No. 14368 

IN THE SUPREME CCUlD OF THE STATE OF MONTANA 

1978 

rnrn-DAKOTA UrILITIES CaMPAJm 

et al., 

Plaintiff and Respondent, 

I;OWlB nNE RURAL, ELECTRIC et al. , 

Defendants and Appellants. 

Appeal fran: District Court of the Seventh Judicial District, 

Honorable L. C. Gulbrandson, Judge presiding. 

Counsel of Record: 

For Appellants: 

V. G. Koch argued, Sidney, fibntana 

JBhdank, Currsning and Best, Sidney, Mntana 

Otto T. Mank argued, Sidney, mntana 

For Respondent: 

Cresap and Phillips, Sidney, Mntana 

Paul S. Cresap argued, Sidney, Mntana 

Suhnitted: July 21, 1978 

Filed: , , - : 273 2rt 
Mr. Justice John C. Sheehy delivered the Opinion of the 

Court. 

This appeal arises from a declaratory judgment entered 

in favor of Montana-Dakota Utilities Company by the District 

Court, Seventh Judicial District, Richland County, Montana. 

The principal issue is whether Lower Yellowstone Rural 

Electric Association, a cooperative, and Upper Missouri G 

and T, a cooperative, its electric supplier, have the right 

to tap an electric transmission line owned by Montana-Dakota 

Utilities Company (MDU) under an agreement between MDU and 

Basin Electric Power Cooperative. 

Lower Yellowstone Rural Electric Association (LYREA) is 

a transmission and el.ectrica1 distribution cooperative, 

serving its members in the area involved in this dispute. 

Upper Missouri G & T Electric Cooperative (UM G & T) is an 

electric generation and transmission cooperative of Sidney, 

Montana, which is the electric power supplier to 11 member 

cooperatives, including LYREP.. GM G & T is in turn a member 

and part owner of Basin Electric Power Cooperative (Basin) 

which is an electrical generation cooperative organized for 

the purpose of generating and supplying the electric power 

needs of its members. 

Shell Oil Company (Shell) is contemplating construction 

of a gas plant to be located in the SE 1/4 of Section 7, 

Township 22 North, Range 60 East, Richland County, Montana. 

The electric needs of the proposed Shell gas plant are such 

that the estimated. connected load for full plant operation 

at its industrial plant will be 400 kilowatts or larger 

within 2 yea.rs from the date of initial service. The electric 

service load is needed both for the plant when it is in full 

operation, and for construction of the plant. 
Montana-Dakota Utilities Company is an electric utility 

engaged in generating, transmitting and supplying electric 

power. 

The proposed Shell plant is within the service area 

both for MDU and LYREA; since UM G & T is the electrical 

supplier for LYREA, it is also included in the case as a 

defendant. There is no dispute that defendants are proper 

parties before us nor any objection that Basin has not been 

made a party defendant in this cause. 

On January 13, 1972, MDU and Basin entered into an 

Interconnection and Common Use Agreement ("agreement") for 

joint use of their electrical facilities, where capacity 

allowed, in order to "maximize service reliability and 

minimize the respective investments". The electric power 

needs of UM G & T and its members are obtained from Basin 

and the United States Bureau of Reclamation (Bureau). MDU 

and UM G & T are suppliers of the total requirements for 

electric power used by consumers within their respective service 

areas. Even before the agreement of January 13, 1972, the 

Bureau wheeled electric power over the transmission lines of 

MDU for the use of UM G & T and its members, for which the 

Bureau paid MDU sums based on tabulations of kilowatt hours 

delivered to the cooperative members. 

The nearest transmission line to the proposed Shell gas 

plant is a 57 kilo-volt (KV) transmission line owned by MDU 

but subject to the agreement. The point to be decided here 

is whether MDU or LYREA will be the electric supplier for 

the proposed Shell gas plant. Resolution of that question 

requires an examination of the Electric Suppliers Territorial 

Integrity Act, section 70-501 et seq., R.C.M. 1947, and the 

terms of the agreement. 
In determining the meaning of the statutes, it is well 

to keep in mind the definitions provided by section 70-502, 

R.C.M. 1947: 

"(1) The term 'electric supplier' means any 

electrical utility and any electric co-operative. 

"(2) The term 'electric utility' means a person, 

firm, or corporation other than an electric 

co-operative which furnishes electrical service 

to the public. 

"(3) The term 'electric co-operative' means a rural 

electric co-operative organized under Chapter 

5 of Title 14, or a foreign corporation admitted 

to do business in Montana. 

"(5) The term 'line' means any electric conductor 

operating at a nominal voltage level of sixtynine thousand (69,000) volts or less, measured 

phase-to-phase." 

With respect to a new industrial electric customer in 

a rural area, such as the proposed Shell gas plant, the 

following pertinent portions of section 70-503, R.C.M. 1947, 

" (2) (a) Subject to subsection (3) the electric 

supplier having a line nearest the premises, 

as measured in accordance with subsection (2) 

(b), shall serve premises initially requiring 

service after the effective date of this act. 

"(b) All measurements under this act shall be 

made on the shortest straight line which can 

be drawn from the conductor nearest the 

premises to the nearest permanent portion 

of the premises. Construction power for 

premises to be constructed shall be supplied 

by the electric supplier having the right 

to serve the completed premises. 

"(3) An electric utility shall have the 

right to furnish electric service to any industrial 

or commercial premises if the estimated connected 

load for full plant operation at such industrial 

or commercial premises will be 400 kilowatts or 

larger within two (2) years from the date of 

initial service, provided however such electric 

utility can extend its lines to such industrial 

or commercial premises at less cost to the 

electric utility, or the industrial or commercial 

customer, than the electric co-operative cost. . . . No premises other than another such 

commercial or industrial premises shall be served 

from a line constructed under this section . . ." 
It appears from the record if MDU extends a line from 

its 57 KV transmission line to the proposed customer, 

its cost will be less than if LYREA utilized its nearest 

conductor to extend such a line, because the Richland conductor 

is 2.63 miles further away from the proposed customer; 

however, if LYREA has the right to tap the MDU 57 KV transmission line under the agreement, then LYREA'S cost of 

extending such line to the proposed customer would be the 

same as that of the electric utility, and under section 70- 

503(3), R.C.M. 1947, previously quoted, LYREA would then 

have the right to supply the customer by tapping MDU's 

transmission line. It also appears if MDU has the right under 

the agreement to refuse permission to LYREA to tap its 

transmission lines to serve Shell, then MDU will be the 

electric supplier for that proposed load; whereas, if under 

the agreement LYREA has the right to tap the transmission 

line, then under the statute LYREA will be the electric supplier 

for that load. 

The District Court made the following Findings of Fact 

and Conclusions of Law which are pertinent here: 

Finding of Fact No. 6: 

"6. That according to the terms of such agreement, Montana-Dakota Utilities Company has the 

sole right to determine excess capacity and 

permissible use of their 57 KV line other than 

at those points of delivery and the entitlement 

amounts set forth in the supplements to the 

interconnecting and common use agreement." 

Finding of Fact No. 7: 

"7. That the Lower Yellowstone Rural Electric 

Association has no right to tap into the 57 KV 

line owned by Montana-Dakota Utilities Company 

as the point where Montana-Dakota Utilities 

measures from to determine distance to the proposed gas plant, without permission from MontanaDakota Utilities, which permission has been denied." 

Finding of Fact No. 8: 

"8. That the evidence as to other loads being 

serviced, or needs for the future, although 

heard by the Court for purposes of completeness of the record, is irrelevant in this 

matter and therefore inadmissible." 
Finding of Fact No. 9: 

"9. That the term 'costs' as used in the 

statute refers to cost of construction from 

the starting point to the industrial load, 

without allocation to other consumers." 

Finding of Fact No. 10: 

"10. That the Montana-Dakota Utilities 57 

KV line is approximately 13,900 feet closer 

than the Lower Yellowstone Rural Electric 

Association's nearest source." 

Finding of Fact No. 11: 

"11. That the cost of construction from 

Montana-Dakota Utilities 57 KV line will 

be less than the cost of construction for 

Lower Yellowstone Rural Electric Association 

from their nearest source." 

Finding of Fact No. 12: 

"12. The Court further finds that the interpretation placed upon Exhibit 'A' by the defendants 

would preclude Montana-Dakota Utilities from 

all industrial loads within the geographic area 

covered by said Exhibit 'A'. The Court is unable, after careful consideration of said agreement, to determine any intent of any party 

thereto, that Montana-Dakota Utilities should 

surrender its statutory rights under Section 

70-503 R.C.M., 1947, which predated the execution of said agreement." 

It also found as a Conclusion of Law: 

"2. That Montana-Dakota Utilities Company 

has the right to furnish electrical power to 

the proposed Shell Oil Company gas plant, 

together with the right to furnish electrical 

power for construction of such plant." 

Our first consideration in determining the issues in 

this case is to look to the Electric Suppliers Territorial 

tegrity Act, determine if a statutory grant or priority 

may be found for either supplier in this case. Essentially, 

this requires an examination of the provisions of section 70-503. 

Under section 70-503(2)(a), the electric supplier, be it 

cooperative or utility, having lines nearest the premises, 

shall serve the premises initially requiring service after 

the effective date of the act (July 1, 1971). The closest 

supplier is determined under (2)(b) of that section by the 

shortest line which can be drawn from the conductor nearest 
the premises to the nearest permanent portion of the premises. 

Since MDU's 57 KV line is the "conductor" nearest the Shell 

plant MDU has the statutory priority, provided it meets the 

provisions of section 70-503(3). Section 70-503(3) gives 

an electric utility the right to furnish electric service to 

an industrial customer on two conditions: (1) that the 

estimated connected load for the proposed customer will be 

400 kilowatts or larger within two years from the beginning 

of service; and (2) that the utility can extend its lines to 

such industrial customer at less cost to the electric utility 

or the customer, than the electric cooperative cost. Again, 

MDU meets each of these conditions, there being no dispute 

as to the estimated connected load after service begins and 

it appearing that MDU's 57 KV line is nearer the customer by 

some 2.63 miles than the nearest conductor of the electric 

cooperative. 

Therefore, under the Electric Suppliers Territorial 

Integrity Act, MDU has the clear right to serve Shell's 

proposed gas plant, subject to one possibility which we must 

next determine. 

That possibility is whether under the agreement, LYREA 

and its supplier UM G & T have the contractual right to tap 

the 57 KV line owned by MDU in order to supply Shell. If 

LYREA has that contractual right, then its cost of construction 

of the line would be the same as the cost to MDU, in which 

event, under section 70-503(3), the cooperative would gain 

the statutory right to serve Shell. Under this section, the 

utility does not have a statutory right unless its cost for 

construction of line is less than the cost would be for the 

electric cooperative. 

The agreement therefore becomes the principal source of 

contention in this case, and we must look to the agreement to 

determine the issues here involved. 
The appellants, LYREA and UM G & T contend as follows: 

1. The agreement was more than a one-time contract to 

service delivery points listed therein and was in fact a 

continuing agreement to interconnect and jointly use all 

systems in the future. 

2. It was intended by the parties that their entire 

systems under the agreement be subject to interconnection 

and common use, and future facilities be constructed as 

provided by Article 2-A of the agreement and future investments shared as set forth in Article 2-B of the agreement. 

3. If District Court Finding No. 6 is upheld, the 

contract has no force of meaning since the owner of the 

system could determine there was no excess capacity regardless 

of facts. The whole intent of the agreement would be destroyed, 

since then a party could arbitrarily deny any connection 

with and common use of its system. 

MDU on the other hand contends: 

1. The contract provided that parties must mutually 

agree with respect to additional transmission, substation 

and related facilities to increase services to respective 

parties from the interconnected system beyond what is already 

agreed. 

2. The existence of excess capacity is a matter to be 

determined solely by the owner of the line. 

3. The true intent of the agreement was that for 

future expansion and interconnection, the parties to the 

agreement must mutually agree by supplementing the contract 

as to point of delivery and amount of delivery. 

In interpreting contracts, our guideposts are the 

statutes enacted by legislature, and a large body of case law. 

In short, a contract is to be construed so as to make it definite, 

operative and reasonable (section 13-709, R.C.M. 1947); words 

-8- 
are to be understood in their usual sense (section 13-710, 

R.C.M. 1947); and technical words are interpreted in the 

sense used in business to which they relate (section 13-711, 

R.C.M. 1947). However broadly the contract may be stated, 

it extends only to those things the parties intended to 

provide for (section 13-714, R.C.M. 1947) and repugnancies 

must be reconciled if possible to give some effect to the 

repugnant clauses, subordinate to the general intent of the 

parties and the purpose of the contract (section 13-718, 

R.C.M. 1947). 

We may also look to how the parties themselves have 

construed the contract in the past performance of it. Knapp 

v. Andrus (1919), 56 Mont. 37, 180 P. 908; Rentfro v. 

Dettwiler (1933), 95 Mont. 391, 26 P.2d 992; Brown v. Griffin 

(1968), 150 Mont. 498, 436 P.2d 695; State ex rel. Yellowstone 

Park Company v. District Court Fourth Judicial District 

(1972), 160 Mont. 262, 502 P.2d 23. 

We conclude the District Court was correct in its 

decision in this case, after we have examined the contractual 

provisions, and the way the parties have construed the 

agreement between themselves. 

The pertinent provisions of the agreement are these: 

"ARTICLE 1 

"A. Facilities agreed to be constructed by the 

parties shall be listed in supplements to this 

contract. Each supplement shall describe the 

facilities to be added by each party, the 

estimated cost, and the in service date of each 

facility. . . 

"B. Additional division and installation of facilities 

and other methods of mutually beneficial operation 

may be developed from time to time, and this Agreement may be amended by Supplements and Attachments 

from time to time agreed upon and executed by both 

parties hereto, and the entire agreement between 

the parties hereto shall consist of this Agreement 

and such Supplement or Supplements, Attachment or 

Attachments as may from time to time be executed 

by the parties hereto." 
"ARTICLE I1 

"A. This Contract provides for facilities to 

deliver bulk electric service to existing and 

future delivery points as determined to be 

needed by estimates of increase in electric 

service requirements in excess of requirement 

levels existing as of the December, 1971 billing 

period. It is recognized that in the future, 

additional electrical transmission, substation 

and related facilities will be necessary for 

mutual benefit of the Company, and the Cooperative and its Members collectively, in the 

operation of the interconnected facilities of 

the parties hereto. The parties shall, not less 

often than biennially, review electric service 

requirements as experienced and as contemplated 

to be required within the following five years, 

and mutually agree upon the time within which 

the additional transmission, substation and 

related facilities shall be placed in service 

by the respective parties . . . 

"ARTICLE IV 

"A. The Points of Delivery and Capacity Amounts 

which the Parties are entitled to have delivered 

as a result of their respective investments in 

accordance with the provisions of Article I1 

shall be tabulated and identified in an Exhibit 

included as part of each Supplement executed on 

behalf of each of the Parties and attached to 

this Agreement. Such Exhibit may be amended from 

time to time as the parties may agree, to add to 

or subtract from or change quantities of the Points 

of Delivery. . . 

"B. To the extent that the transmission system is 

capable of delivering electric service in excess 

of the quantities set forth in said Exhibit to 

each Supplement, in the sole determination of 

the owner, either party may use such excess capacity, 

so long as such excess shall exist, including the 

right to tap the transmission lines of the other 

party, within the common service area as shown on 

the map, attached hereto as Exhibit A in accordance 

with Article VI-J of this Agreement. . ." 

We interpret the foregoing provisions of the agreement 

that the purpose of the contract is to provide for facilities 

to deliver bulk electric service to existing and future 

delivery points (Article I1 (a) ) . 

The facilities to be used jointly by parties were to be 

listed in supplements added to the contract (Article I (A) ) . 
The addition of future facilities or methods of mutually 

beneficial operations were to be provided by supplements and 

attachments, but these were to be agreed upon and executed 

by both parties (Article I(B)). The point of delivery and 

the capacity amounts which the parties are entitled to have 

delivered to them are required to be tabulated and identified 

in an exhibit included as part of the supplement attached 

to the agreement. The exhibit regarding delivery points 

could also be amended from time to time, again subject to 

the agreement of both parties (Article IV(a)). 

The nub of the cooperative's argument that it is entitled 

to tap transmission lines of MDU to serve the Shell gas 

plant lies in the language of Article IV(B). It is provided 

elsewhere in the agreement that all property owned by either 

party subject to the agreement shall remain the property of 

that party no matter where situated and by whom installed or 

operated. Thus MDU is the owner of the 57 KV transmission 

line, even though it is a transmission line subject to the 

terms of the agreement. LYRE$ maintains here the clause, 

"in the sole determination of the owner," modifies the 

clause preceeding it, rather than the clause succeeding it. 

This troublesome clause is in such juxtaposition that some 

ambiguity results. LYREA maintains the clause modifies the 

preceeding language, so that it is "in the sole determination 

of the owner," to determine the excess that the transmission 

system is capable of delivering over and above the quantities 

set forth in the exhibits. From that interpretation, LYREA 

argues to consider MDU the sole determiner of excess capacity 

in the 57 KV transmission line would be to deprive the contract 

of force or meaning since the owner could determine there was 

no excess capacity regardless of the fact excess capacity might 
indeed be present. While we admit the language used is 

subject to that possible interpretation, yet we conclude it 

is more consistent with the purpose and general intent of 

the contract, the clause "in the sole determination of the 

owner" modifies the succeeding language, namely, either 

party may use the excess capacity as long as it exists, 

including the right to tap the transmission line of the 

other party, but only in the sole determination of the 

owner. In other words, we find the intent and purpose of 

the agreement between the parties is to provide that their 

facilities which are subject to the joint interconnection 

agreement are to be used for points of delivery and for 

amounts of entitlement as set forth in exhibits attached to 

the agreement. To the extent there is excess capacity in 

the joint transmission systems over and above the entitlement 

rates at the points of delivery, that excess capacity may be 

used by either party, but in the sole determination of the 

owner of the facility involved. 

Were we to hold otherwise, it would mean anytime excess 

capacity existed, either party could, without the consent of 

the owner, tap the transmission lines of the other for the 

purpose of enlarging its entitlement in the system or for 

serving new loads such as the new Shell gas plant. It was 

this possibility that led the District Court to its finding 

of fact No. 12, above quoted, to the effect MDU would be 

precluded by such an interpretation from serving all new 

industrial loads within the geographic area covered by the 

agreement. The District Court determined this would in effect 

deprive MDU of its statutory rights under the Electric Suppliers 

Territorial Integrity Act, because under this agreement, as 

so interpreted, the cooperative, having the right to tap the 
transmission lines of MDU would in all cases be the electric 

supplier for new industrial loads. This, being because in 

such cases there would never be a situation in which MDU's 

cost of extending its line to the new load would be less 

than the cost of the cooperative, as required by section 70- 

503 (3), R.C.M. 1947. 

We are fortified in our construction of the contract by 

the way the parties themselves have construed this agreement. 

On the same date as the execution of the agreement, the 

parties entered into two supplements for interconnection and 

common use of their joint facilities. Supplement No. 1 

covers the area in which the Shell gas plant would be located. 

In Exhibit No. 1-B to Supplement no. 1, as required in 

Article IV, Paragraph A, above quoted, there is set forth 

for the company and for the cooperative, the points of 

delivery and entitlement rates of delivery throughout the 

geographic areas. Supplement No. 1 is dated and executed in 

formal manner as is the agreement itself. The attachment of 

those supplements makes it clear the parties intended from 

the beginning that all points of delivery from the interconnected system would be specifically designated in supplements 

which were to be agreed upon by the parties. Thus, unless 

MDU agrees, LYREA has no contractual right to tap MDU's 57 

KV transmission line. Of course, the same rule of consent 

from the owner would apply if MDU wanted to tap any of the 

cooperative's transmission lines also subject to the agreement. 

This Court finds itself in agreement therefore with the 

interpretation of the agreement by the District Court, and 

with its conclusion that M U has the statutory and contractual 

right to be the electric supplier for the proposed Shell gas 

plant. 
One other contention of LYREA however, should be 

mentioned. The cooperative contended if it were allowed to 

tap the MDU transmission line, it could serve not only the 

Shell gas plant, but also several other electric users in 

the vicinity including, for example, some oil well pumping 

units. The cooperative contended the possibility that other 

consumers might also use the same service line would reduce 

the cost of the service line to the cooperative, because it 

could allocate such costs to the different potential users. 

The cooperative contended this fact should be considered in 

determining which electric supplier has the lesser cost in 

supplying the Shell gas plant. However, section 70-503(3), 

R.C.M. 1947, is clear such allocation could not be considered 

by the Court. The statute provides "no premises other than 

another such commercial or industrial premises shall be 

served from a line constructed under this section". Unless 

therefore the other potential users met the qualifications 

for commercial and industrial premises, (a load of 400 

kilowatts or larger) they could not be served from such a 

new service line, where the electric supplier is determined 

under section 70-503. Moreover, if such potential additional 

new users existed, MDU would have as much right to serve 

them as would the cooperative, thus making the cost to each 

the same, in which event the ownership of the nearest conductor 

would determine the electric supplier. 

The declaratory judgment of the District Court is 

affirmed. 
We Concur: 

Chief Justice 

Justices 

"&lk&&+$* Hon. Robert J. Boyd, 

District Court Judge, 

Sitting in for Mr. Justice 

Gene B. Daly