You can
search the entire site.
or go to the recent opinions, or the chronological or subject indices.
Matanuska Electric Association, Inc. v. Chugach Electric Association, Inc. (10/08/2004) sp-5838
Matanuska Electric Association, Inc. v. Chugach Electric Association, Inc. (10/08/2004) sp-5838
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-
10598/10618
Appellant/Cross-Appellee, )
) Superior Court No.
v. ) 3AN-99-8152 CI
)
CHUGACH ELECTRIC )
ASSOCIATION, INC., ) O P I N I O N
)
Appellee/Cross-Appellant. ) [No. 5838 - October
8, 2004]
_______________________________ )
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Peter A. Michalski, Judge.
Appearances: Kyle W. Parker and David J.
Mayberry, Patton Boggs LLP, Anchorage, for
Appellant/Cross-Appellee. James E.
Torgerson, Jonathan B. Ealy, and Aaron M.
Schutt, Heller Ehrman White & McAuliffe LLP,
Anchorage, and Donald W. Edwards, General
Counsel, Chugach Electric Association, Inc.,
Anchorage, for Appellee/Cross-Apellant.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Bryner, and Carpeneti, Justices.
CARPENETI, Justice.
I. INTRODUCTION
Matanuska Electric Association (MEA) sued Chugach
Electric Association (Chugach) for breach of contract. The
superior court denied Chugachs motion to dismiss, but granted its
motion for summary judgment. MEA appeals and Chugach cross-
appeals. We affirm the courts grant of summary judgment to
Chugach on MEAs ninth cause of action, but reverse its grant of
summary judgment to Chugach on MEAs fifth cause of action. We
accordingly reverse and remand on the amount of attorneys fees as
well.
II. FACTS AND PROCEEDINGS
A. Facts
MEA and Chugach are electric utility corporations.1
MEA does not produce the electricity it sells to its customers;
it buys electricity from Chugach pursuant to a purchase and sale
agreement (the Agreement).2 The Agreement became effective in
1989 and runs through 2014.
Section 17 of the Agreement provides that the parties
must act in good faith and in conformance with prudent utility
practice. Section 34(o) defines prudent utility practice for the
purposes of the Agreement. Section 9 governs ratemaking between
Chugach and MEA, though Chugachs rates must ultimately be
approved by the Regulatory Commission of Alaska (the Commission).3
Section 9(d) of the Agreement requires Chugach to submit any
proposed rate changes to a Joint Committee, composed of two
members of the Chugach board of directors and one member,
appointed by the AEG&T board of directors, who is a member of
both the AEG&T and MEA boards of directors. The Agreement calls
for Chugach to submit its proposed rate changes to the Commission
after a Joint Committee review process, during which MEA has the
right to submit evidence and address the Joint Committee.
Section 9(h) of the Agreement provides Chugach with the right to
bypass the Joint Committee process to develop interim rates.
In order to raise capital, Chugach issued two sets of
bonds in 1991. As of December 31, 1998 Chugach had $23,205,000
in outstanding bonds due in 2002 and $217,705,000 in outstanding
bonds due in 2022. These bonds had a blended interest rate of
9.04%, which Chugach noted was higher than the interest rates
that would accrue on debt of the same maturity originated in
todays market. Rather than defease4 or otherwise refinance this
debt, Chugach hedged against future rises in interest rates by
entering into a treasury rate lock agreement.5 According to MEA,
Chugachs failure to refinance required MEA to pay higher prices
on the electricity it bought from Chugach.
In October 1999 the Commission ordered Chugach to file
a general rate case by June 30, 2000 based on the test year 1999
so that it could better evaluate the reasonableness of Chugachs
rates. Before this deadline, MEA twice wrote to Chugach to
remind it that the Agreement required it to submit its rate case
to the Joint Committee before filing it with the Commission. In
March 2000 Chugach responded to these letters with an outline
indicating that it would begin the Joint Committee process on May
15, 2000. MEA rejected this proposal and filed a motion for a
preliminary injunction ordering Chugach to submit the rate case
to the Joint Committee eleven weeks before the Commission
deadline. The parties settled this dispute in March 2000, and
Chugach agreed to begin the Joint Committee process no later than
eleven weeks before the Commission deadline.
In June 2000 the Commission changed the test year to
2000 and extended Chugachs filing deadline to June 30, 2001. In
February 2001 MEA again reminded Chugach of the Joint Committee
requirement, but Chugach responded by stating that it would not
be able to submit the rate case to the Joint Committee eleven
weeks before the Commission deadline. Instead, Chugach proposed
that it submit the rate case to the Joint Committee at the same
time as it submitted the rate case to the Commission, and noted
that it might seek to establish interim rates outside of the
Joint Committee process. MEA rejected this proposal, stating
that Section 9(d) of the Agreement was intended to provide MEA
with an opportunity to participate in developing the rate case
before its submission to the Commission. In May 2001 the
Commission again extended the deadline, to early November 2001.
Finally, in July 2001 Chugach filed its 2000 rate case with the
Commission, requesting both interim and permanent rates, without
submitting the rate case to the Joint Committee process.
B. Proceedings
In December 1998 MEA filed a complaint against Chugach
with the Commission. MEAs complaint requested that the
Commission investigate whether Chugach . . . engaged in
unreasonable management practices by refusing to refinance its
long-term bonded indebtedness. The Commission dismissed MEAs
regulatory complaint in June 2000 by declining to initiate a
formal investigation into the reasonableness of Chugachs debt
management practices.
While its complaint against Chugach was before the
Commission, MEA alleged similar claims in a complaint it filed in
the superior court in February 2000. In part, this complaint
alleged (in MEAs fifth cause of action) that Chugachs failure to
refinance its bond debt violated the good faith and prudent
utility practice provisions of section 17 of the Agreement, and
sought damages for the alleged breach. The superior court denied
Chugachs motion to dismiss this claim, but it granted Chugachs
motion for summary judgment, holding that Chugach owed MEA no
duty under the Agreement to conduct its debt management in
accordance with prudent utility practice. MEA also sought (in
its ninth cause of action) a declaratory judgment and an
injunction ordering Chugach to comply with Section 9(d) of the
Agreement by submitting its permanent rate case to the Joint
Committee before submitting it to the Commission. The superior
court granted summary judgment in favor of Chugach on this issue.
Having separately disposed of MEAs other causes of action, none
which are at issue here, the superior court entered final
judgment in favor of Chugach. Chugach then moved for attorneys
fees, which the superior court awarded in the amount of
$84,557.67.
MEA appeals the superior courts grant of summary
judgment in favor of Chugach on both claims and the award of
attorneys fees. Chugach cross-appeals the denial of its motion
to dismiss MEAs claim that Chugachs debt management practices
were unreasonable (the fifth cause of action).
III. STANDARD OF REVIEW
We review questions concerning the application of the
doctrines of primary agency jurisdiction and exhaustion of
administrative remedies de novo, as they present questions of
law.6 Whether res judicata or collateral estoppel apply are also
questions of law, and are therefore reviewed de novo as well.7
We also review a trial courts grant of summary judgment
de novo, drawing all reasonable factual inferences in favor of
the non-movant, and affirming where the record presents no
genuine dispute of material fact and the movant is entitled to
judgment as a matter of law.8 We may affirm a grant of summary
judgment on any basis appearing in the record.9
If a trial courts interpretation of a written contract
was based exclusively on documentary evidence, we review its
interpretation de novo as a question of law.10 In conducting such
a review we adopt the rule of law that is most persuasive in
light of precedent, reason, and policy.11
IV. DISCUSSION
A. Whether Chugachs Debt Management Practices Comply with
Prudent Utility Practice Cannot Be Resolved on Summary Judgment.
1. The superior court properly refused to dismiss
MEAs debt management claim (fifth cause of action)
based on the doctrines of primary agency
jurisdiction, comity, failure to exhaust
administrative remedies, res judicata, or
collateral estoppel.
Even though Chugach prevailed on summary judgment, it
argues that the superior court erred by denying its motion to
dismiss MEAs claim related to its debt management practices.
Chugach argues that dismissal was appropriate on the grounds of
primary agency jurisdiction, comity and abstention, failure to
exhaust administrative remedies, res judicata, and collateral
estoppel.12 Chugachs arguments on these issues are based on its
mistaken belief that the Commission dismissed MEAs regulatory
complaint because it reached the substantive merits of Chugachs
debt management practices, and found them reasonable.13 But the
Commission did not reach any such conclusion; it simply exercised
its discretion to dismiss MEAs complaint without reaching its
merits. The Commission stated that it was convinced that
although there is ample room for argument on the merits of
competing financial management strategies, it is not in the
public interest at this time to devote the resources required on
the part of the Commission or the competing utilities to initiate
an investigation. Because the Commission declined to exercise
its jurisdiction to hear this complaint, the superior court
properly declined to dismiss the suit on these grounds.
a. The Commission waived its primary agency
jurisdiction.
Chugach argues that the superior court should have
dismissed or stayed MEAs claim that Chugachs debt management
practices violated the Agreements prudent utility practices
requirement because the Commission has primary jurisdiction over
the claim. We disagree.
In Greater Anchorage Area Borough v. City of
Anchorage,14 we stated that the doctrine of primary agency
jurisdiction provides that a court may, in appropriate cases,
stay or dismiss pending litigation so as to enable a proper
agency to initially pass upon an aspect of the case calling for
administrative expertise.15 This generally occurs [w]hen a case
raises questions of fact not within the ordinary experience of
courts, or if the case requires the exercise of administrative
discretion.16 This doctrine is based on the need for an orderly
and reasonable coordination of the work of agencies and courts,17
which is generally best achieved when courts decline to rule on a
subject peculiarly within the agencys specialized field without
first taking into account what the agency has to offer.18 The
reasonableness of Chugachs financial management practices is
clearly an issue within the Commissions area of expertise.19
However, as the language of Greater Anchorage suggests,
and as numerous courts have stated, the primary agency
jurisdiction doctrine is one of prudence, and not an absolute
jurisdictional limitation.20 And when an agency has discretion to
deny proceedings requested by the plaintiff and elects not to
exercise this discretion, the court may decline to apply the
doctrine.21
The terms of the Agreement itself provide further
support for the non-exclusivity of the Commissions jurisdiction.
Part 9(f) states: The unavailability of relief from the
Commission shall not act to deprive the reviewing court of
authority to order any form of equitable remedy the court
considers appropriate.
In this case, the questions of whether Chugach failed
to abide by prudent utility practices in its debt management
practices, and the amount of damages caused by this failure, were
initially presented to the Commission. The Commission declined
to resolve these questions. Accordingly, although the doctrine
of primary agency jurisdiction would normally apply to a case
such as this one, we find that the Commission has waived its
primary jurisdiction.
b. The principle of comity is inapplicable.
The Commissions refusal to exercise its jurisdiction
over MEAs claim also renders moot Chugachs argument that the
superior court erred by not deferring to the Commission under the
principle of comity.22 The doctrine of comity is one of deference
and respect among tribunals of overlapping jurisdiction.23 A
question of comity arises when there is tension . . . between
courts and/or agencies having concurrent jurisdiction over the
same matter. 24 In such cases, [t]he doctrine of comity teaches
that one court should defer action on causes properly within its
jurisdiction until the courts of another sovereignty with
concurrent powers, and already cognizant of litigation, have had
an opportunity to pass upon the matter.25
While it might have been proper for the superior court
to refrain from adjudicating this claim between the filing (on
February 8, 2000) and dismissal (on June 6, 2000) of MEAs
similarly worded regulatory complaint, the principle of comity
was not implicated, because the Commission subsequently declined
to exercise its jurisdiction. The Commission had ample
opportunity to pass upon the matter, and declined to do so.
Following its dismissal of MEAs complaint, the Commission no
longer had concurrent jurisdiction with the superior court, and
the principle of comity was no longer relevant.
c. MEA is excused from exhausting its
administrative remedies.
Chugach also argues that the superior court should have
dismissed this claim because MEA failed to exhaust its
administrative remedies. A party must generally exhaust
administrative remedies before bringing an action challenging an
agency decision; this allows the agency to apply its expertise
and correct its own errors.26 But this requirement may be excused
where the attempt to exhaust administrative remedies is futile or
severely impractical.27 We have held the pursuit of
administrative relief to be futile where an administrative body
refuses to address a legal claim brought by a petitioner.28 In
this case, MEA brought its claim before the Commission, which
dismissed the claim without adjudication. The exhaustion
requirement is thus excused in this case.
d. Res judicata and collateral estoppel are
inapplicable.
Finally, Chugach alleges that the doctrines of res
judicata and collateral estoppel preclude the relitigation of
MEAs claim. Only where another tribunal has resolved a claim or
issue on its substantive merits will the claim be precluded by
res judicata29 or the issue by collateral estoppel.30 Because the
Commission declined to exercise its discretionary power to
investigate Chugachs debt management practices, and did not
adjudicate the merits of MEAs regulatory complaint, these
doctrines cannot bar the superior court from hearing this claim.
2. The superior court erred in granting summary
judgment to Chugach on MEAs fifth cause of action.
After refusing to dismiss MEAs debt management claim
outright, the superior court granted Chugachs motion for summary
judgment on this issue. The court found that as a matter of law
Chugach owed MEA no contractual duty under the Agreement to
manage its debt in accordance with prudent utility practice.31
Because we find as a matter of law that the Agreement did impose
such a duty, we reverse.
Our resolution of this issue centers on the meaning and
scope of several provisions of the Agreement. Section 17 states
that [e]ach party to this Agreement covenants and agrees
to . . . act and perform in a manner consistent with Prudent
Utility Practice. Section 34(o) later defines Prudent Utility
Practice in the following way:
At a particular time any of the practices,
methods and acts engaged in or approved by a
significant portion of the electric utility
industry at such time, or which in the
exercise of reasonable judgment in light of
facts known at such time, could have been
expected to accomplish the desired results at
the lowest reasonable cost consistent with
good business practices, reliability, safety
and reasonable expedition. Prudent Utility
Practice is not required to be the optimum
practice, method or act to the exclusion of
all others, but rather to be a spectrum of
possible practices, methods or acts which
could have been expected to accomplish the
desired result at the lowest reasonable cost
consistent with reliability, safety and
expedition.
Section 34(o) further notes that Prudent Utility
Practice . . . shall apply not only to functional parts of the
parties generation, transmission, and distribution facilities,
but also to appropriate structures, landscaping, painting, signs,
lighting and other facilities.
In granting summary judgment to Chugach, the superior
court focused on the latter portion of Section 34(o), and what it
characterized as the extreme difference between the class of
items mentioned and long-term debt management. The superior
court also noted that, although the Agreement is over fifty pages
in length, and effective for over twenty years, it does not
mention long-term debt management. Accordingly, the court held
that both the language of the contract and a common sense
analysis of the expectations of the parties indicate that, under
the Agreement, the prudent utility practice standard only applies
to the maintenance and operation of Chugachs facilities and
equipment. We believe that this standard also governs the
utilitys investment practices.
The goal of contract interpretation is to give effect
to the parties reasonable expectations,32 which we assess by
examining the language of the disputed provisions, the language
of other provisions, relevant extrinsic evidence, and case law
interpreting similar provisions.33 In reaching a reasonable
interpretation of a contract, we attempt to give effect to all of
its terms, if possible.34 We consider disputed language within
the context of the whole contract and its purposes, and the
circumstances surrounding its formation.35 While it was
understandable to focus only on section 34(o), by doing so the
superior court did not consider several of the Agreements other
provisions, and their implications in light of the Agreements
overall purpose.
The overarching language of section 17, stating
generally that both parties agree to act and perform in a manner
consistent with Prudent Utility Practice, must apply to the core
aims of the Agreement, which include ensuring a fair and
reasonable rate scheme. Chugach suggests that because the
Agreement does not include any specific price terms, its only
purpose is to assure that MEA receives adequate supplies of
power.36 But even though the Agreement does not include specific
prices or rates for this power, it does set forth various
substantive ratemaking principles and ratemaking procedures in
section 9. The prudence standard therefore must also apply to
Chugachs ratemaking scheme, as this is a key component of its
supply of power.
A utilitys pricing or rate scheme must inherently take
all of the utilitys costs into account. And these costs include
the costs to the utility of managing its debt.37 It thus stands
to reason that if the Agreement applies the prudent utility
standard to Chugachs power supply policies in general, and if
these policies include ratemaking principles and procedures, then
the Agreement also applies the prudent utility standard to
Chugachs debt management practices.
This conclusion finds support in the cases that MEA
cites to support its contention that the Prudent Utility Practice
Standard has a long-established and accepted usage in the utility
industry . . . [that] plainly includes application of the
standard to a utilitys financial management decisions. Chugach
responds that these cases only show that the Commission, as well
as similar bodies in other states, has jurisdiction to review and
act to ensure that utilities exercise reasonable financial
management practices. Along similar lines, the superior court
dismissed these cases as simply stat[ing] that a regulatory
commission can force a public utility to manage its long-term
debt in accordance with Prudent Utility Practices. But we read
these cases more broadly than Chugach and the lower court.
In each case, the relevant utility commission sought to
ensure that the utility would provide service to its customers at
the fairest rate, and to further this aim, reviewed the utilitys
financial practices.38 Thus the Federal Power Commission stated:
It is common knowledge that when a utility is not in a good
financial condition, service is inclined to suffer and proper
rate adjustments are resisted. Accordingly, directly or
indirectly, the consumer will be affected.39 The Commission
further stated that [a] competitive enterprise must seek in every
legitimate way to cut its costs and to operate economically.40
The Commission subsequently stated that at least since 1956, it
has been clear that utility managements are under a duty to
refinance their debt in order to take advantage of changing
interest rates and provide the consumer with the lowest embedded
debt costs.41
There can be no doubt that MEA is a customer or
consumer of Chugachs power; even Chugach admits as much. And
there is no reason that the rates that Chugach charges MEA for
this power should not be based on the same considerations of
fairness and reasonableness that govern utility rates for retail
customers. Section 9(e)(4) of the Agreement states both that, in
order to give effect to the fairness principles set forth in
Section 9(b), any Power Supply Costs that the Commission (or the
court) allows Chugach to include in rates for Chugachs retail
ratepayers should also be included in rates charged to [MEA]
under this Agreement, and that, to the extent that
reasonableness, prudency, and similar standards may by law be
invoked and applied to deny recovery of particular costs in
rates, the applicability of such standards shall not be affected
by this Agreement. The precedents cited by MEA have even greater
persuasion power when considered in conjunction with the entire
Agreements purpose and terms. Chugach should have reasonably
expected that the prudent utility standard would apply to its
debt management.
Because we conclude that the Agreement impliedly
required Chugach to manage its long-term debt in accordance with
prudent utility practice, and because it is unclear whether
Chugach in fact did so, we reverse the grant of summary judgment
and remand this issue to the superior court for further findings.
B. The Superior Court Properly Granted Summary Judgment to
Chugach on MEAs Ninth Cause of Action.
1. Chugach submitted its permanent rate request to the
Commission at the same time as its interim rate request; under
Section 9(h) of the Agreement both rate requests were exempt from
the Joint Committee process.
MEAs ninth cause of action sought to compel Chugach to
complete the process for seeking a rate change specified in
section 9(d) of the Agreement before submitting its rate case to
the Commission. MEA contends that the superior court erred in
granting summary judgment to Chugach on this claim. Section
9(d)(1) of the Agreement mandates that
[b]efore Chugach implements any change in
rates, charges, or other tariff provisions
applicable to power sold under this Agreement
(other than interim tariff changes under
Section 9(h) below), the Chugach staff will
submit the proposed change, together with
such explanatory materials as the Chugach
staff has prepared . . . to a Joint Committee
for review.
MEA contends that Chugach violated section 9(d) by attaching its
2000 permanent rate case to its interim rate 42 case and
submitting both to the Commission four months before the
Commissions deadline for filing the permanent rate case, without
first submitting it to the Joint Committee. The superior court
rejected this argument and granted summary judgment to Chugach
because it found that by attaching the permanent rate case to the
interim case, both were exempted from the Joint Committee process
by the terms of section 9(h), which excludes interim rate cases
from review.43
Chugach contends that interim rate relief was necessary
because it faced a situation where, if certain conditions came to
pass, it could have failed to collect enough under existing rates
to cover its financial obligations. Chugach argues that the
Commission requires a utility to file its entire rate case with
its interim rate request, because it requires the same supporting
information for an interim rate request as for a permanent rate
request. Chugach argues that this requirement was in harmony
with the Agreement because Section 9(h) specifically states that
interim rate requests are subject to such regulatory restraints
as may exist at the time and because it had a reasonable
expectation that the contract would be interpreted to allow it to
follow the industry practice of making both filings together.
MEA responds that allowing Joint Committee review after
submission to the Commission would completely frustrate the
purpose of section 9(d) because MEA bargained for the provision
to ensure that it would have a right to participate before firm
positions were taken.
We are troubled by Chugachs avoidance of the Joint
Committee process. Section 9(d) of the Agreement clearly
envisions the submission of permanent rate requests to the Joint
Committee process prior to their submission to the Commission.
Nonetheless, because the permanent rate request was filed
simultaneously with the interim rate request, the permanent rate
request was entitled to exemption from the Joint Committee
process. Chugach was authorized by law to file both requests at
the same time. Indeed, the rate filing system appears to call
for the submission of both rate requests simultaneously; the
interim rate request is simply an extension of the permanent rate
request, as both requests require identical information.44 In
describing rate (tariff) filings, the Alaska Administrative Code
provides that [i]f interim approval of a tariff filing is sought,
that request must also be set out in the tariff advice letter.45
That Chugach was entitled to file its permanent and interim rate
requests simultaneously was reinforced at the July 10, 2001
prehearing conference for Chugachs interim rate request, where
Hearing Examiner Clark repeatedly rejected the notion that
separate interim and permanent rate filings were required. At
one point he stated that Chugach has the burden of proof on the
legal standards so I think we are looking at one filing, not two
and not really establishing two separate schedules to accomplish
the tasks. Because Chugachs permanent rate request was an
extension of its interim rate request, Chugach was entitled to
file its permanent and interim rate requests simultaneously under
section 9(h), which allows Chugach to bypass the Joint Committee
process and use other or abbreviated procedures to develop
interim rates.
2. MEA did not properly raise the issue of whether Chugach
acted in good faith in submitting its interim rate request to the
Commission.
MEA argues that summary judgment was inappropriate on
the section 9(d) issue because there is a genuine issue of
material fact as to whether Chugach acted in good faith in
submitting its permanent and interim rate requests. MEA argues
that there is ample evidence for a trier of fact to conclude that
Chugach filed the interim rate request in order to avoid its
obligations under the agreement. Chugachs response is that MEA
failed to properly raise this claim before the superior court.
MEA does not respond to this argument in its reply brief.
MEAs Second Amended Complaint did not mention Chugachs
alleged bad faith in submitting its rate requests. Additionally,
Chugach correctly points out that MEAs briefs before the superior
court asserted that MEAs Ninth Cause of Action presents a pure
issue of law concerning the proper construction of Section 9(d).
While MEA may be correct that it set forth evidence that might
support a determination that Chugach acted in bad faith, this is
irrelevant if MEA did not properly raise that claim. As we have
previously held, [m]atters not made issues or tried before the
lower court will not be considered on appeal.46 Because MEA fails
to demonstrate that it properly raised this issue below, we hold
that the superior court did not err in granting summary judgment
in favor of Chugach on MEAs ninth cause of action.
C. We Must Vacate the Superior Courts Award of Attorneys Fees
to Chugach.
MEA argues that the superior court erred in granting
Chugach attorneys fees because Chugach failed to timely request
fees and failed to timely provide documentary support for them.
We do not reach this argument, however, because our reversal of
summary judgment on MEAs debt management claim requires that we
vacate the fee award.47 On remand, after determining whether
Chugachs debt management violated prudent utility practice, the
superior court must determine anew whether and to what extent
either party is entitled to recover attorneys fees.
V. CONCLUSION
We AFFIRM the superior courts grant of summary judgment
to Chugach on MEAs ninth cause of action, because the Agreement
did not obligate Chugach to submit its permanent rate request to
the Joint Committee process, and because MEA did not properly
raise its claim that Chugach combined its two rate requests in
bad faith. But because the Agreements prudent utility practice
provisions apply to Chugachs debt management practices, we
REVERSE the superior courts grant of summary judgment to Chugach
on MEAs fifth cause of action and REMAND for further proceedings
consistent with this opinion. We accordingly VACATE the award of
attorneys fees to Chugach and REMAND this issue for further
proceedings consistent with this opinion.
_______________________________
1 Many of the facts in this decision are taken from
Matanuska Elec. Assn, Inc. v. Chugach Elec. Assn, Inc., 53 P.3d
578 (Alaska 2002) and Matanuska Elec. Assn, Inc. v. Chugach Elec.
Assn, Inc., 58 P.3d 491 (Alaska 2002).
2 The Alaska Electric Generation and Transmission
Cooperative (AEG&T) is also a party to the Agreement, but was not
a party to this case.
3 The name Regulatory Commission of Alaska was
substituted for Alaska Public Utilities Commission in 1999 in
accordance with ch. 25, 30(a), SLA 1999.
4 Defeasance is sometimes used by public utilities to
refinance or remove bonded indebtedness. The utility purchases
U.S. Treasury or other government-backed securities. The
interest and principal payments from these securities are then
used to cover the debt-service requirements of the outstanding
bonds. The bond debts are thus removed from the utilitys balance
sheet for accounting and financial reporting purposes. Depending
on the method of defeasance used, the utility may also be freed
from any indenture provisions related to the bonds. See James
Hempstead, Total Recall, 132 No. 4 Fort. 20, 22 (1994).
Chugach argues that defeasance does not really
eliminate bond debt, but only shifts it. Chugach also asserts
that it would have had to borrow funds in larger amounts than its
outstanding bond principal in order to purchase sufficient
government securities to cover its bond debts, because government
securities are low risk and thus pay low interest rates. In sum,
Chugach claims that defeasance did not make financial sense and
was the most expensive, least attractive refinancing method
available.
5 A rate-lock is a derivative or hedge agreement based on
interest rates. See Mathew Urbina and David J. Mangefrida,
Regulatory Monitor: Recent IRS (Mis)guidance?, Investment Lawyer,
April 2002, at 18. In this case, the rate-lock was based on U.S.
Treasury interest rates. Chugach wanted to offset the risk of
potentially higher interest rates on its bonds. Under the rate-
lock agreement, if interest rates rose above a certain target
rate as of March 17, 2002 Chugachs hedge partner (Lehman
Brothers) would have to make a corresponding payment to Chugach,
which would increase proportionately by the amount the actual
rate exceeded the target rate. Conversely, if rates fell below
the target rate on that date, Chugach would have to make a
corresponding payment to Lehman. As with any hedge, the point
was to insure against losses resulting from a rise in the price
of the underlying commodity (the interest rates). The cost to
Chugach of such insurance was the payment amount if rates
declined on March 17, 2002.
6 State, Dept of Revenue v. Andrade, 23 P.3d 58, 65
(Alaska 2001).
7 Alaska Contracting & Consulting, Inc. v. Alaska Dept of
Labor, 8 P.3d 340, 344 (Alaska 2000).
8 Spindle v. Sisters of Providence in Washington, 61 P.3d
431, 436 (Alaska 2002).
9 Id.
10 Krossa v. All Alaskan Seafoods, Inc., 37 P.3d 411, 415
(Alaska 2001).
11 Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).
12 Chugach also argues that any award of damages to MEA
would constitute prohibited retroactive ratemaking. Because we
refer the issue of damages to the Commission, we decline to
address this issue.
13 As noted in Part II.B., supra, before suing Chugach in
state court over whether Chugachs debt management practices
violated the Agreements prudent utility practices requirement,
MEA brought a similar regulatory complaint before the Commission.
14 504 P.2d 1027 (Alaska 1972) (overruled on other grounds
by City & Borough of Juneau v. Thibodeau, 595 P.2d 626 (Alaska
1979)).
15 Id. at 1032 (emphasis added).
16 Oil Heat Inst., Inc. v. Alaska Pub. Serv. Corp., 515
P.2d 1229, 1233 (Alaska 1973).
17 G & A Contractors, Inc. v. Alaska Greenhouses, Inc.,
517 P.2d 1379, 1383 (Alaska 1974).
18 Id.
19 See AS 42.05.141(a) and AS 42.05.511(a) (Commission may
do all things necessary and proper to carry out its authority,
including investigating reasonableness of rates, regulations, and
practices of public utilities, including investment policies and
practices).
20 See, e.g., United Parcel Serv., Inc. v. Chadwicks of
Boston, Ltd., 900 F. Supp. 557, 563 (D. Mass. 1995) ([T]he
doctrine of primary jurisdiction does not involve a question
about jurisdiction in an ordinary, bright-line categorical
sense. . . . Rather, [it] is a flexible tool for the allocation
of business between court and agency [and] is determined by
prudential, rather than bright-line categorical, legal grounds.)
(internal citations and quotations omitted).
21 Mezines, Basil J. et al., 5 Administrative Law
47.03[1] (Matthew Bender, 1992). See also Owner-Operator Indep.
Drivers Assn, Inc. v. New Prime, Inc., 192 F.3d 778, 785-86 (8th
Cir. 1999) (where agency with primary jurisdiction declines to
provide guidance or to commence a proceeding that might obviate
the need for judicial action, the court can then proceed
according to its own light.) (internal quotations omitted).
22 Chugach mentions [t]he Doctrines of Comity and
Abstention, but in fact has only briefed the comity issue. We
therefore decline to consider whether any form of judicial
abstention ought to apply to this case.
23 Yaracs v. Summit Acad., 845 A.2d 203, 208 (Pa. Commw.
Ct. 2004).
24 Id. (quoting Pa. State Troopers Assn v. Pa. Labor
Relations Bd., 617 A.2d 1183, 1187 (Pa. Commw. Ct. 1996)).
25 Id. (quoting Lambert v. Blackwell, 134 F.3d 506, 514
n.18 (3d Cir. 1997)).
26 Hyning v. Univ. of Alaska, 621 P.2d 1354, 1355 (Alaska
1981).
27 Sprucewood Inv. Corp. v. Alaska Hous. Fin. Corp., 33
P.3d 1156, 1164 (Alaska 2001).
28 State, Dept of Revenue v. Andrade, 23 P.3d 58, 67
(Alaska 2001).
29 Plumber v. Univ. of Alaska Anchorage, 936 P.2d 163, 166
(Alaska 1997) (providing that [t]he doctrine of res judicata as
adopted in Alaska provides that a final judgment in a prior
action bars a subsequent action if the prior judgment was (1) a
final judgment on the merits, (2) from a court of competent
jurisdiction, (3) in a dispute between the same parties (or their
privies) about the same cause of action.).
30 Universal Motors, Inc. v. Neary, 984 P.2d 515, 518 n.11
(Alaska 1999) (providing that collateral estoppel may be invoked
where (1) the party against whom the preclusion is employed was a
party to or in privity with a party to the first action; (2) the
issue precluded from relitigation is identical to the issue
decided in the first action; (3) the issue was resolved in the
first action by a final judgment on the merits; and (4) the
determination of the issue was essential to the final judgment.).
31 MEA also argues that Chugachs practices violated the
Agreements express and implied good faith requirements. Because
we resolve this issue based on prudent utility practice grounds,
we do not reach this contention.
32 Stepanov v. Homer Elec. Assn, Inc., 814 P.2d 731, 734
(Alaska 1991).
33 Mitford v. de Lasala, 666 P.2d 1000, 1005 (Alaska
1983).
34 Id.
35 Casey v. Semco Energy, Inc., 92 P.3d 379, 383 (Alaska
2004).
36 MEA disputes the notion that the Agreements purpose
pertains only to the supply of electric power, suggesting instead
that it governs the relationship generally between the parties.
This contention is dubious, and because we conclude that Chugachs
debt management practices are implicated by the Agreements
provisions regarding the sale of power, we need not consider it.
37 See King County Water Dist. No. 75 v. City of Seattle,
577 P.2d 567, 570 (Wash. 1978) (utilitys rates based in part on
the cost of capital, which includes interest payments on debt and
equity capital).
38 See the Alaska Public Utilities Commissions decision in
In re Homer Elec. Assn, Inc., No. U-83-35, 6 A.P.U.C. 59 (Alaska
Pub. Util. Commn Nov. 4, 1983) (abstract only) (full opinion
available by request from Regulatory Commn of Alaska); In re
Pac. Bell, 23 C.P.U.C. 316 (Cal. Pub. Util. Commn Dec. 22, 1986),
in which the California Public Utilities Commission determined
that a utility should refinance high-cost debt rather than pass
along unnecessarily high interest costs to customers in the form
of higher prices. See also In re Okla. Gas & Elec. Co., 5 F.P.C.
52, in which the Federal Power Commission denied in part a
utilitys request for an exemption from preferred stock redemption
regulations, 5 F.P.C. at 59, after determining that the utilitys
plan to redeem certain stocks and issue new stock would mortgage
the future for a present temporary benefit to the parent company
and certain stockholders, and that its likely effect on consumers
was not wholesome. Id. at 57-58; In re Mfrs. Light & Heat Co., 44
F.P.C. 314 (1970), in which, examining proposed rate increases by
six utilities, the Federal Power Commission specifically
addressed a decision by the utilitys parent company to repurchase
its outstanding debt at a discount. Id. at 319-25.
39 In re Okla. Gas & Elec. Co., 5 F.P.C. at 58.
40 Id.
41 Pa. Gas & Water Co., 44 F.P.C. at 323-24.
42 Interim rate relief is granted only when a utilitys
financial situation clearly is so critical and so precarious
that rate relief cannot await the normal regulatory
process. . . . In re RCA Alaska Communications, Inc., 2 A.P.U.C.
173, 185 (Alaska Pub. Util. Commn. Nov. 22, 1977).
43 Section 9(h) of the Agreement provides:
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.
44 3 Alaska Administrative Code (AAC) 48.275(a) (2000)
provides that each filing with the commission of a permanent or
interim tariff revision that involves a change in rates to the
customers of a utility or shippers of a pipeline carrier must
include identical information.
45 3 AAC 48.220(a) (2000).
46 B.B. v. D.D., 18 P.3d 1210, 1214 (Alaska 2001).
47 See, e.g., Tenala, Ltd. v. Fowler, 993 P.2d 447, 449 &
n.7 (Alaska 1999) (reconsideration of attorneys fees warranted
after partial reversal and remand).
