Alaska Supreme Court Opinions made Available by Touch N' Go Systems and Bright Solutions

Touch N' Go, the DeskTop In-and-Out Board makes your office run smoother. Visit Touch N' Go's Website.
  This site is possible because of the following site sponsors. Please support them with your business.
www.gottsteinLaw.com

You can search the entire site. or go to the recent opinions, or the chronological or subject indices. 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).