Whitehall Wind, LLC, v. Montana Public Service Commission

Whitehall Wind, LLC, v. Montana Public Service Commission, 2015 MT 119 (May 5, 2015) (Baker, J.) (5-0, rev’d)

Issue: Whether the district court properly reversed the PSC’s determination that Whitehall had not established a legally enforceable obligation to deliver energy to Northwestern.

Short Answer: No.

Reversed and remanded for reinstatement of the PSC’s June 2012 order

Facts: Federal law requires large electric utilities to buy available energy from qualifying facilities, which may provide energy, capacity or both pursuant to a contract or a legally enforceable obligation. Montana law requires the PSC to set rates and conditions if a qualifying small power production facility and a utility are unable to mutually agree to a contract for the sale of electricity.

Whitehall Wind is a qualifying facility, and Northwestern is a public utility subject to the PSC’s jurisdiction. In August 2002, Whitehall contacted Northwestern and tried to negotiate a contract to sell energy from a proposed wind-generating facility. Unable to reach an agreement, Whitehall petitioned the PSC in August 2002 to set a long-term avoided cost rate for electricity that Whitehall proposed to generate and sell. The PSC issued an order in January 2003 setting a short-term rate of $.010639 per kwh. Whitehall petitioned the district court on Jan. 31, 2003, for judicial review, seeking an order for the PSC to set a long-term rate.

The district court reversed and remanded in December 2008, directing the PSC to determine whether Whitehall had established a legally enforceable obligation. The PSC and Northwestern appealed, and this Court affirmed. 2010 MT 2.

In June 2010, the PSC issued an order concluding that Whitehall had not incurred a legally enforceable obligation, having instead merely sought information to ascertain the viability of its proposed project.

Procedural Posture & Holding: Whitehall petitioned for judicial review, and the district court reversed and remanded the PSC’s decision, holding that Northwestern’s refusal to negotiate created a legally enforceable obligation. The PSC and Northwestern appeal, and the Supreme Court reverses.

Reasoning: A legally enforceable obligation is defined under state law, and was a matter of first impression for the PSC. It concluded that the “touchstone of a legally enforceable obligation” is “an absolute, unconditional commitment to deliver energy, capacity, or energy and capacity at a future date.” ¶ 10. Because the PSC found that Whitehall intended to use the rate set by the PSC to determine whether it could feasibly proceed with the project, and that the contracts it submitted to Northwestern were meant to stimulate negotiations rather than present a firm commitment, it concluded Whitehall had not incurred a legally enforceable obligation.

The district court reversed, concluding the PSC exceeded its authority and ignored the facts. The court held that refusing to negotiate can create a legally enforceable obligation, relying on several FERC orders, all of which the Supreme Court distinguishes factually. The PSC did not exceed its statutory authority by concluding that evidence of a utility’s refusal to negotiate, without more, is insufficient to establish that a qualifying facility has committed itself to the proposed project. The PSC’s findings of fact were not clearly erroneous, and Whitehall has not shown that its substantial rights were prejudiced for any of the reasons listed in § 2-4-704(2)(a), MCA.