Petition for Review of Agency Decision
Anne Q. Wood, Stephen Q. Wood, Salt Lake City, for petitioner
Michael J. Hammer, Salt Lake City, for respondent Public
D. Reyes, Att'y Gen., Justin Jetter, Asst. Att'y
Gen., Salt Lake City, for respondent Division of Public
D. Reyes, Att'y Gen., Robert J. Moore, Asst. Att'y
Gen., Salt Lake City, for respondent Office of Consumer
Jeff Richards, Yvonne R. Hogle, D. Matthew Moscon, R. Chad
Pugh, Salt Lake City, for respondent PacifiCorp d/b/a Rocky
Justice Pearce authored the opinion of the Court in which
Chief Justice Durrant, Associate Chief Justice Lee, Justice
Himonas, and Justice Petersen joined.
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 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.
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.
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.
This is not the first time we have seen these parties or been
asked to weigh in on a conflict between the two.
PacifiCorp and MWF share a contentious history, more
fully outlined in an opinion addressing a prior chapter in
this litigation. 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.
"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." 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." 16 U.S.C. § 824a-3(a), (b)(1). And
state regulatory agencies are required to implement those
rules. Id. § 824a-3(f)(1).
The Utah Code contains similar provisions. 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.
"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
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
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.
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. §
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.
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).
In our earlier opinion, we addressed the regulatory process
the Commission used in its administration of must-purchase
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. ¶
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.
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. 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.
MWF challenged PacifiCorp's decision. Id. The
Commission denied the challenge. Id. We reversed.
Id. In Ellis-Hall II, we reviewed 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.
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.
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
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
to Schedule 38
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 Electric Service
Schedule No. 38 (2015). 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).
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
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).
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."
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
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.
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 . . . ."
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
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 ...