ESSA.docx

MEMORANDUM
TO:ALAN G. LANCE
ATTORNEY GENERAL
FROM:DON HOWELL
DATE:APRIL 24, 1998
SUBJECT:SNAKE RIVER VALLEY ELECTRIC ASSOCIATION V. PACIFICORP
(THE ANTITRUST CASE)
On April 20, 1998, federal District Judge B. Lynn Winmill granted the State’s Motion for Summary Judgment affirming the validity of the Idaho Electric Supplier Stabilization Act (ESSA), Idaho Code §§ 61-332 to -334B.  The Cooperative sued PacifiCorp (dba Utah Power & Light) alleging that the utility had violated federal antitrust laws preventing the Coop “from providing electric power both to PacifiCorp’s existing customers and to the potential ‘new’ customers . . . in the area surrounding Idaho Falls. . . .”  
PROCEDURAL HISTORY
In April 1997, the District Court issued a Memorandum Decision and Order holding that ESSA did not grant antitrust immunity to PacifiCorp.  Using U.S. Supreme Court precedent, the Court noted that state-action immunity would only be conferred upon PacifiCorp if: (1) the state through ESSA “clearly articulated and affirmatively expressed state policy permitting anti-competitive conduct by regulated parties”; and (2) that the state “actively supervise” the anti-competitive actions of private parties to ensure that the state’s interests are being met.  California Retail Liquor Dealers Ass’n v. Midcal Aluminum, 445 U.S. 97 (1980).  In its April ruling, the Court held that the ESSA clearly articulated the State policy that permits PacifiCorp to restrain competition for its existing customers.  However, the Court concluded that PacifiCorp had not demonstrated as a matter of law that the state of Idaho actively supervised the implementation of that policy by private suppliers of electric power.  Under ESSA, the State allows an aggrieved party to seek judicial review in state court for violations of ESSA.  The Court noted that it was aware of only one reported judicial opinion by an Idaho court reviewing an ESSA dispute in nearly 30 years.  Consequently, the Court concluded that one instance of judicial review in that time did not meet the requirement of “active supervision.”
Following this ruling, the State was granted leave to intervene to protect its interest in the continued vitality of ESSA.  Following briefing and oral argument, the Court subsequently reversed its earlier decision and found that PacifiCorp should be immune from federal antitrust liability under the state-action immunity doctrine first set out in Parker v. Brown, 317 U.S. 341 (1943).  This case recognizes an exception to federal antitrust laws for anti-competitive conduct undertaken by private entities pursuant to state law.
THE ELECTRIC STABILIZATION ACT (ESSA)
The ESSA was enacted by the Idaho Legislature in 1970.  Its purpose was to “promote harmony among and between electric suppliers furnishing electricity within the state of Idaho, prohibit the ‘pirating’ of customers of another supplier, discourage duplication of electric facilities, and stabilize the territories and customers served with electricity by such suppliers.”  Idaho Code § 61-332.  The ESSA speaks to both existing and new customers of electric power.  It specifically prohibits an electric supplier such as the Coop from providing service to current or former customers without the written consent of the other supplier.  Turning to new customers, the ESSA also provides that where only one supplier has an existing line within 1,320 feet of the customer or where two or more suppliers have existing service lines within that distance, the supplier having the closest line “has the right to provide service.”  Idaho Code § 61-322C(2), (3).  If no supplier has a service line within that distance or if two or more electric suppliers have lines which are equal distance from the new customer, then the consumer has “the right to choose among potential electric suppliers.”  Memorandum Decision and Order at 6 citingIdaho Code §§ 61-332C(1) and (4).(footnote: 1)
THE APRIL 20 DECISION
In its recent decision, Judge Winmill found that the ESSA satisfies the “clearly articulated” prong of the Midcal test.  Id. at 8 citingSouthern Motor Carriers Rate Conference v. United States, 471 U.S. 48, 60 (1985).   “In drafting ESSA, the Idaho Legislature could hardly have been clearer in expressing its desire to restrain competition among electric suppliers.”  Id. at 9.(footnote: 2)
In an about face, the Court found in this subsequent Decision and Order that the “active supervision” prong of the Midcal test was also met.  The “active supervision of the Midcal test requires that state officials have and exercise power to review particular anti-competitive acts of private parties and disapprove those that fail to accord with State policy.”  Id. at 10-11 citingPatrick v. Burget, 486 U.S. 94, 100 (1988).  The Court reversed its initial active supervision decision for four reasons.
First, the Court noted that the United States Supreme Court had recognized at least twice in dicta that a state statute itself may satisfy the “active supervision” requirement by mandating restraints on competition.  FTC v. Ticor Title Ins. Company, 504 U.S. 621, 640 (1992); 324Liquor Corp. v. Duffy, 472 U.S. 335, 344 n.6 (1987).  In essence, the Court recognized that the ESSA absolutely prohibits the pirating of current and former customers.  Thus, the Court stated that the ESSA statutory scheme may be characterized as self-policing because it leaves no discretion for anti-competitive conduct.
Second, the Court took judicial notice of the State’s evidence introducing additional ESSA district court cases.  This evidence brings “the tally of Idaho court cases involving ESSA to four.”  Decision and Order at 19.  The Court observed that this was exactly the number of California PUC decisions in an antitrust  case where the Ninth Circuit found that the active supervision prong was met.  Nugget Hydroelectric Company v. Pacific Gas & Electric Company, 981 F.2d 429 (9th cir. 1992).  
Third, the Court accepted Brett’s argument that it would be inequitable and illogical to require ESSA to be violated in multiple instances, thereby generating Court decision before state-action immunity could be conferred.  The Court observed that ESSA “so unambiguously forbids competition in broad circumstances that it is reasonable to assume that private entities have no difficulty understanding the statute well enough to comply.  . . .Here, the paucity of court decisions is a better indicator that ESSA is widely complied with than it is an indicator of the state’s lack of [active supervision].  Decision and Order and 15, n.12.  
Finally, the Court rhetorically asked what better assurance could there be that PacifiCorp is carrying out the State’s anti-competitive policies, than the State’s intervention in this case asserting the vitality of ESSA.
The Court recognized that the ESSA did not confer state-action immunity in those two situations where new customers were able to choose between electric suppliers.  However, the Court noted that the Cooperative made no specific factual allegations in its initial pleadings regarding new customers.  Consequently, PacifiCorp contented that granting the State’s Motion for Summary Judgment would permit the Court to dismiss the Coop’s Complaint in its entirety.  Because the record was not clear on this point, the Court granted summary judgment to the State but recognized that all issues were not resolved.  The Coop was directed to file a brief on all remaining issues in this case no later than May 4, 1998.
bls/M:essa.dh
FOOTNOTES
1:
In these latter two instances, the customer has may choose among potential electric suppliers.  Consequently, the State conceded that the ESSA did not clearly articulate a policy to displace competition in these two instances.  However, Brett argued that the ESSA’s anti-piracy provisions and the two instances where new customers did not have a right to choose clearly exhibited a state policy to displace competition.
2:
The Court also rejected the Coop’s argument the consensual ability of a supplier to allow another supplier to serve a current or former customer does not undermine the Legislature’s purpose of restraining competition among electric suppliers.