Massachusetts Mun. Wholesale Elec. Co. v. State, 92-440
| Decision Date | 04 February 1994 |
| Docket Number | No. 92-440,92-440 |
| Citation | 639 A.2d 995,161 Vt. 346 |
| Court | Vermont Supreme Court |
| Parties | , Util. L. Rep. P 26,386 MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC CO. v. STATE of Vermont, et al. |
Stephen S. Ankuda of Parker & Ankuda, P.C., Springfield, and Nicholas J. Scobbo, Jr. and Gerald J. Caruso of Ferriter, Scobbo, Sikora, Singal, Caruso and Rodophele, P.C., Boston, MS, for plaintiff-appellant.
Jeffrey L. Amestoy, Atty. Gen., and William Griffin, Chief Asst. Atty. Gen., Montpelier, for defendant-appellee State of VT Peter H. Zamore of Sheehey Brue Gray & Furlong, P.C., Burlington, and Christopher L. Dutton, South Burlington, for defendant-appellee Green Mountain Power Corp.
Edward B. French of Stackpole & French Law Offices, Stowe, for defendant-appellee Village of Stowe.
Edward V. Schwiebert and Laura E. Johnson of Abell, Kenlan, Schwiebert & Hall, P.C., for defendants-appellees Villages of Ludlow, Hardwick, Morrisville and Swanton.
Before ALLEN, C.J., and GIBSON and MORSE, JJ., and DAVENPORT, Superior Judge, and ELLISON, District Judge (Ret.), Specially Assigned.
Plaintiff Massachusetts Municipal Wholesale Electric Company (MMWEC) appeals from a summary judgment order declaring valid its Stony Brook Power Project contracts with defendant Vermont utilities. MMWEC contends that the contracts are void ab initio under Vermont Department of Public Service v. Massachusetts Municipal Wholesale Electric Co., 151 Vt. 73, 558 A.2d 215 (1988) (MMWEC I ), which declared contracts for MMWEC's Seabrook Power Project void. MMWEC also argues that, on its face, 1989, No. 112, § 1 (Act 112, § 1) does not ratify the contracts, and, in any event, that the Vermont Legislature does not have the power to ratify them. Finally, MMWEC argues that, if Act 112 ratifies the Stony Brook contracts, it violates MMWEC's rights under the Due Process, Contract, and Commerce Clauses of the federal constitution. We hold that, although the Stony Brook contracts with the municipal utilities would have been void under MMWEC I, they nevertheless were ratified by Act 112, § 1 and are valid. In addition, we conclude that the contract with Green Mountain Power Corporation (GMP) is valid under MMWEC I.
MMWEC is a public corporation and political subdivision of the Commonwealth of Massachusetts that acts as a joint planning and action agency through which suppliers of electricity develop electric power supply programs for municipal utilities. It is governed by a board of nine directors, two appointed by the Governor and seven elected by member municipalities. Only Massachusetts municipalities having electric departments may be members. Vermont electric suppliers that contract with MMWEC are not represented on the Board.
Since 1976, MMWEC has been developing a bulk power supply system by obtaining ownership interests in electric power facilities through planning and acquisition vehicles called "projects." MMWEC finances a project by issuing long-term revenue bonds, which are secured by payments made by project participants under power sales agreements (PSAs). Project participants are both member and nonmember municipal electric suppliers who contract with MMWEC to purchase a share of "project capability," that is, "the amount of electric capacity and energy, if any, which the Project is capable of producing at any particular time...." In exchange, project participants agree to pay monthly pro rata shares of the costs MMWEC incurs in acquiring, constructing, financing and operating the project. MMWEC retains all ownership interest in the project.
Under the terms of the PSAs, MMWEC establishes the amount of monthly payments to provide sufficient revenues to meet its full obligations, and project participants must set electric rates sufficient to pay their shares of MMWEC's project costs, including debt service. The PSAs are subject to MMWEC's General Bond Resolution, which vests in the MMWEC board of directors sole discretion to issue bonds for each project. The PSAs also restrict the participants' ability to issue nonproject debt and require project participants to make payments to MMWEC whether or not the project is completed or operating, thus shifting all risks of the project to participants.
One of MMWEC's projects is the Stony Brook Intermediate Unit, an oil- and gas-fueled generating facility that MMWEC began building in 1977 in Ludlow, Massachusetts. In October 1977, defendants, the Villages of Ludlow, Hardwick, Morrisville, Stowe and Swanton, and GMP, executed PSAs to purchase shares of project capability of MMWEC's Stony Brook project. The facility began commercial operation in 1981, and defendants have been receiving power pursuant to the Stony Brook PSAs since that time. The Stony Brook PSAs require the participants to pay MMWEC whether or not the project produces electricity. The validity of these PSAs is the subject of this action.
The enforceability of MMWEC PSAs was previously adjudicated in MMWEC I. In 1979, MMWEC executed PSAs with five Vermont municipalities and two Vermont electric cooperatives to sell shares of project capability of MMWEC's ownership interest in two proposed nuclear generating units known as Seabrook Units Nos. 1 and 2. The parties' rights and obligations under the Stony Brook PSAs are almost identical to those under the Seabrook PSAs. Seabrook was under construction but had not begun producing electricity in October 1985, when the Vermont Department of Public Service filed a complaint against MMWEC in superior court seeking a declaration that the Seabrook PSAs were invalid. Because the Stony Brook PSAs are virtually identical to the Seabrook PSAs, MMWEC filed this action in July 1986, initially requesting a declaration that the Stony Brook PSAs are valid. The parties stipulated to postponing those proceedings until this Court reached a decision regarding the Seabrook PSAs.
In MMWEC I, we held that the Seabrook PSAs were void ab initio because provisions assigning to MMWEC all decision-making power with respect to incurring debt and making expenditures constituted an impermissible delegation of legislative authority by the municipalities and electric cooperatives. 151 Vt. at 86, 89-90, 558 A.2d at 223, 224-25. In particular, we concluded that paragraph 3(a) of the PSAs constituted an impermissible delegation of spending authority because it provided that "MMWEC makes all decisions to incur, or to refrain from incurring, project debt." Id. at 82-83, 558 A.2d at 221. MMWEC thus had "exclusive control over the magnitude of the participants' monthly payments and over the duration of these payments." Id. at 83, 558 A.2d at 221. We also concluded that paragraph 5(f) violated the nondelegation doctrine by restricting the participants' "power to make expenditures with regard to other projects or purchases." Id. at 85, 558 A.2d at 222.
In response to MMWEC I, the Vermont Legislature enacted Act 112, § 1, which purports to ratify certain energy contracts for electric capacity or energy from plants in operation by January 1, 1989. Subsequently, the parties to this action entered into a stipulation under which MMWEC amended its complaint to request a declaration that the Stony Brook PSAs are void on the ground that they are virtually identical to the Seabrook PSAs.
On cross-motions for summary judgment, the trial court held that this case is factually distinguishable from MMWEC I and thus the Stony Brook PSAs are not void ab initio under the reasoning of that case. Further, it held that by enacting Act 112, § 1, the Vermont Legislature had ratified the Stony Brook PSAs. Finally, it concluded that applying Act 112 to the Stony Brook PSAs does not violate MMWEC's constitutional rights. MMWEC appeals from these trial court rulings.
MMWEC first argues that the court erred in determining that MMWEC I does not control this case because the PSAs at issue here are indistinguishable from the PSAs in MMWEC I. We agree that MMWEC I controls as to the Vermont municipalities. MMWEC I, however, considered the validity of PSAs executed by municipalities and electric cooperatives only. It did not decide whether an investor-owned corporation was acting beyond its power by entering a similar PSA. Thus, we address the validity of the Stony Brook PSA executed by GMP separately.
In MMWEC I, we declared the Seabrook PSAs void because the Vermont municipalities impermissibly attempted to redelegate their legislative authority to incur debt and to make expenditures on other projects or purchases. Id. at 86, 558 A.2d at 223. A comparison of the contracts for the two projects reveals that the essential terms of the Stony Brook PSAs are almost identical to those of the Seabrook PSAs. Specifically the Stony Brook PSAs contain the same two provisions that necessitated declaring the Seabrook PSAs void in MMWEC I. Both contracts impermissibly transfer to MMWEC exclusive control over decisions to incur project debt and to set the participants' monthly payment amounts. Both contracts restrict the power of the municipalities to incur other debts, thus limiting the future exercise of legislative authority. See id. at 83, 85, 558 A.2d at 221, 222.
Nonetheless, defendant municipalities proffer two bases for distinguishing the Stony Brook Project from the Seabrook Project. First, they argue that Stony Brook involved less risk than Seabrook because it concerned a gas-and-oil-fueled facility rather than a nuclear facility. Defendants maintain that the risk in undertaking a conventional gas-and-oil power plant is minimal. They equate MMWEC's authority under the Stony Brook PSAs to that of a general contractor, who supervises construction and acquires the materials. Because the risk was minimal, defendants maintain that the delegation of authority under the Stony Brook PSAs was permissible.
MMWEC disputes defendants' risk assessment, maintaining that Stony Brook may have been considered more risky at the time the PSAs...
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