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<title>Idaho Enacts Legislation Reacting to Court Ruling</title>
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<p align="left"><strong><small><font face="Arial">About The Author:</font></small></strong></p>
<p align="left"><font face="Arial" style="font-size: 9pt">Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.</font></p>
<p><small><font face="Arial"><font style="font-size: 9pt">He can be reached at:</font><br>
<br>
<b><font color="#0000FF">Brown, Olson & Gould, PC</font></b><br>
2 Delta Drive<br>
Suite 301<br>
Concord, NH 03301<br>
<a href="mailto:[email protected]">[email protected]</a><br>
(603) 225-9716<br>
<a href="mailto:[email protected]"></a></font></small></p>
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<img src="../images/statelin.gif" alt="STATELINE by Robert Olson" border="0" width="375" height="75"><p align="left"><b><u><br>
March 2001<br>
</u><font face="Arial" size="6" color="#000000">Idaho Enacts
Legislation Reacting To Court Ruling Enhancing
The Possibility For Competitive Market Under 1970
Electric Act<br>
</font>
</b><strong>by Robert Olson -- Brown, Olson and Wilson, P.C.<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
200</em>1/03/30)</font></p><center>
<p ALIGN="JUSTIFY"><font face="Arial">On February 28, 2001, Idaho Governor Dirk
Kempthorne signed into law H.B. 142, which amended the Electric Supplier
Stabilization Act of 1970 (1970 Act). The 1970 Act permitted electric utilities
to enter into agreements with other electric suppliers to allocate service
territories and customers. The 1970 Act also permitted utilities to allow other
electric suppliers access to their customers, but only with the consent of the
utilities involved. On October 3, 2000, the Ninth Circuit Court of Appeals ruled
that, as a result of these provisions in the 1970 Act, the state’s utilities
were subject to federal anti-trust law. H.B. 142 was enacted in response to the
Ninth Circuit’s ruling and amended the 1970 Act to require approval of such
allocation agreements by the Idaho Public Utilities Commission (IPUC). H.B. 142
also added new provisions to the 1970 Act, including provisions addressing
wheeling of power and consumer access to alternative electric suppliers.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The Ninth Circuit ruling arose from a
situation where an electricity aggregator sought to deliver power to customers
of a utility. Under the 1970 Act, the utility refused to give consent to deliver
the power. The aggregator brought an action in federal district court, alleging
that the utility violated federal anti-trust laws. The federal district court
ruled against the aggregator, but the Ninth Circuit reversed, holding that the
1970 Act did not shield the states’ utilities from federal anti-trust law.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">Snake River Valley Electric Association (SRVEA),
a non-profit cooperative organized to buy electricity at wholesale rates for its
members, is the plaintiff in the Ninth Circuit case. Most of SRVEA’s members
reside in Idaho in the service territory of Utah Power and Light, a subsidiary
of PacifiCorp (PacifiCorp). SRVEA entered into a contract with Enron for the
wholesale purchase of electricity, and sought access to PacifiCorp’s
facilities to wheel its power through PacifiCorp’s territory to its members.
SRVEA also sought permission from PacifiCorp to serve PacifiCorp’s customers.
PacifiCorp refused to consent, and SRVEA filed the federal court action.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">PacifiCorp filed a motion for summary
judgment, stating that the 1970 Act permitted it to engage in the conduct
alleged to be anti-competitive conduct. The district court agreed, finding that
PacifiCorp’s compliance with the 1970 Act shielded it from regulation under
federal anti-trust laws. The Ninth Circuit stated that the state action immunity
doctrine can immunize anti-competitive conduct from federal anti-trust laws if
that conduct is engaged in pursuant to state laws restricting competition. The
state action immunity doctrine involves a two-part test for determining whether
the state law restricting competition is an act of government and not a mere
authorization by government for parties to violate anti-trust laws. The two-part
test requires that the anti-competitive conduct challenged be: (1) clearly
articulated in state law, and (2) actively supervised by the state.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The Ninth Circuit found that PacifiCorp’s
refusal to provide consent for SRVEA to service customers in PacifiCorp’s
territory was clearly articulated in the 1970 Act. Therefore, the first prong of
the test was met. The Ninth Circuit also found, however, that the second prong
of the test, requiring the active supervision of the anti-competitive conduct by
the state, was not met. The second prong requires the state to exercise ultimate
control over the conduct to ensure that only anti-competitive conduct which
furthers state regulatory policy is protected. The Court noted that the policy
behind this part of the test is designed to ensure that rates are established
not as a result of private agreements but as a result of deliberate state
intervention. The Ninth Circuit found the 1970 Act prohibited state review of
agreements, between electric suppliers to divide up their service territories.
As a result of this finding, the Ninth Circuit held the 1970 Act did not
immunize utilities from federal anti-trust scrutiny for their alleged
anti-competitive conduct.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">H.B. 142 left in place the 1970 Act
provision enabling electric suppliers to enter into agreements to allocate
service territories and customers. It added, however, a provision requiring the
IPUC to reject or approve such agreements after notice and opportunity for a
hearing. To approve such an agreement, the IPUC must find the allocation of
territories or customers designated in the agreement conforms to the purposes of
the amended Act, which are to promote harmony among electric suppliers, prohibit
"pirating" of customers, discourage duplication of electric
facilities, actively supervise certain electric supplier conduct, and stabilize
electric suppliers’ territories and customers.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">H.B. 142 added a new section to the 1970
Act which states that electric suppliers are not required to wheel power over
their systems if such service results in "retail wheeling and/or a sham
wholesale transaction." A supplier who refuses to wheel under this
provision is required to seek IPUC review of its decision. H.B. 142 also permits
electric suppliers and consumers to petition the IPUC for an exception to the
provision which maintains that electric suppliers shall not supply electric
service to customers who are or have been connected to another supplier’s
facilities. The IPUC may grant such an exemption if it finds the request is
consistent with the purposes of the amended Act.</font></p>
<p ALIGN="JUSTIFY"><font face="Arial">The stated legislative intent of H.B. 142
is to confer anti-trust immunity under the state action immunity doctrine. H.B.
142 also includes a legislative finding that a negative judicial ruling would
have the effect of repealing provisions of the 1970 Act. Additionally, H.B. 142
adds a new section to the 1970 Act which provides that electric suppliers are
immune from actions under state law where the suppliers are acting (or not
acting) in compliance with the 1970 Act, as amended.</font></p>
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<blockquote>
<p align="left"><font face="Arial">
<small>Robert A. Olson is a partner in the law firm of Brown, Olson &
Gould P.C.
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:</small></font><p align="center">
<font face="Arial"><small><font color="#0000FF"><b>Brown, Olson & Gould, PC</b></font><br>
2 Delta Drive, Suite 301<br>
Concord, NH 03301 <br>
<br>
<a href="mailto:[email protected]">[email protected]</a> | (603) 225-9716<a href="mailto:[email protected]"></a></small></font>
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