A.W. Brown Co., Inc. v. Idaho Power Co., 18975

• Decision Date: 09 March 1992
• Docket Number: No. 18975,18975
• Citation: 828 P.2d 841,121 Idaho 812
• Parties: A.W. BROWN COMPANY, INC., Complainant-Appellant on appeal, v. IDAHO POWER COMPANY, Respondent-Respondent on appeal, and Idaho Public Utilities Commission, Respondent on appeal. Boise, January 1992 Term
• Court: Idaho Supreme Court

Page 841

828 P.2d 841

121 Idaho 812

A.W. BROWN COMPANY, INC., Complainant-Appellant on appeal, v. IDAHO POWER COMPANY, Respondent-Respondent on appeal and Idaho Public Utilities Commission, Respondent on appeal.

No. 18975.

Supreme Court of Idaho,

Boise, January 1992 Term.

March 9, 1992.

Rehearing Denied May 5, 1992.

Roden, Arkoosh & Riceci, Boise, for complainant-appellant. C. Thomas Arkoosh, argued.

Larry EchoHawk, Atty. Gen., Scott D. Woodbury, Deputy Atty. Gen., Boise, for respondent Idaho Public Utilities Com'n. Scott D. Woodbury, argued.

Evans, Keane, Koontz, Boyd, Simko & Ripley, Boise, for respondent-respondent Idaho Power Co. Barton L. Kline, argued.

BAKES, Chief Justice.

This case is an appeal from an order of the Idaho Public Utilities Commission denying appellant A.W. Brown, Inc.'s request that the PUC order Idaho Power to purchase electricity from Brown at an earlier, superseded cogeneration rate. We affirm the Commission's decision.

Section 210 of the Public Utility Regulatory Policies Act (PURPA) requires electric utilities to purchase electricity produced by cogenerators or small power producers (CSPP's) that obtain qualifying facility (QF) status under Section 201 of PURPA. Pursuant to congressional directive, the Federal Energy Regulatory Commission (FERC) implemented Sections 201 and 210 of PURPA by enacting regulations establishing the requirements and procedures for obtaining qualifying status and eligibility for rates and exemptions. Under FERC regulations, utilities are to purchase QF power at a rate equal to the utility's full avoided cost, which is the incremental cost of energy to the utility which, but for the purchase from the QF, the utility would generate itself or purchase elsewhere. FERC regulations promulgated the PURPA requirements, but left implementation of those requirements to the regulatory authorities of the individual states. 18 C.F.R. § 292.401. In response to these FERC and PURPA requirements, the Idaho Public Utilities Commission (PUC or Commission) established regulations under which Idaho utilities are to purchase power from CSPP's. The Commission also established a rule that power purchase contracts, once negotiated, be presented to the Commission for approval.

In 1983, the PUC established rates which Idaho Power was required to pay for energy bought from CSPP's, known as "200 rates." ¹ In the 200 order, the PUC indicated that it intended the 200 rates to remain in effect for four years, unless there was good cause to reconsider the rate sooner. In January, 1985, Idaho Power filed an application seeking reconsideration of the 200 rates, and in May, 1985, the PUC determined that the 200 rates were no longer reasonable and, in Order No. U-1006-248, computed new rates. ("248 rates.") In the 248-rate order, the PUC decided that "grandfather status," or the right to obtain the higher 200 rates, would be extended only to those potential CSPP's who, on or before April 29, 1985, had either already signed a contract with Idaho Power to produce and sell energy or who had filed meritorious complaints with the PUC alleging that Idaho Power had declined to enter into a contract with them and that they were otherwise entitled to sell energy at the earlier 200 rates. In a subsequent order, the Commission held "that in order to be 'meritorious' a complainant must allege and prove (1) that the project was substantially mature to the extent that would justify finding that the developer was ready, willing and able to sign a contract and (2) that the developer had actively negotiated for a contract which, but for the reluctance of the utility, would have been executed."

A.W. Brown Company, Inc. (Brown) is the developer of a small hydroelectric project, Sunshine No. 2, located on Lake Creek near Salmon, Idaho. In 1983, while researching the feasibility of the project, Brown contacted the Idaho Power Company office in Pocatello, asking about applicable rates and conditions for interconnection with Idaho Power. In response, Idaho Power sent a form letter to Brown, addressed to "Dear Potential Electricity Supplier," outlining the current rates and interconnection requirements. Brown alleged that it proceeded with the development of the Sunshine No. 2 project based upon the terms contained in this letter.

In the fall of 1984, Brown began the application process for a FERC license and, in early 1985, it began the consultation phase with the required federal agencies. In early 1985, while the 248 rate case was pending, Brown advised the PUC of the existence of its project. Brown also spoke with Mr. John Ferree, of Idaho Power, who told Brown that the project would only be entitled to the lower rate set in the 248 case, not the higher 200 rate.

Brown's license from FERC was finally issued in March, 1987. Brown did not file notice with FERC of its status as a QF until September 9, 1987.

On June 3, 1987, Brown filed a complaint in Seventh Judicial District Court which: (1) sought a judgment, based on federal law, requiring Idaho Power to purchase the electrical output of Sunshine No. 2 at the higher 200 rates; (2) alleged that Brown did not receive notice of the 248 case proceedings and thus was not bound by the April 29, 1985, cutoff date for 200 rate entitlement; and (3) sought damages for Idaho Power's failure to purchase power from Brown at the 200 rate. The district court dismissed the counts of the complaint seeking determination of the PURPA issues, concluding that the PUC had jurisdiction to hear those issues. The district court stated, however, that it would have jurisdiction to determine damages depending on the PUC's determination of the PURPA issues.

Brown then filed a complaint before the PUC on October 6, 1988, seeking a determination of Idaho Power's obligation under PURPA to purchase the electrical output of the Sunshine No. 2 project at the 200 rate. Idaho Power filed an answer generally denying any obligation to Brown to purchase electricity at the 200 rate. Idaho Power also moved the PUC for a prehearing order, requesting that it hear not only whether Brown was entitled to the 200 rate, but also the issue of damages, to which the PUC agreed.

The PUC conducted a hearing on all issues on August 31, 1989, and on August 22, 1990, it issued an order ruling against Brown. The Commission made various findings of fact and conclusions of law, holding that: (1) Brown was not entitled to sell energy to Idaho Power at the 200 rate because it had not, before the April 29, 1985, cutoff date, negotiated or entered into a contract with Idaho Power, nor had it filed a meritorious complaint against Idaho Power; (2) the letter sent to Brown by Idaho Power was informational only and was not an offer to contract; and (3) the Commission was not required to give Brown formal notice of the 248 proceeding. Brown filed a petition for rehearing, which the Commission denied. Brown then filed this appeal.

Brown raises the following issues on appeal:

1. Does the PUC have authority, under federal and state law, to establish a regulatory scheme to determine whether and when a qualifying CSPP is entitled to a contract to sell energy at avoided cost rates?

2. If so, did Brown comply with the Commission's requirements before the April 29, 1985, cutoff date, such that he was entitled to sell energy to Idaho Power at the higher 200 rates?

3. Is the PUC required to comply with the Administrative Procedures Act when setting avoided cost rates, such that it was required to give Brown formal notice of the 248 rate-setting proceeding?

4. Did the PUC have jurisdiction to consider and rule on the damages issues?

Under Art. 5, § 9 of the Idaho Constitution, this Court has only limited jurisdiction to review decisions of the PUC. On questions of law, "[t]he review on appeal shall not be extended further than to determine whether the commission has regularly pursued its authority...." I.C. § 61-629. See also, Idaho State Homebuilders v. Washington Water Power, 107 Idaho 415, 418, 690 P.2d 350, 353 (1984) ("In the instant case and in cases similar to this one, the scope of review is limited to a determination of 'whether the Commission regularly pursued its authority' and whether the constitutional rights of the appellant have been violated by the Commission's action"); Utah Power & Light v. Idaho Pub. Util. Com'n., 102 Idaho 282, 284, 629 P.2d 678, 680 (1981) ("This Court's scope of review on appeal in cases of this type is to determine only if the Commission regularly pursued its authority and whether the constitutional rights of the utility were violated....").

Regarding questions of fact, where the Commission's findings are supported by substantial, competent evidence, this court must affirm those findings. Empire Lumber v. Washington Water Power, 114 Idaho 191, 193, 755 P.2d 1229, 1231 (1988) (" 'Where [the Commission's] findings are supported by competent and substantial evidence this Court is obliged to affirm its decision,' " quoting Boise Water Corp. v. Idaho Public Utilities Comm'n, 97 Idaho 832, 555 P.2d 163 (1976)); Utah-Idaho Sugar Co. v. Intermountain Gas Co., 100 Idaho 368, 376, 597 P.2d 1058, 1066 (1979) ("In reviewing findings of fact we will sustain a Commission's determination unless it appears that the clear weight of the evidence is against its conclusion or that the evidence is strong and persuasive that the Commission abused its discretion.").

We first consider whether the Commission had authority to establish the requirement that, before a CSPP can lock-in a certain rate, there must be a signed contract to sell at that rate or a meritorious complaint alleging that the project was mature and that the developer had attempted, and failed, to negotiate a contract with the utility. Brown argued, before both the Commission and this Court, that the Commission was preempted by federal law from adopting such a rule and that a CSPP need only achieve qualifying status in...