On July 29, 2016, the Utah Public Service Commission (the Utah Commission) required PacifiCorp (dba Rocky Mountain Power) to enter into a twenty-year power purchase agreement at higher avoided cost rates than were existence when PacifiCorp ultimately decided to sign the contract.
Thayn Hydro operates a small, 575 kW hydroelectric project near Green River, Utah, and has been selling power to PacifiCorp since the early 1990s. Thayn Hydro attempted to finalize its power purchase agreement and lock in the then current avoided cost rates in late July 2015, but PacifiCorp delayed the negotiation process for months, and was not willing to finalize a contract until after new and lower avoided cost rates dropped on September 18, 2015. After the rate change, PacifiCorp refused to sign a contract with the older and higher rates and insisted on Thayn Hydro agreeing to a contract at the new and lower prices. Later, on January 9, 2016, the Utah Commission lowered the standard contract term in Utah from twenty to fifteen years, which meant that Thayn Hydro was facing both lower prices and a shorter contract term.
Thayn Hydro, which ultimately filed an informal complaint with the Utah Commission, and (after settlement negotiations) PacifiCorp ultimately agreed to provide Thayn Hydro with a twenty-year contract and full avoided cost rates that were in existence before the rate decrease in September 2015. The settlement PPA was filed with the Utah Commission, which issued a preliminary order stating that it was reluctant to approve the PPA unless the parties could show that Thayn Hydro had formed a “legally enforceable obligation.” While both Thayn Hydro and PacifiCorp supported the settlement, PacifiCorp opposed a finding that Thayn Hydro had formed a legally enforceable obligation, which as a practical matter meant that PacifiCorp’s position was that Thayn Hydro was not legally entitled to the higher rates.
The Utah Commission concluded that Thayn Hydro had formed a legally enforceable obligation with PacifiCorp and was legally entitled to a PPA at both the higher prices and longer contract term. The Utah Commission did not resolve the question of when a legally enforceable obligation is determined in all cases, but concluded that Thayn Hydro had shown “but for” the actions of PacifiCorp, a contract would have been formed. The Utah Commission decided that it did not need to address the limitations on when a legally enforceable obligation could be found, but concluded that in this case it was clear that Thayn Hydro was entitled to a long-term contract at favorable rates.
Smith Hartvigsen, PLLC and Sanger Law represented Thayn Hydro.
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