City of Springfield v. WASH. PUB. POWER SUP. SYST.
| Citation | 564 F. Supp. 90 |
| Decision Date | 27 April 1983 |
| Docket Number | Civ. No. 82-1387-RE. |
| Parties | The CITY OF SPRINGFIELD, a municipal corporation, acting By and Through the SPRINGFIELD UTILITY BOARD, Plaintiff, v. WASHINGTON PUBLIC POWER SUPPLY SYSTEM, a Washington municipal corporation; City of Eugene, Bonneville Power Administration, an agency of the United States Government; Peter Johnson, Administrator of the Bonneville Power Administration, et al., Defendants. |
| Court | U.S. District Court — District of Oregon |
Peter R. Mersereau, Rankin, McMurry, VavRosky & Doherty, Charles H. Turner, U.S. Atty., Jack G. Collins, Thomas C. Lee, Asst. U.S. Attys., Portland, Or., Paul A. Gaukler, Civ. Div., Dept. of Justice, Washington, D.C., Douglas M. Ragen, John F. Neupert, William H. Walters, Miller, Nash, Yerke, Wiener & Hager, Portland, Or., Gordon, Thomas, Honeywell, Malanca, Peterson & O'Hern, Tacoma, Wash., James H. Clarke, Edwin A. Harnden, Spears, Lubersky, Campbell, Bledsoe, Anderson & Young, Thomas S. Moore, Stephen S. Walters, Stoel, Rives, Boley, Fraser & Wyse, William F. Martson, Jr., Tonkon, Torp, Galen, Booth & Marmaduke, Jay T. Waldron, Schwabe, Williamson, Wyatt, Moore & Roberts, Portland, Or., Robert L. Ackerman, Springfield, Or., Frank H. Hilton, Jr., Schwab & Hilton, Robert M. Kerr, William G. Sheridan, Jr., Tooze, Kerr, Marshall & Shenker, Donald J. Lukes, Brophy & Lukes, Portland, Or., John D. Lowery, Gordon Wilcox, Riddell, Williams, Bullitt & Walkinshaw, Seattle, Wash., Liaison Counsel.
This action concerns three nuclear power plants whose construction was financed under the terms of net billing agreements between the Bonneville Power Administration (BPA), Washington Public Power Supply System (WPPSS), and more than one hundred utilities in Oregon, Washington, Idaho, Montana, Nevada and Wyoming. The plants, known as WPPSS plants 1, 2 and 3, face a somewhat uncertain future. Two other such plants, WPPSS plants 4 and 5, have been terminated in mid-construction, and work has ceased on one of these three plants.
WPPSS plants 1, 2 and 3 share a significant characteristic distinguishing them from WPPSS plants 4 and 5: BPA is a signatory to the contracts governing the financing of their construction. BPA, a federal agency, has assumed the key role in financing the plants through the mechanism of net billing agreements.
In this action, plaintiff City of Springfield, Oregon, seeks a declaration that it had authority to enter into the net billing agreements. The federal defendants, including BPA, seek a further declaration that all participants had authority to enter into the agreements under their respective state laws. The parties now move for summary judgment.
In deciding these motions, I will address several issues. First, I must decide whether this case presents a justiciable controversy. Second, I must decide whether abstention is appropriate and third, I must decide what law governs the interpretation of the net billing agreements. Finally, I must decide the merits of the motions for summary judgment. These issues interrelate significantly and it is appropriate to summarize the background and history of this litigation.
BPA was established in 1937 with the purpose of developing the Northwest's hydroelectric resources and providing low cost energy to the region. In 1966, forecasts of a rapid growth in the power needs of the Northwest caused BPA to urge the construction of nuclear power plants to fill the projected shortfall in the region's energy needs. Between 1970 and 1973 BPA, its customers and WPPSS executed a series of contracts, called net billing agreements, providing for the construction of the nuclear plants. In 1976, WPPSS commenced construction of two more nuclear plants, WPPSS plants 4 and 5. BPA did not participate in those projects, although 88 Northwest utilities did join WPPSS in "participation agreements" for plants 4 and 5.
The predicted sharp growth in Northwest energy demands failed to materialize. As a result, the region faces the prospect of bond payments for the construction of plants which may never generate saleable power. Litigation, however, has certainly been generated, and pends in several state courts, as well as in this court. Meanwhile, WPPSS faces the prospect of a financial meltdown.
In DeFazio, et al. v. Washington Public Power Supply System, Lane County Circuit Court No. 16-81-11344, ratepayers of the city of Springfield challenged the authority of their city to enter into the participation agreements underlying dormant WPPSS plants 4 and 5. The ratepayers secured a ruling that forbade Oregon public utilities, including Springfield, from paying WPPSS in order to retire the debt created by plants 4 and 5. The Lane County Circuit Court ruled that, in entering into the participation agreements without a public vote, the Oregon participants had violated provisions of the Oregon Constitution and various statutes forbidding municipalities from incurring debt without voter approval. DeFazio, now on appeal, sent a shockwave through the Northwest and the municipal bond markets, because it held that Oregon utilities were not liable for the indebtedness for WPPSS plants 4 and 5 and raised the possibility that WPPSS would default on the bonds.
Other litigation, filed in this court, sought a ruling to the effect that DeFazio was wrongly decided and has been dismissed on abstention grounds. That suit, Chemical Bank v. City of Bandon, et al., 562 F.Supp. 704 (D.Or.1983), concerned WPPSS plants 4 and 5, in which BPA owns no interest.
This suit, by contrast, concerns WPPSS plants 1, 2 and 3, in which BPA does have a crucial role. It is argued that BPA has in fact assumed the "dry-hole" risk as to these plants, that is, the obligation of payment if the plants are never completed or never produce saleable power. Thus, it is argued, the utilities which entered into net billing agreements will not be required to retire debts through the use of their taxing power or general revenue, and this, it is further argued, distinguishes DeFazio. Moreover, the federal involvement in these plants, and the prospect of federal responsibility if the "dry-hole" risk comes to fruition, arguably requires that federal law, not the law of Oregon or any other state, govern these contracts. See Clearfield Trust v. United States, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838 (1943); City of Springfield v. WPPSS, et al., 564 F.Supp. 86, (Opinion on motions to dismiss filed March 15, 1983), at n. 2.
A preliminary issue, however, is whether this case is in fact justiciable, and whether abstention is appropriate in deference to the pending appeal of DeFazio. I address these matters first.
When this suit was originally filed, some parties moved to dismiss on the grounds that there was no "case or controversy" concerning the net billing agreements, or that the controversy was not justiciable because the parties to this suit did not have adverse interests. I reserved decision on this issue until litigation of the summary judgment motions on the merits. City of Springfield, supra ().
Since the time of the original argument of those motions some parties have altered their positions and others have entered this suit. At the present time it is clear that, far from being a case in which all parties "desire precisely the same result," see Moore v. Charlotte-Mecklenburg Bd. of Ed., 402 U.S. 47, 48, 91 S.Ct. 1292, 1293, 28 L.Ed.2d 590 (1971), this is a case in which unanimity on any issue is lacking. Some parties argue that the net billing agreements are markedly different in effect from the participation agreements invalidated by DeFazio. Other parties take the opposite position, arguing that the net billing agreements are identical, in effect, with the participation agreements, and therefore either DeFazio was correctly decided and the net billing agreements are invalid or DeFazio was "aberrational," and Oregon utilities did have authority to enter into both kinds of agreements. While some parties argue that federal law governs this case as a result of the federal involvement, others argue that federal law is inapplicable. Some parties argue that abstention is appropriate, others disagree. I conclude that I am faced with a real and justiciable controversy between litigants having adverse interests and asserting adverse positions.
A more difficult issue is the question of abstention. I must start from the axiom that a federal court has the general duty to decide a case properly before it, subject only to certain limited exceptions. Knudsen Corp. v. Nevada State Dairy Commission, 676 F.2d 374, 376-378 (9th Cir. 1982). I conclude that this suit is not appropriate for abstention because it does not require a ruling on possibly doubtful state law issues, and is governed by federal law, see infra. Nor does this case present issues of Constitutional law which could be avoided by a decision on state law issues, nor is this controversy confined exclusively to a special state administrative or judicial body with special expertise. Nor is a state suit pending which would grant the relief sought by plaintiff. See Knudsen, supra at 377-378; cf. Chemical Bank v. City of Bandon, supra. I therefore decline the invitation to abstain.
I find that, because BPA, a federal agency, has assumed the "dry-hole" liability as to WPPSS plants 1, 2, and 3, the net billing agreements are contracts with the federal government whose interpretation is a matter of federal, not state concern. The federal involvement in these projects is certainly extensive. BPA has already "net-billed" more than $1 billion as part of the program for the construction of these plants. BPA admits it is liable for an additional $6 billion to retire the bonds sold to finance the project. Federal...
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Chemical Bank v. Washington Public Power Supply System
...complex "net-billing" agreements that allocated the risk of noncompletion to the federal agency. Springfield v. Washington Pub. Power Supply Sys., 564 F.Supp. 90 at 95 (D.Or.1983). Since Judge Redden concluded that net billing only requires the participants to pay for power as it is provide......
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City of Springfield v. Washington Public Power Supply System
...court upheld the validity of the net billing agreements and the authority of the local participants to execute them. City of Springfield v. WPPSS, 564 F.Supp. 90 (D.Or.1983). The court stated that "because BPA, a federal agency, has assumed the 'dry-hole' liability as to WPPSS plants 1, 2 a......