,
10 therefore we can.
11 COMMISSIONER REDFORD: And supervision and
12 regulation--
13 MS. O'LEARY: Of a public utility.
14 COMMISSIONER REDFORD:are not specific
15 enough?
16 MS. O'LEARY: Of a public utility.
17 COMMISSIONER REDFORD: Well, if you take that
18 atti tude, it seems like we don't have much authority to do
19 anything. What do we have authority to do?
20 MS. O'LEARY: I think the authority of the
21 Commission is pretty clear in the statute where it lays out
22 specifically what utili ties can and cannot do and who they have
23 to answer to. You know, you have the authority to audit, you
24 have the authority to set rates, you have the authority to
25 investigate, you have the authority to investigate consumer
38
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ARGUMENT
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1 complaints against utili ties, you have the authority to decide
2 whether or not a utility can issue securities. I think you
3 have very specific authority.
4 COMMISSIONER REDFORD: Okay. All right, thank
5 you. I don't have any further questions.
6 Commissioner Kempton, do you have any further
7 questions?
8 COMMISSIONER KEMPTON: No, Mr. Chairman.
9 COMMISSIONER REDFORD: Okay. We'll take this
10 matter under advisement and we will issue our decision in the
11 near future.
12 Thank you very much. We're adj ourned.
13 (The hearing concluded at 10: 42 a. m. )
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HEDRICK COURT REPORTING
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ARGUMENT
e 1 AUTHENTICATION
2
3
4 This is to certify that the foregoing is a
5 true and correct transcript to the best of my ability of the
6 proceedings held in the matter of Idaho Power Company,
7 Complainant, versus Glenns Ferry Cogeneration Partners, Ltd., a
8 Colorado Limited Partnership, Respondent, Case No. IPC-E-08-20,
9 commencing on Tuesday, March 3, 2009, at the Commission Hearing
10 Room, 472 West Washington, Boise, Idaho, and the original
11 thereof for the file of the Commission.
-
e
12
13
14
15
IV
ta y
in and for the te of Idaho,
residing at Meridian, Idaho.
My Commission expires 2-5-2014.
Idaho CSR No. 475
16
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HEDRICK COURT REPORTING
P. O. BOX 578, ßOISE, ID 83701
AUTHENTICATION