Bunker Hill Co. v. Washington Water Power Co.
| Decision Date | 11 March 1977 |
| Docket Number | No. 12085,12085 |
| Citation | 561 P.2d 391,98 Idaho 249 |
| Parties | The BUNKER HILL COMPANY, Appellant, v. The WASHINGTON WATER POWER COMPANY, and Idaho Public Utilities Commission, Respondents. |
| Court | Idaho Supreme Court |
Robert E. Brown of Brown, Peacock, Keane & Boyd, Kellogg, for appellant.
Paul D. McCabe, Coeur d'Alene, Robert L. Simpson, of Paine, Lowe, Coffin, Herman & O'Kelly, Spokane, Wash., for Washington Water Power Co.
Wayne L. Kidwell, Atty. Gen., Dan L. Poole, Conley E. Ward, Jr., Asst. Attys. Gen., Boise, for Idaho Public Utilities Com'n.
Appellant, Bunker Hill Company, operates an electrolytic zinc plant at Kellogg, Idaho, which receives its electric power as a special contract customer of respondent, Washington Water Power Company (the Power Company). A contract between the parties which dates from June 1, 1956, and which has been approved by the Idaho Public Utilities Commission (P.U.C.) provides for a rate review at four-year intervals at the request of either party. In 1970, the Power Company made its first request for such a review and in April, 1973, the contract was amended to provide for an immediate 5 per cent increase for Bunker Hill and another 3 per cent increase, effective January 1, 1974. The amendment also provided for further adjustments should the P.U.C. authorize a revision in the monthly rate of the Power Company's 'Extra Large Service' tariff (Schedule 22). In August, 1974, the P.U.C. authorized such a rate increase of 14.3 per cent in the Schedule 22 tariffs.
In October, 1974, the Power Company requested another rate review, as specified in the Bunker Hill contract. Two points were at issue. First, the parties disputed the numerical results which followed from the 1973 amendment and the subsequent tariff increase. Second, the Power Company proposed four years of progressive increases so that Bunker Hill would reach the full level of Schedule 22 accounts by 1978.
These issues were still being negotiated when, in March, 1975, the Power Company again went before the P.U.C. seeking a general 4 per cent rate increase. Bunker Hill intervened at the hearings, opposing the general rate hike and seeking a ruling that its version of the contract amendment was correct.
The P.U.C.'s order No. 12069 of August 5, 1975,
(1) ruled against Bunker Hill on the contract interpretation question, thus granting the Power Company a 16.15 per cent increase, retroactive to 1974;
(2) found that the Power Company's plan of progressive rate increases for Bunker Hill through the year 1978 was fair and reasonable; and
(3) granted the Power Company a 4 per cent general rate increase.
Bunker Hill filed a timely Petition for Rehearing in which it challenged each of these three rulings. The Petition was denied by the Commission on September 24, 1975. This appeal was taken from the Commission's orders.
For reasons stated below, we set aside the Commission's Order.
At the conclusion of their rate review negotiations in 1973, Bunker Hill and Washington Water Power Company amended their 1956 contract as follows:
'. . . if the Idaho Public Utilities Commission approves or authorizes revisions in the monthly rate in the schedules for the Power Company's 'Extra Large Service' tariff(s) for electric service, the effective monthly rate set forth in Section 5 hereof will be the monthly rate effective January 1, 1974, as set forth above, adjusted in the amount of and to reflect all rate revisions so approved by the Idaho Public Utilities Commission in the Power Company's 'Extra Large Service' tariff(s) for electric service provided.'
In August, 1974, the P.U.C. in Case No. U-1008-86, approved the Power Company's new tariffs, effective November 13, 1974. (Order No. 11563) The Power Company increased Bunker Hill's contract rate by 16.15 per cent-an amount it determined by applying both the present Schedule 22 rate and the former Schedule 22 rate to Bunker Hill's 1973 load data, and then applying the resulting percentage increase to each step of the contract rate in effect on January 1, 1974. Bunker Hill interpreted the amendment to require a 14.3% increase-an amount crresponding to the percentage increase in all of the Idaho Schedule 22 customers as a class. (C.T. 38-39) For each month after November, 1974, Bunker Hill recomputed its monthly bill and withheld the difference between the 14.3 per cent increase it deemed appropriate and the 16.15 per cent increase insisted upon by the Power Company.
This issue was still being negotiated by the parties when, on March 5, 1975, the Power Company made application to the P.U.C. for a 4 per cent general rate increase. Bunker Hill petitioned to intervene in opposition to the general rate increase and, with regard to its own particular dispute, offered to prove that 14.3 per cent was a 'fair and equitable' increase according to the terms of the amended contract.
At the hearing before the P.U.C. in May, 1975, Bunker Hill argued that an increase of 16.15 per cent-when other Schedule 22 customers were only to be increased an average of 14.3 per cent-was discriminatory treatment, in violation of its right to equal protection of the law. Furthermore, bunker Hill argued that the increase was unjustified. The Power Company, during the 1974 hearing that established the new tariff, had only requested a $269,000 increase in revenue from all special contract industrial customers subject to this tariff. An increase of 14.3 per cent would generate $290,000 income from Bunker Hill alone; an increase of 16.15 per cent would generate $333,000-or an amount which exceeded the Power Company's actual request by nearly $65,000.
The Power Company argued that none of its schedules is ever based upon the condition that all customers within a class experience the same percentage increase. Indeed, no customer subject to a given tariff ever pays the average increase. Each individual customer experiences a unique percentage increase which depends upon the characteristics of its own electrical load. Deviations from the average because of the unique make-up of each customer are precisely what go to make up the average and certainly do not constitute unequal or discriminatory treatment in any constitutionally objectionable sense.
The P.U.C. in its Order No. 12069 settled this dispute in favor of the Power Company:
'We have reviewed the Zinc Plant Contract, the April 1973 amendment (Exhibit 1-A), and related documents, and we conclude that Applicant's interpretation of said provisions is correct, and will be adopted by the Commission for purposes of this hearing.' (C.T. 39)
Bunker Hill argues that by so ruling in favor of the Power Company, more revenue will be generated than was originally requested by the Power Company in its 1974 rate increase application. This fact, if true, is not material. Projections of revenue are always imprecise; indeed, the 1975 hearing was required because of a shortfall of net income due to miscalculations made in the 1974 hearing. We are cited to no authority which holds that customers can withhold payments on part of an increase in hopes of a rebate should their category produce more revenue than was originally anticipated by the Power Company and the P.U.C.
It must be stressed that the Commission's decision in this matter is an interpretation of imprecise contractual language, not an abrogation of a contractual agreement. Since the parties agreed to let the P.U.C. settle this dispute and since there is substantial evidence in the record to support the Commission's decision, it will not be disturbed on appeal. Nez Perce Roller Mills v. Public Util. Comm'n, 54 Idaho 696, 34 P.2d 972 (1934).
Bunker Hill is the Power Company's largest Idaho customer. Its electrolytic zinc plant alone consumed 38.40 per cent of the 1973 kWhs of industrial power provided by the Power Company in Idaho, and 21.65 per cent of the Power Company's total kWh sales of electric power in Idaho during 1973. Bunker Hill receives its power at the lowest rate of any Idaho consumer, as the following table of 1974 charges indicates:
Average of all industrial customers 6.1 " " "
Average of all industrial customers 5.26 " " "
under contract
Bunker Hill Zinz Plant * 4.62 mills per kWh
* This figure includes the 16.15 per cent increase the Power Company sought
Note to collect in 1974.
The practice of providing bargain rates to a utility's largest customers grew up in an age of cheap power. The wisdom of this practice has been questioned in recent years as the public has become more aware of the political, economic and environmental costs imposed on society. In a move characterized as the 'progressive elimination of preferential treatment,' the Power Company proposed a four-stage rate increase in order to bring Bunker Hill up to 100 per cent of Schedule 22 ('Extra Large Service' customers) by 1978. This schedule was proposed to the P.U.C. 'in lieu of the present contract rate and the rate amendment clause' agreed to in 1973. The proposal was accepted by the P.U.C. in its Order No. 12069 of August 8, 1975:
THE COMMISSION HEREBY ORDERS AS FOLLOWS: . . . THAT the Washington Water Power Company should make all industrial customers subject to filed tariff rate schedules as soon as practicable; and that Bunker Hill should be made subject to filed tariff Schedule 22, through progressive steps, to be fully effective by October 1, 1978, as proposed by the Washington Water Power Company.
This aspect of the case presents the same problem which the Court recently faced in Agricultural Products Corporation (now Beker Industries) v. Utah Power & Light Co. and Idaho Public Utilities Commission, Idaho, 557 P.2d 617 (1976), namely, the status of private rate contracts in the scheme of public utility regulation. That case laid down the general principles which apply. On the one hand, the State, by virtue of its police...
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