20121227Motion to Dismiss.pdf

RECERD
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ATTORNEYS AT LAW I QH&P•j5LtC
Peter Richardson .-'-
'-"
Tel: [phone] Fax: [phone]
[e-mail]
P.O. Box 7218 Boise, ID 83707 - 515 N. 27th St. Boise, ID 83702
27 December, 2012
Ms. Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
472 W. Washington
Boise, ID 83702
RE: IPC-E-12-26 - MOTION TO DISMISS
Dear Ms. Jewell:
Enclosed please find our MOTION TO DISMISS submitted for filing in the
above-referenced docket on behalf of Exergy Development Group of
Idaho, LLC. Per the Commission's Rules of Procedure, we have enclosed
and original and seven (7) copies, as well as an additional copy to be
stamped and returned to our office. Thank you.
Sincerely,
Nina Curtis
Richardson & O'Leary, PLLC
End.
PETER J. RICAHRDSON (ISB No. 3195) RE
GREGORY M. ADAMS (ISB No. 7454) cc 27 PM 12: 29 Richardson & O'Leary, PLLC
515 North 27" Street DAHU iELiC
P.O. Box 7218 UTILiTIES COMM.iSSO
Boise, Idaho 83707
Telephone [phone]
Fax [phone]
[e-mail]
greg(richardsonandoleary.com
Attorneys for:
New Energy Two, LLC
New Energy Three, LLC
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
)
IN THE MATTER OF THE COMPLAINT AND CASE NO. IPC-E-12-25
PETITION OF IDAHO POWER COMPANY )
FOR A DECLARATORY ORDER ) CASE NO. IPC-E-12-26 REGARDING THE FIRM ENERGY SALES )
AGREEMENT AND GENERATOR )
INTERCONNECTION AGREEMENT WITH j NEW ENERGY TWO, LLC AND
NEW ENERGY TWO, LLC. ) NEW ENERGY THREE, LLC'S
) MOTION TO DISMISS FOR LACK
IN THE MATTER OF THE COMPLAINT AND OF SUBJECT MATTER
PETITION OF IDAHO POWER COMPANY ) JURISDICTION FOR A DECLARATORY ORDER )
REGARDING THE FIRM ENERGY SALES )
AGREEMENT AND GENERATOR )
INTERCONNECTION AGREEMENT WITH )
NEW ENERGY THREE, LLC. )
)
I. INTRODUCTION
COMES NOW, New Energy Two, LLC and New Energy Three, LLC ("Respondents"),
IPC-E- 12-20
RESPONDENTS' MOTION TO DISMISS
PAGE 1
by and through their undersigned counsel, and file this Motion to Dismiss for Lack of Subject
Matter Jurisdiction pursuant to Rule 12(b)(1) of the Idaho Rules of Civil Procedure and Rule 56
of the Idaho Public Utilities Commission's Rules of Procedure ("IPUCRP"). This Motion to
Dismiss for Lack of Subject Matter Jurisdiction is addressed to all of Idaho Power Company's
("Idaho Power") claims and prayers for relief.
Therefore, Respondents respectfully request that the Commission dismiss Idaho Power's
Claims and Prayer for Relief requesting interpretation and enforcement of the Firm Energy Sales
Agreements ("FESA5") because the Commission lacks authority to adjudicate rights and duties
under a contract, let alone to declare Idaho Power is entitled to any award of damages.
II. BACKGROUND
On November 9, 2012, Idaho Power filed with this Commission a "Complaint and
Petition for Declaratory Order" regarding the FESA between it and New Energy Two, LLC and
on November 21, 2012 Idaho Power filed with this Commission a "Complaint and Petition for
Declaratory Order" regarding the FESA between it and New Energy Three, LLC
("Complaints").' In Order No. 32692 the Commission ruled that the two Complaints be
consolidated into a single proceeding and that New Energy and Exergy file a single answer or
motion in defense to the consolidated complaints and petitions no later than December 27, 2012.
In its Complaints, Idaho Power makes certain factual allegations and concludes with a
Prayer for Relief in which this Commission is asked to adjudicate whether or not an event of
force majeure excusing performance under certain contracts has occurred, whether certain
contracts have been breached, and to further adjudicate that Idaho Power is entitled to an award
New Energy Two, LLC and New Energy Three, LLC are collectively referred to herein as
"New Energy."
IPC-E- 12-25; IPC-E- 12-26
RESPONDENTS' MOTION TO DISMISS
PAGE 2
of damages as a remedy for said alleged breach of contract. Specifically for New Energy Two,
LLC, Idaho Power asked for entry of a declaratory order that:
1)the Commission has jurisdiction over the interpretation and enforcement of the
FESAs and the GIA;
2)that Exergy Development's [New Energy Two] claim of force maj cure does
not exist so as to excuse New Energy Two's failure to meet the amended
Scheduled Operation Date for the Swager Farms project;
3)that New Energy Two has failed to place the Swager Farms Project in service
by the Scheduled Operation Date of October, 2012, and that Idaho Power may
terminate the FESA as of December 30, 2012, if the Swager Farms Project fails to
achieve its Operation Date by that date;
4)that, pursuant to the FESA, Idaho Power is entitled to an award of liquidated
damages.2
With respect to New Energy Three (Double B Dairy Project) Idaho Power asked:
1)the Commission has jurisdiction over the interpretation and enforcement of the
FESAs and the GIA;
2)that Exergy Development's [New Energy Two] claim of force majeure does
not exist so as to excuse New Energy Three's failure to meet the amended
Scheduled Operation Date for the Double B project;
3)that if New Energy Three has failed to place the Double B Project in service by
the Scheduled Operation Date of December 1, 2012, Idaho Power may collect
delay damages;
4)that, if New Energy Three fails to achieve its Operation Date by March 1,2013,
Idaho Power may terminate the FESA.3
In the body of its Complaints, Idaho Power asserts that this Commission has jurisdiction
over its declaratory ruling and breach of contract claims with reference to scant and unsupportive
2 Complaint at p. 37.
Complaint at pp. 27-28.
IPC-E- 12-25; IPC-E- 12-26
RESPONDENTS' MOTION TO DISMISS
PAGE 3
legal authority supporting that assertion.4 For additional authority, Idaho Power references the
FESAs themselves - which, as discussed more fully below, cannot be used to bootstrap this
Commission's limited jurisdiction to expand it into that of a court of general jurisdiction.
III. ARGUMENT
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
enforcement of the FESAs. Those claims may only be heard in a court of competent jurisdiction.
This is so despite Idaho Power's attempts to convince the Commission that a clause in the
FESAs somehow represent Respondents' intent to rewrite Idaho law and confer jurisdiction upon
the Commission over FESA contract claims.
A. Idaho Law Deprives the Commission of Jurisdiction Over Any Claims Requesting
Interpretation or Enforcement of the FESAs.
Idaho Power filed its Petition and Complaint "pursuant to this Commission's Rules of
Procedure, including but not limited to RP 54 and RP 101." Complaints at p. 1. But both
IPUCRP 54 (dealing with Complaints) and IPUCRP 101 (dealing with Declaratory Orders)
specifically require that the referenced pleading identify the legal authority upon which it is
based. IPUCRP 54.03 requires a complaint to "refer to statutes, rules, orders or other controlling
law involved." Likewise, IPUCRP 101.02(c) requires that a petition for declaratory order
"indicate the statute, order, rule or other controlling law" upon which the petitioner relies.
Idaho Power's failure to cite any statutory provision is telling because multiple Idaho
Supreme Court opinions have established that the Commission's authority is limited to those
4 See Complaints (-25) at p. 28 and (-26) at p. 19.
IPC-E- 12-25; IPC-E- 12-26
RESPONDENTS' MOTION TO DISMISS
PAGE 4
powers expressly granted to it by statute. See Application of Boise Water Corp. to Revise and
Increase Rates Chargedfor Water Service, 128 Idaho 534, 538, 916 P.2d 1259, 1263 (1996);
Alpert v. Boise Water Corp., 118 Idaho 136, 140, 795 P.2d 298, 302 (1990); Matter of Strand,
111 Idaho 341, 342, 723 P.2d 885, 886 (1986); Idaho Power Co. v. Idaho Pub. Util. Comm 'n.,
102 Idaho 744, 750, 639 P.2d 442,448 (1981); Wash. Water Power Co. v. Kootenai
Environmental Alliance, 99 Idaho 875, 881-882,591 P.2d 122,128-129 (1979); US. v. Utah
Power & Light Co., 98 Idaho 665, 667-669, 570 P.2d 1353, 1355-1358 (1977); Lemhi Telephone
Co. v. Mountain States Tel. & Tel. Co., 98 Idaho 692, 571 P.2d 753 (1977).
The Commission's jurisdiction is statutorily derived and cannot be expanded without
legislative action. "The Public Utilities Commission has no inherent power; its powers and
jurisdiction derives in its entirety from the enabling statutes, and nothing is presumed in favor of
its jurisdiction." Lemhi, 98 Idaho at 696, 571 P. 2d at 757 (internal quotation omitted). The
general rule is stated in 2 Am. Jur. 2d Administrative Law § 282, as:
Administrative agencies are tribunals of limited jurisdiction, and nothing is
presumed in favor of an agency's jurisdiction. As a general rule, agencies have
only such adjudicatory jurisdiction as is conferred on them by statute. Their
jurisdiction is dependent entirely upon the validity and the terms of the statutes
reposing power in them, and they cannot confer jurisdiction on themselves.
The enabling statute for the Commission is clear and unequivocal, and narrowly
circumscribes the Commission's jurisdiction:
INVESTMENT OF AUTHORITY. The public utilities commission is hereby
vested with power and jurisdiction to supervise and regulate every public utility in
the state and to do all things necessary to carry out the spirit and intent of the
provisions of this act.
I.C. § 61-501 (emphasis supplied). As early as 1921, the Idaho Supreme Court made clear that
the Commission only has jurisdiction over public utilities:
[Y]et in every case before the Public Utilities Commission, it must in the first
IPC-E-12-25; IPC-E-12-26
RESPONDENTS' MOTION TO DISMISS
PAGE 5
instance determine from the evidence before it whether the utility with which it is
seeking to deal is a public utility, for unless it be a public utility, the commission
is without any jurisdiction over it whatsoever.
Natatorium Co. v. Erb, 34 Idaho 209, 215, 200 P. 348, 350 (1921).
There is no provision in the Public Utilities Law that requires or permits the Commission to
interpret or enforce civil contracts, nor is such authority "necessary" to carry out the "spirit and
intent" of the Commission's regulatory and supervisory authority over public utilities.
The Idaho Supreme Court has ruled on the question of the Commission's jurisdiction to
interpret and/or enforce private contracts on several occasions throughout the past three decades.
As was the case in Lemhi, the issue presented here by Idaho Power's Complaint is "in all
manners one calling for the interpretation and enforcement of the parties' contractual rights." 98
Idaho at 696, 571 P.2d at 757. The Supreme Court held in that case:
Generally, construction and enforcement of contract rights is a matter which lies
in the jurisdiction of the courts and not the Public Utilities Commission. This is
true notwithstanding that the parties are public utilities or that the subject matter
of the contract coincides generally with the expertise of the commission. If the
matter is a contractual dispute, it should be heard by the courts.
Id at 696-697, 571 P.2d at 757-758 (collecting cases in support of this proposition).
Similarly, in Bunker Hill Co. v. Wash. Water Power Co., the Idaho Supreme Court held that:
Here, as in Lemhi, the parties' dispute arises from differing constructions
and interpretations of the contract rights of the parties. While one of the parties is
a public utility, and while the general area of power supply may be one in which
the Commission is presumed to have expertise, nevertheless, the matter remains a
contractual dispute involving the legal interpretation of a contract which
historically lies within the jurisdiction of the courts. Hence, no jurisdiction is
vested in the Public Utilities Commission and the refusal of the Commission to
grant Bunker Hill's motion to dismiss was error.
101 Idaho 493, 494; 616 P.2d 272, 273 (1980).
Notwithstanding this precedent, Idaho Power makes the assertion that, "The Commission
IPC-E- 12-25; IPC-E- 12-26
RESPONDENTS' MOTION TO DISMISS
PAGE 6
has jurisdiction over the interpretation of contracts where the parties have agreed to submit a
dispute involving contract interpretation to the Commission."5 With no analysis or explanation as
to how the two cases cited support the extraordinary proposition that parties to a contract may
confer jurisdiction on the Commission when it has no such jurisdiction in the first place, Idaho
Power cites to Afton Energy, Inc. v. Idaho Power Co. (hereinafter Afton IV), 111 Idaho 925, 929,
729 P.2d 400,404 (1986) (citing Bunker Hill Co. v. Wash. Water Power Co., 98 Idaho 249, 252,
561 P.2d 391, 394 (1977)).
It is true that the majority opinion in the Afton line of cases did not rely upon any
particular Idaho statute as the basis for the Commission's authority to order Idaho Power to enter
into a long-term, fixed-rate PURPA contract. Afton Energy, Inc. v. Idaho Power Co. (hereinafter
Afton 1/111)107 Idaho 781, 784-786, 693 P.2d 427,430-432 (1984). Rather, the Court held "the
federal government is permitting the Commission to further certain federal policies through the
performance of those functions the Commission is authorized to perform under Idaho statutes."
Id. at 784, 693 P.2d at 430. The Court further held that "PURPA was intended to confer upon
state regulatory commissions responsibilities not conferred under state law." Id. at 785, 693 P.2d
at 431. Thus, the Commission acts pursuant to federal authority when it implements PURPA's
mandatory purchase provisions and the Federal Energy Regulatory Commission's implementing
regulations that require utilities to interconnect to and purchase power from QFs. See 18 C.F.R.
§ § 292.101 et seq. But unlike the authority to order utilities to enter into contracts containing the
avoided cost rates and the authority to require utilities to interconnect to QFs in a non-
discriminatory fashion, the avoided cost provisions of PURPA provide no independent basis of
Complaint (-25) at p. 29 and (-26) at p. 19.
IPC-E- 12-25; IPC-E- 12-26
RESPONDENTS' MOTION TO DISMISS
PAGE 7
authority to interpret executed QF contracts. See American Ref-Fuel Co. of Niagara, L.P. v.
Niagara Mohawk Power Corp., 97 FERC 161,15 8, ¶11 61,701-61,702 (2001). Instead,
interpretation of an executed QF contract is a matter governed by state contract law, id., and each
particular state's laws govern the proper forum for such contract disputes. In Idaho, the
Commission simply does not have ongoing jurisdiction over any contract disputes.
Indeed, if this Commission upholds Idaho Power's claim that the Commission has
jurisdiction over a complaint for damages for violation of a PURPA contract or to resolve
disputes between a utility and a QF over the terms of such a contract, then this Commission
would have jurisdiction over the QF itself. This result has been thoroughly repudiated by the
Idaho Supreme Court in the very Afton decision and its progeny relied on by Idaho Power. In
Afton 11111, Idaho Power sought to amend a PURPA contract by adding the following language:
The rates, terms and conditions set forth in this agreement are subject to the
continuing jurisdiction of the Idaho Public Utilities Commission. The rates, terms
and conditions under this agreement are subject to change and revision by order
of the Commission upon a finding , supported by substantial competent evidence,
that such rates, terms or conditions, change or revision is just, fair, reasonable,
sufficient, non-preferential and non-discriminatory.
107 Idaho at 786, 693 P.2d at 432 (emphasis in original).
The Court's resounding rebuke to Idaho Power's proposal may be instructive to Idaho
Power in assisting it to understand that it still cannot confer jurisdiction over PURPA contracts
on the IPUC:
[W]e reject Idaho Power's argument that the Commission does not have any
authority to establish an avoided cost rate which is fixed for the duration of the
contract and which is not subject to the Commission's continuing jurisdiction. It
is clear that both Congress and FERC, through its implementing regulations,
intended that CSPPs [QFs] should not be subjected to the pervasive utility-type
regulation which would result if the contract language proposed by Idaho Power
were approved by the Commission. In fact, one of Congress' main objectives in
enacting PURPA was to encourage cogeneration and small power production by
exempting CSPPs from pervasive state regulation. Congress was aware that such
IPC-E- 12-25; IPC-E- 12-26
RESPONDENTS' MOTION TO DISMISS
PAGE 8
regulation presented a strong disincentive for CSPPs to engage in power
production where the financial risks were great and the returns were not
guaranteed to be recoverable. The Commission, in refusing to adopt Idaho
Power's proffered language was merely carrying out the directives imposed by
PURPA and the implementing FERC regulations.
Id. at 788, 693 P.2d at 434 (emphasis added).
Jurisdiction to interpret the terms of a PURPA contract and to award or declare entitlement to
damages is exactly the type of regulation the Idaho Supreme Court rejected in Afton.
In Afton IV, Idaho Power again sought PUC interpretation of a PURPA contract - which
the Court again rejected. The Court inAfion IV identified the issue thusly:
The present proceeding was initiated by Idaho Power when it moved the
Commission to modify Orders Nos. 17478, 17495 and 17609 to conform to the
Afton I/Ill and declare the second payment option of the contract in effect... The
Commission, reading the motion as a contract interpretation request, dismissed it,
holding that the district court is the proper forum to interpret contracts.
111 Idaho at 928, 729 P.2d at 403.
The Court unambiguously affirmed the Commission's finding that PURPA contract disputes
belong in district court:
It [Idaho Power] has simply asked the Commission, through a motion to modify a
previous order, to declare that one of two freely negotiated payment options is in
effect as selected by a legal determination of this Court. In other words, Idaho
Power has gLkedLor an interpretation Q(its contract. The district court is
proper forum fo this action. We hold the Commission acted properly when it
dismissed Idaho Power's motion to modify pervious orders.
Id. at 930, 729 P.2d at 405 (emphasis added).
The Court in Afton IV explained in some detail the exceptions to its general rule that
contract disputes do not belong at the IPUC:
The Court has recognized exceptions to this rule. In Bunker Hill Co. v.
Washington Water Power, supra, we allowed the Commission to interpret an un-
precise contract because "the parties agreed to let the PUC settle this dispute and
since there is substantial evidence in the record to support the Commission's
decision. . . Additionally, the Commission can use its expertise and supply a
IPC-E- 12-25; IPC-E- 12-26
RESPONDENTS' MOTION TO DISMISS
PAGE 9
reasonable contract rate where the parties have an existing contract but are unable
to agree to the specific rate ... Here however, the contract between Afton and
Idaho Power does not fall within any of these exceptions. Idaho Power and Afton
have not agreed to allow the Commission to interpret the contract. The contract,
while being complex, does not require any particular expertise in the ratemaking
area to interpret the disputed provision.
Id. at 929, 729 P.2d at 404 (emphasis added).
Based on the foregoing, there can be no dispute that Idaho law deprives the Commission
of jurisdiction over the subject matter of Idaho Power's request that the Commission interpret the
FESAs and declare Idaho Power entitled to damages.
B. Respondents Have Not Consented to the Commission's Jurisdiction to Interpret and
Enforce the FESAs.
Apparently recognizing that the Commission is the wrong forum to try a contract dispute,
Idaho Power has attempted to establish that the parties have somehow consented to confer
jurisdiction on the Commission. Idaho Power cites to the FESA's paragraph 19. 1, which Idaho
Power requires each QF to include in any FESA Idaho Power will sign. While Idaho Power did
insert language into the instant parties' FESAs to the effect that disputes would be submitted to
the Commission if a dispute arose, the Commission has consistently disavowed the ability of the
parties to unilaterally confer jurisdiction on it:
The Commission reminds the parties that jurisdiction may not be conferred on the
Commission by contractual stipulation. The authority and jurisdiction of the
Commission is restricted to that expressly and by necessary implication conferred
upon it by enabling statutes.
In Re Application of Idaho Power for Approval of FESA with Interwest Hydro,
Inc., IPUC Case No. U-1006-295, Order No. 21359, p. 1(1987).
In another case, the Commission directly addressed the same FESA language at issue
here:
Agreement 121.1 reads as follows: "All disputes related to or arising
under this Agreement, including, but not limited to, the interpretation of the terms
IPC-E- 12-25; IPC-E- 12-26
RESPONDENTS' MOTION TO DISMISS
PAGE 10
and conditions of this Agreement, will be submitted to the Commission for
resolution."
The Commission reminds the parties that jurisdiction may not be
conferred on the Commission by contractual stipulation. The authority and
jurisdiction of the Commission is restricted to that expressly and by necessary
implication conferred upon it by enabling statutes. The nature and extent of the
Commission jurisdiction to resolve actual disputes will be determined by the
Commission on an individual case-by-case basis notwithstanding paragraph 21.1
of the Agreement.
In Re Application of Idaho Power for Approval of FESA with Glenns Ferry
Cogeneration, IPUC Case No. IPC-E-92-32, Order No. 24674 (1993).6
The Commission warned Idaho Power that contract disputes are the sole province of the
judiciary when it issued one of its first orders creating security and liquidated damages
provisions for QF contracts. In determining the appropriate calculation of liquidated damages to
include in QF FESAs, the Commission was clear that "Contract disputes and interpretation in the
event of alleged default or breach are normally appropriate for judicial determination, not
Commission determination." In Re Investigation on the Commission's Own Motion of
Reasonable Terms for Security in Agreements Between Idaho Power Company and
Cogenerators and Small Power Producers, IPUC Case No. U-i 006-292, Order No. 21800 at p. 4
(1988).
Even if Respondents were to consent to Commission jurisdiction (which they do not),
none of the other criteria used by the Afton IV Court are applicable. As that Court noted, these
contracts while complex, do not require any particular ratemaking expertise to interpret,
particularly the delay, default and Force Maj cure provisions upon which Idaho Power relies as
the entire basis for its FESA claims. Just as the Commission has stated in the past, a court is the
appropriate forum to determine if Idaho Power is entitled to collect liquidated damages.
6 Ultimately, in 2008, Idaho Power attempted to bring a complaint for breach of contract against the Glenns
Ferry QF at the Commission in Case No. IPC-E-08-20. As can be seen from a review of the pleadings in that
docket, Idaho Power ultimately withdrew its Complaint when the QF filed a motion to dismiss and it became
obvious that the Commission had no jurisdiction over a breach of contract claim.
IPC-E- 12-25; IPC-E- 12-26
RESPONDENTS' MOTION TO DISMISS
PAGE 11
V. CONCLUSION
WHEREFORE, Respondents respectfully prays that the Commission dismiss Idaho
Power's claims for interpretation and enforcement of the FESAs for lack of subject matter
jurisdictionRespondents stands ready for oral argument on its Motion if the Commission so
desires.
Respectfully submitted this 27th day of December, 2012.
RICHARDSON & O'LEARY, PLLC
Peter J. Rich dson (ISB No: 3195)
Gregory M. Adams (ISB No. 7454)
Attorneys for Respondents
IPC-E- 12-25; IPC-E- 12-26
RESPONDENTS' MOTION TO DISMISS
PAGE 12
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the Z7" day of December, 2012, a true and correct copy,
of the within and foregoing EXERGY DEVELOPMENT GROUP OF IDAHO'S MOTION
TO DISMISS CASE NO. IPC-E-12-26 was served in the manner shown to the following
parties
Jean Jewell X Hand Delivery
Commission Secretary _U.S. Mail, postage pre-paid
Idaho Public Utilities Commission - Facsimile
472 W Washington - Electronic Mail
Boise ID 83702
jean ieweIIcpuc idaho QOV
Donovan Walker - Hand Delivery
Idaho Power Company _U.S. Mail, postage pre-paid
P0 Box 70 - Facsimile
Boise ID 83707 X Electronic Mail
dwalkeridahopower.com
Leslie White, Registered Agent - Hand Delivery
New Energy Two, LLC _U.S. Mail, postage pre-paid
New Energy Three, LLC - Facsimile
6152 N Sparkford Way Electronic Mail
Boise, 1D83713
lwhite)exergydeveIopment corn
James Carkulis - Hand Delivery
Exergy Development Group of Idaho, LLC _U S Mail, postage pre-paid
802 W Bannock Ste 1200 - Facsimile
Boise ID 83702 X Electronic Mail
Icarkuliscexerqydevelopment.com
Laura Knothe - Hand Delivery
Exergy Development Group of Idaho, LLC _U.S. Mail, postage pre-paid
lknothe(@-exergydeveloprnent.com - Facsimile
X Electronic Mail
T__~ &,— (& dl)
Nina Curtis
CERTIFICATE OF SERVICE