20090113Brief in Opposition to Respondent Motion.pdf

Bruce C. Jones, ISB #3177
Joy M. Bingham, ISB #7887
JONES & SWARTZ PLLC
1673 W. Shoreline Drive, Suite 200 (83702)
Post Offce Box 7808
Boise, Idaho 83707-7808
Telephone: [phone]
Facsimile: [phone]
E-mail: bruce(ijonesandswartz1aw.com
joy(ijonesandswarz1aw.com
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2009 JM1 '2 PM 5: 00
Attorneys for Idaho Power Company
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IDAHO POWER COMPANY,
Case No. IPC-E-08-20
Complainant,
GLENNS FERRY COGENERATION
PARTNERS, LTD., a Colorado Limited
Parnership,
IDAHO POWER COMPANY'S BRIEF
IN OPPOSITION TO RESPONDENT'S
MOTION TO DISMISS FOR LACK OF
SUBJECT MATTER JURISDICTION
vs.
Respondent.
I.
INTRODUCTION
Complainant Idaho Power Company's ("Idaho Power") Petition for Declaratory Order
and Formal Complaint for Breach of Contract is properly before the Idaho Public Utilities
Commission ("Commission") because the Commission has the unique expertise needed to
deterine whether Respondent Glenns Ferr Cogeneration Partners, Ltd. ("Glenns Ferr
Cogeneration") has peranently curtailed its deliveries of energy to Idaho Power as a result of
IDAHO POWER COMPAN'S BRIEF IN OPPOSITION TO RESPONDENT'S
MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JUSDICTION - 1
Glenns Ferr Cogeneration's loss of its thermal host. This narrow focus requires the
Commission to look only at the facts and circumstances surrounding the operating status of
Glenns Fer Cogeneration since October of 2007. The issuance of a declaratory order regarding
the existence of a permanent curtailment would be a proper utilization of the Commission's
experise in shaping, reviewing and approving contracts between cogeneration facilities and
electrc utilities.
II.
STATEMENT OF FACTS
A. The Commission Controlled the Development of the Parties' Firm Energy
Sales Agreement
With the federal enactment of the Public Utility Regulatory Policies Act ("PURP A") in
1978, the Commission was charged with the authority and duty to require the utilities it regulated
to purchase power generated by qualifying cogenerators or small power producers ("Qualifyng
Facilties" or "QFs") by means of fixed term contracts. Indeed, PURP A was designed so that
utilities were mandated to purchase power from QFs, whether they wanted to or not. 16 U.S.C.
§ 824a-3(a). Glenns Ferr Cogeneration's facility is a natural gas fired tubine generator located
at the Magic West potato processing facility in Glenns Ferr, Idaho ("Glenns Ferr Project" or
"the Project"). The Glenns Ferr Project is a "cogeneration facility", which is one which
sequentially produces electricity and other forms of useful theral energy (such as heat or
stear), for industral, commercial, heating, or cooling purposes. 18 C.F.R. § 292.202(c). In
order to obtain the necessar qualifyng status, a cogeneration facility has to be certified as such
by the Federal Energy Regulatory Commission ("FERC") which, in par, requires Glenns Ferr
Cogeneration to maintain a minimum ratio of thermal energy output to be received by a theral
host and electrc energy to be purchased by Idaho Power. 18 C.F.R. §§ 292.205, 292.207.
IDAHO POWER COMPAN'S BRIEF IN OPPOSITION TO RESPONDENT'S
MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JUSDICTION - 2
Durng the 1980's and early 1990's the Commission issued numerous orders which
established the rates and many of the ters and conditions which Idaho Power is required to
include in long-ter contracts to purchase energy from QFs. Pursuant to these Commission
orders and federal statutory requirements, Idaho Power and Glenns Ferr Cogeneration entered
into a Firm Energy Sales Agreement ("FESA" or "the Agreement") on December 9, 1992.
Under the Agreement, Glenns Ferr Cogeneration agreed to sell the energy generated by its
electrical facility to Idaho Power for a term of 20 contract years.
1 The Project was the first of its
kind to offer energy generated by natural gas to Idaho Power, and the Commission's final order
approving the Agreement recognized several nonstandard and unique features. Ultimately, the
Commission approved the Agreement on Januar 22, 1993, in Order No. 24674.2
For the most part, agreements between QFs and Idaho Power follow an established
template based on numerous prior Commission orders. However, the Commission has often
peritted QFs and Idaho Power to negotiate unique provisions in FESAs and present them to the
Commission for review and approvaL. In the FESA between Glenns Fer Cogeneration and
Idaho Power, two areas were recognized by the Commission and the pares as being particularly
unique. First, were the provisions of the FESA that recognized the integral role the Commission
plays in QF contracts and the continuing jursdiction of the Commission over the ters and
conditions of the FE SA. Paragraph 7.3 specified such continuing jursdiction due to the fact that
the FESA was a special contract and would accordingly be constred puruant to Idaho law.3
1 Ex. A to Affdavit of Counsel in Support of Idaho Power Company's Brief in Opposition to
Respondent's Motion to Dismiss for Lack of Subject Matter Jurisdiction ("Aff. of Counsel"), Fir
Energy Sales Agreement Between Idaho Power Company and Glenns Ferr Cogeneration Parners, Ltd.2 Ex. B to Aff. of Counsel, IPUC Order No. 24674.
3 Ex. A to Af. of Counsel, the Agreement, ~ 7.3.
IDAHO POWER COMPANY'S BRIEF IN OPPOSITION TO RESPONDENT'S
MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JUSDICTION - 3
Also, in paragraph 21.1 of the FESA, the parties agreed that all disputes arsing under the FESA
would be submitted to the Commission for resolution.4
Prior to filing its Motion to Dismiss, Glens Ferr Cogeneration had taken the position
that the Commission has continuing jurisdiction, not only in the Agreement, but also as recently
as June 10, 2008, when it stated that "( w)e understand that our reading of the provisions of the
FESA may differ with Idaho Power's, and would be willng, under Section 21.1 of the FESA, to
take any resulting difference of opinion to the Idaho Public Utilties Commission . . . for
resolution."s In approving the Agreement, the Commission, in Order No. 24674, stated that it
would determine jurisdiction as to the resolution of disputes on an individual case-by-case basis,
notwithstanding paragraph 21.1 of the Agreement.6 While Idaho Power acknowledges that
contracting paries may not confer jurisdiction on the Commission by contractual stipulation, the
Commission has broad discretion to hear unique factual situations and recognizes that it does
have jursdiction to hear disputes on a case-by-case basis.7
The second unique area of the FESA, which arose out of the paries' negotiations, was
the necessity of a secure theral host to receive the energy from the Project for the entire 20-
year contract term. Commission Order No. 24674 discussed that the compensation to Idaho
Power for the increased risk of loss of motive force attbutable to the Project would be mitigated
by the commitment of Glenns Ferr Cogeneration to provide, arong others, periodic assurances
4 Ex. A to Aff. of Counsel, the Agreement, ~ 21.1.5 Ex. C to Aff. of Counsel, Letter from Steven J. Helmers, Vice President, Glenns Ferr Cogeneration
Partners, Ltd., to M. Mark Stokes (June 10,2008) (hereinafter "the Letter").
6 Ex. B to Aff. of Counsel, IPUC Order No. 24674, p. 4.7 See Utah Power & Light Co. v. ¡PUC, ll2 Idaho 10, l4,730 P.2d 930,934 (1986). The Idaho Supreme
Court has often ruled that "the IPUC has every power, express or implied, necessary to enable it to
exercise its powers and puroses." ¡d. (citations omitted). "Although no express statute in the public
utilties law provides authority to the IPUC in this instance, the broad general power of the IPUC
(LC. § 61-501), coupled with its powers of certification provide a basis for jurisdiction in this unique
factual situation." ¡d.
IDAHO POWER COMPAN'S BRIEF IN OPPOSITION TO RESPONDENT'S
MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JUSDICTION - 4
of ongoing performance of the theral host for the full term of the Agreement. 8 As such, the
Order noted paragraph 4.l.11 of the Agreement, which provided that Glenns Ferr Cogeneration
would be liable to Idaho Power for any permanent curtailment of energy deliveres resulting
from an uncured breach by the thermal host. 9 Additionally, paragraph 21.3 of the Agreement
imposed liability on Glenns Ferr Cogeneration for a peranent curtailment, in whole or in par,
of deliveries of energy to its thermal host. 10 Consequently, the Commission authorized the
Agreement with the understanding that Idaho Power was due some security within the
Agreement, which was partially provided through compliance by the thermal host. The
Commission's recogntion of the importance of the performance of the theral host to the
continued operation of the QF necessarily carres with it the authority to declare whether a
peranent curtailment on the par of that host and/or Glenns Ferr Cogeneration has occured.
B. The Commission Provided Specifc Security for Idaho Power in the FESA
Perhaps the best exarple of the Commission's intimate involvement in the deterination
of rates, terms and conditions for PURPA contracts is the Commission's limitations on securty
in agreements between Idaho Power and QFs like Glenns Ferr Cogeneration. In 1987 and
1988, in Case No. U-1006-292, the Commission conducted an extensive investigation into issues
raised by Idaho Power and the predecessors to A vista and Rocky Mountain Energy regarding
provisions that could be included in QF contracts to provide performance security if QFs chose
to be paid levelized rates. The utilities were concerned that if economic conditions changed, QFs
might simply walk away from their contracts, leaving customers without adequate remedies to
recover the overpayments associated with levelized rates. The three utilities argued that the
8 Ex. B to Aff. of Counsel, IPUC Order No. 24674, pp. 1-3.9 Ex. A to Aff. of Counsel, the Agreement, ~ 4.l.11; Ex. B to Aff. of Counsel, IPUC Order No. 24674,
p. 2, ~~ (c-d).
10 Ex. A to Aff. of Counsel, the Agreement, ~ 21.3.
IDAHO POWER COMPAN'S BRIEF IN OPPOSITION TO RESPONDENT'S
MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JUSDICTION - 5
contracts should provide liquid securty that the utilities could look to if QFs failed to perform
for the full ter of their agreements and such failure resulted in financial injury to customers.
The outcome of that proceeding, set out in Order No. 21690,11 was that the Commission
prescrbed ver specific security provisions which could be included in QF contracts that would
allow the QFs to avoid having to post liquid security. Idaho Power believes that the situation
with Glenns Fer Cogeneration provides exactly the type of scenaro that Idaho Power was
concerned about. For its own business reasons, Glenns Ferr Cogeneration's thermal host, Idaho
Fresh-Pak, Inc. ("Idaho Fresh-Pak"), has decided to cease operations at Glenns Ferr, thereby
renderng Glenns Ferr Cogeneration unable to perform its contract with Idaho Power. Whether
Glenns Ferr Cogeneration wil have sufficient resources to repay Idaho Power is yet to be
determined. The situation clearly demonstrates the need for the Commission to be involved in
the initial deterination of whether or not Glenns Ferry Cogeneration has defaulted on its FESA
with Idaho Power.
C. The Parties Cooperated Under the Terms of the FESA Until 2007 When
Glenns Ferry Cogeneration Permanently Curtailed its Energy Deliveries
Before electrc energy deliveries commenced, the Agreement was twice arended to
accommodate diffculties experenced by the Project. In the Agreement, Glens Fer
Cogeneration selected its initial Scheduled Operation Date as January 1, 1995, with December 1,
1994, being the First Energy Date.12 On April 12, 1994, Idaho Power and Glenns Ferr
Cogeneration entered into a First Amendment to the Agreement. l3 The primary modification of
the Agreement was to delay the Scheduled Operation Date from Januar 1, 1995 to Januar 1,
1996, and the First Energy Date from December 1, 1994 to December 1, 1995. The Commission
II Ex. D to Aff. of Counsel, IPUC Order No. 21690.
12 Ex. A to Aff. of Counsel, the Agreement, Appendix B, ~ B-3.13 Ex. E to Aff. of Counsel, the First Amendment to the Agreement.
IDAHO POWER COMPAN'S BRIEF IN OPPOSITION TO RESPONDENT'S
MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JUSDICTION - 6
approved the First Amendment to the Agreement on May 18, 1994, in Order No. 25505.14 Those
sare ters of the Agreement were modified a second time when Idaho Power and Glens Fer
Cogeneration entered into a Second Amendment to the Agreement on December 30, 1995.15
Among other things, the Scheduled Operation Date was suspended until March 7, 1996, and the
First Energy Date to Februar 5, 1996. The Commission approved the Second Amendment in a
Minute Entr dated Januar 8, 1996.16
Thereafter, the paries proceeded according to the terms of the Agreement until
October 24,2007, when Glenns Ferr Cogeneration was last able to deliver steam to its theral
host and halted deliveries of electrcity to Idaho Power. In order to maintain its status as a QF
under federal law, Glenns Ferr Cogeneration was required to sell thermal energy (stear)
generated by the Project to a "thermal host," an entity that uses the stear in its own
manufacturing or production facility. Idaho Fresh-Pak was a potato processing facility that was
the most recent thermal host to the Project. In February 2008, Idaho Fresh-Pak permanently shut
down its Glenns Ferr operations. As a result of Glenns Fer Cogeneration losing Idaho Fresh-
Pak as its sole thermal host, Glenns Ferr Cogeneration has peranently curailed all of its
deliveries of energy to Idaho Power.
III.
STANDARD OF REVIEW
The natue of a motion to dismiss for lack of subject matter jurisdiction pursuant to Idaho
Rule of Civil Procedure 12(b)(1) or IPUC Rule of Procedure 56 is to determine whether the
plaintiff has the right to be before a paricular trbunaL. Since the jurisdictional question is
14 Ex. F to Aff. of Counsel, IPUC Order No. 25505.
15 Ex. G to Aff. of Counsel, the Second Amendment to the Agreement.
16 Ex. H to Aff. of Counsel, IPUC Minute Entry, Januar 8, 1996.
IDAHO POWER COMPAN'S BRIEF IN OPPOSITION TO RESPONDENT'S
MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JUSDICTION - 7
unique to the Commission, as it would be the distrct cour, there exists a "broader power to
decide its own right to hear the case than it has when the merits of the case are reached." Osborn
v. United States, 918 F.2d 724, 729 (8th Cir. 1990) (citations omitted). In deciding on a motion
to dismiss, the standard of review is the sare as that used in summar judgment. Gibson v. Ada
County, 142 Idaho 746, 751, 133 P.3d 1211, 1216 (2006). Therefore, the Commission must
"liberally construe all disputed facts in favor of the nonmoving pary, and all reasonable
inferences that can be drawn from the record wil be drawn in favor of the nonmoving party."
Porter v. Bassett, 146 Idaho 399, 195 P.3d 1212, 1215 (2008).
iv.
ARGUMENT
A. The Commission has the Jurisdiction to Resolve this Dispute
PURP A contracts are unique. They require the Commission to balance the interests of
customers and QF developers within an intertwined body of both Federal and Idaho law. Since
the Commission has been intimately involved in development of QF contracts and has
administered the requirements of PURP A in Idaho for many years, citation to the FESA, the
federal statutes and precedent set forth therein sufficiently referenced controlling law as required
by IPUC Rules of Procedure 54 and 101. Moreover, this dispute is one of first impression before
the Commission, as it would be before the distrct court. Consequently, binding precedent is not
available for citation and the most pertinent controllng law is that produced by the Commission
itself. "The natue and extent of the Commission jurisdiction to resolve actual disputes wil be
determined by the Commission on an individual case-by-case basis. . .." ¡PUC Order
No. 24674, p. 4 (emphasis added). The Commission must look to the technical nature of the
Agreement and the circumstances under which the Agreement was produced, which render it a
IDAHO POWER COMPAN'S BRIEF IN OPPOSITION TO RESPONDENT'S
MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JUSDICTION - 8
special contract. The parties have always looked to the Commission for guidance regarding the
unique provisions of the Agreement and PURP A compliance; 17 and until faced with an actual
dispute, Glenns Fer Cogeneration advocated for resolving any dispute before the
Commission.18 Since the Agreement anticipates Commission jurisdiction, the Commission itself
deterined it has discretion to resolve disputes, and the Commission is knowledgeable about the
unique aspects of PURP A law and PURP A contracts, this dispute is properly before the
Commission.
B. The Commission has the Authority to Exercise Discretion and Accept Jurisdiction
Over this Matter because the Agreement is a Special Contract Fallg Outside the
District Court's General Jurisdiction over Contract Disputes
Typically wholesale contracts for the purchase and sale of power are within the sole
jursdiction of the FERC. PURP A changed that for QFs. Federal law delegated to the
Commission the obligation to oversee creation of the wholesale PURP A contracts, including the
FESA between Idaho Power and Glenns Ferr Cogeneration, and that duty should remain as to
dispute resolution. Due to federal law, the mandatory purchase requirement, and the
Commission's extensive involvement with creation of the terms and conditions of the
Agreement, the Agreement canot be viewed as a normal contract which a distrct cour would
expect to see on a routine basis. Moreover, just as Idaho Power "canot divorce itself from the
contractual responsibilty attendant to implementation of a federally mandated requirement of
purchase,,,19 the Commission should not withhold its special expertise in superising its federal
17 See Exs. A, E and H to Aff. of CounseL.18 Ex. C to Aff. of Counsel, the Letter, p. 2. The Letter states: "We understad that our reading of the
provisions of the FE SA may differ with Idaho Power's, and would be wiling under Section 21.1 of the
FESA, to take any resulting difference of opinion to the Idaho Public Utilities Commission ("PUC") for
resolution." ¡d.
19 Ex. I to Aff. of Counsel, IPUC Order No. 21800, ~ 1, p. 3.
IDAHO POWER COMPAN'S BRIEF IN OPPOSITION TO RESPONDENT'S
MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JUSDICTION - 9
charge to implement FERC rules and regulations.2° Consistently, while Idaho law indicates that
contract interpretation is generally for the courts, not the Commission, it has not been determined
that interpretation and enforcement ofPURPA contracts are solely for the cours.
As Glenns Fer Cogeneration notes, Lemhi Telephone Co. v. Mountain States Telephone
& Telegraph Co. stands for the general proposition that normal contractual disputes should be
heard by the courts. 98 Idaho 692, 696, 571 P.2d 753, 757 (1977). However, a normal contract
dispute is not representative of the dispute currently before the Commission. The present matter
is analogous to McNeal v. ¡PUC, where the Idaho Supreme Cour held that the Commission has
the authority to interpret and enforce special, federally directed, contracts. 142 Idaho 685, 689,
132 P.3d 442, 446 (2006). The contracting paries in McNeal, PageData and Qwest, entered into
an interconnection agreement that was negotiated according to federal requirements determined
by the Federal Communications Commission, but approved by the Idaho Public Utilities
Commission. McNeal v. ¡PUC, 142 Idaho 685, 687, 132 P.3d 442, 444 (2006). When a dispute
arose, PageData fied a complaint with the Commission alleging noncompliance by Qwest.
McNeal, 142 Idaho at 444, 132 P.3d at 687. Qwest responsively requested the Commission to
dismiss the complaint because PageData had not exhausted arbitration procedures as required per
the agreement. ¡d. The Commission dismissed the complaint because the paries had not
complied with the mandatory arbitration provisions of the contract, and upon reconsideration
fuher found that "the interpretation of contracts generally lies with the courts and not the
Commission." ¡d. The Supreme Court upheld the Commission's order with regard to the
mandatory arbitration of the parties' dispute, but disagreed with its contention that the contract
dispute should be handled by the courts. McNeal, 142 Idaho at 446, 132 P.3d at 689.
20 Ex. B to Aff. of Counsel, IPUC Order No. 24674, ~ 2, p.4; Ex. I to Aff. of Counsel, IPUC Order
No. 21800, ~ 2, p. 7.
IDAHO POWER COMPAN'S BRIEF IN OPPOSITION TO RESPONDENT'S
MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURSDICTION - 10
The Cour held that while general contract interpretation is traditionally the province of
the courts, interretation and enforcement of special contracts, mandated by federal law onto
utilities, falls outside the norm. The federal law's "grant to the state commissions of plenar
authority to approve or disapprove these interconnection agreements necessarly cares with it
the authority to interpret the provisions of agreements that state commissions have approved."
McNeal, 142 Idaho at 446, 132 P.3d at 689 (citations omitted). The Court clearly accepted that
"because of federal law interconnection agreements fall outside of the norm." ¡d. Akn is the
federal governance of PURP A contracts that are then administered at the state level by the
Commission. As such, the Commission should accept jursdiction of this dispute arsing under a
special PURP A contract for the purpose of determining whether a peranent curailment of
energy deliveries has occurred.
v.
CONCLUSION
For the foregoing reasons, Idaho Power respectfully requests that the Commission deny
Glenns Ferr Cogeneration's Motion to Dismiss for Lack of Subject Matter Jurisdiction.
DATED this 12th day of Januar, 2009.
JONES & SWARTZ PLLC
By bi~¿RUCE C. JONES
JOY M. BINGHA
=- -
IDAHO POWER COMPAN'S BRIEF IN OPPOSITION TO RESPONDENT'S
MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JUSDICTION - 11
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that I have this 12th day of January, 2009, served the foregoing
IDAHO POWER COMPANY'S BRIEF IN OPPOSITION TO RESPONDENT'S MOTION TO
DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION upon all paries of record in
this proceeding, by the method indicated, addressed as follows:
Glenns Ferr Cogeneration Parers, Ltd.
c/o Power Plant Management Serices, LLC
7001 Boulevard 26, Suite 310
North Richland Hils, TX 76180
Attn: Fred Barber/Scott Gross
P1.S. Mail
( ) Fax: [phone]
( ) Overnght Delivery
( ) Messenger Delivery
( ) Email: fbarber(ippmsllc.com
sgrossppms(isuddenlink.net
National Corporate Research LT
921 S. Orchard Street, Suite G
Boise, ID 83706
KfU.S.Mail
( ) Fax:
( ) Overnight Delivery
( ) Messenger Delivery
( ) Email:
~(-~
BCEJONES
IDAHO POWER COMPAN'S BRIEF IN OPPOSITION TO RESPONDENT'S
MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JUSDICTION - 12