Asson v. City of Burley
| Decision Date | 26 September 1983 |
| Docket Number | 14809,Nos. 14719,s. 14719 |
| Citation | 670 P.2d 839,105 Idaho 432 |
| Parties | Gary ASSON and LeRae Asson, husband and wife, citizens of the City of Burley; Ransom H. Brown and Betty Brown, husband and wife, citizens of the City of Heyburn; and J.R. Simplot Company, Petitioners, v. CITY OF BURLEY; Charles Shadduck, Mayor of the City of Burley; James Parker, J. Garth Payne, Frances McDonald, Dale Doman, Walter Petersen, and Truman Bradley, as members of the City Council of Burley; City of Heyburn, Harold R. Hurst, Mayor of the City of Heyburn; and Wilford Wilcox, Dean Baker, David Mayes, and Larry McComb, as members of the City Council of Heyburn, Respondents. Richard H. BOHLE and Paula L. Bohle, husband and wife; Blaine Jensen and Lillian D. Jensen, husband and wife; Charles B. Park and Billie F. Park, husband and wife; Clarence F. Bellem and Lillian B. Bellem, husband and wife; Magic Valley Foods, Inc., an Idaho corporation; Cameron Sales, Inc., an Idaho corporation, Petitioners, v. CITY OF RUPERT, William F. Whittom, Mayor of the City of Rupert, Clark Cameron, Dwinelle E. Allred, June Dombeck and Ronald E. Klebe, as members of the City Council of Rupert, Respondents. |
| Court | Idaho Supreme Court |
Craig Meadows and Phillip M. Barber, Boise, for petitioners Asson, et al.
Roger D. Ling, Rupert, for petitioners Bohle, et al.
William Parsons, Burley, for respondent City of Burley. Stephen A. Tuft, Burley, for respondent City of Heyburn.
Donald J. Chisholm, Burley, for respondent City of Rupert.
A.L. Smith, Idaho Falls, for intervenor City of Idaho Falls.
Peter B. Wilson, Bonners Ferry, for intervenor City of Bonners Ferry.
R.B. Kading, Jr., and R.M. Turnbow, Boise, for intervenor Washington Public Power Supply System.
Howard Humphrey, and Stanley Welsh, Boise, for intervenor Chemical Bank.
In 1976, five Idaho cities 1 (parties to this action) entered into an agreement with the Washington Public Power Supply System (WPPSS) for future supplies of electrical energy to be generated by two planned nuclear power plants. Although the plant projects were later terminated, under the terms of the agreement the cities were nevertheless required to continue to pay their percentage shares of the bond obligations incurred, amounting to millions of dollars. Residents and purchasers of electricity of three of the five cities brought this petition for a writ of prohibition, pursuant to this Court's authority under Idaho Const. Art. 5, § 9 and I.C. §§ 7-401, 402, to prevent the respondent cities from raising municipal electric rates to cover their payment obligations. The petitioners allege the cities acted without constitutional authority when entering into the 1976 agreements.
The record shows that each of the five Idaho cities owns and operates an electrical distribution system that carries electricity within the city and to nearby areas. 2 However, only two of the cities have generating facilities (Idaho Falls and Bonners Ferry), and those facilities do not supply all of their power needs. Thus, each of the five cities relies on outside electrical power supplies. Since 1963 (and before, for several cities) the outside supplier has been the federal government, through its agency the Bonneville Power Administration (BPA). The BPA provides the Pacific Northwest region with comparatively inexpensive hydroelectric power generated at facilities along the Columbia River system.
In the late 1950's and early 1960's, Pacific Northwest cities were receiving forecasts of greatly increased future energy demands. It was expected that the Northwest's hydroelectric resources would soon be inadequate to meet the needs of the region's power users. During this period, and through the late 1960's and into the 1970's, cooperative efforts were made by electricity purchasers such as municipalities and utility districts to predict the region's future energy needs and to make plans to meet them. Organizations such as the Public Power Council and the Pacific Northwest Utilities Conference Committee involved utilities in the region in energy forecasting and planning activities. 3 Another organization, the Joint Power Planning Council, including BPA and many of its power customers, made a study of future energy requirements and concluded that new electrical generating plants would have to be built to keep pace with increasing power demands. A plan was developed which called for the construction of several thermal power plants.
In January 1971 and 1973, and September 1973, the five Idaho cities, together with other Pacific Northwest utilities, entered into agreements with WPPSS to purchase electrical "project capability" from three nuclear power plants to be constructed by WPPSS. 4 Financing for the three nuclear plants was arranged under a plan called "net billing." The cities were to purchase shares of project capability from WPPSS, payment for which was to be made out of city utility revenues. The cities would then assign their project capability to BPA, which would reimburse the cities by reducing their wholesale power bills in amounts equal to their payments to WPPSS. In this way, BPA would actually fund the WPPSS projects. 5
Each city entered into the agreement with respect to these first three plants (referred to as Projects 1, 2, and 3) after passage by its city council of a resolution authorizing execution of the agreement. Each city also represented, in the form of an opinion letter from its counsel, that it had authority to enter into the agreements. 6 The cities had specified statutory authorization, by means of a provision enacted in 1971, to participate in a net-billing arrangement and purchase electrical power to be resold to BPA:
7
The net-billing financing plan made it possible for BPA to assist in insuring future supplies for its electricity customers. Each participating utility pays WPPSS its share of the costs of developing the projects, and BPA gives the participant a credit in the amount of such payment on the BPA bill for power purchased by the participant.
In December 1973 the Public Power Council investigated the possibility of two additional power plants to be designed, financed and built by WPPSS. For various reasons (one of which was a 1973 Treasury Department ruling denying tax exempt status for bonds to finance additional thermal plants from which BPA would receive more than 25% of the energy output), the two newest plants (Projects 4 and 5) could not be financed under the same arrangements as Projects 1, 2 and 3, which had BPA involvement. During 1974 and the first half of 1975, the Public Power Council, BPA, WPPSS and various utilities discussed possible financing plans for Projects 4 and 5.
Although three nuclear plants were already being built, many Northwest utilities were still convinced that the future would bring energy demands well beyond the output of existing and planned power plants. BPA customers were made aware of a possible "notice of insufficiency" in 1973 and thereafter. The "notice of insufficiency" was an official statement by BPA to its preference customers that it would not be able to supply them with sufficient electricity by the early 1980's. BPA informed its customers that unless a plan were created to provide for future power production it would be forced to issue its notice of insufficiency. 8
The proposed additional nuclear plants were to be located at the same sites as Projects 1 and 3 to reduce costs. Costs were projected to be low in comparison to other alternative power facilities. Impelled by the region's forecasts of energy shortages and the apparent advantageous circumstances of pairing two new plants with projects already under construction, the cities entered into a second set of agreements with WPPSS in July 1976.
The agreements, in summary form, provided that WPPSS would use its best efforts to arrange financing for the two plants, to obtain regulatory permits, to issue and sell bonds, and to complete planning and engineering studies, arrange for construction and timely completion of the plants, and thereafter maintain the plants. Project 4 was to be completed in March 1982, and Project 5 in April 1984. If WPPSS failed to secure financing, or if the plants were not completed as planned, the participating cities were nevertheless bound to pay their obligations. The agreement provided:
9
The payment obligation of each city was based on its percentage share of the project capability purchased. The city pays its percentage of the projects'...
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