Petition of Vermont Elec. Power Producers, Inc.

• Decision Date: 12 July 1996
• Docket Number: No. 95-441,95-441
• Citation: 683 A.2d 716,165 Vt. 282
• Court: Vermont Supreme Court
• Parties: , Util. L. Rep. P 26,544 Petition of VERMONT ELECTRIC POWER PRODUCERS, INC.

Page 716

683 A.2d 716

165 Vt. 282, Util. L. Rep. P 26,544

Petition of VERMONT ELECTRIC POWER PRODUCERS, INC.

No. 95-441.

Supreme Court of Vermont.

July 12, 1996.

Michael Marks of Tarrant, Marks & Gillies, Montpelier, for appellant.

Morris L. Silver and Mary C. Marzec, Law Clerk (On the Brief), Rutland, for appellee Central Vermont Public Service Corp.

David J. Mullett of Cheney, Brock, Saudek & Mullett, P.C., Montpelier, for appellee Vermont Electric Power Producers, Inc.

Sheldon M. Katz, Special Counsel, Montpelier, for appellee Department of Public Service.

Before GIBSON and MORSE, JJ., and MEAKER, NORTON and TEACHOUT, Superior Judges, Specially Assigned.

GIBSON, Justice.

Appellant Vermont Power Exchange, Inc. (VPX) appeals orders of the Public Service Board (PSB) denying VPX's motion to dismiss a petition brought by Vermont Electric Power Producers, Inc. (VEPPI) and denying VPX's motion to disqualify VEPPI's attorney from further proceedings in this matter. The VEPPI petition sought to revoke VPX's designation as the state's purchasing agent for purposes of implementing the federal Public Utility Regulatory Policies Act (PURPA), 16 U.S.C. § 824a-3, and 30 V.S.A. § 209. VPX argues that the PSB erred in: (1) failing to conclude, as a matter of law, that VPX's designation as PURPA purchasing agent is a public franchise that cannot be terminated except for cause; (2) failing to hold an evidentiary hearing on VPX's franchise and other claims; and (3) failing to disqualify VEPPI's attorney from continued participation in these proceedings. We reverse the PSB order denying VPX's motion to disqualify VEPPI's attorney; otherwise, we affirm.

Since 1984, VPX has served as the state's PURPA purchasing agent. In prior decisions, we have reviewed the history and purpose of PURPA and "the unique way in which Vermont has implemented PURPA." In re Vermont Power Exch., 159 Vt. 168, 171-72, 617 A.2d 418, 419 (1992); see In re Department of Pub. Serv., 161 Vt. 97, 102, 632 A.2d 1373, 1376 (1993); In re East Georgia Cogeneration Ltd. Partnership, 158 Vt. 525, 528-29, 614 A.2d 799, 801-02 (1992); In re Department of Pub. Serv., 157 Vt. 120, 121-22, 126, 596 A.2d 1303, 1304-05, 1307 (1991); In re Vicon Recovery Sys., 153 Vt. 539, 543-44, 572 A.2d 1355, 1357-58 (1990). Rather than allowing cogenerators and other small power producers to sell electric power directly to utility companies, the PSB, pursuant to the authority granted in 30 V.S.A. § 209(a)(8), promulgated PSB Rule 4.100, which authorized the designation of a single purchasing agent to serve as an intermediary between the power producers and the purchasing utilities. ¹ See Public Service Board Rule 4.104(A); Department of Pub. Serv., 157 Vt. at 121, 126, 596 A.2d at 1304, 1307. VPX has been the only designated Rule 4.100 purchasing agent for the state since Vermont's PURPA compliance system began. Vermont Power Exch., 159 Vt. at 172, 617 A.2d at 420.

Under the terms of the 1984 agreement between the PSB and VPX, VPX's designation as PURPA purchasing agent could be "revoked by the Board at any time without prior notice." In 1987, however, the PSB issued a new designation order for VPX, which stated:

This designation shall remain in effect unless terminated (a) by the Board for cause (in accordance with contested case procedures); (b) by VPX on the ground that there is no reasonable prospect for it to obtain a fair return on its investment or to recover its costs and meet its obligations on an on-going basis; or (c) by the mutual agreement of the Board and VPX.

(Emphasis added.)

Simultaneously with the issuance of the 1987 designation order, the PSB and VPX executed a "Contract for Personal Services" (Contract), under which VPX agreed to perform certain services in addition to those specified for the purchasing agent in Rule 4.100. The Contract provided that, "[u]nless the designation of [VPX] as purchasing agent is sooner terminated, this agreement shall have a term of five years and, unless either party gives 180 days' written notice of its intention not to renew, shall be renewed for a term of five years on each anniversary hereof."

In a letter sent the same day by VPX to PSB's general counsel, VPX expressed its "understanding of various matters regarding the designation of Vermont Power Exchange, Inc. as the Rule 4.100 purchasing agent, and the contract between the Public Service Board and the Exchange." According to VPX:

The designation permits the Board to terminate the Exchange's status as the Purchasing Agent for cause, in accordance with contested case procedures, as described in the Board's Rules of Civil Procedure. Cause, as used in the designation, shall be deemed to include only negligence, neglect of material obligations, fraud, or the inability of the Exchange to perform its material obligations as Purchasing Agent.

(Emphasis added.) The letter was signed by VPX President Lawrence Copp and countersigned by Thomas Wies, General Counsel to the PSB.

On December 31, 1990, the PSB notified VPX of its intention not to renew the Contract, effective June 30, 1995. VPX did not contest the termination of its Contract with the PSB, nor did the parties attempt to negotiate a new personal services contract.

In April 1994, VEPPI, a nonprofit corporation controlled by power producers and purchasing utilities, petitioned the PSB to revoke VPX's designation as the Rule 4.100 purchasing agent, and to designate VEPPI as purchasing agent, effective July 1, 1995. VPX moved to dismiss the VEPPI petition on two grounds: first, that the PSB's 1987 designation order created a "franchise" as a matter of law, and that such a franchise could be revoked only for "cause"; and second, that designation of VEPPI as purchasing agent would violate the Rule 4.100 requirement of an independent purchasing agent. ² VPX also moved to disqualify VEPPI's attorney from further representation of VEPPI in this matter, on the ground that the attorney (who also represents VEPPI in the instant appeal) had served as associate general counsel to the PSB at relevant times and in such role had reviewed VPX's contract and designation order and recommended renegotiation of the PSB's relationship with VPX.

In January 1995, the PSB hearing officer, relying on the parties' written submissions and oral argument, but without taking evidence, denied VPX's motion to dismiss. The hearing officer agreed with VPX that the 1987 designation order and the Contract, although executed simultaneously, served different purposes and had different durations. The termination of the Contract therefore did not affect the operation of the designation order. With respect to the designation order, the hearing officer concluded that "[t]he 1987 Board intended that VPX could remain the state's purchasing agent, even without a contract, so long as VPX did not provide cause for termination." The hearing officer further found that "VEPPI has not made any allegations that amount to 'cause,' as VPX would have that term understood here." Nevertheless, the hearing officer held that the 1987 PSB did not have the authority to vest VPX with "a durable form of agency," but rather could act only in a way that did not "restric[t] the 1995 Board from transferring existing power contracts to a different agent." The hearing officer therefore rejected VPX's claim of a franchise terminable only for cause, and held instead that, "[s]ince the Board's Designation Order was based upon a broadly delegated legislative power, the Board can ... terminate VPX, even without a showing of dereliction or neglect." (Emphasis added.)

VPX sought and obtained interlocutory review by the PSB. In an order filed June 30, 1995, the PSB affirmed the hearing officer's denial of VPX's motion to dismiss. The PSB held that the 1990 Amendment to Rule 4.100 gave the PSB the authority to alter or revoke the 1987 designation order without a showing of "cause." The PSB, however, went on:

[I]f "cause" is required to revoke VPX's designation, that term must be broadly defined. The term is not limited merely to negligence or fraud. Subject to limitations of explicit contract, the purchasing agent can be replaced if another candidate should appear who can fulfill the function at less cost or with greater effectiveness.

....

We hold that, notwithstanding the limiting language contained in the Designation Document, the Public Service Board, upon determining that the public interest would thereby be served, today has authority to appoint an entity other than VPX as purchasing agent.

(Emphasis added.) The present appeal followed.

In reviewing a PSB order, we employ "a strong presumption that orders issued by the Public Service Board are valid," East Georgia Cogeneration Ltd. Partnership, 158 Vt. at 531, 614 A.2d at 803, and "we give great weight to the Board's interpretations of its own regulations." Id. We also accord "great deference to the particular expertise and informed judgment of the Board." Vermont Power Exch., 159 Vt. at 179, 617 A.2d at 424. Where the PSB's findings fairly and reasonably support its conclusions of law, we will uphold the PSB's decision. In re New England Tel. & Tel. Co., 159 Vt. 459, 461-62, 621 A.2d 232, 235 (1993).

I.

VPX first argues that its 1987 designation as the state's Rule 4.100 purchasing agent created a common-law "franchise," terminable only for cause.

The PSB is a body of special and statutory powers, as to which nothing is presumed in favor of its jurisdiction. Vermont Power Exch., 159 Vt. at 176, 617 A.2d at 422. Consequently, the PSB's powers include only those expressly granted by the Legislature and such incidental powers as are necessarily implied to carry out its express grant. Id. Nevertheless, we have also recognized that:

[u]nder Vermont's implementation of PURPA, the Legislature's grant of power to the PSB is very broad. It grants jurisdiction in all matters respecting the sale of electricity to...