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HomeMy WebLinkAbout20200917Central Rivers Power US Motion to Dismiss.pdfPreston N. Carter, ISB No. 8462 Givens Pursley LLP 601 W. Bannock St. Boise, lD 83702 Telephone: (208) 388-1200 Facsimile: (208) 388-1300 prestonc arter@ givenspursley. com Attorneys for Central Rivers Power US, LLC BEFORE THE IDAIIO PUBLIC UTILITIES COMMISSION tr4:::t.:fiV** t itS[P l? P}{ 2r t I : :ri:-11 if1 l !': I I ;LJl*(V. , ..; j-",;.-;.li4SiSi$, -. -1i i I ; :. .": I -. i-: iBi rti iu] WOOD FIYDRO, LLC, Complainant, v. IDAHO POWER COMPANY, Re spondent/Cro ss-C omplainant, v. WOOD HYDRO, LLC, Cross-Respondent, ENEL GREEN POWERNORTH AMERICA, INC. Cross-Respondent, v. CENTRAL RTVERS POWER US, LLC Cross-Respondent. Case No. IPC-E-20-28 Cnxrnlr, Rrvnns Powrn US, LLC's MorroxToDrsMrss Central Rivers Power US, LLCI ("Lowline #2"),by and through its counsel of record, Givens Pursley LLP, files this Motion to Dismiss. towline #2 respectfully requests that the t Although Central Rivers Power, LLC is named in the Cross-Complaint, the facility at issue is owned and operated by Lowline Rapids, LLC ("Lowline #2"). By filing this Motion, neither Central Rivers Power nor Lowline Cel.rrnAl- RrvEns PowBns US LLC's MorIoN ro DISIrass I 530297 l_5.docx 115327 .ll Pecn I Idaho Public Utilities Commission (the "Commission") issue an order dismissing ldaho Power Company's ("Idaho Power" or "Company'') Cross-Complaint against Cental Rivers for lack of jurisdiction. Alternatively, Lowline #2 respectfully submits that even if the Commission has jurisdiction, it should decline to exercise jurisdiction because the dispute is more properly adjudicated in district court. INTRODUCTION A. Facts and procedural history This case involves a dispute over the liquidated damages clause in the Firm Energy Sales Agreement ("FESA") between Lowline #2 and Idaho Power.2 Lowline #2 owns and operates the Lowline #2 facility, which is a Qualifying Facility ("QF") under the Public Utility Regulatory Policies Act of 1978, 16 U.S.C. $ 2601 et seq. Lowline #2became aparty to this case when Idaho Power filed a Cross-Complaint against Central Rivers and Enel Green Power North America, Inc. ("Enel") in response to a formal complaint filed against Idaho Power by Wood Hydro, LLC ("Wood Hydro"). ln the Cross-Complaint, Idaho Power alleges that all three QFs o'have an old version of a 3l-year,levelized rate, mandatory purchase, PURPA QF contract with Idaho Power." Cross- Complaint at flI. According to Idaho Power, under the FESA "the project must deliver up to its Annual Net Energy amount from Section 6.3 [of the FESA] or be subject to a schedule of Lump Sum Refund Payment (Section 21.2lentitled "Liquidated Damages"l; Appendix D)." Id. atl22. Idaho Power alleges that Lowline#2 didnot provide energy during June 2019-April 2020, and therefore "[t]here was a permanent curtailment of the project's Annual Net Energy #2 concede that Central Rivers Power is the proper pafiy to this proceeding. Such matters can be resolved ifthe case proceeds. 2 Specifically, paragraph 21.2 of the FESA, entitled "Liquidated Damages." The FESA, which is attached to Idaho Power's Cross-Complaint as Attachment 3, is described in more detail below. Csxrnar Rrvsns Powpns US LLC'S MouoN ro Drsurss 15302971 S.docx 115327.11 PAGE 2 deliveries for Contract Year 32." Id. at\25. As a result, Idaho Power claims that Lowline #2 owes over $3.6 million to Idaho Power under the FESA's liquidated damages clause. Id. at\26. The Cross-Complaint seeks, among other things, that "the Commission direct . . . Central River[s] Power to pay the amounts assessed by Idaho Power as Lump Sum Repayment Amounts." Id. p. 18, fl4. In other words, Idaho Power seeks from the Commission an order compelling Lowline #2topay $3,616,983 to Idaho power. B. Lowline #2's FESA Although Idaho Power treats all three QFs and all three FESAs as the same, this case involves three separate QFs and three separate FESAs. Lowline #2 focuses on its own FESA here. Lowline #2's predecessor entered into the FESA on Septemb er 12,1986. The FESA was approved by the Commission on November l, 1986. Under the FESA, Idaho Power is required to purchase Net Energy from the l,owline #2Facility at a contractually defined pice. See FESA fl6.1 (purchase obligation;3, 17.1 (purchase price).a 'Net Energy,, is defined as, The electric energy produced by the Facility, less station Use and less Losses, expressed in kilowatt hours (..kwh,,), delivered to Idaho [Power] at the Point of Delivery. FESA 1T1.10. The FESA sets forth an estimate of the Net Energy that the QF believed it could provide to Idaho Power on an annual basis, defined as "Annual Net Energy." FESA fl6.2 ("Based on long-term historical water flow records and average longterm energy estimates based thereon, Seller estimates that it can deliver Net Energy in the following amounts: . . . ." (emphasis 3 Paragraph 6.1 provides, "Except when either party's performance is prevented by events offorce majeure (Article XVI) or otherwise excused as provided herein, Idaho [Power] shall purchase all of the Net Energy and Surplus Energt delivered by Seller to the Point of Delivery." (Emphasis added).a Paragraphs 7.1 and 7.2 set forth the prices for Net Energy and Surplus Energy. CBNrRer RTvERS PowERs US LLC's MorroN To DrsMrss 15302971_5.docx [5327.1] PacB 3 added)); FESA !f 1.1 ("Annual Net Enerey" - The amount of Net Energy Seller estimates it will deliver to Idaho [Power] at the Point of Delivery during each Contract Year." (emphasis added)). Consistent with the FESA's terms, when approving the FESA the Commission recognized that the annual net energy amount was an estimate: "The estimated anrntal average energy production [under the FESA] is 15,755,610 kilowatt hours." Case No. U-l006-281, Order No. 20823 at 1 (emphasis added). Paragraph 21.2 isthe liquidated damages clause at issue here. That paragraph provides, in full and with key terms in italics, 21.2 Liquidated damases. The parties agree that the amount of the payment which Idaho [Power] is to make to Seller is based on the agreed value to Idaho [Power] of Seller's performance of irs obligation to provide Net Energt as set out in Article VI for the full term of the Agreement. The parties further agree that if Idaho [Power] does not receive such full performance (1) Idaho [Power] shall be deemed damaged by reason thereof, (2) it would be impractical or extremely difficult to fix the actual damages to Idaho [Power] resulting therefrom, (3) the payments as provided below are in the nature of adjustrnents in Net Energy prices and liquidated damages and not a penalty, and are a reasonable attempt by the parties to estimate a fair compensation to Idaho [Power] for the reasonable losses that would result from such total or partial default. 21.2.2 Failure to Deliver for Term of Aereement - If, at any time prior to the end of the term of the Agreement, Seller permanently curtails in whole or in part its deliveries of the Annual Net Energt amount Seller shall pay to Idaho [Power], as Idaho [Power's] sole and exclusive remedy for damages arising out of this permanent curtailment of Net Energy deliveries, the appropriate lump sum repayment amount specified in Appendix D, multiplied by the difference in megawatt-hours between the annual Net Energy amount specified in paragraph 6.3 and the reduced Annual Net Energy amount. This payment amount will bear interest from sixty (60) days after Idaho [Power] receives notice of Seller's permanent reduction of the annual Net Energt amount, until paid, at a rate equal to the average of the prime interest rates of the Idaho First National Bank in effect during each month of that period. For purposes of this paragraph, reduced deliveries of Net Energy due to below- CsNrner RryBns Powsns US LLC's MouoN ro Dtsutss I 5302971_5.docx 115327 .ll P.lcs 4 normal water conditions (paragraph 6.4) shall not be considered a permanent curtailment. FESA lBl.2 (emphasis added). Unlike the other FESAs at issue in this case, the Lowline #2 FESA does not contain a dispute resolution clause. Paragraph 7.3 provides that the "rates, terms and conditions contained in th[e] Agreement" will be construed in accordance with several cited cases, Section 210 of PURPA, and 18 CFR $ 292.303-308.s In addition, unlike the Wood Hydro FESA, Lowline #2's FESA does not contain a "Refund of Lump Sum Repayment" clause, which allows for a refund of up to 90%o of thelump Sum Repayment amount if the Wood Hydro QF returned to generation within one year,s time after an outage. Cross-Complaint, Attachment l,fel.l. Finally, some of the key contractual terms at issue in this case are different in the three FESAs. For example, the term 'Net Energy" is defined differently, andthe language of the liquidated damages clause in each FESA is different.6 ARGUMENT A. As a general rul+applicable here-the Commission does not have jurisdiction overconstruction and enforcement of contract rights. Both the Commission and the courts recognize that, as a general matter, jurisdiction over contractual disputes lies with the courts and not with the commission: 5 The cited cases are.' Afion Energt, Inc. v. Idaho Power Co ., 107 Idaho 781, 693 p .2d 427 (lgg4) (Afton I/II)and ldaho Power Co. v. Idaho Public Utilities Comm'n, 107 Idaho 1122, 695 p .2d 126l (19g5). Both casesprimarily addressed the issue of whether rates in a PURPA contract could be adjusted byihe Commission, consistentwith federal law, pursuant to the fair, just, and reasonable standard. Neither case relates to the Commission,sjurisdiction over contractual disputes. 6 The defined term in the Lowline #2 FESA is "Net Energy." In both Wood Hydro,s and Enel,s FESAs, thedefined term is "Net Firm Energy." Cross-Complaint, Attachment I , fll . I I ; Attachment 2, tTl .10 (emphasis added).The former is defined as "electric energy produced by the Facility, . . . delivered to Idaho ffowerl at the point ofDelivery." Id. at Attachment 3, 'lf l .10. The latter is defined in both FESAs as "electric "n"igy produced by theFacility, . . . which Seller commits to deliver to Idaho (Power) at the Point of Delivery on a-ioig-t"r* average basisfor the full term of the Agreement." Id. at Attachment 1,'tf 1 .l l; Attachment 2, fll.10 (emptrasis-aOaed). Theliquidated damages clauses vary from FESA to FESA and are too lengthy to set forth in this motion. CENTRAL RTvERS PowERS US LLC's MouoN ro DrsMrss 1 530297 l_5.docx [1 5327.1)PecB 5 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' Idaho pUC Order No. 32780 (April 2013) (quoting Lemhi Tel. Co. v. Mountain States Tel. & Tel. C o., 98 ldaho 692, 696, 57 t P .2d 7 53, 7 57 (197 7) (emphasis added))' As with most legal rules, there are exceptions, discussed below. But this case falls within the general rule. Idaho Power's Cross-Complaint seeks enforcement of the FESA. Indeed, the Cross-Complaint specifically seeks an order requiring Lowline #2 to pay contractual damages in excess of $3.6 million. Lowline #2 disputes, among other things, [daho Power's interpretation of the FESA, the enforceability of the liquidated damages clause, and Idaho Power's compliance with the FESA,s notice provisions.T Adjudication of these issues falls squarely within the general prohibition on the Commission resolving contractual disputes. This matter is a contractual dispute; "it should be heard by the courts." 1d. B. The.,consent,, exception does not apply to the Lowline #2 FESA. The Idaho Supreme Court has recognized exceptions to the general rule, primarily that ,,the Commission has authority to interpret contracts where the parties have agreed to permit the Commission to do so." Idaho Power Co. v. New Energt Two, LLC, 156 Idaho 462, 463 ' However, the "consent" exception does not apply if the contract at issue does not reflect the parties' consent to allow the Commission to adjudicate disputes. Afton Energt, Inc- v. Idaho power Co.,ll1 Idaho g25,729 P.2d 400 (1986) (AftonlZ) ("[T]he contract between Afton and 7 FESA !f2l.l. pursuant to the Commission's rules, Lowline #2 is not required to file an allswer since it has filed this motion. fbape 31.01.01.057.02 (noting that answers to complaints must be filed within twenty-one days ..unless . . . a motion to dismiss is made within twenty-one (21) days"). Lowline #2's reference to potential arguments does not waive any argument or defense or otherwise limit its ability to advance arguments and defenses as the case proceeds. CBNTR TRIVERS POWERS US LLC'S MOTION TO DISMISS PAGE 6 I 530297 l-5.docx 115327 .l) Idaho Power does not fall within any of the exceptions. Idaho Power and Afton have not agreed to allow the Commission to interpret the contract.,,). The "consent" exception does not apply to this case. First and foremost, Lowline #2,s FESA does not contain a dispute resolution clause.8 Instead, the FESA merely provides that the FESA is a special contact that shall be construed in accordance with certain caselaw, pURpA, and PURPA regulations. FESA fl7.3. As nAfton IY,inthis case Lowline #2hasnot..agreed to allow the Commission" to resolve disputes related to the FESA. Afton IV,l I I Idaho at929 (1e86). Second, even if the Commission concludes that the o'consent" exception applies and that it has jurisdiction to interpret the Lowline #2 FESA, it still lacks jurisdiction to award damages. As the Commission explained, "The Commission, mindful of its statutory underpinnings, has never assumed the jurisdiction or authority to assess or determine damages nor would it in this case attempt to do so." Idaho PUC Order No. 22453 (April l9S9). Stated another way, in another context: The commission is not authorized to award o'damages,, to customers under the Public Utilities Laws. Idaho Code g 6l-702 provides that any person injured by the conduct of a public utility may file ,,an action to recover such loss, damage or injury . . . in any court of competent jurisdiction . . . ." consequently, persons injured by public utilities have recourse through Idaho courts. Idaho PUC Order No. 33524 (May 2016) (emphasis in original). Just as the Commission is not a forum of "competentjurisdiction" to award damages to customers of apublic utility, it is not a forum of "competent jurisdiction" to award liquidated damages to Idaho power. - 8 The dispute resolution clause in ldaho Power co. v. New Energt Two, LLC staled:,,All disputes related to orarising under this Agreement, including, but not limited to, the interpietation of the terms and conditions of thisAgreement, will be submitted to the commission for resolution." t st Iaano 462,464,32g p.3d 442, 444 (2014). CBNrner Rrvsns Powrns US LLC's MorroN ro DrsMrss I 530297 l_5.docx ll5327.ll Pacs 7 To be clear, Idaho Power has requested that the Commission award liquidated damages. Idaho power uses the phrase "lump sum repayment," but it is a request for damages all the same. The very provision on which Idaho Power' s damages claim relies (5 2l .2.1 of the Lowhne #2 FESA) is labeled "Liquidated Damages." The provision itself, as quoted by Idaho Power in its Cross-Complaint, states that it is "Idaho Power's sole and exclusive remedy for damages . . . ." Cross-Complaint atn24 (emphasis added). While Idaho Power may prefer the phrase "lump sum repayment," the very terms of the Lowline #2 FESA indicate that it is truly seeking liquidated damages. Third, the "consent" exception does not apply because the parties cannot contractually extend the Commission's jurisdiction to encompass an award of damages. Administrative authorities, like the Commissio n, "are tribunals of limited jurisdiction and their jurisdiction is dependent entirely upon the statutes reposing power in them and they cannot confer it upon themselves . . . ." Idaho Power Co. v. Idaho Pub. Utils. Comm'n, l02Idaho 744,750, 639 P.2d 442,448 (1981). "[J]urisdiction may not be conferred on the Commission by contractual stipulation." Idaho PUC Order No. 21361 (July 1987); Idaho PUC Order No. 25354 (January lgg4).In short, the Commission's jurisdiction is limited to the boundaries set by Idaho's enabling statutes. No statute authorizes the Commission to award damages, liquidated or otherwise. Accordingly, even if Lowline #2 consented to the Commission's jurisdiction over contractual disputes--and it has not-that consent would not confer jurisdiction over this case. Fourth and finally, applyng the "consent" exception to this case would cause the exception to swallow the rule. In its current state, the "consent" exception permits the Commission to exercise jurisdiction where the parties have explicitly consented to the Commission's jurisdiction over contractual disputes. Lowline #2's FESA does not contain any language of consent. To bring the Lowline #2 FESA within the bounds of theooconsenf' CsNrnaL RrvERs PowERs US LLC's MortoN to Dlstvttss I 5302971-5.docx 115327 .ll Pecs 8 exception, the Commission would have to make some finding that Lowlin e #2 implicitly consented to jurisdiction, or establish some other, new basis for finding an exception. This would expand the exception so broadly that it swallows the rule. C' Even if the Commission would have concurrent jurisdiction over this case, it shoulddefer jurisdiction over this contract dispute to the courts. As discussed above, Lowline #2 respectfully submits that the Commission does not have jurisdiction over this case. However, even if the Commission does have concurrent jurisdiction, it should not exercise it here. As the commission has stated, Mindful of our duty, we recognize that in some instancesCommission power, authority and jurisdiction is coincident orconcurent with that of Idaho courts, specifically in the area ofcontracts. Determining when to exercise our jurisdiction is oftenpredicated on an attitude of self-restraint and atetermination of the most appropriate forum. Idaho PUC OrderNo. 25918 (March 1995). This Commission has expertise in rate-setting, regulating the terms of service of utilities, and implementing PURPA and its regulations. Courts have expertise in interpreting contracts, determining whether liquidated damages clauses are enforceable, and awarding damages. This matter falls within the core competency of a court, not of the commission. First, this dispute is frst and foremost a dispute over liquidated damages, that will likely include 1) whether the liquidated damages clause was triggere d-i.e.,whether Lowline #2has engaged in a "permanent" curtailment; 2) whether the liquidated damages clause is enforceable;e 3) whether Idaho Power has complied with the notice requirements and other conditions precedent to collecting liquidated damages; 4) the amount of damages; and 5) other potential ^ e Liquidated damages are not enforceable in many circumstances, even when the contract states that clause isenforceable. see, e.g.,schroederv. Partin,l5l Idaho 471 ,476,25gp.3d617,622(2011)(quoting Graves v. cupic,75 Idaho 451,456,272,P.2d 1020,1023 (1954) ("[W]here the forfeiture or damage n*ea Uy the--contract isarbitrary and bears no reasonable relation to the anttipated damage, and is exorbitant and unconscionable, it isregarded as a 'penalty', and the contractual provision iherefor is v-oid and unenforceable.,,) CENTRAL RIVgns Powgns US LLC,S MoTIoN ro DTsIr,TTss I 5302971_5.docx U5327.11 Pecr 9 common-law defenses. None of these issues are the types of matters in which the Commission has special expertise. Second, the ru1es of procedure, rules of evidence, and manner of proceeding in Idaho courts are geared towards disputes of this nature. The Commission's are not. For example, Idaho courts will apply the parol evidence rule to determine whether extrinsic evidence should be used to interpret the phrase "permanent ." See, e.g., AED, Inc. v. KDC Invests', LLC,155 Idaho 159' 165,307 p.3d 176,182 (2013) ("The parol evidence rule bars the use of extrinsic evidence when a court interprets a written contract."). The admissibility of extrinsic evidence and the related parol evidence rule are "among the law's muddiest waters." Williston on Contracrs, $ 33:5' (4th ed.). In fact, "the parol evidence rule is billed as the most litigated doctrine in contract law'" Juanda Lowder Daniel, K./.S.S. the Parol Evidence Rule Goodbye: Simplifying the Concept of Protecting the Parties' Written Agreement,5T Syracuse L. Rev. 227,228 (2007)' Idaho power's contractual argument is largely based on extrinsic evidence. Lowline #2's arguments are likely to be largely based on the plain language of the FESA-that permanent curtailment means, well, a curtailment thatis permanent as opposed to annual. Thus, in this case the Commission will have to determine whether the parol evidence rule applies or instead whether extrinsic evidence is admissible. It is not clear whether the Commission adheres to the parol evidence rule. ,See IDAPA 31.01.01.261 ("The presiding officer at hearing is not bound by the Idaho Rules of Evidence.";.r0 Judicial rules of evidence, and judicial interpretation of caselaw interpreting and applyng the parol evidence rule, are better suited to undertake this task' In addition, the role of Commission Staffis not particularly clear in this instance. Lowline #2 recognizes and respects Commission Staffls expertise, education, and experience in ro Lowline #2,s research did not reveal any Commission decisions discussing the parol evidence rule' CrNrnEr RTVSNS POWBNS US LLC,S MONON TO DISMISS 1530297 | 5.docx [5327'l] PAGE 10 accounting, ratemaking, and other utility-related issues. However, Lowline #2 respectfully submits that a judge's staffof law clerks is befter suited to analyzeldaho caselaw regarding the parol evidence rule, contractual interpretation, whether the liquidated damages clause is enforceable, and other issues that will be addressed in this case. Moreover, the Idaho court's rules of procedure are clear here: there will be a complaint, answer, discovery, and likely dispositive motions with oral argument on the relevant legal points. A jury trial will be held if there are disputed issues of fact, with the prevailing party being entitled to attorney fees. The Commission's rules, by contrast, call for either a technical hearing, in which the parties will present pre-filed testimony, or modified procedure, which is an on-the- record proceeding. There is no opportunity for a jury trial. There is an opportunity for discovery, but common judicial discovery procedures such as depositions, motions to compel, motions for protective orders, and similar mechanisms are rare or nonexistent. While the Commission,s processes are well-suited to resolve technical issues related to utility regulation, they are not tailored to resolve multi-million-dollar contractual disputes that hinge on primarily legal issues. Finally, in district court the prevailing party will be entitled to an award of attorney fees. I.C'$12-120(3)("Inanycivilaction...inanycommercialtransaction...theprevailingparty shall be allowed a reasonable attorney's fee . . . ."). Lowline #2 is not aware of any analogous provision in the Commission's enabling statutes or rules. In short, as a matter of substance and of procedure, the judicial process is set up to accommodate and resolve contractual disputes such as these. The Commission's processes are not' Lowline #2 respectfully submits that the Commission should defer to the courts and refrain from exercising jurisdiction over this dispute. CrNrnar RrvERs PowERS US LLC,s MouoN To DrsMrss 1 530297 l_5.docx 115327 .ll PAGE I I CONCLUSION Idaho power's Cross-Complaint seeks adjudication of a contactual dispute and an award of over 3.6 million dollars against Lowline #2. Lowline #2's FESA does not contain a clause consenting to the Commission's jurisdiction over contractual disputes. Even if it did, such a clause cannot confer jurisdiction on the Commission where it did not exist before' And even if the Commission could exercise jurisdiction, this dispute should be adjudicated in district court, which has procedures, staff, and expertise that are specifically designed to resolve disputes such as these. For these reasons, Lowline #2 respectfully submits that this proceeding should be dismissed. Dated: September 17, 2020 Respectfully submitted, ,? Preston N. Carter Givens Pursley, LLP Attorneys for Central Rivers Power US, LLC CnNrner Rrvsns PowBns US LLC's MottoN to Dtstvttss 15302971 5.docx U5327'll PAGE 12 CERTIFICATE OF DELIVERY I certiff that on September 17,2020, a true and correct copy of the foregoing was served upon all parties of record in this proceeding via electronic mail as indicated below: COMMISSION STAFF JanNoriyuki Idaho Public Utilities Commission 11331 W. ChindenBlvd., Bldg.8, Ste.20l-A Boise, ID 83714 EMAIL: j an.noriyuki@puc.idaho. gov Edward Jewell, Deputy Attorney General Idaho Public Utilities Commission 11331 W. ChindenBlvd., Bldg.8, Ste.20l-A Boise, ID 83714 EMAIL: edwardjewell@puc.idaho. gov IDAHO POWER COMPANY Donovan Walker Idaho Power Company l22l W.Idaho Street Boise,Idaho 83702 EMAIL: dwalker@idahopower.com wooD HYDRO, LLC C. Thomas Arkoosh Arkoosh Law Offices 802 W. Bannock Street, Suite LP 103 Boise,Idaho 83701 EMAIL: tom.arkoosh@arkoosh.com stacie. foor@arkoosh. com ENEL GREEN POWER NORTH AMERICA,INC. Randald Bartlett EMAIL: randald.bartlett@enel.com generalcounsel@enel. com / -- ----'-- - Preston N. Carter Csxrner. RryERS PowERS US LLC's MorroN ro DrsMrss I 530297 1_5.docx ll 5327.1) Pacs 13