Monsanto Supporting Brief.pdf

SUPPORTING BRIEF OF MONSANTO - 1
Randall C. Budge, ISB 1949
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
P.O. Box 1391; 201 E. Center
Pocatello, Idaho 83204-1391
Telephone: [phone]
Fax: [phone]
Attorneys for Intervenor Monsanto Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
In the Matter of the Application of PacifiCorp )
dba Utah Power & Light Company for ) Case No. PAC-E-01-16
Approval of Interim Provisions for the Supply )
of Electric Service to Monsanto Company. )
)
SUPPORTING BRIEF OF MONSANTO
COMES NOW Monsanto Company (“Monsanto”), through counsel, and hereby
submits this Brief in support of its Motion to Dismiss or Stay the Application of PacifiCorp to
establish an interim tariff rate for Monsanto’s electric service.
INTRODUCTION
Monsanto operates an elemental phosphorus plant near the City of Soda Springs in
Caribou County, Idaho. The electric power requirements of the plant have been supplied by
PacifiCorp and its predecessor Utah Power continuously since 1952. Monsanto is PacifiCorp’s
single largest customer, contributing over 28 percent of all Idaho retail revenues.
Monsanto’s electric service has always been provided pursuant to a special contract.
By Order No. 26282 dated December 21, 1995, this Commission approved the current Power
Supply Agreement (“Agreement”) dated November 1, 1995, between Monsanto and
PacifiCorp. Pursuant to the Agreement, Monsanto receives 9 MW of firm power and energy
SUPPORTING BRIEF OF MONSANTO - 2
and 206 MW of interruptible power and energy. Since May 18, 1990, when Utah Power
eliminated Schedule 13 which provided a tariff rate for customers over 15 MW, no tariff rates
have existed for large industrial service.
CONTRACT INTERPRETATION DISPUTE
For some time a dispute has existed between PacifiCorp and Monsanto regarding the
termination date of the Agreement. The specific provision in the Agreement dealing with
termination, renewal, and notice, is paragraph 2.1, which provides:
“2.1 Term. Subject to the approval of the Idaho Public Utilities
Commission, this Agreement shall become effective on November 1, 1995, shall
continue in full force in effect through December 31, 2001, and thereafter shall
be renewed annually until either party gives at least one year’s written notice
of termination.” (Italics added.)
The explanatory “Technical Assessment Package” prepared and supplied by
PacifiCorp to the Commission with the proposed Agreement when it was submitted for
approval also states that the one year termination notice cannot be given until after December
31, 2001, to wit:
“Section 5: Description of New Agreement
The New Agreement - signed by Monsanto and PacifiCorp on November
1, 1995, and subject to approval by the IPUC - is designed to replace the current
Power Supply Agreement while extending the period of retail service to the
Customer through December 31, 2001. After December 31, 2001, the New
Agreement would be renewed annually until either party gives a termination notice
of one year in advance. The New Agreement would become effective November
1, 1995.” (Italics added.)
The plain language of the Agreement requires that notice of termination cannot be
given until after December 31, 2001. This language, coupled with the “automatic” annual
SUPPORTING BRIEF OF MONSANTO - 3
extension language, prevents the Agreement from being terminated until January 1, 2003, at
the earliest.
In December 2000, PacifiCorp wrongfully gave notice attempting to prematurely
terminate the Agreement, effective December 31, 2001. This termination notice was
premature and ineffective to terminate the parties’ Agreement by year-end 2001.
Because PacifiCorp continues to wrongfully attempt to deny Monsanto the benefit of
it’s bargain, Monsanto filed a Complaint for declaratory relief which is pending in Federal
Court. Monsanto was forced to file suit only after the negotiations reached an impasse.1
MONSANTO’S PENDING DECLARATORY JUDGMENT COMPLAINT
On November 16, 2001, some three weeks prior to the filing of PacifiCorp’s Application
with the Commission, Monsanto filed a Complaint for Declaratory Judgment in State District Court
in Caribou County for the purpose of interpreting the Agreement and obtaining a Court declaration
of the termination date. Attached as Exhibit 1 is a copy of the Complaint with attached Exhibits A
through F. On December 5, 2001, PacifiCorp filed a Notice Of Removal causing the case to be
removed from State District Court to Federal District Court, Exhibit 2. The case is now pending in
the U.S. District Court for the District of Idaho before Federal District Judge B. Lynn Winmill as
Case No. CIV-01-0607-E-BLW as reflected by Exhibit 3.
1This resulted after PacifiCorp refused to follow the existing contract format, which had
served the parties well for many years. Instead, PacifiCorp has insisted on an entirely new generic
contract format, which effectively treats Monsanto as a firm tariff customer without reasonable and
adequate consideration for the unique nature of Monsanto’s interruptible load which has been
historically recognized by this Commission as providing significant operating reserves and load
balancing benefits to the PacifiCorp System.
SUPPORTING BRIEF OF MONSANTO - 4
Monsanto intends to vigorously prosecute this case to a prompt conclusion. Since no factual
disputes exists and the Agreement can be interpreted as a matter of law, Monsanto expects an early
resolution by the Court.
Monsanto’s filing and prosecution of this lawsuit deprives the Commission of jurisdiction
and renders PacifiCorp’s Application to establish an interim rate entirely premature and unnecessary.
In the unlikely event the Court determines the termination date is year-end 2001 as claimed by
PacifiCorp, Monsanto has agreed to apply retroactive to the termination date whatever new rate is
applied to Monsanto’s ongoing electric service, whether established by new agreement between the
parties or by this Commission, and pay interest at a reasonable rate on any deficiency. Monsanto’s
proposal to PacifiCorp to this effect was set forth by letter dated December 6, 2001, Exhibit 4
attached, but rejected by PacifiCorp.
DISTRICT COURT JURISDICTION
It is well established under Idaho law that the Court, not the Public Utilities
Commission, has jurisdiction to determine contract disputes.
The jurisdiction issue was resolved in Afton Energy, Inc. v. Idaho Power Company, 111
Idaho 925, 928, 729 P.2d 400, 403 (1986), where the Idaho Supreme Court declared the district
court’s primary jurisdiction to determine contract disputes of this nature, stating:
“The Commission generally has jurisdiction to hear matters presented
to it regarding the regulation and supervision of public utilities. I.C.
§ 61-501. Grever v. Idaho Telephone Company, 94 Idaho 900, 499
P.2d 1256 (1972). But the Commission's jurisdiction is limited and
has to be found entirely in the enabling statutes. Arrow
Transportation Company v. Idaho Public Utilities Commission, 85
Idaho 307, 379 P.2d 422 (1963). Specifically, the Commission has no
jurisdiction to take away a utility's freedom of contract (so long as the
contract is not inimical to the public interest) and must consider
private contracts when involved in the rate-making process.
SUPPORTING BRIEF OF MONSANTO - 5
Agricultural Products v. Utah Power & Light, 98 Idaho 23, 557 P.2d
617 (1976). As such, the interpretation of contracts, as a general rule,
does not fall within the Commission's jurisdiction. Lemhi Telephone
Company v. Mountain States Telephone & Telegraph Co., 98 Idaho
692, 571 P.2d 753 (1977); Bunker Hill Co. v. Washington Water
Power Co., 101 Idaho 493, 616 P.2d 272 (1980). As this Court stated
in Lemhi:
‘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.
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, 571 P.2d at
757.’ ”
Accord: Idaho Power Co. v. Cogeneration, Inc., 134 Idaho 749, 748, 9 P.3d 1204 (2000), rehearing
denied.
The Uniform Declaratory Judgment Act, I.C. § 10-1201 et seq., enables a party to a written
contract to seek a declaration as to its meaning and effect. I.C. § 10-1202 provides:
“Any person interested under a deed, will, written contract or other
writings constituting a contract or any oral contract, or whose rights,
status or other legal relations are affected by a statute, municipal
ordinance, contract or franchise, may have determined any question
of construction or validity arising under the instrument, statute,
ordinance, contract or franchise and obtain a declaration of rights,
status or other legal relations thereunder.”
Clearly, the Afton Energy case, and I.C. § 10-1202, establish Monsanto’s right and obligation
to obtain a Court’s declaration as to the proper operation and effect of the subject Agreement.
Monsanto’s existing Agreement and the rate established therein have been approved by this
Commission. This Commission lacks statutory authority and has no jurisdiction to interpret or alter
the terms of this Contract. PacifiCorp’s Application is, therefore, clearly premature.
SUPPORTING BRIEF OF MONSANTO - 6
APPLICATION OF PACIFICORP
PacifiCorp’s Application to establish an interim tariff rate for Monsanto is entirely
premature. It cannot and should not be acted upon until the Court has ruled. The Commission’s
power to fix rates under I.C. §61-503 is limited and cannot interfere with Monsanto’s private
contract rights. Afton Energy, Inc. v. Idaho Power Co., supra, Idaho Power Co. v. Cogeneration,
Inc., supra.
PacifiCorp has an unequivocal legal obligation to provide electric service to Monsanto. I.C.
§61-302. In return therefor, Monsanto must pay just and reasonable charges. I.C. §61-301. The
Commission has the right and obligation to establish the amount of these charges once the existing
agreement terminates, but not before. This includes any appropriate true-up from the termination
date with a reasonable rate of interest.
PacifiCorp’s Application is effectively an attempted end-run around the Court action already
in progress to determine the termination date. While it would seem unimaginable, if PacifiCorp
attempted to curtail electric service to Monsanto after year-end, Monsanto would incur literally
millions of dollars in damages, the recovery of which would be sought from PacifiCorp. If any
indication is given PacifiCorp would undertake such action, Monsanto is prepared to immediately
seek injunctive relief from the District Court.
At this time Monsanto has not had an opportunity to evaluate PacifiCorp’s filing to permit
a detailed substantive response. Monsanto fully intends to do so if the Commission denies its
Motion to Dismiss or Stay. Notwithstanding, Monsanto desires to make brief initial comment on
some aspects of the Application.
SUPPORTING BRIEF OF MONSANTO - 7
Monsanto anticipates it may take substantially longer for the Commission to establish a new
industrial tariff through PacifiCorp’s proposed procedure than the time necessary to resolve the
Contract dispute in Court. This is because establishing an entirely new tariff rate should necessarily
involve a thorough analysis and examination of PacifiCorp’s proposed cost-of-service study for
Monsanto, cost-of-service studies for other customers, inter-jurisdictional allocation issues and
PacifiCorp’s overall revenue requirement. It is noteworthy that PacifiCorp has not had a general rate
case in Idaho for more than a dozen years.
PacifiCorp’s proposed new Tariff Schedule 9 for Monsanto proposes firm rather than
interruptible service from Monsanto. The proposed new rate of 31.4 mills per kWh for firm service
represents a 70 percent increase over Monsanto’s existing Special Contract Rate which would
threaten the viability of continued operation of the Soda Springs plant, the loss of which would be
an economic disaster to the regional economy.
PacifiCorp’s proposed rate for Monsanto ignores the unique interruptible nature of
Monsanto’s load which has historically been recognized by this Commission as providing substantial
operating reserve and load balancing benefits to the PacifiCorp System. Further, Monsanto has not
historically been included in class cost-of-service studies or Idaho Jurisdictional Revenue
Requirements. This is because Monsanto has always been treated as a system customer, not an Idaho
Jurisdictional Load. As stated by this Commission in Order No. 26282 in Case No. UPL-E-95-4
approving the current Agreement:
“The Monsanto interruptible load is not treated as an Idaho jurisdictional load
for jurisdictional allocation purposes. It is treated as a system load. PacifiCorp has
four other smaller loads in Utah that are also treated as system loads. Costs and
revenues associated with system loads are spread to all jurisdictions instead of just
the jurisdiction in which the customer is physically located. Four percent of
Monsanto revenues are spread to Idaho based on a jurisdictional energy allocator.”
SUPPORTING BRIEF OF MONSANTO - 8
Furthermore, as a jurisdictional customer and by reason of its unique interruptible
characteristics, Monsanto’s rates have not been established based upon traditional cost-of-service
methodology. Instead, Monsanto’s rates have been established based upon paying variable energy
costs plus a reasonable contribution to fixed costs. PacifiCorp’s current proposal is a dramatic
departure from ratemaking principles that have been applied to Monsanto by past Commissions as
each special contract was presented and approved. The impact of PacifiCorp’s new and untested
studies and methodologies for pricing the Monsanto Contract will have substantial yet unknown
impacts on the Idaho jurisdiction and the rates paid by other customers, which will require a
thorough investigation. It is incredulous for PacifiCorp to expect such a proceeding to be handled
on modified procedure which Monsanto strenuously objects to.
CONCLUSION
Monsanto’s Motion to Dismiss should be granted. The Commission has no jurisdiction to
establish the termination date of Monsanto’s Agreement nor establish an interim or any other rate
until the Court has determined that Monsanto’s Agreement is no longer in effect. A Declaratory
Judgment Action is pending in Federal District Court to make this determination. Alternatively,
PacifiCorp’s Application is clearly premature and should be stayed until the District Court has ruled.
Monsanto’s willingness and ability to true-up any deficiency relating to power supplied after
the Contract termination date with a reasonable rate of interest adequately protects and safeguards
PacifiCorp and other ratepayers.
RESPECTFULLY SUBMITTED this 13th day of December, 2001.
RACINE, OLSON, NYE, BUDGE &
BAILEY, CHARTERED
SUPPORTING BRIEF OF MONSANTO - 9
By
RANDALL C. BUDGE
SUPPORTING BRIEF OF MONSANTO - 10
CERTIFICATE OF MAILING
I HEREBY CERTIFY that on this 14th day of December, 2001, I served a true, correct
and complete copy of the foregoing document, to each of the following, in the manner
indicated:
Jean D. Jewell, Secretary [ ] Hand Delivery
Idaho Public Utilities Commission [ ] U.S. Mail/Postage Prepaid
P.O. Box 83720 [ x] Overnight Mail
472 W. Washington Street [ x] Facsimile
Boise, Idaho 83720-0074
Fax: [phone]
John M. Eriksson [ ] Hand Delivery
Stoel Rives LLP [x ] U.S. Mail/Postage Prepaid
201 S. Main St., Ste 1100 [ ] Overnight Mail
Salt Lake City, Utah 84111 [ ] Facsimile
Mary S. Hobson [ ] Hand Delivery
Stoel Rives LLP [x] U.S. Mail/Postage Prepaid
101 South Capitol Blvd, Suite 1900 [ ] Overnight Mail
Boise, Idaho 83702-5958 [ ] Facsimile
Doug Larson [ ] Hand Delivery
PacifiCorp [x] U.S. Mail/Postage Prepaid
201 South Main, Suite 2300 [ ] Overnight Mail
Salt Lake City, Utah 84140-0023 [ ] Facsimile

RANDALL C. BUDGE