City of Fulton v. Central Elec. Power Co-op., WD

• Decision Date: 14 May 1991
• Docket Number: No. WD,WD
• Citation: 810 S.W.2d 349
• Parties: CITY OF FULTON, Missouri, Appellant/Cross-Respondent, v. CENTRAL ELECTRIC POWER COOPERATIVE, Respondent/Cross-Appellant. 43656.
• Court: Missouri Court of Appeals

Page 349

810 S.W.2d 349

CITY OF FULTON, Missouri, Appellant/Cross-Respondent, v. CENTRAL ELECTRIC POWER COOPERATIVE, Respondent/Cross-Appellant.

No. WD 43656.

Missouri Court of Appeals Western District.

May 14, 1991.

Motion for Rehearing and/or Transfer

to Supreme Court Denied

June 27, 1991.

Donald James Mariea, Fulton, for appellant/cross-respondent.

Robert C. Smith, Jr., Columbia, for respondent/cross-appellant.

Before KENNEDY, P.J., and FENNER and BRECKENRIDGE, JJ.

FENNER, Judge.

The City of Fulton, Missouri (Fulton) appeals the trial court's judgment in a contract dispute between Fulton and Central Electric Power Cooperative (Central). Central cross-appeals.

Fulton is a municipal corporation of the State of Missouri which owns and operates an electrical generating and distribution system. Fulton purchases quantities of electrical power from outside sources for the purpose of supplying electricity to its customers in and around the City of Fulton.

Central is a Missouri rural electric cooperative organized and existing under the laws of the State of Missouri and is engaged primarily in the business of generation and transmission of electrical power to distribution cooperatives located in the central part of Missouri. Central purchases electric power and energy from Associated Electric Cooperative, Inc. (Associated).

Associated is a generation and transmission cooperative, which among other things, provides bulk electric power and energy at wholesale to its six member-owner rural electric cooperatives. Central is one of the six rural electric cooperatives receiving electricity from Associated. Central, in turn, transmits and resells electric power and energy to its member distribution cooperatives, which then distribute and sell such electricity at retail to their respective member-owners consisting of rural customers in central Missouri.

On December 1, 1976, Fulton entered into a long-term contractual agreement with the City of Sikeston, Missouri (Sikeston). The contract provides for Fulton to purchase specified amounts of electricity from Sikeston into the 1990's. However, Fulton had no transmission lines extending between Fulton and Sikeston. Therefore, Fulton entered into an agreement with Associated to transmit the electric power and energy purchased from Sikeston over the lines of Associated. This transmission of electricity across another's line is known as "wheeling."

Fulton's contract for wheeling of electric power across Associated's lines was also entered on December 1, 1976. The contract between Fulton and Associated was coextensive with the purchase contract between Fulton and Sikeston. The contract provided that Fulton would have to enter into a separate agreement with Associated's member-owner rural electric cooperative for wheeling beyond the nearest Associated 161/69 kilovolt (kv) substation. This necessitated Fulton's agreement with Central which was entered into on August 5, 1977.

Under Fulton's contract with Central, Fulton agreed to pay a wheeling rate of eighty cents per kilowatt per month "for the peak year kilowatts delivered during the billing month or the amount of kilowatts contracted, whichever is greater," ($0.80/kwm), for the first five years of the contract. The five year period was to begin when the Sikeston power plant became operational. The contract provided that after the first five years the wheeling rate was to be renegotiated. The contract also provided that the agreement was subject to termination by either party after the first five years upon at least 24 months written notice to the other party. ¹

The initial five year term of Fulton's contract with Central ended September 1, 1986. The parties attempted without success to negotiate a new wheeling rate. Upon failure to negotiate a new wheeling rate, Central notified Fulton that it would continue to wheel energy, but that payment was expected in the amount of $1.80/kwm. Fulton then filed this action to enjoin Central from refusing to wheel electric power at the rate of $0.80/kwm and requested that the court determine a reasonable rate for the remaining term, if any, of the contract.

Pursuant to an agreement of the parties the trial court granted a preliminary injunction which continued the $0.80/kwm rate and required Fulton to pay an additional sum of $1.00/kwm into an escrow account pending the outcome of the litigation. The trial court then proceeded to decide the case in a bifurcated fashion.

The court first held a hearing to determine whether a valid, enforceable contract existed between the parties after the initial five year term. At the conclusion of the first hearing the court entered findings of fact and conclusions of law. The court held that a valid contract existed between Fulton and Central past the initial five year term which required two years notice prior to termination, leaving open to negotiation the wheeling rate beyond the initial five years.

In the second part of the bifurcated proceeding the court heard evidence and without formal findings and conclusions ordered that a reasonable wheeling rate past the initial five year term of the contract was $1.39/kwm. Fulton and Central both appeal.

Applicable to all points raised on appeal by both Fulton and Central is the standard of appellate review in a court tried case which directs that the appellate court must sustain the trial court's judgment unless there is no substantial evidence to support it, it is against the weight of the evidence, it erroneously declares the law, or it erroneously applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976).

In its first point Fulton argues that the contract required that the wheeling rate of $0.80/kwm was applicable beyond the initial five year period until the...