Title: TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, INC; THE UNITED STATES OF AMERICA; CARBON POWER & LIGHT, INC.; WHEATLAND RURAL ELECTRIC ASSOCIATION, INC.; RURAL ELECTRIC COMPANY; WYXULEC COMPANY; RIVERTON VALLEY ELECTRIC ASSOCIATION, INC.; HOT SPRINGS COUNTY RURAL ELECTRIC ASSOCIATION, INC.; NIOBRARA ELECTRIC ASSOCIATION, INC.; BIG HORN RURAL ELECTRIC COMPANY; and WYOMING RURAL ELECTRIC ASSOCIATION v. THE WYOMING PUBLIC SERVICE COMMISSION; JOHN R. SMYTH, BIL TUCKER, AND NELS J. SMITH, in Their Official Capacities as Commissioners of the Wyoming Public Service Commission; PACIFICORP, D/B/A PACIFIC POWER AND LIGHT COMPANY; SHOSHONE RIVER POWER, INC.; and GARLAND LIGHT & POWER COMPANY

State: wyoming

Issuer: Wyoming Supreme Court

Document:

TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, INC; THE UNITED STATES OF AMERICA; CARBON POWER & LIGHT, INC.; WHEATLAND RURAL ELECTRIC ASSOCIATION, INC.; RURAL ELECTRIC COMPANY; WYXULEC COMPANY; RIVERTON VALLEY ELECTRIC ASSOCIATION, INC.; HOT SPRINGS COUNTY RURAL ELECTRIC ASSOCIATION, INC.; NIOBRARA ELECTRIC ASSOCIATION, INC.; BIG HORN RURAL ELECTRIC COMPANY; and WYOMING RURAL ELECTRIC ASSOCIATION v. THE WYOMING PUBLIC SERVICE COMMISSION; JOHN R. SMYTH, BIL TUCKER, AND NELS J. SMITH, in Their Official Capacities as Commissioners of the Wyoming Public Service Commission; PACIFICORP, D/B/A PACIFIC POWER AND LIGHT COMPANY; SHOSHONE RIVER POWER, INC.; and GARLAND LIGHT & POWER COMPANY1989 WY 235784 P.2d 627Case Number: 89-26Decided: 12/29/1989Supreme Court of Wyoming
TRI-STATE GENERATION AND 
TRANSMISSION ASSOCIATION, INC; THE UNITED STATES OF AMERICA; CARBON POWER & 
LIGHT, INC.; WHEATLAND RURAL ELECTRIC ASSOCIATION, INC.; RURAL ELECTRIC COMPANY; 
WYXULEC COMPANY; RIVERTON VALLEY ELECTRIC ASSOCIATION, INC.; HOT SPRINGS COUNTY 
RURAL ELECTRIC ASSOCIATION, INC.; NIOBRARA ELECTRIC ASSOCIATION, INC.; BIG HORN 
RURAL ELECTRIC COMPANY; AND WYOMING RURAL ELECTRIC ASSOCIATION, 
PETITIONERS,

v.

THE WYOMING PUBLIC 
SERVICE COMMISSION; JOHN R. SMYTH, BIL TUCKER, AND NELS J. SMITH, IN THEIR 
OFFICIAL CAPACITIES AS COMMISSIONERS OF THE WYOMING PUBLIC SERVICE COMMISSION; 
PACIFICORP, D/B/A PACIFIC POWER AND LIGHT COMPANY; SHOSHONE RIVER POWER, INC.; 
AND GARLAND LIGHT & POWER COMPANY, RESPONDENTS.

Michael A. 
Williams, Robert E. Youle, and Edward A. Gleason of Sherman & Howard, 
Denver, Colo., and Bruce Asay of Kline, Buck & Asay, Cheyenne, for petitioner Tri-State Generation and 
Transmission.

John R. Bolton, 
Asst. Atty. Gen., Cheyenne, Richard Allen Stacy, U.S. Atty., Cheyenne, J. 
Christopher Kohn and Larry R. Steffes, Washington, D.C., for petitioner 
U.S.

Joseph B. Meyer, 
Atty. Gen., Mary B. Guthrie, Roger C. Fransen, Sr. Asst. Attys. Gen., Cheyenne, 
for respondent Public Service Com'n of 
Wyoming.

Stanley K. 
Hathaway of Hathaway, Speight & Kunz, Cheyenne, and Stephen S. Walters and 
George M. Galloway of Stoel, Rives, Boley, Jones & Grey, Portland, Or., for respondent 
PacifiCorp.

Robert D. Olson 
of Goppert, Olson & Guill, Cody, for 
respondent Shoshone River Power, Inc.

Ross D. 
Copenhaver and Tracy J. Copenhaver of Copenhaver, Kath & Kitchen, Powell, for respondent Garland Light and Power 
Co.

Before CARDINE, C.J., and THOMAS, URBIGKIT, MACY 
and GOLDEN, JJ.

CARDINE, Chief 
Justice.

[¶1.]     In this case, 
petitioners, Tri-State Generation and Transmission Association, Inc. (Tri-State) 
and its member utilities, along with the Rural Electrification Administration 
(REA), seek reversal of an order of the Wyoming Public Service Commission (PSC) 
which approved the sale of the assets of Shoshone River Power, Inc. (Shoshone) 
and Garland Light & Power Company (Garland) to Pacific Power and Light 
Company (PP & L), claiming the sales would adversely affect the rates 
charged consumers. Petitioners claim that the PSC prejudged this controversy and 
denied them due process; that the PSC's order contradicts federal law and 
jeopardizes the REA's nationwide program; that the PSC's narrow focus on 
quantifiable damages failed to vindicate the public interest as is required by 
Wyoming law; 
and that the PSC's order is unconstitutionally retroactive in its 
effect.

[¶2.]     We affirm the order of 
the PSC.

[¶3.]     The hearing conducted 
by PSC was the hearing required by our decision in the case Tri-State Generation 
and Transmission Ass'n, Inc. v. Wyoming Public Service Comm'n, 735 P.2d 718 
(Wyo. 1987). That decision was rendered in a case in which only the sale of 
Shoshone was at issue, but it is evident that the decision applied equally to 
the sale of Garland. We note, at the outset, that at the 
time this litigation was unfolding before the PSC and in this court, the parties 
in this case, with the exception of the PSC, were also litigating issues 
relating to breach of contract in the federal courts. Many of the issues 
litigated in federal court have now been resolved. Tri-State Generation and 
Transmission Ass'n, Inc. v. Shoshone River Power, Inc., 805 F.2d 351 (10th Cir. 
1986); Tri-State Generation and Transmission Ass'n, Inc. v. Shoshone River 
Power, Inc., 874 F.2d 1346 (10th Cir. 1989).

[¶4.]     The facts essential to 
disposition of this case follow. Additional facts may be gleaned from the 
opinions cited above. Upon remand by us to the PSC, a contested case hearing was 
held to ascertain the propriety of the rate changes that resulted from the sale 
of Shoshone and Garland to PP & L. Shoshone 
and Garland are 
electric distribution cooperatives whose assets are owned by the consumers they 
serve. They sell electric power at retail to consumers in Wyoming. Both are 
regulated by the PSC. Tri-State is made up of twenty-five distribution 
cooperatives, including Shoshone and Garland, and generates and purchases electric 
power which is then sold at wholesale to its member cooperatives. Much of 
Tri-State's debt is financed or guaranteed by the REA. That debt is secured 
largely by assignments to REA of Tri-State's agreements with its members for the 
sale and purchase of wholesale electric power. Such agreements were in force 
between Tri-State and Shoshone and Garland and had been assigned as security to 
REA.

[¶5.]     The impetus for this 
litigation arises from Shoshone's and Garland's obligations to buy power from 
Tri-State and, in turn, REA's interest in preserving the solvency of Tri-State 
because of their creditor/debtor relationship. The contracts between Shoshone 
and Garland and Tri-State require that Shoshone 
and Garland, so 
long as they are in existence, purchase all their requirements for electric 
power from Tri-State. The crucial question is whether Shoshone and Garland cease to exist, 
and hence become relieved of their obligation to buy power from Tri-State, when 
they sell their assets and dissolve their corporate existence. The Tenth Circuit 
Court of Appeals has answered this question:

"We hold, therefore, that 
Shoshone has an implied obligation to remain in business and not to eliminate 
its requirements, as long as there are members in the Shoshone system requiring 
electric power. In other words, the fulfillment of Shoshone's contractual 
undertakings necessarily implies the continuance of Shoshone's system. 
Otherwise, the contract could not be carried out in the way anticipated and 
would be rendered unreasonable to Tri-State and REA. Consequently, Shoshone 
breaches the all-requirements contract as a matter of law when it attempts to 
eliminate its requirements by selling its members subscriptions to Pacific and 
ceasing business." Tri-State Generation, 874 F.2d  at 1360.

[¶6.]     The petitioners posit 
four issues before this court:

"I. The PSC prejudged the 
result of the rehearing, thereby denying petitioners' due process 
rights.

"II. The PSC's Order 
contradicts federal law and jeopardizes a nationwide federal program of rural 
electrification, and it is thereby precluded.

"III. The PSC's narrow 
focus on quantifiable damages within the State of Wyoming and its refusal 
to consider evidence presented by petitioners ignored the public interest. 

"IV. The PSC violated the 
Wyoming Constitution, and directives of this Court [Wyoming Supreme Court] when 
it attempted to give retroactive effect to its previous order approving the sale 
of Shoshone River Power, Inc. (`Shoshone')."

[¶7.]     In response, the PSC 
contends:

"I. The Public Service 
Commission of Wyoming's decision in this proceeding was fair and free from 
bias.

"II. The decision of the 
Public Service Commission of Wyoming approving the sales of Garland and Shoshone to 
Pacific is supported by substantial evidence and is the product of proper 
consideration of the evidence presented.

"III. The Public Service 
Commission of Wyoming's action in this proceeding is not preempted by federal 
law.

"IV. The Public Service 
Commission of Wyoming's order allowing its approval of the Shoshone sale to be 
effective on the date of its initial approval of that sale was not an 
impermissible retroactive order."

[¶8.]     PP & L, Shoshone 
and Garland also presented briefs to this court, 
and they take essentially the same positions espoused by Tri-State and REA, 
although the issue of retroactivity does not apply to Garland.

[¶9.]     As a preface to our 
disposition of the issues raised, we must first delineate the roles played by 
the federal courts and the PSC. At first blush, there may appear to be an 
inconsistency between the determination reached by the federal court and that 
reached in the PSC administrative proceeding. On closer examination, however, it 
is apparent that adjudication of the breach of contract issues litigated in the 
federal courts is very different from the more limited mission of the PSC to 
vindicate the public's interest in just and reasonable utility rates. The PSC is 
not empowered to decide whether a breach of contract occurred in this case. The 
PSC has power only to regulate and supervise every public utility in the state 
as provided for by law and duly adopted rules and regulations. W.S. 37-2-112. 
The PSC is commanded to ensure that:

"All rates shall be just 
and reasonable, and all unjust and unreasonable rates are prohibited. Except as 
otherwise provided in W.S. 15-7-407, no public utility shall in any manner 
charge, demand, collect or receive from any person greater or less or different 
compensation for any service rendered or to be rendered by the public utility 
than is charged, demanded, collected or received by the public utility from any 
other person for a like and contemporaneous service under similar circumstances 
and conditions." W.S. 37-3-101.

[¶10.]  In determining what rates are just and 
reasonable, the PSC may take into consideration depreciation of plant, 
obsolescence of equipment, expense of operation, physical and other values of 
the plant, system, business and properties of the public utility whose rates are 
under consideration. W.S. 37-2-122. The PSC does not have jurisdiction to 
determine the rights of parties to a contract. Tri-County Electric Ass'n, Inc. 
v. City of Gillette, 525 P.2d 3, 9 (Wyo. 1974). In summary, 
the PSC's role is to ensure that the sales did not result in unjust or 
unreasonable utility rates for affected consumers. That determination is not 
altered by the assertion that the effectuation of those sales was in breach of 
contracts between Tri-State and Shoshone and Garland.

[¶11.]  We think it evident that the issues 
asserted by the petitioners in this case are based largely upon a supposition 
that the PSC had power to adjudicate the rights of the various parties to this 
action under a complex series of contracts and statutes which govern rural 
electrification. First, petitioners claim that the PSC was biased in its 
adjudication of this matter and that they were denied due process of law. This 
is based in large part upon the fact that the PSC refused to grant a contested 
case hearing until after remand by this court. We hold that such a circumstance 
does not support a finding of bias. PSC initially believed, in good faith, that 
a hearing was not required. We are directed to nothing in the record that now 
convinces us that the hearing after remand was not conducted fairly, 
impartially, and satisfied all requirements of due 
process.

[¶12.]  Petitioners assert that the refusal of 
the chairman to receive evidence which pertained to breach of contract, as well 
as other obligations amongst the parties to this litigation, demonstrates PSC's 
bias. We hold that this contention does not support an allegation of bias. As we 
shall develop more fully in response to petitioners' second and third arguments, 
PSC's rulings on the admission of evidence pertaining to the breach of contracts 
were proper.

[¶13.]  Petitioners also make passing reference 
to the absence of one of the PSC commissioners from a significant portion of the 
remand hearing as supporting their allegation of bias. The record only 
demonstrates that the absence was due to a death in the family. There is nothing 
to suggest that the commissioner was anything less than a full-fledged 
participant in the decision making process. Members of administrative agencies 
are assumed to be men of conscience and intellectual discipline who are capable 
of judging the case before them fairly and on the basis of the evidence 
presented. Fallon v. Wyoming State Board of Medical Examiners, 441 P.2d 322, 329 
(Wyo. 1968); Armed Forces Cooperative Insuring Ass'n v. Department of Insurance, 
622 P.2d 1318, 1326-27 (Wyo. 1980). One who asserts impermissible bias has the 
burden to overcome the contrary presumption and must affirmatively establish the 
existence of bias. Id., at 1327; Board of 
Trustees, LaramieCountySchool 
District No. 1 v. Spiegel, 549 P.2d 1161, 1167 (Wyo. 1976). We hold that 
petitioners have failed to carry this burden of demonstrating 
bias.

[¶14.]  Petitioners begin their second argument 
with another faulty premise which undermines their entire argument. Petitioners 
assert: "By allowing Shoshone and Garland to sell their assets and avoid their 
obligations under the wholesale power contracts, the PSC's order will 
impermissibly undermine a federal program [rural electrification]. Therefore, 
the order is precluded by federal law and cannot stand." The PSC order did not 
allow Shoshone and Garland to sell their assets. Rather, it found 
that the public interest was served by the changes in rates that would result, 
or which had already resulted, because of the sales or proposed sales. The PSC 
order does not allow Shoshone and Garland to avoid their obligations to Tri-State 
and/or the REA. On the contrary, the PSC order quite appropriately makes clear 
that it does not have authority to adjudicate those issues which have now 
already largely been settled by the litigation in federal court. We need not 
address this argument further because the order does not have the effect 
contended by the petitioners and it could not offend federal law for reasons 
that do not exist.

[¶15.]  In their third contention, petitioners 
assert that the PSC's narrow focus on dollars obscured public interest 
considerations of fundamental fairness. Our review of the record reveals that 
the PSC considered all offered evidence which was relevant to its statutory 
authority to review utility rates. It refused to consider evidence which was not 
pertinent to that mission. Thus, it refused to consider evidence relating to the 
alleged breaches of contract. The PSC's refusal to consider this evidence was 
correct, for, as we noted earlier in our discussion, it does not have authority 
to determine the rights of parties to a contract. Tri-County Electric Ass'n, 
Inc., 525 P.2d  at 9. Petitioners' real burden in this regard, which they have 
ignored to their detriment, is this:

"The scope of our review 
of an appeal from an administrative action is directed by § 16-3-114 W.S. 1977. 
Under that statute, we are bound to review the entire record to see if the 
agency's action is supported by substantial evidence. If so, we must uphold the 
agency's actions and not substitute our judgment for that of the agency's. 
Substantial evidence has been defined `as such relevant evidence as a reasonable 
mind might accept as adequate to support a conclusion.' Substantial evidence may 
indeed be less than the great weight of evidence, but is more than a mere 
scintilla of evidence. The possibility of drawing two inconsistent conclusions 
from the evidence presented does not preclude the agency's conclusion from being 
supported by substantial evidence. The burden is on appellant to prove 
arbitrary, illegal or fraudulent action by the agency." (footnote and citations 
omitted) Burlington Northern Railroad Co. v. 
Public Service Comm'n, 698 P.2d 1135, 1138-39 (Wyo. 1985).

Petitioners have 
failed to carry that burden with their argument that the PSC improperly refused 
to consider what the long-range, across-the-board effects on Tri-State and the 
REA would be if Shoshone and Garland were permitted to breach their 
contracts and if no remedy were available to remedy those breaches. Moreover, 
the issue of what damages are due Tri-State is now res judicata. Tri-State 
Generation, 874 F.2d 1346.

[¶16.]  Finally, petitioners contend that the 
PSC's order is impermissible because it has an unconstitutional, retroactive 
effect. This contention is based upon Art. 1, § 35 of the Wyoming Constitution 
which mandates that "[n]o ex post facto law, nor any law impairing the 
obligation of contracts, shall ever be made." Once again, all of petitioners' 
premises are faulty. The PSC made no law which was ex post facto or which 
impaired the obligation of contracts. All the PSC did was to review the 
rate-making impact of the Shoshone sale. The time of taking effect of the sale 
was wholly a matter of contract between the parties. The PSC could not, and did 
not, make any decisions regarding the terms or conditions of that 
contract.

[¶17.]  The order of the PSC is affirmed in all 
respects.