General Cable Corp. v. Citizens Utilities Co.

• Decision Date: 26 August 1976
• Docket Number: CA-CIV,Nos. 1,s. 1
• Parties: GENERAL CABLE CORPORATION, a New Jersey Corporation, Appellant and Cross-appellee, v. CITIZENS UTILITIES COMPANY, a Delaware Corporation, Appellee and Cross- appellant. GENERAL CABLE CORPORATION, a New Jersey Corporation, Appellant, v. ARIZONA CORPORATION COMMISSION and Citizens Utilities Company, a Delaware Corporation, Appellees. 3061, 1 3062.
• Court: Arizona Court of Appeals

Page 350

555 P.2d 350

27 Ariz.App. 381

GENERAL CABLE CORPORATION, a New Jersey Corporation, Appellant and Cross-appellee, v. CITIZENS UTILITIES COMPANY, a Delaware Corporation, Appellee and Cross- appellant.

GENERAL CABLE CORPORATION, a New Jersey Corporation, Appellant, v. ARIZONA CORPORATION COMMISSION and Citizens Utilities Company, a Delaware Corporation, Appellees.

Nos. 1 CA-CIV 3061, 1 CA-CIV 3062.

Court of Appeals of Arizona, Division 1, Department A.

Aug. 26, 1976.

Rehearing Denied Sept. 28, 1976.

Petition for Review Denied Oct. 19, 1976.

Lewis & Roca by John P. Frank, Thomas C. Horne, Walter Cheifetz, Phoenix, for appellant and cross-appellee

Evans, Kitchel & Jenckes, PC, by Earl H. Carroll, Stephen W. Pogson, Lex J. Smith, Phoenix, for appellee and cross-appellant.

Bruce E. Babbitt, Atty. Gen., by Charles S. Pierson, Asst. Atty. Gen., Phoenix, for appellee State Corp. Commission.

OPINION

OGG, Judge.

The cases of 1 CA-CIV 3061, Mohave County Superior Court No. C--9279 and 1 CA-CIV 3062, Maricopa County Superior Court No. C--279134 were consolidated in this appeal.

Both appeals involve the attempt of the appellant/plaintiff General Cable Corporation to free itself from the terms of an electrical supply contract entered into between General Cable and the appellee/defendant Citizens Utilities Company. Under the terms of this May, 1968 contract, General Cable agreed to pay for the minimum amounts of energy which it specified were necessary to supply the needs of a rod mill and a pulp plant it intended to build in Kingman, Arizona.

General Cable's anticipated needs for power would have increased Citizens' Kingman power loads by approximately 40%. At that point in time Citizens was unable to supply the anticipated needs without the construction of new facilities for delivery of power to General Cable. The negotiations were begun in 1966 and were closed when both parties signed a contract in May 1968. The contract was then submitted to the Arizona Corporation Commission for its approval, which was given.

Under the terms of the contract, Citizens agreed to furnish demand and energy minimums in accordance with General Cable's stated requirements. Citizens also agreed to construct the necessary facilities to serve the needs of General Cable. General Cable agreed to pay for minimum amounts of demand and energy which it specified were necessary for the operation of the proposed rod mill and pulp plant. In the industry this type of agreement is often referred to as an 'availability contract' or a 'take or pay contract.'

At some point in 1968 General Cable decided not to proceed with its plans to construct a pulp plant. At this time construction of the new facilities to serve General Cable was proceeding and was completed in May, 1969. General Cable first advised Citizens that it was not going to build the pulp mill in December, 1969. Because of the cancellation of the pulp mill, General Cable has not utilized all of the demand and energy minimums it contracted to pay, while Citizens has been ready to provide all the electrical power as requested by General Cable in the contract.

This involved problem can be reduced to simple terms. General Cable contracted for utility services. The need for a large part of such service terminated with the cancellation of the construction of the pulp mill. Must General Cable now continue to pay over the twenty year term of the contract for electricity it will never use? General Cable estimates this cost of unused electricity over the life of the contract to amount to something between.$4.5 to $9.5 million.

1 CA-CIV 3061 was tried before the court in Mohave County, where the judge held that General Cable was bound by the terms of its contract and was not entitled to any relief. In the same case Citizens also filed a counterclaim, alleging that certain billings to General Cable had been undercharged because of certain billing mistakes. The court entered judgment against Citizens on its counterclaim and directed that all parties pay their respective costs. General Cable appealed the judgment against it and Citizens cross-appealed from that portion of the judgment requiring each party to bear its own costs.

On appeal General Cable contends that the trial court erred when it refused to award damages and when it failed to declare the contract void as against public policy and illegal as in violation of the constitution and laws of this state. General Cable alleges that the rates charged under the contract are discriminatory and unreasonable in violation of Art. 15, § 12, of the Arizona Constitution and ARS § 40--361A. Both the Arizona Constitution and statutory law require that charges imposed for a utility service must be just and reasonable. General Cable argues that forcing payments under the terms of the contract results in General Cable paying excessive rates for the electricity it receives since it must pay for electricity that is never furnished nor used.

General Cable is in a class with other industrial customers for rate purposes and as a result of paying for electricity it does not use under the contract General Cable pays more than twice as much per kilowatt hour as the other industrial users. General Cable cites cases that a utility company may not discriminate between customers who are similarly situated. Town of Wickenburg v. Sabin, 68 Ariz. 75, 200 P.2d 342 (1948); Texas Power & Light Co. v. Doering Hotel Co., 147 S.W.2d 897 (Tex.Civ.App.1941); 4 E. McQuillan Municipal Corporations § 1829 (2nd ed. 1928).

We are in agreement with the principle of law that a utility company may not discriminate between customers who are similarly situated. However, in this case we do not believe General Cable was in a similar situation with the other industrial customers in the Kingman area. The fact that a special contract had to be entered into between the parties whereby Citizens would construct new facilities to meet the specific needs of General Cable is a clear indication that General Cable was not just an ordinary industrial customer. Here were special circumstances and the fact that the rates and contract minimums might be different as to one specific customer means that such customer is not similarly situated--not that there is discrimination. Availability contracts such as the one before us have been upheld by the courts. Mobil Oil Corporation v. Tennessee Valley Authority, 387 F.Supp. 498 (N.D.Ala.1974); Oliver-Mercer Electric Cooperative Inc. v. Fisher, 146 N.W.2d 346 (N.D.1966); City of Memphis, Tennessee v. Ford Motor Co., 304 F.2d 845 (6th Cir. 1962).

The City of Memphis, Tennessee v. Ford Motor Co., supra, presented a situation analogous to this case. Ford contracted with the city for electricity to be provided for Ford's assembly plant. The contract provided for minimum monthly payments to be made by Ford over the five year life of the contract. After two years of the contract period Ford sold the plant, removing the need for electricity. Ford sued to cancel the minimums due for the remainder of the contract period. The court upheld the terms of the availability contract and held that Ford was obligated to pay the minimum electricity bills, notwithstanding the fact that Ford was not using the electricity. Like Ford, General Cable obligated itself to pay for more electricity than it might use from time to time, in exchange for the utility agreeing to meet its specific electricity demands. Like Ford, General Cable, after the availability power...