Monticello v. Public Service Commn

This opinion is subject to revision before final
publication in the Pacific Reporter
2019 UT 43IN THE
SUPREME COURT OF THE STATE OF UTAH
MONTICELLO WIND FARM, LLC,
Petitioner,
v.
PUBLIC SERVICE COMMISSION OF UTAH,
Respondent.
No. 20180572
Filed August 12, 2019
On Petition for Review of Agency Decision
Attorneys:
Mary Anne Q. Wood, Stephen Q. Wood, Salt Lake City,
for petitioner
Michael J. Hammer, Salt Lake City, for respondent
Public Service Commission
Sean D. Reyes, Att’y Gen., Justin Jetter, Asst. Att’y Gen.,
Salt Lake City, for respondent Division of Public Utilities
Sean D. Reyes, Att’y Gen., Robert J. Moore, Asst. Att’y Gen.,
Salt Lake City, for respondent Office of Consumer Services
R. Jeff Richards, Yvonne R. Hogle, D. Matthew Moscon,
R. Chad Pugh, Salt Lake City, for respondent PacifiCorp d/b/a
Rocky Mountain Power
JUSTICE PEARCE authored the opinion of the Court in which
CHIEF JUSTICE DURRANT, ASSOCIATE CHIEF JUSTICE LEE,
JUSTICE HIMONAS, and JUSTICE PETERSEN joined.
JUSTICE PEARCE, opinion of the Court:
INTRODUCTION
¶1 PacifiCorp entered into an agreement with Monticello Wind
Farm, LLC (MWF) for the purchase of wind energy. Under Utah and
federal law, PacifiCorp and MWF could set the terms for that
agreement in one of two ways. They could follow the procedure set
MONTICELLO WIND FARM v. PSC
Opinion of the Court
by the Public Service Commission (Commission) and fix pricing
based on PacifiCorp’s avoided costs; that is, what it would cost
PacifiCorp to produce the energy itself or obtain it from another
source. In this event, the Commission, pursuant to its procedure,
would review any executed agreement to ensure it did not exceed
those costs. Or PacifiCorp and MWF could operate outside the
Commission’s framework. They could negotiate their own pricing
terms and contractually limit the scope of the Commission’s review.
This case requires us to decide which type of contract MWF and
PacifiCorp signed.
¶2 PacifiCorp submitted the agreement to the Commission for
approval. The Commission reviewed the pricing to ensure
consistency with PacifiCorp’s avoided costs. The pricing, however,
was based on a methodology the Commission had discontinued.
And the information underlying that methodology had not been
updated for several years. For those reasons, the Commission
concluded the pricing could not be deemed consistent with
PacifiCorp’s avoided costs. The Commission denied the application.
¶3 On appeal, MWF asks us to review the Commission’s order.
MWF primarily asserts the parties opted out of the Commission’s
framework and, as a result, the Commission was obligated to
approve the agreement unless its terms would seriously harm the
public interest. This case turns on a question of contract
interpretation and asks what type of contract the parties penned. We
conclude the agreement was one negotiated within the
Commission’s framework. And was therefore an agreement the
Commission could reject if it obligated PacifiCorp to purchase
energy at a price higher than its avoided costs. The remainder of
MWF’s challenges are not properly before us and therefore do not
provide MWF a path to victory. We affirm.
BACKGROUND
¶4 This is not the first time we have seen these parties or been
asked to weigh in on a conflict between the two. PacifiCorp1 and
MWF share a contentious history, more fully outlined in an opinion
_____________________________________________________________
1 PacifiCorp does business in Utah as Rocky Mountain Power.
PacifiCorp engaged in some conduct relevant to this opinion as
PacifiCorp and in other conduct relevant to this opinion as Rocky
Mountain Power. For purposes of this opinion, we do not
differentiate between the two.
2
Cite as: 2019 UT 43Opinion of the Court
addressing a prior chapter in this litigation. 2 See Ellis-Hall Consultants
v. Pub. Serv. Comm’n, 2016 UT 34, ¶¶ 1–16, 379 P.3d 1270 (Ellis-Hall
II). We relate only the facts relevant to this stage of the proceedings.
Regulatory Background
¶5 “To encourage the development of alternative energy
resources, federal law requires a utility to purchase wind energy and
other forms of alternative power from qualifying facilities at its
avoided cost—what it would have cost the utility to generate the
power itself or purchase it from another source.” 3 Ellis-Hall II, 2016
UT 34, ¶ 3 (footnote omitted) (citing 16 U.S.C. § 824a–3; 18 C.F.R.
§ 292.101). The Federal Energy Regulatory Commission prescribes
rules governing these transactions, including rules ensuring that the
rates for such purchases “shall be just and reasonable to the electric
consumers of the electric utility and in the public interest.” 4 16 U.S.C.
_____________________________________________________________
2 In the earlier litigation, Ellis-Hall Consultants was the entity
embroiled in a dispute with PacifiCorp. See Ellis-Hall Consultants v.
Pub. Serv. Comm’n, 2016 UT 34, ¶¶ 1–2, 379 P.3d 1270. Based on the
record before us, it is our understanding that Ellis-Hall Consultants
is the parent, owner, and developer of MWF. For purposes of this
opinion, we do not distinguish between the two.
3 Under our state code, a “qualifying power production facility”
is a facility that “produces electrical energy solely by the use . . . of
biomass, waste, a renewable resource, a geothermal resource, or any
combination of the preceding sources;” “has a power production
capacity that . . . is no greater than 80 megawatts;” and “is a
qualifying small power production facility under federal law.” UTAH
CODE § 54-2-1(25). Whether MWF is a qualifying facility is not at
issue in this proceeding.
4 “Under the Federal Power Act, 16 U.S.C. § 791a et seq., the
Federal Energy Regulatory Commission (‘FERC’) is responsible for
regulating ‘public utilities’ that offer electric power in interstate
commerce.” Crossroads Cogeneration Corp. v. Orange & Rockland Utils.,
Inc., 159 F.3d 129, 132 (3d Cir. 1998) (emphasis omitted). And “in
1978, Congress modified the Federal Power Act by enacting the
Public Utility Regulatory Policies Act (‘PURPA’), 16 U.S.C. § 823a et
seq.,” to “control power generation costs and ensure long-term
economic growth by reducing the nation’s reliance on oil and gas
and increasing the use of more abundant, domestically produced
fuels.” Id. (emphasis omitted) (citation omitted). Under PURPA,
FERC prescribes rules “to encourage cogeneration and small power
(continued . . .)
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Opinion of the Court
§ 824a–3(a), (b)(1). And state regulatory agencies are required to
implement those rules. Id. § 824a–3(f)(1).
¶6 The Utah Code contains similar provisions. 5 Utilities are
required to “offer to purchase power from qualifying power
producers.” UTAH CODE § 54-12-2(1). And pursuant to section 54-12-
2, the terms for agreements between utilities and qualifying facilities
are set in one of two ways. Under subsection (2), the Commission
creates the process for determining the agreement’s terms and
conditions, including the power purchase rates: “The commission
shall establish reasonable rates, terms, and conditions for the
purchase or sale of electricity or electrical generating capacity, or
both, between a purchasing utility and a qualifying power
producer.” Id. § 54-12-2(2).
¶7 “In establishing these rates, terms, and conditions, the
commission shall either establish a procedure under which
qualifying power producers offer competitive bids . . . or devise an
alternative method which considers the purchasing utility’s avoided
costs.” Id. And Utah law defines “avoided costs” in the same manner
as federal law—the cost to the utility of generating the power itself
or purchasing it from another electrical corporation. See id. § 54-2-
1(1). Thus, under subsection (2), a utility fulfills its must-purchase
obligation by agreeing to purchase power from a qualifying facility
in accordance with the terms, conditions, and methodology the
Commission sets.
¶8 Under subsection (3), in contrast, the Utah Code provides
for contracts formed outside of the Commission’s framework. See id.
§ 54-12-2(3). Rather than agreeing to the purchase or sale of power
pursuant to the Commission’s process and conditions, a utility and
production,” which “require electric utilities to offer to” “purchase
electric energy” from “qualifying cogeneration facilities and
qualifying small power production facilities.” 16 U.S.C. § 824a-
3(a)(2).
5 Utah Code section 54-12-1 codifies the legislature’s intent to,
e.g., “promote the more rapid development of new sources of
electrical energy,” “remove unnecessary barriers to energy
transactions involving independent energy producers and electrical
corporations,” “encourage the development of independent and
qualifying power production and cogeneration facilities,” and
“promote a diverse array of economical and permanently sustainable
energy resources in an environmentally acceptable manner.”
4
Cite as: 2019 UT 43Opinion of the Court
qualifying facility may reach an agreement on their own terms. See
id. And they may set the pricing: “Purchasing utilities and qualifying
power producers may agree to rates, terms, or conditions for the sale
of electricity or electrical capacity which differ from the rates, terms,
and conditions adopted by the commission under Subsection (2).” Id.¶9 Subsection (3) thus mirrors a federal regulatory provision
addressing “the regulation of sales and purchases between
qualifying facilities and electric utilities.” See 18 C.F.R. § 292.301(a).
The federal regulation provides that “[n]othing in this subpart . . .
[l]imits the authority of any electric utility or any qualifying facility
to agree to a rate for any purchase, or terms or conditions relating to
any purchase, which differ from the rate or terms or conditions
which would otherwise be required by this subpart.” Id.§ 292.301(b)(1).
¶10 Section 54-12-2 does not further define the Commission’s
role with respect to these agreements. It merely provides that “[t]he
commission may adopt further rules which encourage the
development of small power production and cogeneration facilities.”
UTAH CODE § 54-12-2(4). But other provisions of state law vest the
Commission with “power and jurisdiction to supervise and regulate
every public utility in this state,” “to supervise all of the business of
every such public utility in this state, and to do all things, whether
herein specifically designated or in addition thereto, which are
necessary or convenient in the exercise of such power and
jurisdiction.” Id. § 54-4-1. And state law requires that “[e]very public
utility shall . . . provide . . . service . . . as will be in all respects
adequate, efficient, just and reasonable,” and that “[a]ll rules and
regulations made by a public utility affecting or pertaining to its
charges or service to the public shall be just and reasonable.” Id. § 54-
3-1.
¶11 Under this framework, the Commission thus administers
the state and federal laws requiring utilities to purchase power from
qualifying facilities. Ellis-Hall Consultants, LLC v. Pub. Serv. Comm’n,
2014 UT 52, ¶ 21, 342 P.3d 256 (Ellis-Hall I). Accordingly, “[t]he
Commission establishes the methodology for determining avoided
cost. It also promulgates regulatory tariffs establishing the rules for
the negotiation and approval of power purchase agreements.” Ellis-
Hall II, 2016 UT 34, ¶ 3. And, as noted above, the Commission
operates under “a statutory mandate to set a rate that is in the public
interest.” Ellis-Hall I, 2014 UT 52, ¶ 21 (citation omitted).
¶12 In our earlier opinion, we addressed the regulatory process
the Commission used in its administration of must-purchase
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MONTICELLO WIND FARM v. PSC
Opinion of the Court
agreements. Ellis-Hall II, 2016 UT 34, ¶¶ 1–16, 34–42. We examined
the Commission’s regulatory tariff Electric Service Schedule No. 38
(Schedule 38), which governs negotiations between a qualifying
facility and PacifiCorp. Id. ¶ 4. And as we noted there, under
Schedule 38, a party seeking to enter into a power purchase
agreement with PacifiCorp must first request and obtain “indicative
pricing,” which “is aimed at allowing the producer to make
determinations regarding project planning, financing, and
feasibility.” Id. ¶¶ 1, 5 (citation omitted) (internal quotation marks
omitted). PacifiCorp is required to provide indicative pricing to a
qualifying facility “once the facility submits certain information
regarding a proposed project.” Id. ¶ 5. After a party receives the
indicative pricing, that party should take “specific subsequent steps
[identified by the Commission] . . . to be entitled to receive a draft
power purchase agreement and to proceed toward final
negotiation.” Id. ¶ 6.
Prior Litigation
¶13 Sometime in 2012 or early 2013, MWF requested indicative
pricing from PacifiCorp. Id. ¶¶ 2, 9. At that time, the Commission
authorized “a ‘market proxy’ methodology for determining the
avoided cost for wind power projects.” Id. ¶ 8. And in early 2013,
MWF received indicative pricing based on that methodology. Id.
¶ 12.
¶14 But before MWF executed a power purchase agreement
with PacifiCorp, the Commission changed its approach. Id. The
Commission issued an order discontinuing use of the market proxy
method in favor of a new method, “which allowed [PacifiCorp] to
determine its avoided cost based on current energy production cost
rather than the cost of the most recently executed proposal” for the
supply of wind energy. Id. ¶¶ 8, 12. “This new methodology was
expected to lower [PacifiCorp’s] avoided costs.” Id. ¶ 12. 6 PacifiCorp
then rescinded its indicative pricing proposal with MWF “on the
ground that the [Commission] had since issued an order adopting a
new pricing methodology.” Id. ¶ 2.
¶15 MWF challenged PacifiCorp’s decision. Id. The Commission
denied the challenge. Id. We reversed. Id. In Ellis-Hall II, we reviewed
_____________________________________________________________
6As we noted in Ellis-Hall II, “This seems to be undisputed. . . .
[MWF] asserts” it would not be “economically feasible for [MWF] to
proceed under the new methodology.” 2016 UT 34, ¶ 12 n.2.
6
Cite as: 2019 UT 43Opinion of the Court
Schedule 38’s provisions setting out the process by which a
qualifying facility may obtain indicative pricing from PacifiCorp. Id.¶¶ 4–7. We also examined two orders the Commission issued that
are relevant to that process, including the “Phase Two” order
providing that the market proxy method would be discontinued. Id.¶¶ 11–12, 34–42. And we concluded that MWF was “not required to
submit a request for new indicative pricing.” Id. ¶ 43. MWF was
“entitled to proceed in reliance on the methodology set forth in the
indicative pricing proposal it received from [PacifiCorp].” Id. In so
holding, we opined that those documents “yield a right to a wind
power developer to rely on the methodology set forth in the
‘indicative pricing proposal’” it had received from PacifiCorp. Id.
¶ 37.
¶16 We explicitly and pointedly did not reach other conclusions
about the process. We expressly left open whether MWF would have
“a right to require [PacifiCorp] to enter into a power purchase
agreement” and whether the Commission would be “require[d] . . .
to approve such an agreement.” Id. ¶ 44. “Those questions [were] not
properly presented for our review,” and we “decline[d] to reach
them.” Id. We likewise concluded that the scope of PacifiCorp’s
discretion, if any, not to enter into such an agreement was “not
properly presented” for resolution. Id. ¶¶ 45–46.
¶17 Moreover, we expressly left unresolved the Commission’s
assertion that any agreement reached on “a now-outdated indicative
pricing proposal [would] ultimately be thwarted by an inevitable
decision by the Commission to decline to approve a power purchase
agreement based on such methodology.” Id. ¶ 47. “The Commission
ha[d] not as yet declined to approve a power purchase agreement,”
and we declined “to offer an advisory opinion on a matter that [was]
not yet ripe for our review.” Id.
¶18 Accordingly, we reiterated that “we [were] in no position to
decide whether [MWF] ha[d] an ultimate right to enter into a power
purchase agreement with [PacifiCorp] or to secure approval from the
Commission.” Id. ¶ 48. We concluded only that, “for now,” MWF
was “entitled . . . to rely on the indicative pricing proposal it was
provided” and “ha[d] no obligation to submit a request for new
indicative pricing as it move[d] forward in negotiations over a
power purchase agreement with [PacifiCorp].” Id.
Revisions to Schedule 38
¶19 Nearly a year before we issued our opinion in Ellis-Hall II,
and while that case was pending before this court, the Commission
revised Schedule 38 (Revised Schedule 38). See Rocky Mountain Power
7
MONTICELLO WIND FARM v. PSC
Opinion of the Court
Electric Service Schedule No. 38 (2015). 7 Before the revision, Schedule
38 did not include a specified timeframe for the expiration of
indicative pricing proposals. See Rocky Mountain Power Electric Service
Schedule No. 38 (2012). 8
¶20 In addition, Schedule 38 stated that “such prices are merely
indicative and are not final and binding.” Id. I.B.3. Schedule 38
further provided: “Prices and other terms and conditions are only
final and binding to the extent contained in a power purchase
agreement executed by both parties and approved by the
Commission.” Id.
¶21 Following the changes, however, Revised Schedule 38
included a set six-month timeframe for the parties to execute a
power purchase agreement using a particular pricing proposal. “The
prices in the proposed power purchase agreement . . . shall be
recalculated . . . using the most recent available pricing inputs and
methods approved by the Commission” if a power purchase
agreement has not been executed “within six (6) months after
indicative pricing was provided.” Rocky Mountain Power Electric
Service Schedule No. 38 I.B.9 (2015).
¶22 Revised Schedule 38 retained language indicating that
pricing is not final and binding until “contained in a power purchase
agreement executed by both parties and approved by the
Commission.” Id. I.B.4. And it expressly authorized the Commission
to “at any time make changes to this Schedule, [qualifying facility]
pricing methods and inputs, or terms and conditions applicable to
[qualifying facility] pricing and power purchase agreements.” Id.
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7 See UTAH PUB. SERV. COMM’N, DOCKET NO. 15-035-T10 (In the
Matter of Rocky Mountain Power’s Filing to Comply with the
Commission’s Order Issued on June 9, 2015, in Docket No. 14-035-140);
UTAH PUB. SERV. COMM’N, DOCKET NO. 14-035-140 (In the Matter of the
Review of Electric Service Schedule No. 38, Qualifying Facilities
Procedures, and Other Related Procedural Issues).
8 See UTAH PUB. SERV. COMM’N, DOCKET NO. 12-035-T14 (In the
Matter of Tariff Revisions in Compliance with the Commission’s Report
and Order in Rocky Mountain Power’s 2012 General Rate Case, Docket 11-
035-200 dated September 19, 2012 . . . .); UTAH PUB. SERV. COMM’N,
DOCKET NO. 11-035-200 (In the Matter of the Application of Rocky
Mountain Power for Authority to Increase Its Retail Electric Utility
Service Rates in Utah and for Approval of Its Proposed Electric Service
Schedules and Electric Service Regulations).
8
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Current Dispute
¶23 We issued our opinion in Ellis-Hall II in July of 2016. More
than a year later, in late 2017, MWF and PacifiCorp entered into a
power purchase agreement (PPA). In that agreement, MWF
expressed its intent to operate as a qualifying facility. And
PacifiCorp agreed to purchase the wind energy MWF generated as
well as any associated green tags. 9
¶24 The PPA provided that “[t]he rates, terms[,] and conditions
in [the PPA] [were] in accordance with the rates, terms, and
conditions approved by the Commission in Docket No. 03-035-14 for
purchases from Qualifying Facilities.” That docket includes several
orders issued by the Commission between 2003 and 2013, including
the Commission’s 2005 order “resolv[ing] differences . . . regarding
methods by which . . . indicative prices are determined for the
purpose of negotiating agreements pursuant to Schedule No. 38.” See
UTAH PUB. SERV. COMM’N, DOCKET NO. 03-035-14 (In the Matter of the
Application of PacifiCorp for Approval of an IRP-based Avoided Cost
Methodology for QF Projects Larger than One Megawatt), Oct. 31 2005
Report and Order, at 7. In that order, the Commission approved the
“market price proxy [method] for determination of avoided costs”
for certain wind facilities “up to [PacifiCorp’s] . . . target megawatt
level of wind resources.” Id. at 33.
_____________________________________________________________
9 Generally speaking, a green tag or “renewable energy
certificate, or REC . . . , is a market-based instrument that represents
the property rights to the environmental, social and other non-power
attributes of renewable electricity generation. RECs are issued when
one megawatt-hour (MWh) of electricity is generated and delivered
to the electricity grid from a renewable energy resource.” Green
Power Partnership, EPA, https://www.epa.gov/greenpower/
renewable-energy-certificates-recs (last visited August 5, 2019).
Along those lines, the PPA defined “green tags” as “(a) the
Environmental Attributes associated with all Output, together with
(b) the Green Tag Reporting Rights associated with such energy and
Environmental Attributes, however commercially transferred or
traded under any or other product names, such as ‘Renewable
Energy Credits,’ ‘Green-e Certified,’ ‘Carbon Credits[,]’[] or
otherwise. One Green Tag represents the Environmental Attributes
made available by the generation of one MWh of energy from
[MWF].”
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MONTICELLO WIND FARM v. PSC
Opinion of the Court
¶25 The PPA also expressly provided that it would not become
effective until the Commission approved it: “This Agreement shall
become effective when it is executed and delivered by both Parties
and has been approved by the Commission . . . .”
¶26 And in a provision addressing the rights of the parties if
PacifiCorp were to default, the PPA provided that MWF could “seek
a new power purchase agreement with PacifiCorp . . . , though
PacifiCorp shall not be obligated to provide in such power purchase
agreement avoided cost prices that are higher than the avoided cost
prices contained in this Agreement.”
¶27 In addition, the PPA included a Mobile-Sierra clause,
providing that the power purchase rates would “remain in effect . . .
absent agreement of the parties” and that “the standard of review for
changes hereto . . . shall be the ‘public interest’ application of the
‘just and reasonable’ standard . . . set forth” in federal case law: 10
Rates Not Subject to Review. The rates for service
specified herein shall remain in effect until expiration
of the Term, and shall not be subject to change for any
reason, including regulatory review, absent agreement
of the parties. Neither Party shall petition FERC
pursuant to the provisions of Sections 205 or 206 of the
Federal Power Act (16 U.S.C. § 792 et seq.) to amend
such prices or terms, or support a petition by any other
person seeking to amend such prices or terms, absent
the agreement in writing of the other Party. Further,
absent the agreement in writing by both Parties, the
standard of review for changes hereto proposed by a
Party, a non-party or the FERC acting sua sponte shall
be the “public interest” application of the “just and
reasonable” standard of review set forth in United Gas
Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332(1956) and Federal Power Commission v. Sierra Pacific
_____________________________________________________________
10 As the United States Supreme Court has explained, “Under
th[e] Court’s Mobile–Sierra doctrine, FERC must presume that a rate
set by a freely negotiated wholesale-energy contract meets the
statutory just and reasonable requirement” applicable to such
contracts. NRG Power Mktg., LLC v. Me. Pub. Utils. Comm’n, 558 U.S.
165, 167 (2010) (citation omitted) (internal quotation marks omitted).
“The presumption may be overcome only if FERC concludes that the
contract seriously harms the public interest.” Id. (citation omitted).
10
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Power Co., 350 U.S. 348 (1956) and clarified by Morgan
Stanley Capital Group. Inc. v. Public Util. Dist. No. 1 of
Snohomish, 554 U.S. 527, 128 S. Ct. 2733 (2008).
¶28 Finally, the PPA included a provision indicating that it
constituted the “entire agreement” between the parties: “Entire
Agreement[:] This Agreement supersedes all prior agreements,
proposals, representations, negotiations, discussions or letters,
whether oral or in writing, regarding the subject matter hereof. No
modification hereof shall be effective unless it is in writing and
executed by both Parties.”
¶29 PacifiCorp submitted the PPA in an application to the
Commission, requesting an order approving the PPA and finding
the terms “just and reasonable and in the public interest.” The
application noted that “PacifiCorp is obligated to purchase power
from qualifying facilities,” and “[i]n accordance with” Ellis-Hall II,
“the [PPA] uses the proxy method for pricing the energy produced”
by MWF.11
¶30 MWF intervened in the proceeding. Two other entities also
made appearances, 12 each arguing that the application should be
denied. The Division of Public Utilities (DPU) moved for summary
judgment asserting the PPA did not comply with Revised Schedule
38’s timelines. And the Office of Consumer Services (OCS) moved
for summary judgment asserting the avoided cost calculations
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11 To the extent PacifiCorp’s application suggests that, under
Ellis-Hall II, PacifiCorp was obligated to purchase power in
accordance with indicative pricing it had provided under the
Commission’s market proxy methodology, we note that issue is not
directly before us. And that conclusion implicates questions we did
not resolve, and expressly left open, in Ellis Hall II. See Ellis-Hall II,
2016 UT 34, ¶¶ 44–48.
12 See UTAH CODE § 54-4a-1(1)(a) (providing that the Division of
Public Utilities may “appear as a party” and “otherwise participate
in proceedings before the Public Service Commission”); id. § 54-10a-
203(2) (providing for the Office of Consumer Services to be
represented “at a hearing or other proceeding affecting the services,
rates, or charges of an applicable public utility”); id. § 54-10a-301
(setting out the Office of Consumer Services’ power and duty to
advocate positions advantageous to residential and small
commercial consumers).
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MONTICELLO WIND FARM v. PSC
Opinion of the Court
contained in the PPA were not timely calculated as required by
federal regulations. See 18 C.F.R. § 292.304(d) (providing that, with
respect to qualifying facilities, power purchase rates “shall” be based
on the purchasing utility’s avoided costs “calculated at the time of
delivery” or “at the time the obligation is incurred”). PacifiCorp
stayed mute, taking “no legal position” on the motions and leaving
MWF to defend the application on its own.
¶31 In response, MWF asserted, in relevant part, that Revised
Schedule 38 could not be applied retroactively. MWF claimed that
the Commission lacked authority to apply orders retroactively, both
as a general principle and in this particular circumstance, because
MWF had, in its own estimation, “submitted every document and
complied with every provision under Original Schedule 38 before
[the revised schedule] took effect.” According to MWF, it had
“begun the Schedule 38 process and would have executed a PPA”
under the earlier version of Schedule 38 “had PacifiCorp not refused
to proceed with negotiations . . . under its earlier indicative pricing.”
¶32 In addition, MWF pointed to Ellis-Hall II and asserted it had
a right to rely on the market proxy methodology for purposes of the
PPA. MWF also claimed that it had incurred a legally enforceable
obligation 13 with PacifiCorp, prior to execution of the PPA and prior
to the Commission’s Phase Two order altering the method for
calculating avoided costs. On those grounds, MWF alleged, the
Commission could not reject the PPA based on its reliance on the
market proxy methodology.
¶33 Finally, MWF threw in a reference to subsection (3) of
section 54-12-2. Citing that provision, MWF briefly asserted that
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13 Qualifying facilities have the option of providing energy to a
purchasing utility “pursuant to a legally enforceable obligation.” 18
C.F.R. § 292.304(d). FERC has explained that “[s]ection 292.304(d)
and the requirement that a [qualifying facility] can sell and a utility
must purchase pursuant to a legally enforceable obligation were
specifically adopted to prevent utilities from circumventing the
requirement of PURPA that utilities purchase energy and capacity
from [qualifying facilities].” Cedar Creek Wind, LLC, 137 FERC
¶ 61006, ¶ 32 (Oct. 4, 2011). “Thus, . . . if the electric utility refuses to
sign a contract, the [qualifying facility] may seek state regulatory
authority assistance to enforce the PURPA-imposed obligation on
the electric utility . . . and a non-contractual, but still legally
enforceable, obligation will be created . . . .” Id.12
Cite as: 2019 UT 43Opinion of the Court
PacifiCorp and MWF were “not limited” to the rates, terms, and
conditions the Commission set, but had “negotiated” their own
terms, and “nothing in the PPA require[d] the [Commission] to first
find that the rates, terms, and conditions [were] consistent with any
order of the [Commission] before approving the PPA.”
¶34 The Commission granted both motions for summary
judgment. The Commission noted that, for purposes of the parties’
agreement, the “prices [PacifiCorp] agree[d] to pay in the PPA are
the same as those it provided in [its] 2013 Indicative Pricing
[Proposal].” And the Commission concluded that, “on its face,” the
application “fails to comply with Schedule 38 and uses outdated
avoided cost pricing that is not reflective of [PacifiCorp’s] Must
Purchase Obligation under applicable law.”
¶35 To reach that conclusion, the Commission first noted that
PacifiCorp sought an order approving the PPA. The Commission
observed that “[t]he requested relief [was] consistent with Schedule
38[,] which articulates a requirement for [Commission] approval
prior to the agreements becoming effective.” The Commission then
opined on its role with respect to approval of the PPA. Citing much
of the regulatory background noted above, the Commission
characterized its “primary role” in evaluating the application as
determining “whether the rates are in the ‘public interest’ and, more
specifically, do not exceed avoided costs.”
¶36 The Commission then turned to the calculation of avoided
costs the PPA used. Applying Revised Schedule 38, the Commission
noted that “avoided cost pricing for [qualifying facilities’] PPAs in
Utah is ordinarily calculated at the time the [qualifying facility]
receives indicative pricing, provided the [qualifying facility] enters
[into] a PPA within six months.” Because MWF did not enter into a
power purchase agreement within that timeframe, but sought
approval of an agreement executed in 2017, which incorporated
pricing methodology discontinued in 2013, the application
“foreclose[d]” the Commission from “finding the PPA’s pricing
accurately reflects avoided costs under Schedule 38.”
¶37 And with respect to MWF’s reliance on Ellis-Hall II as a basis
for those pricing terms, the Commission highlighted the questions
we expressly left open in that opinion, and concluded that Ellis-Hall
II did “not necessarily . . . require[]” PacifiCorp to enter into the PPA
or require that the Commission approve such an agreement. The
Commission suggested that a contrary interpretation of Ellis-Hall II
would conflict with federal law.
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MONTICELLO WIND FARM v. PSC
Opinion of the Court
¶38 With regard to “whether [Revised] Schedule 38’s six-month
time period for execution is applicable to the PPA,” the Commission
concluded that it “plainly [was].” “There is nothing retroactive about
applying tariff provisions that have been effective since August 2015
to a PPA executed in December 2017.”
¶39 But, notably, the Commission also concluded that “it ma[de]
no difference” which version of Schedule 38 applied. “[N]othing in
Former Schedule 38 vested a [qualifying facility], who had obtained
indicative pricing, to compel [PacifiCorp] to enter a contract years
later based on stale pricing.” The terms of “Former Schedule 38
expressly provided [that PacifiCorp] ‘will update its pricing
proposals at appropriate intervals to accommodate any changes to
[its] avoided-cost calculations.’” (Second alteration in original.) And
the Commission’s “role in applying Schedule 38 (in any of its
iterations) and approving PPAs is to ensure . . . [PacifiCorp] pays no
more than its avoided cost.” Accordingly, the Commission
concluded, “[w]hether we apply Former Schedule 38 or current
Schedule 38, we cannot find that [the PPA’s] pricing reflects the
avoided cost rates [PacifiCorp] must pay to satisfy its Must Purchase
Obligation.”
¶40 The Commission did not reach any conclusion “as to
whether MWF may demonstrate a [legally existing obligation] prior
to the execution of its PPA in December 2017” and left open the
opportunity for MWF to do so.14 In addition, the Commission did
not expressly address MWF’s fleeting assertion that under
subsection (3) of section 54-12-2, the Commission could approve the
PPA even if it did not comply with the Commission’s pricing
methodology.
¶41 MWF petitioned the Commission for reconsideration and
rehearing. MWF asserted that by June of 2013, it had established a
_____________________________________________________________
14 The Commission opened a separate docket “for the purpose of
adjudicating [MWF’s] assertion that a legally enforceable obligation
(‘LEO’) existed as of June 25, 2013.” But MWF asked the Commission
to terminate that docket, explaining that it planned to seek judicial
review of the Commission order at issue here. In response to MWF’s
request, the Commission stayed the docket, stating that it would not
take “further action on the matter . . . until and unless a party
requests otherwise.” No questions regarding the existence of a
legally existing obligation have been raised in this proceeding, and
we do not address that issue here.
14
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legally existing obligation with PacifiCorp for the purchase of wind
energy, and MWF “elected to administer the legally enforceable
obligation” through the PPA executed in 2017. On that basis, MWF
asked that the Commission alter its order.
¶42 In support, MWF asserted two claims. First, MWF asked for
summary approval of the application based on the existence of a
legally enforceable obligation and a negotiated-rate contract.
According to MWF, the Commission had erred by “rejecting a
negotiated rate contract that [was] fully[ ]compliant with federal law,
as the PPA . . . fairly administer[ed] the legally enforceable
obligation . . . [PacifiCorp] incurred in 2013 to purchase [energy]
from [MWF] at an avoided-cost rate computed on the Market Proxy
methodology.” MWF asserted that the PPA—permitting PacifiCorp
to purchase energy from MWF, obtain the associated green tags, and
avoid “substantial litigation expenses”—“represent[ed] a resolution
to a complex case,” and “nothing in federal law” restricted
PacifiCorp’s “ability to agree to pay . . . a rate in excess of an avoided
cost proxy methodology.” Therefore, in MWF’s view, “[t]he factual
record, clearly establishing a legally enforceable obligation was
incurred on or before June 25, 2013, provide[d] a sufficient basis for
the [Commission] to summarily approve” the application.
¶43 In the alternative, “[i]f the [Commission] decline[d] to
summarily affirm the . . . contract that set[] forth the terms and
conditions by which the legally enforceable obligation . . . [would] be
administered, then [MWF] request[ed] that the [Commission] grant
rehearing and issue findings of fact and conclusions of law” in
MWF’s favor. MWF requested that the Commission conclude, as a
matter of law, that “[MWF] established a legally enforceable
obligation on or about June 25, 2013,” that “[a]s of June 25, 2013,
[PacifiCorp] was obligated to calculate the avoided cost by reliance
on the Market Proxy methodology,” and that “[PacifiCorp] [was]
obligated to purchase the output from [MWF] pursuant to the terms
and conditions of [the PPA].”
¶44 In the context of this alternative argument, asserting a
legally enforceable obligation requiring PacifiCorp to purchase
power from MWF under the market proxy methodology, MWF
briefly addressed the Commission’s application of Revised Schedule
38. “[MWF] request[ed] that the [Commission] reconsider its
conclusion that the Schedule 38 Tariff put into effect in June 2015
governs either the negotiated-rate contract voluntarily executed by
the parties in 2017 or the legally enforceable obligation incurred by
[PacifiCorp] in June 2013.” MWF claimed the application of Revised
Schedule 38 constituted an impermissible collateral attack on Ellis-
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MONTICELLO WIND FARM v. PSC
Opinion of the Court
Hall II and was “arbitrary, capricious, inconsistent with reasoned
decisionmaking and violate[d] the rule against retroactive
rulemaking.” MWF did not address the portion of the Commission’s
order concluding it was inconsequential whether it applied the
revised or earlier version of Schedule 38.
¶45 The Commission denied MWF’s petition. The Commission
did not delve into the arguments MWF raised, but stated that “[f]or
all of the reasons enumerated” in its prior order, the Commission
“affirm[ed] [its] conclusion that the PPA . . . failed to comply with
Schedule 38 and employed outdated avoided cost pricing . . . not
reflective of [PacifiCorp’s] obligation to purchase power from
qualifying facilities under applicable law.” MWF filed a petition for
review with this court.
STANDARD OF REVIEW
¶46 “[A]gency decisions premised on pure questions of law are
subject to non-deferential review for correctness.” Ellis-Hall II, 2016
UT 34, ¶ 27.
ANALYSIS
¶47 MWF raises a number of challenges to the Commission’s
order denying PacifiCorp’s application for approval of the PPA.
MWF first asserts PacifiCorp and MWF “had an unambiguous right
to enter into the PPA without adhering to [the Commission’s]
regulations regarding avoided costs.” On that basis, MWF claims the
Commission could reject the PPA’s pricing terms only upon a
showing that they would seriously harm the public interest. And
according to MWF, no such showing was made. Second, MWF
asserts the Commission erred in its interpretation and retroactive
application of Revised Schedule 38. Finally, MWF asserts a number
of constitutional violations with respect to Revised Schedule 38.
I. MWF Fails to Demonstrate That the PPA’s Pricing
Terms and Avoided Cost Methodology Were Not
Subject to Commission Review and Approval
¶48 The central issue on appeal asks whether the Commission
exceeded the scope of its authority in reviewing and rejecting
PacifiCorp’s application for approval of the PPA. And that question
turns on whether we view the application as containing pricing
settled on as a result of the parties’ negotiations, pursuant to Utah
Code section 54-12-2(3), or as dictated by the Commission’s
regulatory framework, pursuant to Utah Code section 54-12-2(2) and
Schedule 38. The Commission treated the application as falling into
the latter category and rejected the application because it did not
16
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find the PPA’s pricing terms to be equal to or less than PacifiCorp’s
avoided costs. For that reason, the Commission did not find the
PPA’s pricing terms to be in the “public interest.”
¶49 With respect to the kind of contract the parties’ submitted
and the review it warranted, the Commission explained that it
reviewed the PPA under a provision of Schedule 38 providing that
“[p]rices and other terms and conditions” of agreements executed
between PacifiCorp and qualifying facilities “are only final and
binding to the extent . . . approved by the Commission.” See Rocky
Mountain Power Electric Service Schedule No. 38 I.B.4 (2015). 15
¶50 This review was appropriate, the Commission explained,
because PacifiCorp had submitted the PPA to the Commission
requesting an order approving the PPA and finding its terms and
conditions “just and reasonable and in the public interest.” The
Commission observed that this “requested relief [was] consistent
with Schedule 38[,] which articulates a requirement for
[Commission] approval prior to [an agreement between PacifiCorp
and a qualifying facility] becoming effective.” And when reviewing
contracts submitted in accordance with Schedule 38, the Commission
reasoned, its “primary role is to find whether the rates are in the
‘public interest’ and, more specifically, do not exceed avoided costs.”
The Commission thus reviewed the PPA under a Schedule 38
provision providing for approval of contracts negotiated within that
framework.
¶51 Schedule 38 outlines the Commission-approved process for
negotiating power purchase agreements between PacifiCorp and
qualifying facilities. See Rocky Mountain Power Electric Service Schedule
No. 38. Under that schedule, a qualifying facility may obtain
indicative pricing from PacifiCorp and then, based on that pricing,
proceed toward execution of a final agreement. Id. I.B. PacifiCorp
calculates indicative pricing based on a Commission-approved
methodology aimed at capturing PacifiCorp’s avoided costs. See id.I.B.4. As noted above, Schedule 38 provides that indicative pricing
_____________________________________________________________
15 In a separate argument, MWF asserts the Commission should
have reviewed the PPA under an earlier version of Schedule 38. See
infra ¶ 75. But whether the PPA is subject to Commission review
pursuant to Schedule 38 does not depend on which version of the
schedule we reference. And for purposes of our review here, we cite
to the revised schedule.
17
MONTICELLO WIND FARM v. PSC
Opinion of the Court
does not become final until the parties execute an agreement and the
Commission approves. Id.¶52 MWF challenges the Commission’s order, arguing the
Commission erroneously invoked Schedule 38 as a basis for
reviewing the PPA. And therefore, according to MWF, the
Commission applied the wrong type of review. MWF claims that the
level of review in which the Commission engaged applies only when
a utility and qualifying facility enter into an agreement incorporating
the rates, terms, and conditions the Commission specifies in
Schedule 38. In contrast, when parties operate outside of the
Commission’s rules and negotiate their own terms, an agreement
cannot be rejected, MWF asserts, unless its terms would seriously
harm the public interest or the parties contractually grant the
Commission greater review authority. According to MWF,
PacifiCorp and MWF negotiated outside Schedule 38’s framework
and, as a result, the PPA provides for limited Commission review.
¶53 Utah Code section 54-12-2 lends the backbone of MWF’s
argument. Subsection (1) provides that “[p]urchasing utilities shall
offer to purchase power from qualifying power producers.”
¶54 Under subsection (2), the Commission controls the process:
The commission shall establish reasonable rates, terms,
and conditions for the purchase or sale of electricity or
electrical generating capacity, or both, between a
purchasing utility and a qualifying power producer. In
establishing these rates, terms, and conditions, the
commission shall either establish a procedure under
which qualifying power producers offer competitive
bids for the sale of power to purchasing utilities or
devise an alternative method which considers the
purchasing utility’s avoided costs. The capacity
component of avoided costs shall reflect the purchasing
utility’s long-term deferral or cancellation of
generating units which may result from the purchase
of power from qualifying power producers.
UTAH CODE § 54-12-2(2).
¶55 MWF’s argument focuses on subsection (3), under which a
qualifying facility and purchasing utility may negotiate their own
terms. “Purchasing utilities and qualifying power producers may
agree to rates, terms, or conditions for the sale of electricity or
18
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electrical capacity which differ from the rates, terms, and conditions
adopted by the commission under Subsection (2).” Id. § 54-12-2(3). 16
When parties negotiate pricing pursuant to subsection (3), MWF
asserts, those terms may be set aside by the Commission only upon a
showing that they seriously harm the public interest, unless the
parties contractually agree to grant the Commission greater review
authority.
¶56 MWF’s initial premise is largely undisputed. The
Commission agrees that PacifiCorp may, and often does, enter into
power purchase agreements that are not based on the Commission’s
methodology for calculating avoided costs and are not subject to
Commission approval for compliance. 17 And we agree with MWF
that the parties could operate outside of the Commission’s
framework and enter into an agreement containing rates, terms, and
conditions that differ from those the Commission prescribes. Heavily
contested, however, is whether that is what PacifiCorp and MWF
actually did.
¶57 The problem with MWF’s argument is that it largely ends
here. Having demonstrated that parties may negotiate power
purchase rates outside of Schedule 38, the next step in MWF’s
argument would be to establish, as a matter of contract
interpretation, that the parties did exactly that. But in its principal
brief, MWF takes this issue almost entirely for granted. In other
words, to paraphrase Dr. Ian Malcolm, MWF’s brief is so
preoccupied with whether or not it could enter into such an
agreement, it doesn’t stop to demonstrate that it did.
¶58 With respect to this central question of contract
interpretation, MWF gives us the following line: “There can be no
doubt that the Commission lacked the authority to enforce its tariff,
Schedule 38, against the PPA, because the PPA was entered into by
[PacifiCorp] and [MWF] under 18 C.F.R. § 292.301(b) and Utah Code
Ann. § 54-12-2(3).” Examining MWF’s brief for further development
of this point, we find precious little.
_____________________________________________________________
16 See also 18 C.F.R. § 292.301(b)(1) (“Nothing in this subpart . . .
[l]imits the authority of any electric utility or any qualifying facility
to agree to a rate for any purchase, or terms or conditions relating to
any purchase, which differ from the rate or terms or conditions
which would otherwise be required by this subpart . . . .”).
17 The record before us does not provide visibility into how often
PacifiCorp enters into these types of contracts.
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MONTICELLO WIND FARM v. PSC
Opinion of the Court
¶59 Whether PacifiCorp and MWF negotiated an agreement
outside of the Commission’s Schedule 38 framework is a question of
contract interpretation. And when interpreting contracts, “we first
look at the plain language [of the contract] to determine the parties’
meaning and intent.” Brady v. Park, 2019 UT 16, ¶ 53, --- P.3d ---
(alteration in original) (citation omitted). “If the language within the
four corners of the contract is unambiguous, the parties’ intentions
are determined from the plain meaning of the contractual language,
and the contract may be interpreted as a matter of law.” Id. (citation
omitted). “[W]here a contractual term or provision is ambiguous as
to what the parties intended, the question becomes a question of fact
to be determined by the fact-finder.” Id.¶60 The PPA provided that “[t]he rates, terms[,] and conditions
in [the PPA] [were] in accordance with the rates, terms, and
conditions approved by the Commission in Docket No. 03-035-14 for
purchases from Qualifying Facilities.” That docket includes the
Commission’s 2005 order “resolv[ing] differences . . . regarding
methods by which . . . indicative prices are determined for the
purpose of negotiating agreements pursuant to Schedule No. 38.” See
UTAH PUB. SERV. COMM’N, DOCKET NO. 03-035-14 (In the Matter of the
Application of PacifiCorp for Approval of an IRP-based Avoided Cost
Methodology for QF Projects Larger than One Megawatt), Oct. 31, 2005
Report and Order, at 7.
¶61 And in that 2005 order, the Commission approved the
“market price proxy [method] for determination of avoided costs”
for certain wind facilities “up to [PacifiCorp’s] . . . target megawatt
level of wind resources.” Id. at 33. The PPA thus purported to be
consistent with pricing principles the Commission set as part of its
process for obtaining an executed agreement under Schedule 38.
¶62 The PPA also expressly provided, consistent with Schedule
38, that it would not become effective until the Commission
approved: “This Agreement shall become effective when it is
executed and delivered by both Parties and has been approved by
the Commission . . . .”
¶63 Moreover, in an approach again consistent with Schedule 38
and the Commission’s methodology for determining pricing, the
PPA expressly characterized its pricing terms as being based on
avoided costs. The PPA provided that MWF could “seek a new
power purchase agreement with PacifiCorp . . . , though PacifiCorp
shall not be obligated to provide in such power purchase agreement
avoided cost prices that are higher than the avoided cost prices
contained in this Agreement.” (Emphasis added.)
20
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¶64 Finally, the PPA included a provision indicating that it
constituted the “entire agreement” between the parties: “This
Agreement supersedes all prior agreements, proposals,
representations, negotiations, discussions or letters, whether oral or
in writing, regarding the subject matter hereof. No modification
hereof shall be effective unless it is in writing and executed by both
Parties.” As OCS and DPU assert, and MWF appears not to contest,
this provision indicates the contract is “integrated,” meaning that
“parol evidence is . . . not admissible to vary or contradict the clear
and unambiguous terms of the contract.” Tangren Family Tr. v.
Tangren, 2008 UT 20, ¶ 11, 182 P.3d 326 (citation omitted) (internal
quotation marks omitted).
¶65 We are therefore presented with an integrated contract that
expressly relies on, and purports to be consistent with, the
framework set out in Schedule 38 and the Commission’s
methodology for determining pricing. The leap MWF’s position
requires us to make is that this Commission-driven methodology
and pricing were selected, not because the parties intended to
operate within the contours of Schedule 38, but because the parties
intended to operate outside it. And we must reach that conclusion
even though, consistent with Schedule 38, the PPA expressly
contemplates Commission approval prior to becoming effective.
¶66 MWF does not discuss these portions of the PPA. Instead,
MWF hones in on three other aspects of the PPA. And MWF uses
these three provisions to argue that the PPA reflects that the parties
negotiated outside of the Commission’s Schedule 38 framework.
¶67 First, as MWF points out, the PPA’s pricing terms do not
reflect the Commission’s current methodology for calculating
avoided costs. Rather, to calculate the cost, the pricing terms rely on
a discontinued methodology—albeit one the Commission previously
endorsed (and the same one we addressed in Ellis-Hall II). That
discrepancy, MWF asserts, takes the contract outside of Schedule 38
and demonstrates an agreed-upon intent to depart from a
Commission-controlled process. In other words, because the PPA
incorporates an allegedly out-of-date methodology for capturing
avoided costs, MWF alleges the parties must have intended pricing
not reflective of avoided costs or subject to robust Commission
review.
¶68 But MWF’s reading has the potential to nullify the
Commission’s role in approving agreements entered into under
subsection (2). Particularly if, as the Commission stated in its order
and no one has disputed here, the Commission’s “primary role” in
21
MONTICELLO WIND FARM v. PSC
Opinion of the Court
reviewing such contracts is to determine that the pricing terms “do
not exceed avoided costs.” Under MWF’s approach, if the
Commission reviewed what appeared to be a subsection (2) contract,
but concluded the agreement’s power purchase rates were not
consistent with Schedule 38 and the Commission’s avoided-cost
methodology, the Commission should simply conclude that the
parties intended a subsection (3) contract.
¶69 Moreover, MWF’s interpretation falls apart in light of the
abundance of other provisions that demonstrate the parties intended
to operate consistent with Schedule 38’s framework. For example,
MWF offers no explanation for the PPA provisions that call for
Commission approval, characterize the pricing as based on avoided
costs, and profess compliance with the Commission-approved
methodology generated in accordance with the process Schedule 38
outlines. Perhaps an argument might be crafted that would
reasonably explain why all of these terms would exist in an
agreement reached by parties who have no intention of operating in
a Schedule 38 world. But we do not have that argument before us,
and we are not at liberty to make it for MWF.
¶70 MWF next cites the PPA’s Mobile-Sierra clause. That
provision provides that the power purchase rates would “remain in
effect . . . absent agreement of the parties” and “the standard of
review for changes hereto . . . shall be the ‘public interest’ application
of the ‘just and reasonable’ standard . . . set forth” in federal case
law. Under that standard, MWF proposes, a regulatory body—
including the Commission—may review the PPA’s power purchase
rates only to determine if they would seriously harm the public
interest.
¶71 The Commission and PacifiCorp, as well as OPC and DPU,
disagree with MWF’s reading of that provision, however, and
provide an alternative explanation of its meaning. They assert the
Mobile-Sierra clause becomes effective only after the Commission
approves the PPA, and it applies only to any subsequent review of
the agreement by federal regulatory bodies. This interpretation is
supported by the provision’s text, which twice mentions potential
review by a federal regulatory body—not the Commission—and
refers to the PPA’s rates as “remain[ing] in effect,” which, as noted
above, may occur only after Commission approval.
¶72 When read in light of the PPA’s other provisions, which tie
the agreement to the Commission’s methodology for determining
avoided-cost pricing and require approval consistent with Schedule
38, we would be hard-pressed to read the Mobile-Sierra clause as
22
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taking the PPA outside the realm of Schedule 38 and subjecting it to
a remarkably different review process. Were we to read the Mobile-
Sierra clause in the manner MWF advocates, we would still lack any
attempt from MWF to harmonize that interpretation with the PPA’s
remaining provisions. In contrast, Respondents’ interpretation of the
Mobile-Sierra clause is consistent with its language and the PPA’s
other terms.
¶73 Finally, MWF asserts that because it agreed to transfer any
associated green tags to PacifiCorp, that, “by itself, was enough to
take the PPA outside the standard ‘avoided cost’ rules.” We
disagree. Many of the PPA’s terms may have some effect on the total
cost to PacifiCorp of acquiring energy from MWF. But those
peripheral effects on total cost do not alter the question before us:
whether the parties entered into an agreement not to be bound by
Schedule 38 or Commission review of whether the power purchase
rates were consistent with PacifiCorp’s avoided costs. Moreover, the
Commission’s 2005 order issued in Docket No. 03-035-14 instructs
that green tag ownership is a contractual issue between the
qualifying facility and PacifiCorp. See UTAH PUB. SERV. COMM’N,
DOCKET NO. 03-035-14 (In the Matter of the Application of PacifiCorp for
Approval of an IRP-based Avoided Cost Methodology for QF Projects
Larger than One Megawatt), Oct. 31 2005 Report and Order, at 34. In
other words, negotiation of green tag ownership is as consistent with
an agreement reached within the Schedule 38 framework as it would
be with an agreement reached by parties negotiating their own
terms.
¶74 Accordingly, we find no ambiguity about what the parties
intended the PPA to be. MWF has failed to establish that the PPA’s
avoided-cost methodology was not subject to Commission review
pursuant to Schedule 38. MWF has also failed to establish that the
PPA’s pricing terms could be rejected by the Commission only upon
a showing that they would seriously harm the public interest.
II. MWF Protests the Commission’s Application of
Revised Schedule 38, But Left Unaddressed the
Alternative Basis of the Commission’s Order
¶75 MWF next claims that if the PPA’s pricing terms and
methodology are subject to Commission review under Schedule 38,
the Commission should have applied the earlier version of that
schedule. In addition, according to MWF, the terms of Revised
Schedule 38 did not support rejection of the PPA. As MWF puts it,
“it was error to apply the 2015 Schedule 38 retroactively. And, even
23
MONTICELLO WIND FARM v. PSC
Opinion of the Court
if the 2015 Schedule 38 were applicable retroactively, it was error to
read it to require rejection of” the PPA.
¶76 The Commission did not, however, merely reject the PPA
based on its conclusion that Revised Schedule 38 applied. Under a
heading in the Commission’s order entitled, “The PPA is subject to
Schedule 38, but the outcome would not be different were Former
Schedule 38 applicable,” the Commission concluded that “it makes
no difference whether Schedule 38 or Former Schedule 38 applies
because nothing in Former Schedule 38 vested a [qualifying facility],
who had obtained indicative pricing, to compel [PacifiCorp] to enter
a contract years later based on stale pricing.” The Commission
continued, “Our Order Revising Schedule 38 provided greater
specificity to the process, but it did not . . . alter [the Commission’s]
role or the underlying law.” “Whether we apply Former Schedule 38
or current Schedule 38, we cannot find that [the PPA’s] pricing
reflects the avoided costs [PacifiCorp] must pay to satisfy its Must
Purchase Obligation.”
¶77 To reach these conclusions, the Commission addressed the
questions we expressly left open in Ellis-Hall II: whether MWF
would have “a right to require [PacifiCorp] to enter into a power
purchase agreement” based on market proxy indicative pricing and
whether the Commission would be “require[d] . . . to approve such
an agreement.” Ellis-Hall II, 2016 UT 34, ¶ 44; see also id. ¶ 47
(reaching no conclusion as to the assertion that any agreement
reached based on “a now-outdated indicative pricing proposal
[would] ultimately be thwarted by an inevitable decision by the
Commission to decline to approve a power purchase agreement
based on such methodology”). The Commission ultimately
concluded that the result would be the same under the earlier or
revised version of Schedule 38—the Commission would not approve
the PPA.
¶78 MWF does not, in its opening brief, acknowledge this
alternative basis for the Commission’s decision to reject the PPA. A
party challenging an agency order “bear[s] the burden of adequately
briefing all independent bases of the order from which they appeal.”
Living Rivers v. Exec. Dir. of the Utah Dep’t of Envt’l Quality, 2017 UT
64, ¶ 25, 417 P.3d 57 (citing Simmons Media Grp. v. Waykar, LLC, 2014
UT App 145, ¶ 32, 335 P.3d 885 (“This court will not reverse a ruling
of the [district] court that rests on independent alternative grounds
where the appellant challenges only one of those grounds.”
(alteration in original) (citation omitted))). Here, however, MWF has
failed to address the Commission’s alternative ground for its order—
that the result would have been the same under the earlier version of
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Schedule 38 for which MWF advocates. Thus, even were MWF to
prevail on its argument, it would not be entitled to the relief it seeks,
as an alternative basis for the Commission’s order would remain
intact.
¶79 MWF’s only response to this portion of the Commission’s
order appears in its reply brief: a few cursory sentences asserting
that the Commission simply got it wrong. But whether MWF’s
conclusory argument is too little is beside the point—the argument
comes too late.
¶80 “It is well settled that issues raised . . . in the reply brief that
were not presented in the opening brief are considered waived and
will not be considered by the appellate court.” Allen v. Friel, 2008 UT
56, ¶ 8, 194 P.3d 903 (citation omitted) (internal quotation marks
omitted). Our appellate rules provide an opportunity “to respond[]
to the facts and arguments raised” in an appellee’s or respondent’s
“principal brief.” UTAH R. APP. P. 24(b). But the opportunity to
“respond” is not a license to gap-fill missing arguments. When a
respondent’s brief points out that an issue is unpreserved or an
alternative ground is unchallenged, a petitioner may not “respond”
with newly crafted substantive arguments as to that issue or ground.
The timely presentation of arguments is essential to providing an
opposing party with a fair opportunity to respond.
¶81 That principle is fully at play here. Until its reply brief,
MWF had provided no substantive argument as to the Commission’s
authority to reject the PPA under the earlier version of Schedule 38.
No argument as to the Commission’s role, under that schedule, in
reviewing an agreement that incorporated years-old pricing based
on methodology the Commission deemed out-of-date. Thus, other
than MWF’s argument that the PPA was not subject to any version of
Schedule 38, which we addressed above, no argument regarding the
earlier version of Schedule 38 appears in MWF’s principal brief.
Because MWF’s argument on this issue appears for the first time in
its reply brief, we do not consider its merits. 18
_____________________________________________________________
18 Still, we note that MWF’s conclusory response on reply, that
the Commission’s approach is inconsistent with the earlier version of
Schedule 38 and constitutes “nothing but a rehash of the arguments”
in Ellis-Hall II, does little to illuminate the issue. Which version of
Schedule 38 would apply to a later-executed agreement was not at
issue in Ellis-Hall II. And broad questions pertaining to the
Commission’s authority to approve an agreement incorporating
(continued . . .)
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MONTICELLO WIND FARM v. PSC
Opinion of the Court
III. MWF Raises Constitutional Challenges to the Application of
Revised Schedule 38, None of Which Are Properly Before Us
¶82 MWF also raises a number of constitutional challenges to
Revised Schedule 38. MWF claims Revised Schedule 38 “was aimed
squarely and exclusively at [MWF]” and therefore constitutes
“special legislation” in violation of Utah Constitution article VI,
section 26. See UTAH CONST. art. VI, § 26 (“No private or special law
shall be enacted where a general law can be applicable.”). MWF also
claims Revised Schedule 38 “will sometimes,” but not always,
“apply retroactively,” and is therefore “not uniform in its operation”
in violation of Utah Constitution article I, section 24. See id. art. I, § 24
(“All laws of a general nature shall have uniform operation.”).
Finally, MWF asserts Revised Schedule 38 is unconstitutionally
vague because it “typically” applies to projects already under
development, leaving it within PacifiCorp’s or the Commission’s
“unfettered discretion” whether to apply the revised schedule
“retroactively.”
¶83 But as OCS and DPU point out, these constitutional
challenges were not presented to the Commission in MWF’s petition
for rehearing. They have made their first appearance in MWF’s
briefing on appeal. And as a result, MWF’s constitutional challenges
are not properly before us.
¶84 Utah Code section 54-7-15 provides that “[b]efore seeking
judicial review of the commission’s action, any party . . . who is
dissatisfied with an order of the commission shall meet the
requirements of this section.” UTAH CODE § 54-7-15(1). Section 54-7-
15 then provides for a process of rehearing before the Commission:
“After any order or decision has been made by the commission, any
party . . . may apply for rehearing of any matters determined in the
action or proceeding.” Id. § 54-7-15(2)(a). And a party’s opportunity
to seek judicial review is tied to its participation in the rehearing
process: “An applicant may not urge or rely on any ground not set
forth in the application [for rehearing] in an appeal to any court.” Id.
§ 54-7-15(2)(b).
¶85 We have stated that this preservation rule applies as a
matter of statutory mandate, e.g., ABCO Enters. v. Utah State Tax
Comm’n, 2009 UT 36, ¶ 10, 211 P.3d 382, and is a requisite step in
“exhaust[ing] all administrative remedies” before being “allowed to
“outdated” pricing terms were left unresolved in that opinion. See
Ellis-Hall II, 2016 UT 34, ¶¶ 44, 47.
26
Cite as: 2019 UT 43Opinion of the Court
seek judicial review of an agency decision,” In re Questar Gas Co.,
2007 UT 79, ¶ 47, 175 P.3d 545. Accordingly, a party must raise a
ground of error on petition for rehearing before the Commission or
“it has waived its right to raise th[ose] arguments in this court.”
Westside Dixon Assocs. LLC v. Utah Power & Light Co./PacifiCorp, 2002
UT 31, ¶ 23, 44 P.3d 775.
¶86 MWF filed a petition for rehearing before the Commission,
and asserted that its petition was filed pursuant to section 54-7-15.
But MWF’s petition did not raise any of these constitutional
challenges. Accordingly, MWF has waived its right to present these
arguments to this court. See id.¶87 MWF nevertheless asserts we may consider these challenges
under the plain error and exceptional circumstances exceptions to
our general rule of issue preservation. See Salt Lake City v. Kidd, 2019
UT 4, ¶ 31, 435 P.3d 248 (noting that “[a]s a general rule, claims not
raised before [a] trial court may not be raised on appeal” unless the
complaining party “can demonstrate that exceptional circumstances
exist or plain error occurred” (citations omitted) (internal quotation
marks omitted)). OCS and DPU disagree, asserting that section 54-7-
15 operates as a jurisdictional requisite, leaving us no room to apply
those exceptions here. We do not resolve that question because it is
immaterial to the outcome; MWF’s briefing falls far short of
persuading us that either doctrine has application to the
unpreserved challenges it raises.
¶88 To demonstrate plain error, an appellant must establish that
an error exists, it should have been obvious to the trial court, and the
error was harmful. State v. Holgate, 2000 UT 74, ¶ 13, 10 P.3d 346.
Demonstrating error that “should have been obvious to the trial
court” does not always require recitation of case law directly on
point. But it does require a showing of error that was, nonetheless,
plain. And the alleged constitutional missteps MWF claims are not
“plain” by a long stretch.
¶89 In addition, we apply the exceptional circumstances
doctrine sparingly, “to reach an unpreserved issue where a rare
procedural anomal[y] has either prevented an appellant from
preserving an issue or excuses a failure to do so.” State v. Johnson,
2017 UT 76, ¶ 29, 416 P.3d 443 (alteration in original) (citation
omitted) (internal quotation marks omitted). Failure to raise an
argument in a petition for rehearing does not constitute such a
circumstance. Accordingly, MWF’s constitutional challenges are not
properly before us.
27
MONTICELLO WIND FARM v. PSC
Opinion of the Court
CONCLUSION
¶90 MWF has failed to demonstrate that the PPA’s avoided cost
methodology was not subject to Commission review. MWF has
likewise failed to demonstrate that the Commission was required to
approve the PPA unless its pricing terms would seriously harm the
public interest. MWF did not timely raise the remainder of its
challenges. We affirm.
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