20130110Response to Motion.pdf

Zan
DONOVANE. WALKER
25
An IDACORP Company
Lead Counsel
dwaIkeridah opower corn
-Lrc5 çoM
January 10, 2013
VIA HAND DELIVERY
Jean D. Jewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
Boise, Idaho 83702
Re: Case Nos. IPC-E-12-25 and IPC-E-12-26
Complaints and Petitions of Idaho Power Company for Declaratory Order
New Energy Two, LLC (Swager Farms) and New Energy Three, LLC
(Double B Dairy) - Idaho Power Company's Response to Respondents'
Motion to Dismiss
Dear Ms. Jewell:
Enclosed for filing in the above matter are an original and seven (7) copies of Idaho
Power Company's Response to Respondents' Motion to Dismiss.
Very yours,
Donovan E. Walker
DEW:csb
Enclosures
1221 W. Idaho St. (83702)
P.O. Box 70
Boise, ID 83707
DONOVAN E. WALKER (ISB No. 5921)
JULIA A. HILTON (ISB No. 7740)
Idaho Power Company
1221 West Idaho Street (83702)
P.O. Box 70
Boise, Idaho 83707
Telephone: [phone]
Facsimile: [phone]
dwalkercidahopower.com
IhiItonidahopower.com
213 JAN 10 PM 3: 25
OF,4T I SS
Attorneys for Idaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE COMPLAINT
AND PETITION OF IDAHO POWER
COMPANY FOR A DECLARATORY
ORDER REGARDING THE FIRM ENERGY
SALES AGREEMENT AND GENERATOR
INTERCONNECTION AGREEMENT WITH
NEW ENERGY TWO, LLC.
IN THE MATTER OF THE COMPLAINT
AND PETITION OF IDAHO POWER
COMPANY FOR A DECLARATORY
ORDER REGARDING THE FIRM ENERGY
SALES AGREEMENT AND GENERATOR
INTERCONNECTION AGREEMENT WITH
NEW ENERGY THREE, LLC.
CASE NO. IPC-E-12-25
CASE NO. IPC-E-12-26
IDAHO POWER COMPANY'S
RESPONSE TO RESPONDENTS'
MOTION TO DISMISS
The Petitioner/Complainant, Idaho Power Company ("Idaho Power"), pursuant to
the Idaho Public Utilities Commission's ("Commission") Rules of Procedure, including,
but not limited to, RP 57, hereby files this Response to New Energy Two, LLC, and New
Energy Three, LLC's ("Respondents") Motion to Dismiss for Lack of Subject Matter
Jurisdiction ("Motion to Dismiss").
IDAHO POWER COMPANY'S RESPONSE TO RESPONDENTS' MOTION TO DISMISS -1
I. SUMMARY OF THE CASE
Idaho Power filed Complaints and Petitions for a Declaratory Order in the above-
captioned cases due to Respondents' failure to take the necessary steps required to
bring its facilities on-line by the dates required in Respondents' Firm Energy Sales
Agreements ("FESA"). Specifically, instead of taking steps to move forward with the
development of their projects and the required generator interconnection to meet their
Scheduled Operation Dates as required by the FESAs, Respondents chose to assert
claims of force majeure, alleging that proceedings at the Commission excuse its
performance because renewable project lenders were unwilling to lend in Idaho pending
the outcome of those proceedings. Idaho Power maintains that challenges facing
lending cannot constitute the type of unanticipated or unforeseeable events that lead to
a valid event of force majeure. In its Complaints, Idaho Power requested that the
Commission find: (1) that it has jurisdiction over the case; (2) that the claims of force
majeure do not exist and do not excuse Respondents' failure to meet its Scheduled
Operation Dates; (3) that Idaho Power is entitled to damages under the FESAs; and (4)
that Idaho Power may terminate if and when Respondents do not achieve the required
Operation Dates. Respondents filed a Motion to Dismiss, alleging that Idaho law
deprives the Commission of jurisdiction over interpretation or enforcement of the
FESAs. Idaho Power asserts that the Commission does indeed have jurisdiction over
the interpretation of the contracts at issue.
II. ARGUMENT
Respondents misrepresent the law in the state of Idaho claiming that "Idaho law
deprives the Commission of jurisdiction to adjudicate a contract dispute, and the
Commission must therefore dismiss Idaho Power's claims requesting interpretation and
IDAHO POWER COMPANY'S RESPONSE TO RESPONDENTS' MOTION TO DISMISS -2
enforcement of the FESAs. Those claims may only be heard in a court of competent
jurisdiction." Motion to Dismiss at 4. As set forth below, there are instances in which
the Commission can, and does, interpret contracts entered into by public utilities that it
regulates, and has the jurisdiction to do so. Again, contrary to the representations of
Respondents, this is true whether or not the other party to the contract is regulated by
the Commission.
A. The Commission Has Jurisdiction to Hear These Cases.
The Idaho Supreme Court has specifically found that despite language that
contract interpretation is for the courts, the Commission does have jurisdiction, and the
right, to interpret contracts. McNeal v. Idaho Public Utilities Commission, 142 Idaho
685, 689, 132 P.3d 442, 446 (2006). In McNeal, the Commission's interpretation of an
arbitration provision in a Commission-approved contract between PageData, an
unregulated paging provider, and Qwest, at that time a regulated public utility, was
found to be properly within the jurisdiction of the Commission. Id.
In its Motion to Dismiss, Respondents allege that the Commission does not have
jurisdiction because the Commission's powers are limited to those powers that are
expressly granted to it. Motion to Dismiss at 5. While this is correct as a general rule,
the Court has routinely tempered such statements and recognizes that there are
instances in which the Commission does have jurisdiction and authority to interpret
contracts.
Idaho Case law indicates in general that contract
interpretation is for the courts, not the Commission, but has
not determined that interpretation and enforcement of an
interconnection agreement is solely for the courts. The
cases have been careful to use words such as "generally"
and "normally" and also, to provide for exceptions to the
norm.
IDAHO POWER COMPANY'S RESPONSE TO RESPONDENTS' MOTION TO DISMISS -3
Id. The Court then went on to cite several of the very statements relied upon by
Respondents.
In Lemhi Telephone Co. v. Mountain States Telephone &
Telegraph Co., 98 Idaho 692, 696, 571 P.2d 753, 757 (1977)
this court stated: "Generally, construction and enforcement
of contract rights is a matter which lies in the jurisdiction of
the courts and not in the Public Utilities Commission." In
Idaho Power Co. v. Cogeneration, Inc., 134 Idaho 738, 748,
9 P.3d 1204, 1214 (2000) this Court cited Afton Energy Inc.
v. Idaho Power Co., 111 Idaho 925, 929, 729 P.2d 400, 404
(1986), stating: "Questions of contract interpretation and
enforcement are normally the sole province of the courts."
Id. However, the Court in McNeal then found that "Because of federal law
interconnection agreements fall outside the norm." Id.
In McNeal, the Commission was tasked with implementation of federal
regulations, which led to an interconnection agreement, a contract, between PageData
and Qwest. PageData filed a complaint alleging that Qwest was not in compliance with
certain provisions of the agreement. The Commission dismissed the complaint, finding
that under the arbitration clause of the contract that the parties were to first submit the
matter to arbitration. The Supreme Court held that the Commission had authority to
interpret the arbitration provision in the contract. Id. Similarly, in this case, the
Commission is tasked with implementation of the Public Utility Regulatory Policies Act
of 1978 ("PURPA") federal regulatory scheme, which led to an agreement between
Idaho Power, a regulated utility, and Respondents, non-regulated PURPA qualifying
facilities ("QFs"). Here, Idaho Power has also filed complaints due to Respondents'
failure to meet its contractual commitments in that agreement, where Respondents
claim its non-performance is excused by the force majeure clause in the contract.
Similarly, just as the Commission had the jurisdiction and authority to interpret the
IDAHO POWER COMPANY'S RESPONSE TO RESPONDENTS' MOTION TO DISMISS -4
arbitration clause in McNeal, the Commission here has the jurisdiction and authority to
interpret the force majeure clause in the FESA.
B. The Parties Agreed to Submit Disputes to the Commission.
Additionally, the Commission may have jurisdiction over the interpretation of
contracts where the parties have agreed to submit a dispute involving contract
interpretation to the Commission. Afton Energy, Inc. v. Idaho Power Co., 111 Idaho
925, 929, 729 P.2d 400, 404 (1986) 929, 729 P.2d at 404 (citing Bunker Hill Co. v.
Wash. Water Power Co., 98 Idaho 249, 252, 561 P.2d 391, 394 (1977)). Despite their
claims to the contrary, Respondents agreed to submit claims to the Commission in their
agreement. Both FESAs contain identical language regarding Commission jurisdiction.
Paragraph 7.7 of the FESAs provides for continuing jurisdiction of the Commission.
Continuing Jurisdiction of the Commission. This Agreement
is a special contract and, as such, the rates, terms and
conditions contained in this Agreement will be construed in
accordance with Idaho Power Company v. Idaho Public
Utilities Commission and Afton Energy, Inc., 107 Idaho 781,
693 P.2d 427 (1984), Idaho Power Company v. Idaho Public
Utilities Commission, 107 Idaho 1122, 695 P.2d 1 261
(1985), Afton Energy, Inc. v. Idaho Power Company, 111
Idaho 925, 729 P.2d 400 (1986), Section 210 of the Public
Utility Regulatory Policies Act of 1978 and 18 CFR
§292.303-308.
(Double B Complaint, Attachment I at p. 17; Swager Complaint Attachment I at p. 17.)
Paragraph 19.1 of the FESAs also demonstrates that the parties have agreed to the
Commission's jurisdiction regarding any and all disputes, providing that all disputes
relating to the Agreement will be submitted to the Commission.
Disputes - All disputes related to or arising under this
Agreement, including, but not limited to, the interpretation of
the terms and conditions of this Agreement, will be submitted
to the Commission for resolution.
IDAHO POWER COMPANY'S RESPONSE TO RESPONDENTS' MOTION TO DISMISS -5
Id. While not dispositive of Commission jurisdiction in and of itself, nonetheless, it is
clear that these are contracts which were entered into by the parties with the
understanding that disputes or interpretation would be submitted to the Commission.
C. The Commission's Grant of Authority Over Ratemaking Functions and its
Implementation of Federal Law Provides Express Authority and Creates a
Duty for the Commission to Hear the Present Dispute.
Respondents additionally claim that the Commission does not have an express
grant of authority which would allow them jurisdiction, defining the issue as one that
requires a grant of authority for the Commission to "interpret or enforce civil contracts."
Motion to Dismiss at 6. However, Respondents draw this incorrect conclusion by failing
to account for the types of contracts at issue and how they relate to Commission duties.
The answer is very different when the issue is given additional detail and context
because the Commission rightly has jurisdiction over interpretation of contracts relating
to utility rates, which contracts, when entered into pursuant to PURPA, it is required to
implement and oversee under a federal regulatory scheme and pursuant to state law.
The Commission is granted the requisite authority under both Idaho and federal law to
do so.
Idaho Code § 61-501 provides the Commission with authority to supervise and
regulate utilities and to do "all things necessary to carry out the spirit and intent" of the
act. Idaho Code § 61 -1 29 states that utilities are subject to the jurisdiction, control, and
regulation of the Commission. Idaho Code § 61-502 provides jurisdiction over rates,
including rates "or contracts. . . affecting such rates." The Commission is also granted
the power "upon its own motion or upon complaint, to investigate a single rate . .
contract or practice." I.C. § 61-503. The FESAs at issue are utility contracts which
affect rates as defined under § 61-5Q2 and which the Commission has specific authority
IDAHO POWER COMPANY'S RESPONSE TO RESPONDENTS' MOTION TO DISMISS -6
to investigate under § 61-503. The payments made by Idaho Power, as well as any
damages collected, under the FESA are directly assigned to Idaho Power's many
customers through rates. As such, the contractual matters affecting the same fall
directly under the express grant of authority to the Commission.
Furthermore, PURPA itself grants the Commission jurisdiction over the
implementation of the federal statute. Afton Energy, Inc. v. Idaho Power Co., 107 Idaho
781, 784-85, 693 P.2d 427, 430-31 (1984) (hereinafter "Afton I/Ill"). The Court recites
the utility's federal obligations which require that "each State regulatory authority shall
implement such rule." Id. (citing PURPA § 210(f)). The Idaho Supreme Court states
that "it is clear that PURPA was intended to confer upon state regulatory commissions
responsibilities not conferred under state law." Afton I/Ill, 107 Idaho at 784-85, 693
P.2d at 430-31. "Moreover, the United States Supreme Court has interpreted PURPA
as imposing requirements on state regulatory authorities in excess of their duties under
state law." Id. The Federal Energy Regulatory Commission ("FERC") itself states that
"state 'implementation may consist of the issuance of regulations, an undertaking to
resolve disputes between qualifying facilities and electric utilities arising under Subpart
C, or any other action reasonably designed to implement such subpart." Id. (citing 18
CFR § 292.401 (a)(1 980)).
This establishes a clear grant of authority to the Commission that confers upon it
responsibilities under PURPA that are "in excess" of those that were granted under
state law alone, and one which was anticipated to resolve disputes between qualifying
facilities and utilities regarding PURPA matters. By extension, the present dispute
between a utility and qualifying facilities over a PURPA matter is seemingly precisely
what FERC envisioned when it promulgated 18 CFR § 292.401(a). The Afton I/Ill Court
IDAHO POWER COMPANY'S RESPONSE TO RESPONDENTS' MOTION TO DISMISS -7
cited language from the United States Supreme Court and federal laws which creates
an additional basis of authority for the Commission's jurisdiction in these cases. This
combined with the specific state authority previously discussed creates an explicit grant
of authority to the Commission to interpret a PURPA contract.
The Afton I/Ill Court analogized FERC v. Mississippi, 102 S.Ct. 2126, 2137
(1982), to this situation concluding that the Commission's actions of reviewing a dispute
over a PURPA contract were:
similar to its everyday ratemaking functions which
necessarily entail reviewing contracts and transactions which
affect those rates. I.C. § 61-307. Contracts entered into by
public utilities with CSPPs or decisions by utilities not to
contract with CSPPs have a very real effect on the rates paid
by consumers both at present and in the future.
Afton I/Ill, 107 Idaho at 789, 693 P.2d at 435 (emphasis added). This grant of
authority over ratemaking functions creates a duty for the Commission to hear the
present dispute.
III. CONCLUSION
Idaho Power respectfully requests that the Commission deny Respondents'
Motion to Dismiss. The Commission properly has jurisdiction over this matter. Such a
finding is consistent with prior decisions, with state and federal regulations, and with
Commission jurisdiction in other instances where it acts to implement federal
regulations. Idaho Power asks the Commission to find that it has jurisdiction over the
interpretation of the force majeure clause in Respondents' FESA5 and, subsequently, to
determine whether Respondents' claim of force majeure is a valid claim that excuses its
performance under the FESAs. Idaho Power withdraws is request for the Commission
to take any enforcement action pursuant to the FESAs, as those actions are clearly
IDAHO POWER COMPANY'S RESPONSE TO RESPONDENTS' MOTION TO DISMISS -8
defined by the FESAs, and it is not necessary for the Commission to take any action
regarding enforcement. Upon the Commission's determination regarding the force
majeure clause, Idaho Power will exercise the relevant rights and remedies it has as set
forth within the FESA, which may include termination and damages.
Respectfully submitted at Boise, Idaho, this 1oh day of January 2013.
VAN E. WALKER
Attorney for Idaho Power Company
IDAHO POWER COMPANY'S RESPONSE TO RESPONDENTS' MOTION TO DISMISS -9
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 10th day of January 2013 I served a true and
correct copy of IDAHO POWER COMPANY'S RESPONSE TO RESPONDENTS'
MOTION TO DISMISS upon the following named parties by the method indicated
below, and addressed to the following:
Commission Staff
Donald L. Howell, II
Deputy Attorney General
Idaho Public Utilities Commission
472 West Washington (83702)
P.O. Box 83720
Boise, Idaho 83720-0074
New Energy Two, LLC, and New Energy
Three, LLC
Peter J. Richardson
Gregory M. Adams
RICHARDSON & O'LEARY, PLLC
515 North 27th Street (83702)
P.O. Box 7218
Boise, Idaho 83707
Leslie White, Registered Agent
New Energy Two, LLC
New Energy Three, LLC
6152 North Sparkford Way
Boise, Idaho 83713
James Carkulis
Exergy Development Group of Idaho, LLC
802 West Bannock, Suite 1200
Boise, Idaho 83702
X Hand Delivered
U.S. Mail
Overnight Mail
FAX
X Email don. howellcDuc.idaho.qov
Hand Delivered
X U.S. Mail
Overnight Mail
FAX
X Email DeterrichardsonandoIeary.com
qreqrichardsonandoIeary.com
Hand Delivered
X U.S. Mail
Overnight Mail
FAX
X Email IwhiteexerqydeveloDment.com
Hand Delivered
X U.S. Mail
Overnight Mail
FAX
X Email jcarkulisexergydevelopment.com
Laura Knothe
Exergy Development Group of Idaho, LLC
Hand Delivered
U.S. Mail
Overnight Mail
FAX
X Email Iknothecexerqydevelopment.com
Christa Bearry, Legal Assistant (j
IDAHO POWER COMPANY'S RESPONSE TO RESPONDENTS' MOTION TO DISMISS -10