A new case has been submitted to the the Montana State Supreme Court that could influence the future of contracts between large and small energy corporations.
Colstrip Energy Limited Partnership (CELP) sells energy to Northwestern Energy. CELP is a Montana limited partnership which owns an electrical generating plant at Colstrip, Montana. (Under federal and Montana law, principally the Public Utility Regulatory Policies Act (“PURPA”), utilities such as Northwestern Energy are obligated to purchase electricity from “qualifying facilities”small generating facilities such as CELP. PURPAs fall under the jurisdiction of the Montana Public Services Commission.
The story of the dispute begins in the 1980’s when both companies were owned and operated under different names and corporate identities – but as each company evolved, the rights to contracts were absorbed into what would become CELP and Northwestern Energy.
In the 1980’s, both companies signed a contract and series of amendments which defined rates and payouts for the next 35 years. The only economic variables in the formulas for payouts to CELP as set in those 80’s contracts were for inflation and costs of construction related to ongoing power production.
The contract worked for 15 of the 35 years. In 2004 and 2005 the problem began. The filings for those years, as appropriate came before the Public Services Commission in 2006 and 2007. In those years, rather than using the criteria laid out in the contract between the two energy corporations, the PSC used different criteria and ruled that Northwestern Energy had overpaid CELP. Examination of that ruling brought CELP to take a closer look at the arduous paperwork from filing by Northwestern from the beginning of the contract and they found that Northwestern had not been following the contract formulas correctly from just a few years after the initiation of the contract.
Under the eye of the Public Services Commission, the issue went to binding arbitration. The decision of the arbitration considered at what is fair to the two companies and not whether or not the companies complied with the contract. Colstrip Energy has appealed the decision to the state supreme court with the complaint that arbitration and the PSC allowed an order to go forth that went outside the powers of the arbitrators and the PSC because they assert the contract was unambiguous. CELP’s contention is that the conclusions the arbitrators reached and the award they made are inconsistent with
their own findings, contrary to the contract, contrary to settled Montana law on interpretation of contracts, and in excess of the scope of the arbitrators’ power.
As the PSC has increasing jurisdiction over energy deals in eastern Montana this case is one Emilie Boyles will follow for you.