Tanner Elec. Co-op. v. Puget Sound Power & Light Co.

• Citation: 911 P.2d 1301,128 Wn.2d 656
• Decision Date: 29 February 1996
• Docket Number: No. 61782-1,61782-1
• Parties: , Util. L. Rep. P 26,511 TANNER ELECTRIC COOPERATIVE, Respondent, v. PUGET SOUND POWER & LIGHT COMPANY, Appellant, Nintendo of America, Inc., Intervenor, Washington Utilities and Transportation Commission, Intervenor.
• Court: Washington Supreme Court

Page 656

128 Wn.2d 656

911 P.2d 1301, Util. L. Rep. P 26,511

TANNER ELECTRIC COOPERATIVE, Respondent, v. PUGET SOUND POWER & LIGHT COMPANY, Appellant Nintendo of America, Inc., Intervenor Washington Utilities and Transportation Commission, Intervenor.

No. 61782-1.

Supreme Court of Washington En Banc.

Feb. 29, 1996.

Perkins & Coie, Steven C. Marshall, Bellevue, Perkins & Coie, Charles C. Gordon, John R. Beck, Seattle, for appellant Puget Sound Power & Light Company.

Windus, Thomas, Calmes & Wiley, Joseph C. Calmes, David W. Wiley, Bellevue, for Nintendo of America Intervenor.

Christine Gregoire, Attorney General, Sally G. Johnston, Asst. Atty. Gen., Olympia, Christine Gregoire, Attorney General, Donald T. Trotter, Asst. Atty. Gen., Seattle, for Washington Utilities & Transportation Intervenor.

Joel C. Merkel, Attorney at Law, Seattle, for respondent Tanner Electric Cooperative.

MADSEN, Justice.

At issue in this case is whether the trial court erred in granting summary judgment on the question of whether a service area agreement between a public utility and a rural electric cooperative was breached by a customer's transfer of power from the utility's service area for use in the cooperative's service area, and whether the utility's actions with regard to the cooperative violated Washington's Consumer Protection Act, RCW 19.86.

Facts

Tanner Electric Cooperative (Tanner) is a nonprofit rural electric cooperative which was formed in 1936 pursuant to the Rural Electrification Act. The basic purpose of the Act was to extend electric service to those rural areas of the country without central station service by providing government loans at low interest rates. Charles F. Phillips, Jr., The Regulation of Public Utilities 560 (1984). When Tanner began its operations it had thirty-two customers on thirteen miles of line. Tanner's headquarters are in North Bend, Washington. In addition to serving North Bend, Tanner serves the Ames Lake area and Anderson Island. Tanner's 1992 annual report stated that its business is "the transmission and distribution of electrical power to rural areas in King County and to Anderson Island at Pierce County". Videotape Recorded Proceedings at 665.

Tanner receives its electric power from Bonneville Power Administration (BPA) in accordance with a demand contract. This contract requires BPA to provide all of Tanner's power needs up to twenty-five megawatts. Puget Sound Power & Light Company (Puget) delivers BPA's power to Tanner pursuant to a 1966 general transfer agreement with BPA. Puget delivers the power to Tanner by "wheeling" it over Puget's transmission lines to a single breaker switch in Puget's North Bend substation (a point of delivery). ¹ Videotape Recorded Proceedings at 305-06. The Puget/BPA contract places a 2.6 megawatt limit on the power wheeled to Tanner.

On July 29, 1966, Tanner and Puget entered into a territorial service area agreement (hereafter referred to as the 1966 agreement). The 1966 agreement sets forth the boundaries of the respective service areas and also provides as follows:

1. Puget agrees to wheel BPA power to Tanner for use in Tanner's North Bend and Ames Lake service areas pursuant to and within sixty (60) days of the execution of an agreement between Puget and BPA for the wheeling of BPA power to Tanner for a period of twenty (20) years.

....

4. Puget agrees that it shall not directly or indirectly distribute wheel, transfer or sell electric energy within the limits of Tanner's service areas.

Ex. 2 at 2. Pursuant to RCW 54.48, which requires that agreements dividing service territories between public utilities and cooperatives be regulated by the Washington Utilities and Transportation Commission (WUTC or the Commission), the parties submitted the 1966 agreement to the WUTC for approval. Approval was granted in 1974, shortly after the enactment of RCW 54.48.

In April 1989, Tanner completed a 1990-91 work plan that projected that its load in the North Bend area would exceed its 2.6 megawatt demand limit at the North Bend substation during the 1990s. After reviewing this projection and consulting with Tanner, BPA decided to plan a new North Bend area substation with Puget. BPA also asked Puget to increase Tanner's North Bend wheeling demand limit to five megawatts. To date, Puget has not agreed to raise the contractual limit on power wheeled to Tanner.

In the spring of 1990, Nintendo of America, Inc. (Nintendo) purchased a 125-acre parcel of property in North Bend. Approximately eighty percent of the property that Nintendo purchased is within Tanner's service area, as set forth in the 1966 agreement, while the remaining twenty percent is within Puget's service area. Nintendo constructed a $50 million automated distribution facility on Tanner's side of the property. This facility is the only Nintendo distribution center in the United States. Once fully operational, the facility anticipated a daily production of some seventy trailer loads of Nintendo video games.

Elmer Sams, Tanner's manager, met with representatives of Nintendo several times in an effort to determine Nintendo's power needs and to solicit Nintendo's business. Nintendo's electrical contractor told Sams that Nintendo planned to build five buildings and a parking lot on the property over a six-year period. According to Sams, the contractor also projected that Nintendo's total electric load would be approximately twenty megawatts.

Sams recommended that Nintendo allow Tanner to install a primary service meter box along Northwest 8th Avenue, which borders part of the Nintendo site and divides the Tanner and Puget service areas. By making such an arrangement, the meter box could be tied into the underground cable that Tanner was planning to install at this location pursuant to its 1990-91 work plan. Further, Sams assured Nintendo officials that Tanner could serve the load to the first building from its existing distribution line on Northwest 8th Avenue. Sams gave Nintendo a proposed commercial rate schedule that was prepared solely for Nintendo. Tanner had never before served a primary meter customer, or a customer which itself distributes the power after it has been supplied to a meter on the customer's property.

After several conversations with Sams, Nintendo officials grew concerned about Tanner's ability to serve the Nintendo facility. Of specific concern was that (1) Tanner's service crew consisted of four people who were responsible for the three service areas, which in some instances are separated by distances as great as sixty miles or are accessible only by ferry; (2) Tanner had less than a dozen employees, including office staff; (3) Tanner used the least reliable "radial feed" distribution configuration; (4) Tanner employed an older form of cable, potentially subject to a degradation process known as "treeing"; and (5) Tanner had never served a customer comparable to Nintendo. Videotape Recorded Proceedings at 1571, 1574-76. Puget also told Nintendo that it would refuse to let Tanner tap Puget's Snoqualmie line near the Nintendo property, thus preventing Tanner from gaining a second point of delivery.

On July 19, 1990, Puget advised Tanner that it was terminating the 1966 agreement with the one-year notice required by that agreement. The termination date was September 27, 1991. Puget then suggested a possible purchase of Tanner, which Tanner rejected.

In September 1990, Puget told Tanner that it would be serving Nintendo's facility pursuant to Nintendo's request. Tanner told Nintendo that such an arrangement would violate section 4 of the 1966 agreement, quoted above. Despite this information, Nintendo accepted Puget's service on January 17, 1991, eight months before the 1966 agreement expired. Puget delivered power to a meter in a structure built by Nintendo on Puget's side of the service area boundary, located along Northwest 8th Avenue. From there, Nintendo, using its own lines, transported the electricity across the Puget-Tanner border to the Nintendo facility in Tanner's service area.

Shortly before this service began, Tanner filed a petition for a declaratory order with the WUTC, seeking a ruling that Puget had no statutory duty to serve Nintendo and that Puget had violated the 1966 agreement. The Commission concluded that Puget did not have a statutory obligation to serve Nintendo, but that no Commission law prohibited such service. The Commission found that it did not have jurisdiction to enforce or interpret the 1966 agreement.

On April 19, 1991, Tanner filed a complaint for injunctive relief and damages against Puget in King County Superior Court. Tanner sought an immediate cessation of Puget's service to Nintendo as well as an order requiring Puget to furnish whatever power Tanner needed to serve Nintendo. The trial court denied Tanner's requests, whereupon Tanner filed an amended complaint bringing claims for breach of contract, tortious interference, common law unfair competition, and violation of the Consumer Protection Act. Tanner's bases for these claims included Puget's service to Nintendo as well as Puget's failure to increase Tanner's wheeling demand limit or to allow Tanner a new point of delivery from which to serve Nintendo; Puget's failure to upgrade the transformer at the North Bend substation; and Puget's refusal to negotiate in good faith with Tanner and the BPA to finalize and implement a plan of service by which both Tanner and Puget would provide adequate service to all customers. Nintendo and the WUTC were granted leave to intervene in the action.

Tanner then moved for partial summary judgment on its breach of contract claim. The trial court granted Tanner's motion and concluded as follows:

While the Nintendo property straddles the boundary of the Puget/Tanner service areas and Puget delivers power to Nintendo at a point on the Nintendo property that is within [the] Puget service area, all of the Nintendo facility is...