EXXON PIPELINE v. LA PUBLIC SERVICE COM'N

• Decision Date: 02 March 1999
• Docket Number: No. 98-CA-1738., No. 98-CA-1737
• Citation: 728 So.2d 855
• Parties: EXXON PIPELINE COMPANY v. LOUISIANA PUBLIC SERVICE COMMISSION. Entergy Louisiana, Inc. v. Louisiana Public Service Commission, et al.
• Court: Louisiana Supreme Court

728 So.2d 855

EXXON PIPELINE COMPANY v. LOUISIANA PUBLIC SERVICE COMMISSION.

Entergy Louisiana, Inc. v. Louisiana Public Service Commission, et al.

Nos. 98-CA-1737, 98-CA-1738.

Supreme Court of Louisiana.

March 2, 1999.

Rehearing Denied April 23, 1999.

Jeffrey W. Bennett, Joseph H. Kavanaugh, Philip A. Franco, New Orleans, Robert L. Rieger, Jr., Baton Rouge, Richard V. Hansum, Houston, TX, Counsel for Applicant in No. 98-CA-1737.

Eve K. Gonzalez, Counsel for Respondent in No. 98-CA-1737.

Terrence G. O'Brien, Stephen T. Perrien, J. Wayne Anderson, New Orleans, Counsel for Applicant in No. 98-CA-1738.

Eve K. Gonzalez, Counsel for Respondent in No. 98-CA-1738.

MARCUS, Justice.¹

This case comes before us as a consolidated appeal pursuant to La. Const. art. IV, § 21(E) filed by Exxon Pipeline Company (hereinafter "Exxon") and Entergy Louisiana, Inc. (hereinafter "Entergy") from a judgment of the Nineteenth Judicial District Court affirming Order Nos. U-20698-A and U-20698-B of the Louisiana Public Service Commission (hereinafter sometimes "PSC").

FACTS AND PROCEDURAL HISTORY

During the late 1970's, Exxon built three pumping stations in Louisiana at Klotzville, Bayou Goula, and Clovelly Farms, as part of its pipeline network for the transportation of crude oil from the Louisiana Offshore Oil Port to its Baton Rouge refinery. It contacted Louisiana Power & Light Company (referred to hereinafter by the name of its successor corporation, "Entergy") to obtain electrical power to operate the three stations. Because of the remote locations of the pumping stations, it was necessary for Entergy to first construct power line extensions and substations in order to provide the requested service.

Exxon and Entergy, both sophisticated corporations, commenced negotiations in July, 1979 and executed an Electric Service Agreement for each of the Exxon pumping stations in 1980. The contracts had several salient features. Each was for a contract term of ten years. Each provided that Exxon would advance the construction costs involved in building facilities capable of providing electric service to the remote pumping stations, and each provided that Entergy would refund the advanced construction costs over the ten year contract in annual payments with interest. Moreover, each contract provided for payment of a monthly "facilities charge" equal to 1.67% of the value of the facilities constructed by Entergy, which charge could be renegotiated if the remote facilities were ever used to serve other customers of Entergy. Each contract also provided that Exxon was obligated to "take or pay" for a certain minimum amount of electrical service each month. Finally, each stipulated that the PSC approved "Large Industrial Service" rate (hereinafter "LIS") would be charged for the power supplied. Alternative PSC approved rates were available at the time to commercial customers such as Exxon. In addition to the LIS rate, Entergy also offered a "Large General Service" rate (hereinafter LGS) and a "General Service" rate (hereinafter GS). Which rate best suited a given customer depended on that customer's level of anticipated power usage.

The PSC concluded, based on the testimony of witnesses presented and evidence filed into the record, that at the time the contracts were entered into in 1980, Exxon was aware of the available alternative power rates. Exxon believed that it would use substantial amounts of electrical power at the plants. Under that forecast, the LIS rate stipulated in the contracts would be the appropriate and most economical rate for Exxon. However, after a few years of operation, Exxon's utilization of the pumping stations proved less than originally expected. Under the then prevailing circumstances, it appeared that Exxon might benefit if Entergy provided electrical service under its LGS rate plan.² An Exxon representative contacted Entergy in May, 1982 and discussed whether Exxon's level of power usage justified continuing under the LIS rates originally selected. Entergy advised that Exxon should put a rate change request in writing if it decided to pursue a change. On March 22, 1983, Exxon requested in writing that Entergy change the rate being charged under the 1980 contracts.

Pursuant to Exxon's written request for contract revisions, the two corporations commenced negotiations to modify the 1980 contracts. In August of 1984, the contracts were amended in several important respects. The facilities charge of 1.67%, previously to be recouped every month for ten years, was left unchanged. However, the mandatory contract term was reduced from ten years to five years. The minimum "take or pay" amount to be paid monthly by Exxon was significantly reduced and the contract was further amended to stipulate that two of the pumping stations would be billed under the LGS rate and the third at the normal GS rate, all retroactive to December 31, 1983. In consideration for some or all of the contract modifications, Exxon paid Entergy a lump sum of $1,064,740.00.³ Credited against that amount was the remaining balance Entergy still owed Exxon for advancing the facility construction costs, which would otherwise have been payable in annual installments over the remaining life of the original ten year contract.

From 1984 through 1993, the parties abided by the terms of the renegotiated contracts, apparently without incident. Nine years after the contracts were revised, Exxon on instituted this proceeding before the PSC on November 19, 1993 for alleged overcharges under the contracts. Specifically, Exxon sought a refund of $660,239.95 representing the differential in the rates it paid before and after the 1984 contract revisions. It also sought a refund of the $1,064,740 lump sum payment made at the time the contracts were amended in 1984. Finally, Exxon sought a refund of the 1.67% monthly "facilities charges" paid under the contracts amounting to $1,233,528.30 and an order relieving it from paying those charges in the future.

During pre-hearing proceedings, Entergy filed an exception to the PSC's subject matter jurisdiction, asserting that the complaint was really in the nature of a contract dispute. Exxon had pleaded, inter alia, error in the confection of the original contracts and Entergy had pleaded the affirmative defense of transaction and compromise. After briefing by the parties, the commission concluded that the exception should be granted in part and denied in part. PSC issued Order No. U-20698, finding:

Those claims of Exxon Pipeline Company which seek the Commission's interpretation, determination of validity, or enforcement of the contracts entered into by the parties are hereby dismissed, for lack of subject matter jurisdiction.

The Order further stipulated that PSC had subject matter jurisdiction:

only over those of Exxon's claims that assert LP & L's imposition of unfair and unreasonable charges for service provided to the pumping facilities, as well as Exxon's claims for a refund of any amounts overcharged.

Neither party requested appellate review of the PSC order declining subject matter jurisdiction over certain of Exxon's claims.

ORDER NOS. U-20698-A and U-20698-B

After due proceedings were had on the remaining claims, PSC issued Order No. U-20698-A. It found that Entergy acted properly in connection with the rates fixed under the original 1980 contracts, which were based on Exxon's expectations for power usage at that time. However, PSC found that as soon as the customer made a written request for application of an alternate rate in March, 1983, Entergy had a duty to timely change the rate but delayed unnecessarily in doing so from March, 1983 through the effective date of the contract revisions, Dec. 31, 1983. It concluded that for those months, March-December, 1983, the rate charged the customer was inappropriate and resulted in an overcharge. Nevertheless, the PSC also decided that the ten year prescriptive period set forth in La. Civ.Code art. 3499 applied to the customer complaint such that Exxon's claim for the charges in all but the last two of those months was prescribed. It awarded Exxon a refund of $32,816 for the months of November and December of 1983, plus legal interest from date of the complaint, pursuant to La. Civ.Code art. 2934.

The PSC further found that the 1.67% "facilities charge" was a fair and reasonable representation of the ongoing costs associated with the electrical service to the remote facilities and that the facilities charge was consistent with Entergy's PSC approved rates and PSC policy. Finally, PSC determined that it had already ruled in Order U-20698-B that it would not review the contract related claim for a refund of the lump sum paid in connection with the 1984 contract revisions since that claim required findings of fact outside the province of the PSC's subject matter jurisdiction.⁴ The PSC considered its prior order final. After a request for rehearing, PSC amended its initial order and determined that no prescriptive period applied to Exxon's claims. By Order No. U-20698-B, it increased the award to $218,460.00 (representing the full overcharge period from March through December, 1983) plus legal interest, and otherwise affirmed Order No. U-20698-A. Both Exxon and Entergy appealed the PSC Orders to the 19th Judicial District Court. The district court affirmed the Orders of the PSC in all respects. The parties now appeal on various grounds to this court.

CLAIMS ON APPEAL

Exxon claims that the PSC was arbitrary and capricious: 1)in declining jurisdiction and refusing to make findings of fact in support of a refund of the lump sum paid in connection with the 1984 contract revisions; 2) in awarding a refund of the differential rates paid from March, 1983 through December 31, 1983 instead of from the inception of the contracts in 1980; 3) in failing to refund "facilities charges" paid in the past and terminate those due under the contracts in the future; and...