20140411Simplot Reply Comments.pdf

Peter J.Richardson ISB #3195
Gregory M.Adams ISB #7454
RICHARDSON ADAMS,PLLC
515 N.27th Street
Boise,Idaho 83702
Telephone:(20$)938-2236
Fax:(20$)938-7904
[e-mail]
[e-mail]
Attorneys for the J.R.Simplot Cornpany
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF IDAHO POWER )CASE NO.IPC-E-13-23
COMPANY’S APPLICATION FOR )
APPROVAL OF SPECIAL CONTRACT )J.R.SIMPLOT COMPANY’S REPLY
BETWEEN IDAHO POWER COMPANY )COMMENTS
AND J.R.SIMPLOT COMPANY )
________________________________________________________________________________
)
I.INTRODUCTION
In this case,J.R.Simplot Company (“Simplot”)asks for the same treatment as other
existing customers on Idaho Power Company’s (“Idaho Power”or the “Company”)system —(1)
a rate approximating what other special contract customers pay,and (2)liability and
indemnification provisions identical to those applicable to other existing customers and
consistent with the Idaho Public Utilities Commission (“Commission”of “IPUC”)orders and
extant Idaho law.Idaho Power asks for less favorable terms for Simplot on both scores.It
requests Simplot pay a higher rate and have fewer liability protections than other ratepayers.The
Commission should not allow for this discriminatory approach.
With regard to the base rates,Simplot maintains its position set forth in its Comments,
and supported by Staff,that the appropriate base rate is the average rate currently available to the
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I I F;;I 32
other special contract customers on Idaho Power’s system.These Reply Comments will respond
solely to Idaho Power’s lengthy argument that the Commission should abandon its long-standing
policy against liability waivers in utility tariffs.For the reasons in Simplot’s Answer and those
further elaborated below,Simplot respectfully requests that the Commission approve the special
contract without Idaho Power’s liability limitations.
II.REPLY ARGUMENT
A.Idaho Power’s Comments on Liability Waivers Incorrectly Framed the Issue.
In considering the appropriateness of limiting Idaho Power’s liability,it is important to
understand the circumstances under which Idaho Power would incur liability in the first instance.
Generally speaking,Idaho Power would be liable in tort or contract if it breached a legal duty to
provide adequate electrical service to Simplot,and Idaho Power’s breach of that duty caused
SimpLot economic harm.“One cannot always look to others,however,to make compensation
for injuries received;many accidents occur that do not give rise to a right to recover damages
from another.”22 Am.Jur.2d Damages §4 (2003).Instead,“there must be both a right of
action for a legal wrong inflicted by the defendant,and damages resulting to the plaintiff
therefrom.”Id.(footnotes omitted).
For example,Idaho courts will not hold a defendant liable for damages caused by a
superseding cause —“an act of a third person or other force which by its intervention prevents the
actor from being liable for harm to another which his antecedent negligence is a substantial
factor in bringing about.”Mico v.Mobile Sales and Leasing,Inc.v.Skyline Corp.,97 Idaho 408,
411-12,546 P.2d 54,57-58 (1975)(internal quotation omitted).Likewise,in Idaho,ajury
finding that 50%or more of the fault is attributable to the plaintiff would bar any recovery in
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tort.See Seppi v.Betty,99 Idaho 186,195,579 P.2d 683,682 (1978).Although Idaho Power
expresses concern over being held to the same implied warranties that apply to all sales of goods
in Idaho,a breach of that warranty cannot be found where the buyer’s misuse of the product
causes it to malfunction or where the breach is not the proximate cause of the loss.Chishoim v.
JR.SimplotCo.,94 Idaho 628,631-32,495 P.2d 1113,1116-17 (1972);I.C.§28-2-314,
comment 13.The only circumstances at issue in this case are those in which Idaho Power has
itself committed some legal wrong that causes damages to flow to Simplot.Thus,Idaho Power’s
concern with “forces beyond the utility’s control”is irrelevant.See Idaho Power’s Comments at
2.
Idaho Power’s analysis also contains a critically incorrect assumption that any damages
the Company would pay for its legal wrongs would be passed onto other ratepayers.from that
assumption,Idaho Power concludes that a liability waiver is necessary to protect other
ratepayers.However,the costs of a utility’s legal wrongs are not ratepayer expenses in Idaho.
For example,when an Idaho electric utility sought to include the costs of environmental clean-up
on the asserted basis that the clean-up was a normal cost of utility business,the Commission
rejected such rate recovery and stated,“For the Company to argue that toxic waste spills are a
normal part of operations,chargeable to ratepayers,is simply unacceptable.”In Re Application
of Utah Power and Light Co.for Approval of its Proposed Electric Rate Schedules and Electric
Service Regulations,Case No.U-1009-137,Order No.19101 at 47 (1984).On the same topic,
the Commission later stated,“It is our hope that the Company does not engage in toxic waste
spills as an ordinary activity of doing business.”In Re Application of Utah Power and Light Co.
for Approval of its Proposed Electric Rate Schedules and Electric Service Regulations,Case No.
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U-1009-157,OrderNo.20372 at 15 (1986).’
Furthermore,contrary to Idaho Power’s apparent position that Idaho state courts are
becoming notorious for large jury verdicts,there are already substantial caps on damages written
into Idaho law even without a contractual liability waiver.For example,in the circumstance of a
personal injury caused by unintentional negligence,Idaho law places a cap of $250,000 (adjusted
for inflation)for non-economic damages,such as pain and suffering.See I.C.§6-1603;Kirkland
v.Blame County Medical Center,134 Idaho 464,4 P.3d 1115 (2000).Idaho Power provides no
support for the notion that jury verdicts have grown to the point that additional limitations on
liability are necessary to continue providing utility services.
B.Idaho Power’s Proposal Is Contrary to Idaho Law.
Idaho Power’s proposed contract language is breathtaking in scope.Idaho Power seeks a
waiver for liability not only of its negligent conduct but also of its own intentionally wrongful
conduct.While Simplot acknowledges that some states (such as Texas)have allowed utilities to
impose on their captive customers a waiver of liability for their negligent conduct,extant Idaho
law is contrary to such a waiver of liability for Idaho Power’s negligence.furthermore,Idaho
Power’s proposal to waive liability for its own intentional wrongs is wholly unsupported by the
law anywhere and is not a lawful policy for the Commission to adopt.
1.Idaho law prohibits Idaho Power from waiving liability for its own
negligence.
The Idaho Supreme Court has long proclaimed that a utility or other public servant
The Texas decision upon which Idaho Power relies so heavily also makes the critically incorrect
assumption that,absent a liability waiver clause for commercial and industrial customers,“Losses paid to
those commercial and industrial customers could be passed on to smaller customers....“Houston
Lighting &Power Co.v.Auchan,995 S.W.2d 668,673 (Tex.1999).For this and other reasons explained
herein,the Texas decision has no applicability in Idaho.
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cannot contract away its liability for its own negligence,yet Idaho Power fails to even mention
this authority until page 11 of its Comments.As early as 1909,the Idaho Supreme Court held:
“We think it may now be conceded to be the law,and that such is recognized by the
overwhelming weight of authority,that a common carrier may limit its strict common-law
liability as an insurer in such manner as the law can recognize as reasonable,and not inconsistent
with sound public policy,but cannot make a contract exempting the carrier from negligence.”
See McIntosh v.Oregon K &Nay.Co.,17 Idaho 100,109,105 P.66,69 (1909)(emphasis
added).
Idaho Power makes the same argument that the Court rejected in Strong v.Western
Union Telegraph Co.,18 Idaho 389,109 P.910 (1910),aff’don reh’g 18 Idaho 409,109 P.917
(1910).In Strong,the Court noted:“It is contended by counsel for respondent that the great
weight of authority upholds the right of the telegraph company to adopt reasonable rules and
regulations to govern the sending of messages,and to adopt rules and regulations such as the
stipulation under consideration,fixing the liability of the company for delay or mistakes in the
transmission or delivery of messages to the sum paid for sending the message,and that said
stipulation is a reasonable one.”18 Idaho at 399,109 P.at 913.After considering a split in
authority across the country on the point,the Court concluded that public policy in Idaho
prohibits a public servant from limiting its liability for negligence by contract.Id.,18 Idaho at
399-409,109 P.at 913-17.
The Strong court reasoned that the customer “is but one of millions;his business will
perhaps not admit of delay or contest in the courts and he is ex necessitate compelled to submit
to any terms which the company might see fit to impose;but the law should not uphold a
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contract under which a public agent seeks to shelter itself from the consequences of its own
wrong and neglect.”Id.,18 Idaho at 402,109 P.at 914 (internal quotation omitted).The Court
further rejected the notion that it would be sufficient to only hold the telegraph company to
liability for gross negligence or intentional acts,instead holding,“Telegraph companies must
therefore be held to a greater degree of care than is included in ‘willful negligence’or ‘fraud.”
Id.,1$Idaho at 406,109 P.at 916.
Although the decisions in McIntosh and Strong are dated,they remain good law.These
decisions were each issued prior to the initial enactment of Idaho’s utility code,I.C.§61-101 et
seq.,in 1913.However,in Idaho,“changes in the common law by the adoption of a statute may
not be presumed,nor may such changes be accomplished by legislation of doubtful implication.”
Industrial Inem.Co.v.Columbia Basin Steel &Iron Inc.,93 Idaho 719,723,471 P.2d 574,578
(1970)(holding that Workmen’s Compensation Law did not abolish common-law action for
indemnification against negligent party).No Idaho statute is contrary to the holding in McIntosh
and Strong that a public servant Like Idaho Power cannot waive its own liability for negligence.
In fact,Idaho courts have consistently and quite recently stated that express agreements
exempting one party from liability for negligence are not valid in the case where a public duty is
involved,such as the duty of a public utility company.See Morrison v.Northwest Nazarene
University,152 Idaho 660,661,273 P.3d 1253,1255 (2012);Jesse v.Lindsay,149 Idaho 70,75,
233 P.3d 1,6 (2008);Lee v.Sim Valley Co.,107 Idaho 976,978,695 P.2d 361,363 (1984);
Steiner Corp.v.Amer.Dist.Telegraph,106 Idaho 787,791,683 P.2d 435,440 (1984);Rawlings
v.Layne &Bowler Pump Co.,93 Idaho 496,500,465 P.2d 107,111(1970).In Lee,the Court
even named utilities and common carriers as “obvious examples of parties owing a public duty”
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and which are thus unable to be contractually exempted from liability for negligence.Lee,107
Idaho at 97$,695 P.2d at 363.
Moreover,in addition to a long line of Idaho Supreme Court decisions,the Idaho
legislature has expressly imposed upon Idaho Power the duty to provide adequate service,and
provided a private right of action against Idaho Power for harm caused by abdication of that
duty.See I.C.§6 1-302,6 1-702.These statutory provisions prohibit Idaho Power from
exempting itself from liability.
Specifically,Idaho Code Section 61-302 states:
Every public utility shall furnish,provide and maintain such service,
instrumentalities,equipment and facilities as shall promote the safety,health,
comfort and convenience of its patrons,employees and the public,and as shall be
in all respects adequate,efficient,just and reasonable.
Idaho Code Section 6 1-702 further provides:
In case any public utility shall do,cause to be done or permit to be done,any act,
matter or thing prohibited,forbidden or declared to be unlawful,or shall omit to
do any act,matter or thing required to be done,either by the constitution,any law
of this state,or any order or decision of the commission,according to the terms of
this act,such public utility shall be liable to the persons or corporations affected
therebyfor all damages or in/u’caused thereby or resulting therefrom.An
action to recover such loss,damage or injury may be brought in any court of
competent jurisdiction by any corporation or person.
(emphasis added).
The Idaho Supreme Court has interpreted these two statutory provisions as imposing a
duty similar to that imposed by common law negligence.See C.C.Anderson Stores Co.v.Boise
Water Corp.,$4 Idaho 355,36 1-62,372 P.2d 752 (1962).Nothing in Idaho’s utility code states
that the Commission may exempt Idaho Power from liability for a negligent failure to provide
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adequate service.Nor should the Commission approve such efforts at Idaho Power’s request.2
2.Idaho Power’s proposed Liability waivers unlawfully purport to waive
liability for Idaho Power’s intentional misconduct.
Aside from the unlawfulness of a liability waiver for negligence,Idaho Power further
seeks to limit its potential liability for intentional misconduct or gross negligence.To establish
gross negligence,“there must be evidence showing not only the breach of an obvious duty of
care,but also showing deliberate indifference to the harmful consequences to others.”S.Grffin
Const.,Inc.v.City ofLewiston,135 Idaho 181,189,16 P.3d 272,226 (2000)(internal quotations
omitted).Generally speaking,“courts will not permit a party to excuse its liability through
exculpatory clauses for intentional harms or for reckless,wanton,or gross negligence.Nor may
contractual exculpatory clauses relieve one from liability for violation of the law,and liability for
knowing or bad faith breaches of contract may never be limited.”1 7A Am.Jur.2d Contracts §
286 (2003)(footnotes omitted);see also Royal Ins.Co.ofAmerica v.Southwest Marine,194 F.
3d 1009,1016 (9111 Cir.1999)(collecting treatises).
Idaho Power itself appears to acknowledge that,even in states that allow liability
limitations in utility tariffs,such liability limitations can only be valid if “they do not purport to
grant immunity or limit liability for gross negligence.”Idaho Power’s Comments at 10 (internal
quotation omitted).Yet Idaho Power’s proposed contract language nevertheless purports to limit
liability for gross negligence.Specifically,Section 11.2 of Idaho Power’s proposed contract
2 Simplot acknowledges that the Commission determined in 1989 that it had authority to limit a
utility’s liability,albeit in very limited circumstances discussed infra.In re Advice Letter No.89-05 of
Contel ofthe West,Inc.,IPUC Case No.Con-T-89-2,Order No.22812 (1989).However,that decision
did not address the cases cited herein or the combined effect of 1.C.§6 1-302 and -702,which leave no
room for Commission approval of Idaho Power’s proposed liability waivers.
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seeks to immunize Idaho Power from any indirect damages3 “under any theory ofrecovery,
whether based in contract,in tort (including negligence and strict liability),under warranty or
otherwise....“See Application at Attachment 1,§11.2 (emphasis added).Because there is no
limit to this language’s waiver of liability for any theory of recovery,it seeks to immunize Idaho
Power even if the Company commits gross negligence,intentional torts,knowing or bad faith
breaches of contract,or even criminal fraud.Under this clause (if it were enforceable),Idaho
Power could intentionally cut the power to the Idaho Project for nefarious purposes,but Simplot
could not recover lost profits or any other indirect damages for the time it was unable to operate.
Likewise for direct damages,4 Section 11.3 of Idaho Power’s proposed contract uses the
same overbroad waiver language to purport to limit Idaho Power’s damages to only 150%of the
value of the annual revenue Simplot would pay under the contract.See Application at
Attachment 1,§11.3.Under this clause (if it were enforceable),Idaho Power could intentionally
engage in conduct calculated to cause a fire that destroys the Idaho Project,but Simplot could
not recover more than 150%of the annual value of payments under the special contract.The
Commission should reject Idaho Power’s liability waiver clauses because insulating Idaho Power
from intentional misconduct is contrary to the law and entirely inappropriate.
C.Idaho Power’s Reliance on the Law in Some Other States Is Unavailing.
Even though Idaho law prohibits Idaho Power’s proposed liability limitations,Idaho
Power’s Comments ask the Commission to rely on out-of-state case law and a law review article.
While these sources are academically interesting,they do not overcome the requirements and
Indirect damages are items such as lost profits that might occur due to an outage.
Direct damages are items such as harm to equipment at the Simplot facility caused by an
unplanned outage.
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controlling authorities of Idaho law.
furthermore,in addition to Idaho,multiple out-of-state courts have refused to allow a
utility to limit liability for its own negligence.See Indianapolis Water Co.v.$choenemann,107
20 N.E.2d 671,677 (md.App.1939)(“Public Service Commission cannot relieve a utility from
liability under the law of negligence as it exists in Indiana,by any rule it may adopt”);see also
Collins v.Virginia Power &Electric Co.,168 S.E.500,504 (N.C.1933);Southwestern Pub.
Serv.Co.V.Artesia Alfalfa Growers’Ass’n,67 N.M.108,353 P.2d 62,68—71 (1960).“The view
generally supported is that an electric utility company cannot validly contract against its liability
for negligence,inasmuch as such a stipulation would be in contravention to public policy.”27A
Am.Jur.2d Energy §222 (2003)(footnotes omitted);see also K.A.Drechsler,Annotation,
Validity of Contractual Provision by One Other Than Carrier or Employerfor Exemption from
Liability,or IndemnUlcation,for Consequences of Own Negligence,175 A.L.R.8,39-40 (1948)
(stating same conclusion).The Commission should not rely on the out-of-state authorities that
Idaho Power cites because they contravene binding Idaho precedent as well as multiple
equivalent out-of-state authorities.
D.Idaho Power Has Presented No Evidence Supporting a Departure From Existing
Commission Policy.
Simplot maintains that approval of Idaho Power’s proposed exculpatory clause would
violate Idaho law.However,even if the Commission disagrees with Simplot’s legal conclusion,
the Commission should still reject Idaho Power’s proposed contract language because it is
entirely unsupported by any evidence orfacts establishing the need for such broad waivers of
liability.In In re Advice Letter No.89-05 ofContel ofthe West,Inc.,the Commission concluded
that exculpatory clauses “should be approved only following our findings based upon aJctual
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record that (1)it is in the public interest to provide the particular utility service and to encourage
the provision of the service,and (2)there is a substantial likelihood that the service would not be
provided in the absence of limitations of liability.”IPUC Case No.Con-T-$9-2,Order No.
22812 (1989)(emphasis added);see also Bradley v.Utah Power and Light,IPUC Case No.
UPL-E-89-9,Order No.23287 (1989).Idaho Power has provided no such factual record.
The Texas case upon which Idaho Power relies so heavily is distinguishable on this point.
The law review article Idaho Power cites explained the reasoning behind the change in Texas
policy:
In 1981,the PUCT conducted a proceeding to determine whether and to what
extent to limit the liability of owners of transmission lines.After hearing extensive
testimonyftpj a wide variety Qfparties,Examiner Rickefts wrote a well-reasoned
report on June 22,1981,in which he concluded that the PUCT should approve
liability limitations applicable to transmission lines and gave reasons in support of
that conclusion.In 1999,a party challenged the validity of a liability limitation
provision similar to the provision the PUCT approved in 1981.The Texas
Supreme Court upheld that liability limitation provision as reasonable.
Richard J.Pierce,Jr.,Regional Transmission Organizations:federal Limitations Neededfor
Tort Liability,23 Energy Law Journal 63,66-67 (2002)(emphasis added)(discussing Houston
Lighting &Power Co.v.Auchan,995 S.W.2d 66$(Tex.1999)).
In contrast,Idaho Power provides no evidence that maintaining the status quo with regard
to its liability will increase rates.It offers no evidence that it has had to secure expensive
insurance policies for other special contract or large power customers for which it has no liability
waivers.There is no allegation or evidence that a failure to include overbroad liability clauses
has somehow limited Idaho Power’s access to capital.Idaho Power makes no claim,and
presumably can provide no evidence,that “there is a substantial Likelihood that the service would
not be provided in the absence of limitations of liability.”See In re Advice Letter No.89-05 of
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Contel ofthe West,Inc.,Order No.22$12.Just as in the Contel case,the Commission has “not
received such a showing in this proceeding.”Id.Instead,Idaho Power points to alleged industry
trends by selectively quoting out-of-state case law and a law review article —none of which
addresses Idaho Power’s factual situation.
Simplot asks for the same treatment as other existing customers.Simplot’s three closing
facilities were Schedule 19-P customers that performed similar industrial functions to the single
new facility.Idaho Power had no limitation on its liability for the three closing facilities.Nor
does it have a limitation of liability for its existing special contract with Micron.There is no
explanation why Simplot’s consolidation into a single facility has triggered the need for a special
insurance policy when such was apparently not needed for the existing customers operating
without liability waivers.There is no evidence supporting the need to impose a different
condition for the provision of service to the new Simplot facility.
On the record before the Commission,Idaho Power’s proposal is fundamentally
discriminatory.Idaho law expressly provides that Idaho Power may not “grant any preference or
advantage to any corporation or person or subject any corporation or person to any prejudice or
disadvantage.”I.C.§61-3 15.The record is devoid of any basis to conclude that Simplot —as
opposed to other customers with no limitation of liability —will impose a higher cost of service
without a liability waiver.Without any record,the Commission can reach no such finding and
should therefore approve the special contract without Idaho Power’s proposed liability waiver
clauses.
III.CONCLUSION
Simplot respectfully requests that the Commission approve a special contract for the
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Idaho Project with base rates and liability limitation provisions that do not discriminate against
Simplot.With regard to the base rates,Simplot maintains its position set forth in its Comments
that the appropriate base rate is the average rate currently available to the other special contract
customers on Idaho Power’s system.Additionally,Simplot respectfully requests that the
Commission approve the special contract without Idaho Power’s liability Limitations.
RESPECTFULLY SUBMITTED this 11th day of April 2014.
RICHARDSON ADAMS,PLLC
Peter Richardson (ISB #3195)
Gregory M.Adams (ISB #7454)
Of Attorneys for J.R.Simplot Company
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