Afton Energy, Inc. v. Idaho Power Co.

• Decision Date: 11 January 1984
• Docket Number: No. 14777,14777
• Citation: 693 P.2d 427,107 Idaho 781
• Parties: AFTON ENERGY, INC., Complainant, v. IDAHO POWER COMPANY, Respondent. IDAHO POWER COMPANY, Appellant, v. IDAHO PUBLIC UTILITIES COMMISSION and Afton Energy, Inc., Respondents.
• Court: Idaho Supreme Court

Page 427

693 P.2d 427

107 Idaho 781

AFTON ENERGY, INC., Complainant, v. IDAHO POWER COMPANY, Respondent.

IDAHO POWER COMPANY, Appellant, v. IDAHO PUBLIC UTILITIES COMMISSION and Afton Energy, Inc., Respondents.

No. 14777.

Supreme Court of Idaho.

Jan. 11, 1984.

On Rehearing Dec. 20, 1984.

Larry D. Ripley, Barton L. Kline, III, and Bruce H. Tompkins, Boise, for respondent-appellant.

Owen H. Orndorff, Boise, for complainant-respondent Afton Energy.

Jim Jones, Atty. Gen., Lynn E. Thomas, Sol. Gen., and John J. McMahon, Deputy Atty. Gen., (argued), Boise, for respondent Idaho Public Utilities Com'n.

Robert M. Turnbow and David G. Gadda (argued), Boise, for intervenor Independent Power Producers Council.

Wynne M. Blake, Lewiston, for amicus curiae American Paper Institute, Inc.

HUNTLEY, Justice.

The basic issue presented today is whether the Idaho Public Utilities Commission (Commission) has authority to order an electric utility to purchase power from a cogenerator or small power producer (CSPP) for a fixed term according to avoided cost rates previously approved by the Commission.

On July 19, 1982, Afton Energy, Inc. (Afton), filed a complaint with the Commission alleging that Idaho Power had intentionally and deliberately protracted the negotiations for the purchase of its power and had continuously employed tactics designed to discourage Afton and destroy its efforts to complete financing of its cogeneration project to be located in Afton, Wyoming. ¹ The complaint requested the Commission to "immediately order Idaho Power to enter into the attached power sales agreement and to furthermore cooperate in good faith and in an expeditious manner to consummate the sale of its power to Idaho Power." R., p. 3.

July 28, 1982, Idaho Power filed an answer to the Afton complaint and alleged that the Commission had no jurisdiction to order Idaho Power to sign the contract attached to the Afton complaint which was not freely negotiated but rather was a standard form contract with terms dictated by the Commission.

The Commission issued its ruling on the Afton complaint by Order No. 17478 on August 3, 1982. The Commission stated that Idaho Power was in fact correct in its assertion that it lacked jurisdiction to order Idaho Power to enter into the specific agreement attached to Afton's complaint or to dictate contract terms between a utility and a CSPP, ² noting that:

"The role of standard form contracts was to serve as 'a solid point of departure for negotiations.' It has been our experience that sponsors of projects are greatly assisted in their initial planning efforts The Commission, however, held that it did have the authority and indeed the duty pursuant to the Public Utility Regulatory Policies Act (PURPA) § 210 (16 U.S.C. § 824a-3) to require utilities to purchase power pursuant to firm agreements with CSPP's. The Commission thereby ordered Idaho Power to "agree to purchase from Afton Energy, Inc., cogenerated power in the amount and for the time period tendered by Afton, ³ at the avoided cost rates for Idaho Power Company that have previously been prescribed and approved by this Commission and that are currently in effect." ⁴ R., p. 84.

                [107 Idaho 783] and their dealings with potential financial backers if the rates, terms and conditions governing future relations with the purchasing utility can be made available at the outset with at least some degree of assurance.  It makes no sense to reinvent the wheel with each project.  Nonetheless, the parties remain free to negotiate whatever terms make sense in light of the unique circumstances of each site's specific application."   R., p. 70
                

On August 11, 1982, Idaho Power filed with the Commission a compliance filing and request for order which provided that: "As is set forth in ARTICLE XIII of the contract, there remains a legal dispute between Idaho and Afton but such dispute has not prevented the execution of the Contract." R., p. 111. The parties then set forth terms and conditions which would apply depending upon this Court's determination of the Commission's authority. The contract was approved by the Commission in Order No. 17495 dated August 17, 1982. Idaho Power petitioned for rehearing of this order on September 1, 1982, which petition was denied by the Commission on September 29, 1982. This appeal followed.

I. PURPA § 210

The Commission found its authority to order Idaho Power to "agree to purchase from Afton Energy, Inc., cogenerated power in the amount and for the time period tendered by Afton, at [previously prescribed avoided cost rates]," under PURPA § 210.

In 1978, this country was faced with an energy shortage which threatened the economic well-being of the entire country. At that time, the generation of electricity consumed more than twenty-five percent of all energy resources used in the United States. In part because of their reliance on oil and gas, electric utilities were plagued with increasing costs and decreasing efficiency in the use of their generating capacities. "Congress accordingly determined that conservation by electric utilities of oil and natural gas was essential to the success of any effort to lessen the country's dependence on foreign oil, to avoid a repetition of the shortage of natural gas that had been Idaho Power argues that PURPA does not confer authority upon the Commission independent of that granted under the Idaho Public Utilities Law, and that therefore the Commission has no authority to require Idaho Power to contract with Afton. That argument misstates the issue.

                experienced in 1977, and to control consumer costs."   Federal Energy Regulatory Commission (FERC) v. Mississippi, 456 U.S. 742, 102 S.Ct. 2126, 2130, 72 L.Ed.2d 532 (1982).  PURPA was designed to alleviate three problems:  (1) utilities were not generally required to purchase electric output from CSPPs at reasonable rates;  (2) some utilities charged discriminatorily high rates for back-up service to CSPPs;  and (3) CSPPs which provided electricity to utilities ran the risk of being considered electric utilities and thus being subjected to state and federal regulation as electric utilities.  45 Fed.Reg. 12215
                

The Commission is the agency authorized and directed by statute to regulate public utilities. Its statutory authority specifically includes the power to approve or disapprove proposed generating facilities and to regulate those matters which impact utility rates. In this instance 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.

I.C. § 61-501 provides:

"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."

Section 61-526 provides that the Commission has the power to approve or disapprove proposed generating plants.

"Certificate of convenience and necessity.--No ... electrical corporation ... shall henceforth begin the construction ... of a line, plant, or system or of any extension of ... line, plant, or system, without having first obtained from the commission a certificate that the present or future public convenience and necessity require or will require such construction: ... and provided further, that ... if public convenience and necessity does not require or will require such construction or extension, the commission on complaint of the public utility claiming to be injuriously affected, or on the commission's own motion, may, after hearing, make such order and prescribe such terms and conditions for the locating or type of the line, plant or system affected as to it may seem just and reasonable: ..."

I.C. § 61-508 further provides in part as follows:

"Whenever the commission, after a hearing had upon its own motion or upon complaint, shall find that additions, extensions, repairs or improvements to or changes in the existing plant, ... facilities or other physical property of any public utility ... ought reasonably to be made, or that a new structure or structures should be erected, ... the commission shall make and serve an order directing such additions, extensions, repairs, improvements, or changes be made or such structure or structures be erected in the manner and within the time specified in said order."

I.C. § 61-129 declares that public utilities are subject to "the jurisdiction, control and regulation of the Commission"; I.C. § 61-612 gives the Commission jurisdiction to hear complaints against utilities alleging violations of rules, regulations or of any provision of law; I.C. § 61-502 gives the Commission jurisdiction to determine reasonable rates, including rates collected under contracts; and I.C. § 61-503 gives the Commission power to investigate a single contract or an entire schedule of contracts of any public utility and to establish new contracts in lieu thereof.

PURPA § 210(f) provides that "each State regulatory authority shall ... implement such [FERC] rule ... for each electric utility for which it has ratemaking

                [107 Idaho 785] authority." 5  FERC's regulations interpret this provision to require 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...."  18 C.F.R. § 292.401(a) (1980).  Moreover, the United States Supreme Court has interpreted PURPA as imposing requirements on state regulatory authorities in excess of their duties under state law.  In FERC v. Mississippi, the Supreme Court stated that through PURPA the federal government attempted to use state regulatory machinery to advance federal goals.  The Court held constitutional the requirement of

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