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Matanuska Electrical Assoc., Inc. v. Chugach Electric Assoc., Inc. (11/15/2002) sp-5640
Matanuska Electrical Assoc., Inc. v. Chugach Electric Assoc., Inc. (11/15/2002) sp-5640
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
MATANUSKA ELECTRIC )
ASSOCIATION, INC., )
) Supreme Court No. S-10080
Appellant, )
) Superior Court No.
v. ) 3AN-99-10830 CI
)
CHUGACH ELECTRIC ) O P I N I O N
ASSOCIATION, INC., )
) [No. 5640 - November 15, 2002]
Appellee. )
________________________________)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Dan A. Hensley, Judge.
Appearances: Stephen M. Ellis and Jeffrey P.
Stark, Delaney, Wiles, Hayes, Gerety, Ellis &
Young, Inc., Anchorage, for Appellant. James
E. Torgerson, Heller Ehrman White &
McAuliffe, Anchorage, and Donald W. Edwards,
Chugach Electric Association, Anchorage, for
Appellee.
Before: Fabe, Chief Justice, Bryner, and
Carpeneti, Justices. [Matthews and Eastaugh,
Justices, not participating.]
CARPENETI, Justice.
I. INTRODUCTION
I. Chugach Electric Association brought an action in the
superior court seeking a declaratory judgment that the order of
the Regulatory Commission of Alaska requiring Matanuska Electric
Association to pay an adjusted fuel surcharge was enforceable.
Matanuska counter-claimed that Chugach breached an agreement
between the parties governing rates, charges, or other tariff
provisions and sought declaratory relief. The superior court
granted summary judgment in favor of Chugach. Matanuska appeals
on the basis that the commission lacked jurisdiction to interpret
the contract and that Matanuskas breach of contract claim is not
precluded by collateral estoppel. Because we conclude that the
dispute in this case centered on a contractual provision dealing
with ratemaking issues falling within the commissions core
jurisdiction and that Matanuska could have appealed the
commissions decision, we affirm the superior courts grant of
summary judgment in favor of Chugach.
II. FACTS AND PROCEEDINGS
A. Facts
Matanuska Electric Association, Inc. (MEA) and Chugach
Electric Association, Inc. are electrical utility corporations
organized under AS 10.25. Both are subject to the regulatory
authority of the Regulatory Commission of Alaska under AS
42.05.141. MEA does not produce the electricity that it sells to
customers, but instead purchases the power from Chugach. The
terms of these purchases are governed by a purchase and sale
agreement (PSA), which was entered into on January 30, 1989 by
MEA, Chugach, and the Alaska Electric Generation and Transmission
Cooperative, Inc. and approved by the commission. Under the PSA,
MEA is obligated to pay a pro rata portion of the actual costs
incurred by Chugach in generating and transmitting the
electricity.
On February 4, 1999 Chugach sent MEA a letter stating
that Chugach was being assessed additional taxes and interest on
gas that it purchased from the Marathon Oil Company due to a
settlement between Marathon Oil and the State of Alaska (Marathon
settlement). Chugach informed MEA that it would be passing
$644,750, MEAs pro rata portion, on to MEA through the fuel
surcharge rate adjustment process. MEA responded with a letter
on February 11, 1999 stating that the recovery of these
additional charges should be implemented through the procedures
agreed to in the PSA, specifically in 9(d).1
On February 16, 1999 Chugach filed tariff advice letter
number (TA) 194-8 with the commission that, among other things,
asked that Chugach be allowed to recover the liabilities incurred
from the Marathon settlement in the amount of $645,000 through a
twelve-month increase in the fuel surcharge rate, beginning
January 1, 1999. MEA filed its objections to TA 194-8 with the
commission on March 12, 1999. MEA argued that Chugachs proposal
was problematic for several reasons, including that fuel
surcharges were an inappropriate means of recovering these types
of costs and that the proposal violated 9(d) of the PSA. On
March 26, 1999 the commission concurred with a utility tariff
analysts recommendation to approve TA 194-8 to the extent that
Chugach be allowed to recover the Marathon settlement through
fuel surcharges. In the recommendation, the analyst noted that
the additional Marathon taxes and royalties are uncommon, but not
inappropriate, expenses pursuant to the Chugach/Marathon
contract.
Chugach filed its next quarterly tariff advice letter,
TA 196-8, on May 17, 1999, incorporating the additional charges
to recover its Marathon-settlement liabilities that the
commission had approved in its March 26 order. MEA objected to
the new tariff advice letter on June 8, 1999, again claiming that
Chugachs treatment of the Marathon settlement costs violated
9(d) of the PSA. On June 25, 1999 a commission tariff analyst
issued a recommendation addressing a number of issues raised by
Chugachs tariff filing; regarding MEAs objection on the Marathon
settlement issue, the analyst recommended that no action was
necessary, since the commission had already ruled on the issue:
In the last surcharge filing, TA 194-8, MEA objected to Chugachs
inclusion of Marathon natural gas tax liabilities in the fuel
surcharge balancing accounts. MEA again objects to the inclusion
of these costs. Staff believes the Commission has adjudicated
this matter and no further determination is necessary. The
commission approved its staffs recommendations by order dated
June 28, 1999.
On August 16, 1999 Chugach filed another quarterly
tariff advice letter, TA 202-8, again incorporating the
previously authorized increase in the fuel surcharge rate to
recoup its Marathon-settlement liabilities. MEA objected yet
again on the basis that Chugach had failed to comply with 9(d)
of the PSA. As before, the commissions staff recommended no
action in response to MEAs objection, noting in a memorandum
dated September 28, 1999, that the commission had already decided
the issue when it approved Chugachs first quarterly tariff
letter, TA 194-8, and that its decision was now final:
In TA 194-8, the Commission approved Chugachs
treatment of Marathon natural gas taxes and
other liabilities. Although MEA filed
objections to TA 194-8, it did not request to
intervene in that proceeding. Furthermore,
the Commission did not suspend TA 194-8. The
reconsideration period for that decision has
ended.
The commission approved the staff recommendation on October 1,
1999.
B. Proceedings
On October 13, 1999 Chugach filed for declaratory and
injunctive relief against MEA in the superior court. Chugach
asked the superior court to rule that Chugach was entitled to a
payment from MEA in the amount of MEAs quarterly pro rata share
of the Marathon settlement. Chugach also asked for a declaration
that MEA was bound by the commissions orders in regards to
Chugachs tariff advice letters, and a declaration that the
dispute is not covered by the PSA. MEA answered the complaint
and counterclaimed for declaratory relief for breach of contract.
Chugach then moved for summary judgment, arguing that the PSA
allowed the commission to establish rates and that statutory law
established that MEA was bound by the orders of the commission to
pay these rates. MEA filed a cross-motion for summary judgment
asking the superior court to grant its counterclaim for
declaratory relief for breach of contract.
On December 13, 2000 the superior court found that the
PSA specifically ceded authority over ratemaking to the
commission and that statutory law gives the commission plenary
authority over ratemaking. Therefore, the superior court held,
the commission had jurisdiction to hear MEAs breach of contract
claim. The superior court went on to hold that MEA took full
advantage of its opportunity to participate in the proceedings
and that the commission specifically decided the issue raised in
the superior court. Also, the superior court found that MEA
failed to appeal the commissions decisions by the appropriate
deadlines. The superior court issued its amended final judgment
in Chugachs favor on April 4, 2001.
MEA now appeals that decision.
III. STANDARD OF REVIEW
We review an appeal from summary judgment de novo.2 A
superior courts grant of summary judgment must be affirmed if the
evidence in the record fails to disclose a genuine issue of
material fact and the moving party is entitled to judgment as a
matter of law.3 All reasonable factual inferences must be drawn
in favor of the party opposing summary judgment.4 On questions
of law, we will adopt the rule of law which is most persuasive in
light of precedent, reason and policy.5
IV. DISCUSSION
The Superior Court Did Not Err in Finding that the
Commission Has Jurisdiction To Decide the Contract Dispute
Between MEA and Chugach.
MEA argues that the superior court erred in granting
Chugachs motion for summary judgment because the commission did
not have jurisdiction to interpret the PSA. MEAs argument rests
on the premise that the commission is a regulatory body set up to
establish utility rates, not to settle contract disputes. The
dispute on appeal is whether the PSA imposes a duty on Chugach to
convene a Joint Committee prior to passing fees from the Marathon
settlement on to MEA. Chugach argues that the parties intended
the commission to have jurisdiction over the PSA as evidenced by
9(e) of the PSA.6
We hold that, in entering into a private contract, MEA
and Chugach were capable of bargaining over the method of dispute
resolution that would be used in settling contract disputes. As
evidenced by 9(e)(3) of the PSA, the parties agreed to have
issues of interpretation of the PSA determined by the commission.
In cases involving other types of contracts, we have held that
parties to a contract are bound by the terms of the contract and,
particularly, by dispute resolution procedures of that contract.7
Moreover, AS 45.05.1418 gives the commission the power to do all
things necessary or proper to carry out the purposes and exercise
the powers it is granted in the law. As we have stated:
This provision presents two guiding
principles for determining the extent of the
[commission]s jurisdiction under specific
provisions of the Act. On the one hand, it
includes a principle of limitation,
restricting the [commission]s power to the
specific jurisdictional areas of its stated
purposes. On the other hand, it includes a
principle of expansion, mandating that the
[commission]s power to act within its
specific areas of jurisdiction is to be
liberally construed.[9]
Because 9(d) of the PSA expressly deals with issues lying within
the commissions core area of jurisdiction changes in rates,
charges or other tariff provisions and because 9(e)(3) evinces
the parties intent to submit to the commission any rate-related
disputes arising under the PSA, we conclude that interpretation
of 9(d) was within the jurisdiction of the commission.
Accordingly, we affirm the decision of the superior court in
granting Chugachs motion for summary judgment.
Because we hold that the commission is the appropriate
venue for disputes concerning 9(d) of the PSA, we need not reach
the issue whether MEA was collaterally estopped from bringing its
breach of contract claim in the superior court. We hold that the
commission had the power to interpret the PSA and that MEA should
have appealed from the commissions decision if it felt that this
decision was in error.
V. CONCLUSION
Because the PSA gave the commission the power to
interpret the PSA and that interpretation of the PSA is within
the scope of the commissions power to set rates, we AFFIRM the
decision of the superior court.
_______________________________
1 Section 9(d) of the PSA states in relevant part:
Before Chugach implements any change in
rates, charges, or other tariff provisions
applicable to power sold under this Agreement
(other than interim tariff charges under
Section 9(h) below), the Chugach staff will
submit the proposed change, together with
such explanatory material as the Chugach
staff has prepared (including materials
prepared for submission to the Commission) to
a Joint Committee for review. The Joint
Committee shall consist of three members, two
appointed from the Chugach Board of Directors
and one appointed from the AEG&T Board of
Directors (which member shall also be a
member of the MEA Board of Directors), such
members to serve at the pleasure of their
respective Boards. The Chugach staff shall
supply directly to MEA and to AEG&T copies of
all materials submitted to the Joint
Committee.
Section 9(h) states:
Interim Ratemaking. Nothing in this
Agreement shall preclude Chugachs use of
other or abbreviated procedures to develop
interim rates for immediate effectiveness
(subject to such regulatory constraints as
may exist at the time). All such interim
rates shall be subject to refunds if the
rates finally adopted and approved for the
period during which the interim rates were in
effect are lower than the interim rates.
2 Ganz v. Alaska Airlines, Inc., 963 P.2d 1015, 1017
(Alaska 1998).
3 Johnson v. Olympic Liquidating Trust, 953 P.2d 494,
496 (Alaska 1998).
4 Id.
5 Ganz, 963 P.2d at 1017 (internal quotations omitted).
6 Section 9(e) states in relevant part:
Commission Review. So long as the Commission
continues to review rates and charges
applicable hereunder:
(1) Chugach shall submit its final
decision on rates and charges to the
Commission for approval, together with a
complete copy of the ratemaking record (if
any) compiled by Chugach pursuant to Section
9(d)(4) of this Agreement.
(2) New rates and charges under this
Agreement shall not become effective until
reviewed and approved by the Commission,
either on a final basis or an interim basis
subject to refunds if the rates and charges
finally approved are lower than those
approved on an interim basis.
(3) AEG&T and/or MEA shall be entitled
to raise before the Commission any objection
or argument to the effect that the rates and
charges as submitted to the Commission
violate the substantive ratemaking principles
set forth in this Agreement or were adopted
in violation of the ratemaking procedures set
forth in this Agreement or violate any other
provision of this Agreement.
7 See Diedrich v. City of Ketchikan, 805 P.2d 362, 367
(Alaska 1991) ([W]hen an employee enters into a contract that
contains grievance procedures, it is not a denial of the right to
a jury trial to require the employee to follow those
procedures.); Sourdough Freight Lines, Inc. v. Local No. 959,
Intl Bhd. of Teamsters, 602 P.2d 430, 431-32 (Alaska 1979)
([U]nder a collective bargaining agreement the court should defer
to whatever means of dispute resolution the parties themselves
have agreed to.); Inman v. Clyde Hall Drilling Co., 369 P.2d 498,
500 (Alaska 1962) ([W]e start with the basic tenet that competent
parties are free to make contracts and that they should be bound
by their agreements.).
8 AS 42.05.141 states in relevant part:
(a) The Regulatory Commission of Alaska
may do all things necessary or proper to
carry out the purposes and exercise the
powers expressly granted or reasonably
implied in this chapter, including
. . . .
(3) make or require just, fair, and
reasonable rates, classifications,
regulations, practices, services, and
facilities for a public utility;
9 Homer Elec. Assn v. City of Kenai, 816 P.2d 182, 186
(Alaska 1991) (internal citations omitted).
