Long Island Lighting Co. v. Trigen-Nassau Energy Corp.

• Decision Date: 19 May 1995
• Docket Number: TRIGEN-NASSAU
• Parties: LONG ISLAND LIGHTING COMPANY, Petitioner, v.ENERGY CORPORATION, Respondent.
• Court: New York Supreme Court

Page 222

628 N.Y.S.2d 222

165 Misc.2d 209

LONG ISLAND LIGHTING COMPANY, Petitioner, v. TRIGEN-NASSAU ENERGY CORPORATION, Respondent.

Supreme Court, Nassau County, Trial IAS, Part 23.

May 19, 1995.

Robert J. Grey by Eric M. Wagner, Hicksville, for petitioner.

King & Spalding by Daniel J. King, New York City, for respondent.

ALLAN L. WINICK, Justice.

Application by petitioner Long Island Lighting Company (LILCO) to stay the arbitration noticed by respondent Trigen-Nassau Energy Corp. (Trigen) pursuant to CPLR Article 78 is denied.

Pursuant to the Parallel Generation Agreement (the Agreement) between LILCO and Trigen dated December 28, 1988 as amended, LILCO agreed during the term of the Agreement, and any renewal or extension thereof, "to purchase and accept from Seller the Electricity produced at Seller's Facility". Electricity is defined in Article 1(G) of the Agreement as "the total amount of electric energy generated by the Facility, less electric energy consumed by the in-plant load of Seller's Power Plant and other lawfully authorized dedicated uses". Trigen constructed the facility in compliance with the Agreement and LILCO has purchased the electricity made available to it since 1988.

By letter dated August 23, 1994, Trigen advised LILCO of its plans to construct an inlet air-cooling system to facilitate greater efficiency of production at its plant in the warmer months of the year. In response, LILCO advised that it did not consider the proposed plant modification to be covered under the parties' existing Agreement and further informed Trigen that it would not purchase any electricity from Trigen, at prices contained in the Agreement, that resulted from increased electrical output due to the proposed installation of the air-cooling system (LILCO letter dated November 3, 1994). Thereafter, on February 8, 1995 LILCO received Trigen's Notice of Intention to Arbitrate seeking a declaration

"that after Trigen-Nassau installs an air-cooling unit at the ... electric cogeneration facility ... LILCO will remain obligated to purchase all the electricity delivered to it by Trigen-Nassau under the terms and at the rates prescribed by the PGA [Parallel Generation Agreement]. Alternatively, Trigen-Nassau seeks a declaration that Trigen-Nassau is not inhibited by the PGA from selling to third parties any electricity generated by the Facility that exceeds the amount of electricity that LILCO is obligated to purchase under the terms of the PGA."

LILCO's instant application to permanently stay the requested arbitration is predicated on the two-pronged contention that (1) the issue raised in Trigen's Notice of Intention to Arbitrate is not an arbitrable claim within the meaning of the Agreement's dispute resolution provisions since Trigen merely seeks an advisory opinion and (2) even if the matter is deemed to be an actual claim or controversy, the arbitration provisions of the Agreement require that the matter be referred to the Public Service Commission (the PSC) since the issue of how much LILCO must pay for electricity to independent power producers like Trigen is one over which the PSC has exercised jurisdiction in the past. LILCO contends, moreover, that a new contract would have to be executed by the parties for the additional electricity generated as a result of the plant modification proposed by Trigen. Trigen counters that the PSC does not have exclusive jurisdiction over what it characterizes as a "contract dispute" which arises from and relates to the Agreement. In this regard, Trigen points to language contained in various rulings of the PSC which state that it will not generally arbitrate disputes between utilities and independent power developers over the meaning of contract terms because such questions do not involve the PSC's authority under the Public Utility Regulatory Policies Act of 1978 and/or Public Service Law section 66-c. (See Case 90-E-0975, Northeast Cogen, Inc.--Petition for a Declaratory Ruling Concerning a Power Supply Agreement dated April 1, 1987 with Niagara Power Corporation.)

Article XX paragraph 1 of the Agreement herein provides with respect to dispute resolution as follows:

"1. Applicability

(a) In any matter where the PSC has exclusive jurisdiction, any controversy or claim arising out of or relating to this Agreement, or any breach thereof, shall be resolved in accordance with the dispute resolution procedures of the PSC then in effect which are applicable to the parties.

(b) In any matter where the PSC does not have exclusive jurisdiction, any controversy or claim arising out of or relating to this Agreement, or any breach thereof, shall be settled by arbitration, except as limited by paragraph 3 of this Article XX."

Pursuant to CPLR 7503(b) arbitration may be stayed "on the ground that a valid agreement was not made or...