Case Title: Idaho Power v. Grouse Creek

Citation: 

Docket Number: 39151-2011

State: idaho

Court: Idaho Supreme Court (civil)

Date: 2013-12-18T00:00:00Z

Document:
IN THE SUPREME COURT OF THE STATE OF IDAHO 
 
Docket No. 39151-2011 
 
IDAHO POWER COMPANY, 
 
Petitioner-Respondent, 
 
v. 
 
IDAHO PUBLIC UTILITIES 
COMMISSION, 
 
Respondent, 
 
and 
 
GROUSE CREEK WIND PARK, LLC, and 
GROUSE CREEK WIND PARK II, LLC, 
 
Appellants. 
 
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Boise, August 2013 Term 
 
2013 Opinion No. 135 
 
Filed: December 18, 2013 
 
Stephen W. Kenyon, Clerk 
 
 
 
Appeal from the Public Utilities Commission of the State of Idaho. 
 
The order of the Public Utilities Commission is affirmed. 
 
Ronald L. Williams, Williams Bradbury P.C., Boise argued for appellants. 
 
Kristine A. Sasser, Deputy Attorney General, Boise, argued for respondent Public 
Utilities Commission. 
 
Donovan E. Walker, Idaho Power Company, Boise, argued for respondent Idaho 
Power Company. 
 
 
EISMANN, Justice. 
 
This is an appeal from an order of the Idaho Public Utilities Commission denying 
approval of contracts between an electric utility and two wind farms on the ground that the 
contract rate for purchasing the power was contrary to public policy because it exceeded the 
utility’s avoided costs.  We affirm. 
 
 
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I. 
Factual Background. 
 
 
The Public Utility Regulatory Policies Act of 1978 (PURPA) was enacted to require 
electric utilities to purchase electricity from qualifying small power production facilities and 
from qualifying cogeneration facilities.  “A ‘small power production facility’ is one that has a 
production capacity of no more than 80 megawatts and uses biomass, waste, or renewable 
resources (such as wind, water, or solar energy) to produce electric power.”  F.E.R.C. v. 
Mississippi, 456 U.S. 742, 750 n.11 (1982).  “A ‘cogeneration facility’ is one that produces both 
electric energy and steam or some other form of useful energy, such as heat.”  Id.  The legislation 
required the Federal Energy Regulatory Commission (FERC) to prescribe rules to encourage 
cogeneration and small power production and to require electric utilities to offer to purchase 
electric energy from qualifying facilities.  16 U.S.C. § 824a–3(a) & (b). 
PURPA “directs FERC, in consultation with state regulatory authorities, to promulgate 
‘such rules as it determines necessary to encourage cogeneration and small power production,’ 
including rules requiring utilities to offer to sell electricity to, and purchase electricity from, 
qualifying cogeneration and small power production facilities.”  F.E.R.C., 456 U.S. at 751; 16 
U.S.C. § 824a–3(b).  However,  PURPA provides that no such rule “shall provide for a rate 
which exceeds the incremental cost to the electric utility of alternative electric energy.”  16 
U.S.C. § 824a–3(b).  The incremental cost is defined as “the cost to the electric utility of the 
electric energy which, but for the purchase from such cogenerator or small power producer, such 
utility would generate or purchase from another source.”  16 U.S.C. § 824a-3(d).  FERC’s rules 
use the term “avoided costs” to mean the incremental cost.  18 C.F.R. § 292.101(a)(6).   
If a state chooses to regulate electric utilities, it must implement FERC rules.  F.E.R.C., 
456 U.S. at 751; 16 USC § 824a–3(f)(1).  However, a state regulatory authority has discretion in 
determining the manner in which the rules will be implemented, and may comply by issuing 
regulations, by resolving disputes on a case-by-case basis, or by other action reasonably designed 
to give effect to FERC’s rules.  F.E.R.C., 456 U.S. at 751.  The “ ‘Act establishes a program of 
cooperative federalism that allows the States, within limits established by federal minimum 
standards, to enact and administer their own regulatory programs, structured to meet their own 
particular needs.’ ”  Id. at 767. 
 
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FERC’s rules acknowledge two ways in which a qualified facility can establish a right to 
sell power to an electric utility.  The utility and the facility can negotiate a rate at which the 
utility will purchase the electric power, 18 C.F.R. § 292.301(b)(1), or the facility can establish 
the right to require the utility to purchase the power “pursuant to a legally enforceable obligation 
for the delivery of energy or capacity over a specified term,” 18 C.F.R. § 292.304(d)(2).  When it 
adopted the latter rule, FERC explained its purpose as follows: 
Paragraph (d)(2) permits a qualifying facility to enter into a contract or 
other legally enforceable obligation to provide energy or capacity over a specified 
term.  Use of the term “legally enforceable obligation” is intended to prevent a 
utility from circumventing the requirement that provides capacity credit for an 
eligible qualifying facility merely by refusing to enter into a contract with the 
qualifying facility. 
 
45 Fed. Reg. 12214, 12224 (February 25, 1980). 
FERC requires that there be a standard avoided-cost rate at which electric utilities are 
required to purchase power from qualified facilities with a design capacity of up to 100 
kilowatts.  18 CFR § 292.304(c)(1).  The standard avoided-cost rate is called the “published rate” 
by IPUC.  The limit on the size of the qualified facility that is eligible for the published rate is 
commonly referred to as the “eligibility cap.”  Qualified facilities within the eligibility cap are 
entitled to sell power at the published rate, while the rate at which those above the eligibility cap 
are entitled to sell power is determined on a case-by-case basis. 
IPUC initially set the eligibility cap at one megawatt, but it later increased it for wind 
projects to an average of ten megawatts (10 aMW) on a monthly basis.  Because wind projects 
do not generate power all of the time, a qualified wind facility that is capable of producing more 
than ten megawatts of power would qualify for the published rate if the power produced during a 
month averaged ten megawatts. 
In late 2007, Wasatch Wind Intermountain, LLC (Wasatch Wind), began investigating 
the feasibility of a wind power project located near Lynn, Utah, close to the Idaho-Utah border.  
It initially considered constructing a wind farm that would generate 150 megawatts of power, but 
later decided to reduce the size of the project.  It desired to sell the power to Idaho Power 
Company (Idaho Power).  On June 29, 2009, Wasatch Wind incorporated Grouse Creek Wind 
Park, LLC (Grouse Creek I). 
 
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Wasatch Wind first contacted Idaho Power in late February 2010.  On February 26, 2010, 
Wasatch Wind sent Idaho Power an e-mail stating, “Wasatch Wind Intermountain would like to 
request that Idaho Power commence Power Purchase Agreement negotiations with our 
subsidiary, Grouse Creek Wind Park, LLC for either a 10 Average MW or something less than 
80 MW Qualifying Facility under PURPA.”  Because the project site was outside of Idaho 
Power’s service area, Wasatch Wind needed to find a way to connect with the Idaho Power 
system.  Wasatch Wind stated in the e-mail, “[W]e understand that in order for you to view our 
project as serious and tender the Power Purchase Agreement and to make the necessary Network 
Service request for this Qualifying Facility, Idaho Power needs to be sure that we have the 
necessary transmission rights secured.”  The parties subsequently had various conversations and 
exchanged various e-mails regarding the proposed project and the requirements for obtaining a 
power purchase agreement and the prices at which Idaho Power would purchase the power.  
Wasatch Wind planned to transmit energy to Idaho Power’s Minidoka substation by 
connecting to a power line that was owned by the Raft River Electric Cooperative and leased to 
Bonneville Power Administration (BPA).  Wasatch Wind had submitted the necessary 
applications to BPA on June 30, 2010, but to obtain approval Wasatch Wind was required to 
provide BPA with performance assurance of $794,376 by August 18, 2010.  The projected online 
date was June 2012.  Wasatch Wind decided not to provide the required performance assurance, 
and on August 19, 2010, it submitted a transmission service request to BPA with a new online 
date of June 2013.   
During the parties’ discussions, the size of the project changed.  In March 2010, Wasatch 
Wind had requested the price at which Idaho Power would purchase energy from a 60 MW 
project.  Ultimately, Wasatch Wind decided to reduce the size of the project to two, 10 aMW 
projects.  On August 17, 2010, Wasatch Wind sent Idaho Power an e-mail in which Wasatch 
Wind stated, “First please consider this a formal request for two separate, standard, non-
levelized, under-ten-average monthly-megawatt, twenty year power purchase agreements.”  On 
August 27, 2010, Wasatch Wind incorporated Grouse Creek Wind Park II, LLC (Grouse Creek 
II). 
The parties continued negotiating and discussing the terms of a power purchase 
agreement.  They disagreed regarding two material terms.  Idaho Power required that Wasatch 
Wind have a firm transmission reservation with BPA to transmit power from the proposed 
 
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projects to Idaho Power’s system and that Wasatch Wind post security for the payment of 
liquidated damages if the projects did not begin delivering power within 90 days of their 
estimated online date. 
On October 1, 2010, counsel for Wasatch Wind delivered two letters to Idaho Power to 
clarify Wasatch Wind’s position on several matters.  One letter was in regard to Grouse Creek I 
and the other in regard to Grouse Creek II.  In the letter, counsel blamed Idaho Power’s 
unjustified actions for Wasatch Wind’s decision not to post the performance assurance required 
by BPA and stated that Wasatch Wind had renewed its efforts with BPA.  Counsel asserted that 
Idaho Power’s requirement for delay security was unenforceable and that Wasatch Wind would 
not sign a purchase power agreement containing a requirement that it post any delay security 
unless it was required by IPUC.  Counsel also stated in the letter that the size of the Grouse 
Creek I project was being reduced from 30 MW to 21 MW and that the size of Grouse Creek II 
would be 21 MW, but that they would be regulated to stay within the 10 aMW eligibility cap in 
order to qualify for the published rates.  Finally, the letter stated that the proposed online date for 
both projects would be December 31, 2012.  Idaho Power responded by letter dated November 1, 
2010.  The letter disputed various factual assertions in the October 1st letters and stated that 
IPUC had approved the posting of security in purchase power agreements since at least 2007.  
The letter also stated that because the projects were not within Idaho Power’s service territory, 
“it is required that each project complete the interconnection process with the host utility and 
also secure firm transmission capacity across all required transmission paths to deliver energy to 
a point of delivery on the Idaho Power electrical system.”  Finally, the letter enclosed a generic 
draft purchase power agreement for Wasatch Wind to fill out and return to Idaho Power. 
On November 5, 2010, Idaho Power and two other electric utilities filed a joint petition 
asking IPUC to investigate various avoided-cost issues and to immediately lower the eligibility 
for the standard avoided-cost rate from ten megawatts to 100 kilowatts.  Based upon the 
information presented, IPUC issued an order on February 7, 2010, temporarily lowering the 
eligibility cap to 100 kilowatts (kW) for wind and solar qualified facilities effective on December 
14, 2010, in order to further study standard avoided-cost rates for those types of facilities.  
IPUC’s concern was that wind and solar projects that were too large to qualify for the utilities’ 
published rate could obtain a rate that was not an accurate reflection of the utilities’ actual 
 
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avoided cost by disaggregating into smaller projects, each of which would be entitled to the 
published rate. 
On November 8, 2010, Grouse Creek I and Grouse Creek II filed complaints against 
Idaho Power with the IPUC seeking to establish that they had legally enforceable obligations 
with Idaho Power requiring it to purchase power under PURPA.  On November 19, 2010, the 
parties met and resolved the two issues that were still in dispute.  Wasatch Wind agreed to the 
requirement of delay security in the purchase power agreements, and Idaho Power agreed not to 
require a firm interconnection agreement before signing a purchase power agreement.  The letter 
from Idaho Power memorializing the agreement concluded by asking Wasatch Wind to review 
the previously provided draft contracts, fill in or correct any of the required information, and 
return them to Idaho Power so it could generate drafts to be signed.  Grouse Creek I and Grouse 
Creek II asked that IPUC not serve the complaints they had filed on Idaho Power because the 
parties were negotiating and had tentatively reached an agreement. 
On December 2, 2010, Wasatch Wind submitted the proposed purchase power 
agreements to Idaho Power, and on December 6, 2010, it submitted additional information for 
Idaho Power to initiate the process of determining that Idaho Power had sufficient transmission 
capacity within its system for the projects.  On December 7, 2010, Idaho Power sent updated 
draft agreements to Wasatch Wind and stated in an e-mail that one piece of key information was 
missing from the information provided by Wasatch Wind, which was the precise location of each 
project to ensure that they were at least one mile apart.  On December 9, 2010, Wasatch Wind 
asked that the online date for both projects be extended by one year to December 2013.  On 
December 14, 2010, Idaho Power sent an e-mail to Wasatch Wind stating that to complete the 
contracts it needed the name of the transmission entity and the complete legal description of the 
location of each project.  The draft agreements submitted by Wasatch Wind on December 2, 
2010 had listed PacifiCorp as the transmitting entity.  On December 15, 2010, Idaho Power sent 
an e-mail to Wasatch Wind agreeing to the extension of the online date for both projects and 
asking again for the information it had requested.  In an e-mail to Idaho Power later that day, 
Wasatch Wind provided the complete legal descriptions of the two projects and stated that BPA 
would be the transmission provider. 
Idaho Power completed the draft purchase power agreements on December 16, 2010, and 
Wasatch Power picked them up the same day for its review.  It signed them on December 21, 
 
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2010, and Idaho Power signed them on December 28, 2010 and inserted that date in the 
agreements as their effective dates. 
Pursuant to the order issued by IPUC on February 7, 2010, the eligibility cap for the 
published rates for wind and solar qualified facilities was reduced to 100 kilowatts effective on 
December 14, 2010.  The agreements provided that Idaho Power would purchase power from 
Grouse Creek I and Grouse Creek II according to the published rates.  Both agreements included 
a provision stating, “This Agreement shall become finally effective upon the Commission’s 
approval of all terms and provisions hereof without change or condition and declaration that all 
payments to be made to Seller hereunder shall be allowed as prudently incurred expenses for 
ratemaking purposes.” 
  On December 29, 2010, Idaho Power filed applications with IPUC requesting 
acceptance or rejection of the agreements.  On February 24, 2011, IPUC issued a written notice 
permitting interested persons to file comments by March 24, 2011.  On that date, Grouse Creek I 
and Grouse Creek II filed motions to intervene and written comments supporting approval of the 
agreements.  IPUC denied the motions to intervene on the ground that the motions were 
unnecessary because Grouse Creek I and Grouse Creek II were parties to the agreements.  As 
parties to the agreements, they were interested persons who could file comments without 
intervening.  On June 8, 2011, IPUC issued its order disapproving the two purchase power 
agreements because the agreements were signed and included effective dates after December 14, 
2010.  The projects did not qualify for the published rates because they were no longer within the 
eligibility cap. 
On June 29, 2011, Grouse Creek I and Grouse Creek II filed a joint petition for 
reconsideration.  They argued that they were entitled to the published rate that was in effect prior 
to December 14 for several reasons including that they had legally enforceable obligations with 
Idaho Power prior to that date even if the contracts were not executed until after that date.  IPUC 
held that the parties executed contracts stating that their effective dates were December 28, 2010, 
and that was the date upon which they had a legally enforceable obligation. 
Grouse Creek I and Grouse Creek II timely appealed.  While the appeal was pending, 
FERC issued a declaratory order involving Cedar Creek Wind, LLC, which had entered into 
agreements with another electric utility in Idaho.  Under the agreements, each of five wind 
projects would sell electricity to the utility using the 10 aMW non-levelized published avoided- 
 
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cost rates.  Cedar Creek Wind signed the agreements on December 13, 2010, and on the same 
date it returned them to the utility for its signature.  The utility did not sign them until December 
22, 2010, after the effective date on which the eligibility cap for published rates was lowered to 
100 kilowatts for wind and solar projects.  IPUC disapproved the agreements, holding that they 
did not become effective until signed by both parties and that they were therefore not eligible for 
the published rates in existence before December 14, 2010.  Cedar Creek Wind sought a 
declaratory order from FERC, and it issued an order stating that IPUC erred by not considering 
that a legally enforceable obligation could have been created before the utility signed the 
contracts.  In its order, FERC interpreted IPUC as holding that “a legally enforceable obligation 
can result from only a fully-executed contract.” 
At the request of all parties, we suspended the appeal and remanded this case back to 
IPUC to reconsider its decision in light of the declaratory order in the Cedar Creek Wind case.  
On remand, IPUC solicited additional briefing from the parties and held oral argument on the 
matter.  On September 7, 2012, it issued its order again refusing to approve the power purchase 
agreements because the rates in them were no longer available as published rates when the 
contracts were executed and became effective. 
In reaching its decision, IPUC stated that it “did not and has never made a determination 
that the creation of a legally enforceable obligation only occurs when a QF [qualified facility] 
and a utility enter into a written and signed agreement.”  It noted that it had previously ruled that 
a qualified facility could obtain an avoided cost rate:  “(1) by entering into a signed contract with 
the utility; or (2) by filing a meritorious complaint alleging that a ‘legally enforceable obligation’ 
has arisen and, but for the conduct of the utility, there would be a contract.”  It held that where 
Grouse Creek I and Grouse Creek II had negotiated agreements with Idaho Power that 
specifically set forth the terms and conditions of the agreements, including their effective date, 
IPUC “recognized and chose to enforce the terms of the Agreements that the parties entered into 
voluntarily.”   Even assuming that a legally enforceable obligation could preempt the terms of 
the parties’ written and signed agreements, IPUC found that there was no legally enforceable 
obligation prior to December 14, 2010.  Finally, IPUC “determined that it was not in the public 
interest to approve the Agreements [because] . . . ‘allowing a project to avail itself of an 
eligibility cap (and therefore published rates) that is no longer applicable could cause ratepayers 
 
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to pay more than the utility’s avoided cost.’ ”  Grouse Creek I and Grouse Creek II then filed an 
amended notice of appeal to this Court. 
 
II. 
Standard of Review. 
 
 
Article 5, § 9, of the Idaho Constitution grants to this Court jurisdiction to review on 
appeal any order of the public utilities commission, and it grants to the legislature the authority 
to “provide conditions of appeal, scope of appeal, and procedure on appeal from orders of the 
public utilities commission.”  Pursuant to that authority, the legislature has enacted Idaho Code 
section 61-629 which limits the scope of review to determining “whether the commission has 
regularly pursued its authority, including a determination of whether the order appealed from 
violates any right of the appellant under the constitution of the United States or of the state of 
Idaho.” 
 
III. 
Did IPUC Err in Failing to Find that Grouse Creek I and Grouse Creek II Had Legally 
Enforceable Obligations Prior to December 14, 2010? 
State agencies that regulate electric utilities are required to implement FERC rules, but 
they have discretion in determining the manner in which the rules will be implemented, and they 
may comply by issuing regulations, by resolving disputes on a case-by-case basis, or by other 
action reasonably designed to give effect to FERC’s rules.  F.E.R.C., 456 U.S. at 751.  “[S]tates 
must provide for legally enforceable obligations as distinct from contractual obligations, but ‘[i]t 
is up to the States, not [FERC], to determine the specific parameters of individual QF power 
purchase agreements, including the date at which a legally enforceable obligation is incurred 
under State law.’ ”  Power Resource Group, Inc. v. Public Utility Comm’n of Texas, 422 F.3d 
231, 238 (5th Cir. 2005); accord Rosebud Enterprises, Inc. v. Idaho Public Utilities Comm’n, 
128 Idaho 609, 623-24, 917 P.2d 766, 780-81 (1996) (Rosebud Enterprises I).  “FERC has given 
each state the authority to decide when a LEO [legally enforceable obligation] arises in that 
state.”  Power Resource Group, 422 F.2d at 239.   
On August 22, 1990, in a proceeding commenced by A.W. Brown Company, Inc., IPUC 
issued an order setting forth requirements for a legally enforceable obligation.  IPUC had 
lowered the published rates and had issued an order stating that regulated utilities were entitled 
 
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to the higher rates that had been in effect if they either had a signed contract with the electric 
utility for the higher rates or had filed a meritorious complaint with IPUC on or before April 29, 
1985.  To prevail on the meritorious complaint, the qualified facility must show that but for the 
actions of the electric utility, the qualified utility was otherwise entitled to a contract.  IPUC held 
that A.W. Brown Company was not entitled to the higher rate, and the company appealed. 
On appeal, we identified the issue as whether IPUC had the authority to establish a 
requirement that “before a [qualified facility] can lock-in a certain rate, there must be a signed 
contract to sell at that rate or a meritorious complaint alleging that the project was mature and 
that the developer had attempted, and failed, to negotiate a contract with the utility.”  A.W. 
Brown Co., Inc. v. Idaho Power Co., 121 Idaho 812, 815, 828 P.2d 841, 844 (1992).  We held 
that IPUC did not err in ruling that the company did not comply with IPUC’s regulatory scheme 
to qualify for the higher rates.  Id. at 818, 828 P.2d at 847. 
Later, in Rosebud Enterprises, Inc. v. Idaho Public Utilities Comm’n, 131 Idaho 1, 951 
P.2d 521 (1997), we affirmed the holding in A.W. Brown and held that it was consistent with 
state and federal law.  We stated: 
In A.W. Brown Co., this Court ruled that IPUC has authority, under state 
and federal law, to require that before a developer can lock in a certain rate, there 
must be either a signed contract to sell at that rate or a meritorious complaint 
alleging that the project is mature and that the developer has attempted and failed 
to negotiate a contract with the utility; that is, there would be a contract but for the 
conduct of the utility.  Rosebud has neither signed a contract nor established that 
Idaho Power will not negotiate with it. 
 
Id. at 6, 951 P.2d at 526 (citation omitted). 
 
In its order issued in the proceeding involving A.W. Brown Co., IPUC correctly noted:  
“The concept of ‘legally enforceable obligation’ does not appear in PURPA.  Rather, it arises 
from the implementing regulations promulgated by the Federal Energy Regulatory 
Commission.”  IPUC then quoted FERC’s explanation for adopting that concept in its 
regulations.  “Use of the term ‘legally enforceable obligation’ is intended to prevent a utility 
from circumventing the requirement that provides capacity credit for an eligible qualifying 
facility merely by refusing to enter into a contract with the qualifying facility.”  45 Fed. Reg. 
12214, 12224 (February 25, 1980). 
“FERC has given each state the authority to decide when a LEO [legally enforceable 
obligation] arises in that state.”  Power Resource Group, 422 F.3d at 239.  In that case, the court 
 
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upheld an order from the state public utilities commission that “a legally enforceable obligation 
arises only when a qualified facility can deliver power within 90 days.”  Id. at 237.  The court 
added, “If FERC had determined it necessary to set more specific guidelines concerning LEOs, it 
could have done so.”  Id. at 239.  Considering FERC’s declared purpose for adopting the concept 
of a legally enforceable obligation and the broad discretion that IPUC has in implementing 
FERC’s rules and in determining the requirements for a legally enforceable obligation, we again 
affirm IPUC’s requirement that a finding of a legally enforceable obligation requires a showing 
that there would have been a contract but for the actions of the utility. 
 
In this case, IPUC found that Idaho Power was not at fault for the failure to have a 
written contract sooner than December 14, 2010, IPUC specifically found: 
The utility did not refuse to sign a contract. In fact, ongoing negotiations 
led to the parties’ voluntarily entering into two subsequent PPAs [power purchase 
agreements].  Grouse Creek never initiated a complaint process because 
Agreements were negotiated and Grouse Creek urged the Commission to approve 
the terms of the Agreements.  We find that no conduct by the utility unnecessarily 
delayed or impeded Grouse Creek’s ability to enter into its Agreements.  Because 
the utility did not impede Grouse Creek’s ability to enter into PPAs, a 
determination regarding a legally enforceable obligation was never triggered. 
 
We must uphold IPUC’s findings of fact if they are supported by substantial, competent 
evidence in the record.  Rosebud Enterprises I, 128 Idaho at 618, 917 P.2d at 775.  These 
findings are not challenged on appeal. 
Grouse Creek I and Grouse Creek II argue at length that they had legally enforceable 
obligations with Idaho Power prior to December 14, 2010.  Because the parties voluntarily 
negotiated their purchase power agreements, which provided that the effective dates were 
December 28, 2010, whether there could have been a legally enforceable obligation prior to 
entering into those agreements is irrelevant under the rule adopted by IPUC.  In addition, each 
contract included a provision stating, “This Agreement constitutes the entire Agreement of the 
Parties concerning the subject matter hereof and supersedes all prior or contemporaneous ora1 or 
written agreements between the Parties concerning the subject matter hereof.” 
 
IV. 
Was IPUC’s Refusal to Approve the Power Purchase Agreements Arbitrary and 
Capricious? 
 
 
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Grouse Creek I and Grouse Creek II argue that IPUC’s decision not to approve their 
purchase power agreements was arbitrary and capricious because it had in other cases previously 
allowed qualified facilities to purchase power at rates that were no longer applicable to those 
facilities.  They raised this issue on their motion for reconsideration, and IPUC explained its 
reasoning.  The purchase power agreements contained effective dates of December 28, 2010.  
Because this Court had previously noted that regulatory agencies perform judicial and legislative 
functions and are therefore not bound by stare decisis, IPUC was not bound by its prior 
grandfathering treatment.  Finally, allowing Grouse Creek I and Grouse Creek II to sell power at 
the rates to which they would have been entitled prior to December 14, 2010, would not have 
been in the public interest. 
 
IPUC’s decision to lower the eligibility cap for wind and solar projects was based upon 
its concern that large wind and solar projects that did not qualify for the published rates could 
disaggregate in order to qualify for the published rates and thereby obtain rates that did not 
accurately reflect the utilities’ actual avoided cost.  FERC rules require that rates for purchasing 
electric power shall “[b]e just and reasonable to the electric consumer of the electric utility and in 
the public interest.”  18 CFR § 292.304(a)(1)(i).  As stated above, qualified utilities that are 
larger than the eligibility cap for published rates must have their purchase rates determined on a 
case-by-case basis.  During oral argument, Grouse Creek I and Grouse Creek II conceded that 
they would not have appealed but for the concern that the avoided cost rates if actually calculated 
for these two projects would be less than the published rates.  Thus, allowing them to sell power 
at the published rates would result in Idaho Power being required to purchase their power at 
more than its actual avoided costs.  Requiring Idaho Power to do so would require it to purchase 
power at rates that are not just and reasonable to its electric consumers and would be contrary to 
the public interest.  IPUC’s decision to disapprove of the purchase power agreements in this case 
was not arbitrary and capricious. 
 
Grouse Creek I and Grouse Creek II cite at length from declaratory orders issued by 
FERC, and they argue that we must give deference to the interpretations of FERC rules 
contained in those orders.  The relevance of FERC orders was explained by the District of 
Columbia Circuit Court of Appeals in Industrial Cogenerators v. F.E.R.C., 47 F.3d 1231 (1995), 
as follows: 
 
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Except that a private party bringing an enforcement action in district court might 
seek to introduce the Declaratory Order in order to show that the FERC supported 
its position, the Order was of no legal moment.  . . .  Unlike the declaratory order 
of a court, which does fix the rights of the parties, this Declaratory Order merely 
advised the parties of the Commission’s position.  It was much like a 
memorandum of law prepared by the FERC staff in anticipation of a possible 
enforcement action; the only difference is that the Commission itself formally 
used the document as its own statement of position.  While such knowledge of the 
FERC’s position might affect the conduct of the parties, the Declaratory Order is 
legally ineffectual apart from its ability to persuade (or to command the deference 
of) a court that might later have been called upon to interpret the Act and the 
agency’s regulations in an private enforcement action . . . . 
 
Id. at 1234-35. 
V. 
Was IPUC Required to Approve the Rates Set Forth in the Purchase Power Agreements? 
 
 
Grouse Creek I and Grouse Creek II argue that 18 CFR § 292.301(b) required IPUC to 
approve the rates set forth in the purchase power agreements.  That rule states: 
(b) Negotiated rates or terms.  Nothing in this subpart: 
(1) Limits 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; or 
(2) Affects the validity of any contract entered into between a qualifying 
facility and an electric utility for any purchase. 
 
 
Grouse Creek I and Grouse Creek II contend that the above-quoted rule requires IPUC to 
honor any rates negotiated between an electric utility and a qualified facility.  That argument is 
contrary to 18 CFR § 292.304(a) which provides: 
(a) Rates for purchases.  (1) Rates for purchases shall: 
(i) Be just and reasonable to the electric consumer of the electric utility 
and in the public interest; and 
(ii) Not discriminate against qualifying cogeneration and small power 
production facilities. 
(2) Nothing in this subpart requires any electric utility to pay more than the 
avoided costs for purchases. 
 
PURPA does not provide that FERC shall become the nationwide public utilities 
commission.  Any rates at which electric utilities can purchase power must be approved by 
IPUC.  Indeed, both of the parties’ contracts expressly provided, “This Agreement shall become 
finally effective upon the Commission’s approval of all terms and provisions hereof without 
 
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change or condition and declaration that all payments to be made to Seller hereunder shall be 
allowed as prudently incurred expenses for ratemaking purposes.”  It is clear that IPUC was not 
required to accept whatever rates were set forth in the purchase power agreements. 
 
VI. 
Are Grouse Creek I and Grouse Creek II Entitled to an Award of Attorney Fees on Appeal 
Pursuant to Idaho Code § 12-121? 
 
 
Grouse Creek I and Grouse Creek II request an award of attorney fees under Idaho Code 
section 12-121.  That statute provides, “In any civil action, the judge may award reasonable 
attorney’s fees to the prevailing party or parties . . . .”  That statute has no application to this 
case.  It only applies in “any civil action,” which is an action by filing a complaint in court as 
required by Rule 3(a) of the Idaho Rules of Civil Procedure.  Lowery v. Bd. of Cnty. Comm’rs for 
Ada Cnty., 117 Idaho 1079, 1082, 793 P.2d 1251, 1254 (1990).  An appeal from an agency 
decision is not a civil action.  Allen v. Blaine Cnty., 131 Idaho 138, 142, 953 P.2d 578, 582 
(1998). 
VII. 
Conclusion. 
 
 
We affirm the order of the IPUC and award costs on appeal to respondents. 
 
 
Chief Justice BURDICK, Justice HORTON, and J. Pro Tem KIDWELL CONCUR.   
 
J. JONES, Justice, concurring in the result.  
 
I concur in the result reached by the IPUC and affirmed by the Court. However, I am 
uncomfortable with the route taken by the IPUC in reaching its final resolution of this case, as 
the three orders issued by the IPUC are somewhat unclear, and rather in conflict, as to the 
elements of a legally enforceable obligation (LEO) and how a qualifying facility (QF) may 
obtain grandfathering status. Because these issues are of vital importance to both utilities and 
QFs, it is essential that they have understandable and predictable criteria for their planning and 
contracting activities. That is not what occurred in these proceedings.  
 
The parties entered into two contracts, each specifically stating the effective date to be 
December 28, 2010. Idaho Power signed the contracts on that date. The IPUC held that that was 
 
15 
the date upon which the parties had a legally enforceable obligation because it was the date the 
contracts were fully executed. The IPUC disapproved the contracts, holding that they did not 
become effective until signed by both parties and that because the projects exceeded the 
eligibility cap established as of December 14, 2010, Grouse Creek was not eligible for the rates 
provided for in the contracts. 
 
The IPUC correctly characterized the contracts as LEOs and had a basis for determining 
that December 28 was their effective date. Grouse Creek is unhappy that Idaho Power inserted 
the December 28, 2010 effective date into the contracts after Grouse Creek had signed them. At 
oral argument, Grouse Creek’s counsel indicated that this was in keeping with Idaho Power’s 
usual practice. However, Grouse Creek was aware of the IPUC proceedings pertaining to the 
eligibility cap and that any decision on lowering the cap would be effective as of December 14, 
2010. The contracts were specifically subject to, and conditioned upon, IPUC approval of the 
entirety of their provisions. If Grouse Creek had concerns that the effective date inserted into the 
contracts would be determinative of its rights, it could have inserted a different effective date 
into the contracts instead of leaving it to Idaho Power to do so. Grouse Creek has made no claim 
of fraud or other grounds for avoidance of the December 28 effective date.  
 
Rather than simply stating that Grouse Creek could not pursue a non-contractual LEO 
theory, since it had voluntarily entered into a contractual LEO with Idaho Power, the IPUC 
addressed the issue of whether an LEO had arisen prior to December 28. In doing so, the IPUC 
relied upon the integration clause in the contracts. In its final order, Order No. 32635, issued on 
September 7, 2012, the IPUC stated: 
Because the parties have existing contracts, and we find no undue or unreasonable 
delay on the part of Idaho Power, a determination of the existence of a legally 
enforceable obligation at another point in time is unnecessary. Moreover, the 
parties agreed that all prior agreements were superseded by the December 28, 
2010 PPAs. Here the Commission did not have to determine whether a legally 
enforceable obligation arose because the parties entered into written Agreements. 
. . . We also find that the Agreements expressly supersede all prior agreements, 
including any entitlement to an otherwise enforceable legal obligation. 
Id. at 16−17. The problem with these holdings is that the parties did not have “existing 
contracts.” 
 
16 
 
What the IPUC failed to take into account in relying on the December 28 contracts is the 
fact that both contracts were contingent upon a condition precedent1: 
This Agreement shall become finally effective upon the Commission’s approval 
of all terms and provisions hereof without change or condition and declaration 
that all payments to be made to [Grouse Creek] hereunder shall be allowed as 
prudently incurred expenses for ratemaking purposes. 
This condition was not fulfilled because the IPUC disapproved the contracts and they thus 
became null and void. The IPUC cannot disapprove the contracts, thereby invalidating them 
pursuant to their express terms, and then rely on them to rule against a contracting party.  
 
Furthermore, the integration clause in the contracts does not negate the existence of a 
non-contractual LEO. That provision reads: 
This Agreement constitutes the entire Agreement of the Parties concerning the 
subject matter hereof and supersedes all prior or contemporaneous oral or written 
agreements between the Parties concerning the subject matter hereof. 
This provision, like all of the other provisions in the contracts, became superfluous and of no 
force or effect upon failure of the condition precedent.  Where the parties specifically agreed that 
the IPUC must approve all terms and provisions of the contract without change or condition, the 
IPUC does not have the ability to selectively enforce any provision of the contracts against any 
contracting party. Of more importance is the fact that the integration clause only pertains to oral 
or written agreements. It does not extend beyond “agreements” to include negotiations, 
representations, and the like. An LEO is not always an agreement, as the IPUC appears to have 
assumed. An LEO, by its very nature, is usually something less than an oral or written 
agreement. It can be established by a “meritorious complaint alleging that the project is mature 
and that the developer has attempted and failed to negotiate a contract with the utility.” Rosebud 
Enterprises, Inc. v. Idaho Public Utilities Comm’n (Rosebud II), 131 Idaho 1, 6, 951 P.2d 521, 
526 (1997). A contract or agreement is a variety of LEO but an LEO is not always a contract or 
agreement.  
                                                 
1 We stated in Weisel v. Beaver Springs Owners Ass’n, Inc.: 
A condition precedent is an event not certain to occur, but which must occur, 
before performance under a contract becomes due. . . .When there is a failure of a 
condition precedent through no fault of the parties, no liability or duty to perform 
arises under the contact. 
152 Idaho 519, 528, 272 P.3d 491, 500 (2012).  
 
17 
 
An LEO is a somewhat amorphous product of a combination of federal and state laws 
based on PURPA. Although states must implement PURPA pursuant to FERC regulations, 
“FERC has adopted regulations . . . [that] afford state regulatory authorities . . . latitude in 
determining the manner in which the regulations are to be implemented.” F.E.R.C. v. Mississippi, 
456 U.S. 742, 751 (1982). This latitude extends to the way in which legally enforceable 
obligations are created. In Rosebud Enterprises, Inc. v. Idaho Public Utilities Comm’n (Rosebud 
I), 128 Idaho 609, 623−24, 917 P.2d 766, 780–81 (1996) (quoting West Penn Power Co., 71 
FERC ¶ 61,153 (1995)), the Court noted that, according to FERC, “‘[i]t is up to the States,’” not 
FERC, “‘to determine the specific parameters of individual QF power purchase agreements, 
including the date at which a legally enforceable obligation is incurred under State law.’”  
A state’s latitude, however, has limits. FERC provides that a QF may provide energy to a 
utility either by entering into a contract or through a legally enforceable obligation. 
18 C.F.R. § 292.304(d). In implementing PURPA, “states must provide for legally enforceable 
obligations as distinct from contractual obligations . . . .” Power Resource Group, Inc. v. Public 
Utilities Comm’n of Texas, 422 F.3d 231, 238 (5th Cir. 2005). FERC explains that “[t]his option 
to sell via legally enforceable obligation was ‘specifically adopted to prevent utilities from 
circumventing the requirement of PURPA that utilities purchase energy and capacity from 
QFs.’” Grouse Creek Wind Park, LLC, 142 FERC ¶ 61187 at P 40 (citing Cedar Creek, 137 
FERC ¶ 61006 at P 32).2 FERC explained:  
[Grouse Creek is] thus entitled to a legally enforceable obligation in those 
situations where, for example, a utility has refused to negotiate a contract. In order 
to protect the rights of a QF, once a QF makes itself available to sell to a utility, a 
legally enforceable obligation may exist prior to the formation of a contract. A 
contract serves to limit and/or define bilaterally the specifics of the relationship 
between the QF and the utility. A contract may also limit and/or define bilaterally 
the specifics of the legally enforceable obligation at the heart of that relationship. 
But the obligation can pre-date the signing of the contract. Moreover, the tool of 
                                                 
2 Although a FERC declaratory order does not “fix the rights of the parties,” it does “advise the parties of the 
Commission’s position.” Indus. Cogenerators, 47 F.3d at 1235. A FERC declaratory order is “much like a 
memorandum of law prepared by the FERC staff in anticipation of a possible enforcement action,” and is also 
“formally used” by FERC “as its own statement of position.” Id. As a general rule, courts defer to an agency’s 
interpretation of its own regulations unless the interpretation is “plainly erroneous or inconsistent with the 
regulation.” Auer v. Robbins, 519 U.S. 452, 461 (1997). For example, in the recent Decker v. Northwest 
Environmental Defense Center, the Supreme Court proclaimed it “well established that an agency’s interpretation 
need not be the only possible reading of a regulation—or even the best one—to prevail.” 133 S.Ct. 1326, 1337 
(2013). Because FERC’s declaratory orders interpret its own regulations, they are not binding on this Court but do 
offer persuasive authority and are entitled to deference.  
 
18 
“seek[ing] state regulatory authority assistance to enforce the PURPA-imposed 
obligation” does not mean that seeking such assistance is a necessary condition 
precedent to the existence of a legally enforceable obligation.  
Id. 
FERC stated that the IPUC’s “limitation on the conditions for legally enforceable 
obligation formation overlooked ‘the fact that a legally enforceable obligation may be incurred 
before the formal memorialization of a contract to writing.’”  Id. at P 36 (citing Cedar Creek, 
137 FERC ¶ 61,006 at P 36). FERC noted that its regulations “expressly use the terms ‘contract’ 
and ‘legally enforceable obligation’ in the disjunctive to demonstrate that a legally enforceable 
obligation includes, but is not limited to, a contract.” Cedar Creek, 137 FERC ¶ 61,006 at P 35. 
Indeed, an LEO may be formed unilaterally, through the actions of a QF. FERC indicated in 
Cedar Creek, that a QF creates an LEO “by committing itself to sell to an electric utility,” 
because this commitment by the QF “also commits the electric utility to buy.” 137 FERC ¶ 
61,006 at P 32.  
Language in the IPUC orders creates confusion as to what is required to establish an 
LEO. In Order No. 32257, the IPUC stated that it “does not consider a utility and its ratepayers 
obligated until both parties have completed their final reviews and signed the agreement.” Id. at 
9.  In its order on reconsideration, Order No. 32299, the IPUC found that “a legally enforceable 
obligation is incurred and a contract is fully executed upon the signature of both parties.” Id. at 8. 
These statements suggest the IPUC failed to recognize that a utility may be obligated to purchase 
a QF’s energy even if it does not agree to the terms of a QF’s commitment to sell to it. FERC 
explicitly stated that “the phrase legally enforceable obligation is broader than simply a contract 
between an electric utility and a QF,” because “the phrase is used to prevent an electric utility 
from avoiding its PURPA obligations by refusing to sign a contract, or . . . delaying the signing 
of a contract, so that a later and lower avoided cost is applicable.” Cedar Creek, 137 FERC ¶ 
61,006 at P 32. However, the IPUC then corrected these statements in its final order, Order No. 
32635, by stating: 
We have a long history of recognizing two methods by which a QF can obtain an 
avoided cost rate in Idaho: (1) by entering into a signed contract with the utility; 
or (2) by filing a meritorious complaint alleging that ‘a legally enforceable 
obligation’ has risen and, but for the conduct of the utility, there would be a 
contract. 
 
19 
Id. at 12 (citing Rosebud II and A.W. Brown v. Idaho Power Co., 121 Idaho 812, 816, 828 P.2d 
841, 845 (1992)). The IPUC went on to state that its “application of this framework conforms 
with FERC’s analysis of its standards,” stating those standards to be: 
Thus, under our regulations, a QF has the option to commit itself to sell all or part 
of its electric output to an electric utility. While this may be done through a 
contract, if the electric utility refuses to sign a contract, the QF may seek state 
regulatory authority assistance to enforce the PURPA-imposed obligation on the 
electric utility to purchase from the QF, and a non-contractual, but still legally 
enforceable, obligation will be created pursuant to the state’s implementation of 
PURPA. Accordingly, a QF, by committing itself to sell to an electric utility, also 
commits the electric utility to buy from the QF; these commitments result either in 
contracts or in non-contractual, but binding, legally enforceable obligations. 
Id. at 12−13 (quoting JD Wind 1, 129 FERC ¶ 61,148 at 61,633). The IPUC continued:  
Either the parties enter into a contract or, if the utility is failing to negotiate or 
refusing to enter into a contract with a QF, the QF can file a complaint with this 
Commission, at which time the Commission will make a determination as to 
whether and when a legally enforceable obligation arose.  
Id. at 13. Then, the Commission said what it should have said in the very first instance, “[w]hen 
a contract has been entered into by the parties and submitted for approval, there is no need for a 
determination regarding any other legally enforceable obligation.” Id. Had the IPUC said exactly 
that in its first order, rather than appearing to equate an LEO with a contract and requiring a 
signature for both, the confusion created by its first two orders might have been averted.  
An LEO is a significant protection for a QF that is dealing with an intransigent electric 
utility. By committing itself to sell its output to an electric utility, a QF has an alternate non-
contractual route to pursue. It does not require signatures or all of the attendant features of a 
contract. However, where the utility does agree to terms acceptable to the QF, the alternate route 
is not necessary. It may well be that Grouse Creek’s filing of the complaints against Idaho Power 
on November 8, 2010, jump-started the negotiations that produced the contracts. Once voluntary 
contracts were entered into by the parties, the non-contractual LEO alternative was no longer 
necessary for, or available to, Grouse Creek. It had an actual LEO. Unfortunately for Grouse 
Creek, it had voluntarily agreed to terms that turned out not to be to its advantage. By ceding to 
Idaho Power the ability to establish the effective date of the contracts, and knowing of the 
ongoing proceeding where the IPUC had notified interested parties that a change in the eligibility 
cap was under consideration and would be effective as of December 14, 2010, Grouse Creek was 
clearly taking a gamble―one which it lost.  
 
20 
 
Unfortunately, after hitting the nail on the head, the IPUC went on to find “that a legally 
enforceable obligation did not arise prior to December 14, 2010, because material terms of the 
Agreements were still incomplete on that date,” and “that the Agreements expressly supersede all 
prior agreements.” Again, these statements seem to imply that an LEO is necessarily a contract, 
entailing all of the elements of a contract. Order No. 32635 at 16 and 17. There was no need to 
insert this superfluous, confusing language into the order.  
Grouse Creek also claims that the IPUC acted in an arbitrary and capricious manner by 
failing to grandfather its projects, pointing out that the IPUC’s action was inconsistent with 
previous grandfathering decisions. The three orders filed by the IPUC do appear to be 
inconsistent with the grandfathering criteria it laid out in 2005, when, as in this case, it was in the 
process of lowering the posted rate eligibility cap. In the Matter of Suspending Idaho Power’s 
PURPA Obligation, Case No. IPC-E-05-22. In that proceeding, the Commission found it 
“reasonable to establish [certain] criteria to determine the eligibility of PURPA qualifying wind 
generating facilities for contracts at the published avoided cost rates.” Order No. 29839 at 9. The 
criteria were: 
(1) [S]ubmittal of a signed power purchase agreement to the utility, or (2) submittal to the 
utility of a completed Application for Interconnection Study and payment of fee. In 
addition to a finding of existence of one or both of the preceding threshold criteria, the 
QF must also be able to demonstrate other indicia of substantial progress and project 
maturity, e.g., (1) a wind study demonstrating a viable site for the project, (2) a signed 
contract for wind turbines, (3) arranged financing for the project, and/or (4) related 
progress on the facility permitting and licensing path. 
Id. at 10. The IPUC later affirmed this grandfathering criteria, noting that it developed the 
requirements “to recognize and not discount the considerable time, effort and energy expended 
by some QFs in developing their projects . . . .” Order No. 29872 at 10. 
An examination of some of the IPUC’s past decisions citing Order Nos. 29829 and 29872 
demonstrates a lack of consistency. In Salmon Falls, a case decided after the 2005 change in 
posted rate eligibility, Idaho Power and a QF submitted an agreement for approval and sought 
grandfathering. Order No. 29951. The Commission found that the “Firm Energy Sales 
Agreement” presented by Idaho Power was acceptable because the “project satisfie[d] the 
grandfathering eligibility criteria established in Order Nos. 29839 and 29872 in Case No. IPC-E-
05-22.” Id. at 5. The IPUC noted that “the Agreement will not become effective until the 
 
21 
Commission has approved all the Agreement’s terms and conditions . . . .” Order No. 29951 at 2. 
Notably, the Commission made no mention of the agreement’s effective date.  
In Yellowstone Power, a QF and Idaho Power submitted an agreement, dated July 28, 
2010, to the IPUC for approval, but maintained that the QF was entitled to avoided cost rates that 
had changed on March 16, 2010. Order No. 32104. In that case, there was no “contract to 
purchase the QF generation on or before March 16, 2010, nor had Yellowstone filed a complaint 
alleging that Idaho Power acted unreasonably or in bad faith by not signing an agreement before 
March 16 when the rates changed.” Id. at 3. Furthermore, the record did not reveal “any 
documentation” to indicate “that there was a meeting of the minds prior to March 16, 2010.” Id. 
at 6. Despite these irregularities, the IPUC nonetheless approved the agreement as submitted, 
granting the QF grandfathered status and entitlement to the rates published prior to March 16. Id. 
at 12. Here, too, the IPUC noted that “[b]y its own terms, the Agreement will not become 
effective until the Commission has approved all of the Agreement’s terms and conditions and 
declares that all payments made by Idaho Power to [the QF] for purchases of energy will be 
allowed as prudently incurred expenses for ratemaking purposes.” Order No. 32104 at 5.  
In Cargill, Idaho Power sought grandfathering for a QF, arguing that “all outstanding 
contract issues had been resolved . . . and that but for the internal review process of [Idaho 
Power] a contract would have been signed” prior to the rate change. Order No. 32024 at 4. 
Although the QF had not filed a complaint with the IPUC as required by A.W. Brown, “by 
signing the Agreement and voluntarily presenting it to the Commission, Idaho Power has 
nevertheless concluded that [the QF] meets the second test of the Commission and should be 
entitled” to grandfathering. Id. at 2. The IPUC Staff offered its opinion “that the grandfathering 
criteria developed and applied by Idaho Power in this case are fair and reasonable.” Id. at 3. The 
IPUC again noted that the “Agreement will not become effective until the Commission has 
approved all of the Agreement’s terms and conditions . . . .” Order No. 32024 at 3. With little 
discussion, the IPUC granted grandfathering to the QF, stating that Idaho Power “fairly 
represented” IPUC’s “past grandfathering requirements” and, citing A.W. Brown, stated that 
Idaho Power’s “approach in this case regarding contract rates” was “in concert with the spirit of 
those prior grandfathering cases.” Id. at 4. Grandfathering, of course, is not the province of Idaho 
Power, but instead “is essentially an IPUC finding that a legally enforceable obligation to sell 
power existed at a given date.” Rosebud I, 128 Idaho at 624, 917 P.2d at 781.  
 
22 
The IPUC, as a regulatory body, may depart from its previous decisions regarding 
grandfathering. “Because regulatory bodies perform legislative as well as judicial functions in 
their proceedings, they are not so rigorously bound by the doctrine of stare decisis that they must 
decide all future cases in the same way as they have decided similar cases in the past.” Id. at 618, 
917 P.2d at 775. Indeed, “[b]ecause each case presents a myriad of facts that distinguish it, no 
one case represents the law by which subsequent parties are bound.” Id. at 615, 917 P.2d at 772. 
Nonetheless, the IPUC must “demonstrate that it has applied the criteria prescribed by statute 
and by its own regulations and has not acted arbitrarily or on an ad hoc basis . . . .” Washington 
Water Power v. Idaho Public Utilities Comm’n, 101 Idaho 567, 575, 617 P.2d 1242, 1250 (1980) 
(quoting Home Plate, Inc. v. OLCC, 20 Or. App. 188, 190, 530 P.2d 862, 863 (1975)). Here, 
with little explanation, the IPUC appears to have departed from its own line of orders on 
grandfathering 
and 
seemingly 
created 
new 
criteria 
applicable 
to 
Grouse 
Creek 
alone―determining the grandfathering issue on the basis of when the contracts were fully 
executed.  
In Order No. 32257, the IPUC indicates that grandfathering applies only to changes in 
rates and not eligibility size. Id. at 10. Then, in Order No. 32299, the IPUC seems to imply that 
the grandfathering concept applies to both. Order No. 32635 does not specifically address 
grandfathering criteria but it clearly appears that the Commission declined to grandfather the 
Grouse Creek contracts because those contracts were not signed by both parties until December 
28, 2010. Id. at 16−17. No mention is made of the various holdings that an agreement does not 
become effective until the IPUC has approved all of its terms and conditions. Nor does the IPUC 
indicate what might have happened if the parties had agreed to an effective date prior to 
December 14, even though the contracts were actually signed after that date. In other words, it 
remains an open question as to whether the IPUC would still refuse to grandfather if the parties 
selected an effective date prior to the change in rates or eligibility but after the contracts were 
signed by both parties. And, in the case where a non-contractual LEO is found to exist, where 
neither party may have signed the contract, it is not clear whether the IPUC would apply the 
criteria set out in Order No. 29839.  
As noted above, the IPUC may change its criteria regarding grandfathering but, if it does 
so, it should demonstrate that it is not acting arbitrarily or in an ad hoc manner. Here, the IPUC 
has provided little explanation for its departure from the grandfathering criteria stated in Order 
 
23 
No. 29839 and subsequent orders. It primarily hangs its hat on the December 28, 2010 effective 
date of the contracts and finds that “[t]he rates in the Agreements, as written, do not comply with 
Commission Order No. 32176.” This reference to the order changing the eligibility cap is 
minimal support for the change but probably sufficient to satisfy the need for explanation since 
Order No. 32176 does contain discussion, policy considerations, and a policy determination 
regarding the eligibility cap.  
It is not the intent hereof to be overly critical of the IPUC because it and its members are 
conscientious and provide good public service. The orders in this case have the potential, 
however, of creating confusion on two important issues―the criteria for establishing a non-
contractual LEO and for qualifying for grandfather status. Careful wording is essential to 
eliminate confusion and provide predictability for interested parties.