# U ni te d S ta te s Co ur t of A pp ea ls

For the Eig hth Circu it

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No. 1 7- 10 91

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Sm ok y Hil ls W in d P ro

ject I I, LLC

Pla in ti ff - App el la nt

v.

Ci ty of In de pe nd en ce, Mi ss ou ri

Defe nd an t - Ap pe ll ee

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No. 1 7- 11 71

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Sm ok y Hil ls W in d P ro

ject I I, LLC

Pla in ti ff - App el le e

v.

Ci ty of In de pe nd en ce, Mi ss ou ri

Defe nd an t - Ap pe ll an t

__ __ __ __ __ __

App eal s fr om

Uni te d S ta te s Di st ric t Co ur t
fo r th e Weste rn Dis tri ct of M is so ur i - Kan sa s C it y

__ __ __ __ __ __

Su bm it te d: Decem

be r 14 , 20 17

Fil ed : M ay

2, 2 01 8

__ __ __ __ __ __Befo re SM ITH, Chi ef J ud ge , KELL Y and ERICKSON, Ci rcu it Ju dg es

.

__ __ __ __ __ __

ERICKSON, Ci rcu it Ju dg e.

Thi s cas e in vo lv es a “ Ren ewab le Ene rg y Pu rch as e Agr eem en t” (“ REPA”) th at

res ul te d fro m arm s- le ng th ba rg ai ni ng be twee n pa rti es wit h lo ng st an di ng ex pe rie nc e

an d ex pe rti se in th e ge ne rat io n an d m ark et in g of el ect ric al en erg y

. Sm ok y Hil ls W in d

Pro ject II, LLC (“ Sm ok y II”)

, op erat es a win d farm ge ne rat in g win d en erg y whi ch it

su pp li es to va rio us cu st om ers , kn own in th e en erg y bu si ne ss as “ of f-t ak ers .” Sm ok y

II i s an in di rect su bs id ia ry of Ene l Green Po wer Nor th Am eri ca, In c., who se pa ren t

co m pa ny is Ene l Green Po wer, Sp A., he ad qu art ered in Ita ly. The Ci ty of

In de pe nd en ce, Mi ss ou ri (“ In de pe nd en ce”)

, own s an d op erat es In de pe nd en ce Po wer

& Lig ht

, a m

un ic ip al el ect ric syste m th at di st ri b u t e s el ect ric it y to it s cu st om ers

. In de pe nd e n c e ge ne rat es el ect ric it y fro m it s own ge ne rat or s bu t al so pu rch as es

who le sa le en erg y fro m va rio us su pp li ers , in cl ud in g Sm ok y II. Sm ok y II br ou gh t su it

fo r br each of co nt ract whe n it di d no t rece iv e pa y m en t fro m In de pe nd en ce on

in vo ic es rel at ed to cu rta il ed en erg y. C u r t ai le d en erg y is win d en erg y th at is no t

act ua ll y pr od uc ed be c a u s e th e pr od uc er is di rect ed to red uc e pr od uc ti on ei th er

be cau se : (1 ) an of

f-t ak er li ke In de pe nd en ce requ es ts th at it s sh are of the pr od uc ti on

be red uc ed

, or (2 ) be cau se th e reg io na l reg ul at or (in th is cas e So ut hwe st Po wer Po ol )

di rect s red uc ti on ba se d on regiona l m ar ke t co ndi tio ns. In de pe nde nc e co un te rcl ai m ed

.

Afte r a fiv e-d ay be nc h tri al

, th e di st ric t co ur t

, ha vi ng juri sd ic ti on pu rs ua nt to 1

28 U

. S

. C

. § 1 3 3 2, he ld In de pe nd en ce li ab le fo r cert ai n ch arg es th at it fo un d to be

“ ti m el y -b il le d” an d d en ie d t he co un te rcl ai m s. Hav in g ju ris di ct io n u nd er 2 8 U.S.C.

The Hon or ab le Ro se an n A. Ket ch m ark

, Uni te d Stat es Dis tri ct Ju dg e fo r th e 1

W es te rn Dis tri ct of M is so ur i.

-2

-§ 12 91

, we affi rm th e jud gm en t of th e di st ric t co ur t, bu t fo r ou r own reas on s as st at ed

be lo w.

I. BACKG ROUND

As is ap pa ren t to pe op le on ly va gu el y aware of th e en erg y bu si ne ss , th e

pr od uc ti on an d de li ve ry of el ect ric it y is a hi gh ly reg ul at ed in du st ry

. The reg ul at or y

co nt ex t go ve rn in g th e rel at io ns hi p be twee n th e pa rti es is de sc rib ed in th e st ip ul at io n

of fact s pr ov id ed to th e di st ric t co ur t pr io r to tri al

. The Uni te d St at es el ect ric al en erg y

g r i d is m ad e up of in te rco nn ect ed tra ns m is si on syste m s an d lo cal di st rib ut io n
syste m s. Hig he r-v ol ta ge tra ns m it ti ng faci li ti es de li ve r el ect ric it y to lo ad cen te rs ov er

lo ng di st an ces , whi le lo wer-v ol ta ge faci li ti es are u se d t o d el iv er en erg y to th e lo cal

co ns um ers

. The Fed eral Ene rg y Reg ul at or y Co m m is si on (“ FERC” ) h a s e x c lu si ve juri sd ic ti on un de r th e Fed eral Po wer Act, 16 U.S.C. §§ 79 1- 82 8, to reg ul at e th e rat es ,
te rm s, an d co nd it io ns of e l e c t r ic al tra ns m is si on se rv ic e in in te rs ta te co m m erce

. FERC, in rece nt y ears , ha s en co ur ag e d t h e c r e at io n of no n- pr of it en ti ti es cal le d

Reg io na l Tran sm is si on Org an iz at io ns (“ RTOs” ) t o manag e th e op erat io n of th es e
syste m s an d th e who le sa le m ark et s fo r th e en erg y tra ns m it te d by th es e syste m s. The

Nor th Am eri can Elec tri c a l R e l ia bi li ty Co rp or at io n (“ NERC”) is a no n- pr of it

reg ul at or y au th or it y ov ers een by FERC. NERC es ta bl is he s an d en fo rces m an da to ry

rel ia bi li ty st an da rd s fo r th e el ect ric it y in du st ry , inc lud ing tr an sm is si on gr id op erat or s.

So u t h w es t Po wer Po ol

, In c. (“ SPP” ), is a FERC- ap pr ov ed RTO th at m an ag es

tra ns m is si on syste m s an d th e who le sa le en erg y m ark et in th e cen tra l Uni te d St at es on

be ha lf of a gr ou p of ut il it ie s an d tra ns m is si on co m pa ni es in fo ur te en st at es , in cl ud in g

Kan sa s an d po rti on s of Mi ss ou ri. SPP an d ot he r RTOs co m m on ly op erat e on a

co ns erv at iv e co nt in ge nc y , or N-1

, ba si s. SPP is a NERC reg io na l el ect ric rel ia bi li ty

co un ci l m em

be r an d is a NERC Rel ia bi li ty Co or di na to r. In th es e cap aci ti es SPP is

res po ns ib le fo r m ai nt ai ni ng rel ia bi li ty of th e bu lk el ect ric po wer syste m in th e reg io n

in whi ch Ind ep en de nc e an d S m ok y II are lo cat ed

.

-3

-On Aug us t 14

, 20 08

, th e pa rti es en t e r e d in to a REPA se tt in g fo rth th e te rm s

an d co nd it io ns fo r th e sa le of en erg y fro m Sm ok y II to In de pe nd en ce. In de pe nd en ce

is jus t on e of fiv e of

f-t ak ers who bu y po rti on s of th e win d en erg y pr od uc ed an d so ld
by Sm ok y II. The pa rti es ag ree th at th e REPA is a va li d an d en fo rcea bl e co nt ra ct

,

2

su pp or te d b y

ad eq ua te co ns id erat io n.

Th e Sm ok y II win d pr ojec t was on ly po ss ib le wit h th e in vo lv em en t o f t a x

eq ui ty in ve st or s. Tax in ve st or s are by na tu re ve ry co nc ern ed ab ou t m in im iz in g ris k

an d were he av il y in vo lv ed i n t h e n e g ot ia ti on of th e REPA. Fran k Co st an za, th e

ex ecu ti ve vi ce pr es id en t of Trad eWind Ene rg y , th e pr im ary st art -u p de ve lo pe r of th e

Sm ok y II pr ojec t be fo re it was bo ug ht by Ene l, te st ifi ed th at hi s fo cu s “ was to m ak e

su re th at in th at co nt ract th at th e t e rm s an d co nd it io ns th at we ag reed on wit h ou r

c o un te rp art

, th e ut il it y , wou ld be fo un d acce pt ab le to th e ta x eq ui ty fin an ci ers .”

Co st an za st res se d th at th e in ve st or s m ad e it pl a i n t h a t th ey were no t in te res te d in

ab so rb in g th e ris k of curt ai lm en t, sta ti ng “ we ne ed to ge t p ai d” an d “ we ne ed to ge t

pa id for cu rta il m en ts .”

The pa rti es an ti ci pa te d cur ta il m en t and in cl ud ed pr ov is io ns in th e REPA th at

go ve rn th e al lo cat io n of co st s as so ci at ed wit h cu rta il m en t. Und er th e REPA,

cu rta il m en ts fal l in to two cat eg or ie s: (1 ) Eco no m ic Cu rta il m en ts

, an d (2 ) Em erg en cy

Cu rta il m en ts

.

Sp eci fic al ly, se ct io n 7.3 (B) pr ov id e s : “ SPP, In te rco nn ect io n Pro vi de r, or

Tran sm is si on Owner m ay cu rta il al l or a po rti on of th e de li v e r y of Test Ene rg y or

Ren ewab le Ene r g y t o B u ye r fro m th e Faci li ty. If su ch cu rta il m en t is no t an

Em erg en cy , th en su ch cu rta il m en t sh al l be co ns i d e red an Eco no m ic Cu rta il m en t.”

The ot he r of

f-t ak ers are th e Ci ty of Sp rin gf ie ld

, Mi ss ou ri; Mi dwe st Ener gy, 2

In c.; Su nf lo wer Elec tri c Po wer Co rp or at io n; an d Ene l Green Po wer Nor th Am eri ca, In c.

-4

-Sect io n 7.3 (C) pr ov id es th at In de pe nd en ce is “ ob li ga te d to pa y for Ren ewab le Ene rg y

or Test Ene rg y no t de li ve red du e to an Eco no m ic Cu rta il m en t at th e rat e se t fo rth in

Sect io n 8 .2.” Se ct io n 8 .2 p ro vi de s:

Pay m ent duri ng Eco no m ic or Emergen cy C u rta il m ent. If
Sel le r is un ab le to de li ve r en erg y to th e Deli ve ry Po in t d u e t o an Em erg en cy Cu rta il m en t or an Eco no m ic C u r t ai lm en t, (A) th e pa rti es sh al l us e reas on ab le effo rts t o d et erm in e th e qu an ti ty of Ren ewab le

Ene rg y th at wou ld ha ve be en pr od uc ed by th e Faci li ty ha d it s ge ne rat io n

no t be en su bjec t to Em erg en cy Cu rta il m en t or an Eco no m ic Cu rta il m en t

an d (B ) Bu y er s ha ll pa y

to Sel le r; (1 ) al l am ou nt s th at Sel le r wou ld ha ve rece iv ed fro m Bu y er un de r th is REPA ha d p ro du ct io n n ot be en so cu rta il ed , and ( 2 ) th e am ou nt of an y Tax Ben efi ts to whi ch Sel le r wou ld h a v e be en en ti tl ed bu t do es no t rece iv e, ad jus te d up ward s fo r ta xe s ba se d on th e m arg in al fed eral an d Kan sa s t ax rat es

. Sel le r sh al l in st al l su ffi ci en t m eas ur in g eq ui pm en t at th e Faci li ty

to co ll ect da ta ne ces sa ry to reas on ab ly de te rm in e th e am ou nt of Faci li ty

ge ne rat io n su bjec t to th e Eme r ge nc y Cu rta il m en t or Eco no m ic

Cu rta il m en t. Sel le r sh al l in st al l su ffi ci en t m et eo ro lo gi cal to wers aro un d

th e Si te o r i n co nju nc ti on wit h th e W in d Turb in es to pr ov id e th e

cap ab il it y of m eas ur in g an d reco rd in g rep res en ta ti ve win d dat a twen ty
fo ur (2 4) ho ur s per day, whi ch win d da ta sh al l be us ed to cal cu la te an y

am ou nt s d ue Sel le r un de r th is Sect io n 8 .2.

Sect io n 1.3 (U) of th e REPA de fin es “ Em erg en cy Cu rta il m en t” as “ a

cu rta il m en t or de red by S P P

, In te rco nn ect io n Pro vi de r, or Tran sm is si on Owner du e

t o an Em erg en cy .” Und er se ct io n 1.3 (T), “ ‘E m erg en cy ’ m ean s an em e r g e n c y

co nd it io n as de fin ed as ‘T LR Lev el 6
– Em erg en cy Pro ced ur es ’ in th e SPP OATT

Att ach m en t R Tra ns m is si on Load in g Reli ef Proce du re.” In th e st ip ul at ed fact s, t he

pa rti es ag ree th at “ [t]he SPP OATT Att ach m en t R Tran sm is si on Lo a d i ng Rel ie f

Pro ced ur e , r efer red to in th e de fin it io n of an Em erg en cy in th e REPA, refe rs to

NERC’s Tran sm is si on Load in g R el ie f (‘TL R’) Proc ed ur es .”

-5

-Arti cl e 9 of th e REPA go ve rn s th e p a rti es ’ bi ll in g an d pa y m en t pr oc es s.

Sect io n 9 .1 p ro vi de s:

Bi ll in g In vo ic es

. T he m on th ly bi ll in g pe rio d sh al l be th e cal en da r

m on th

. No la te r th an f

i f t e e n ( 1 5 ) Bu si ne ss Day s aft er th e en d of each
cal en da r m on th

, Sel le r sh al l pr ov id e to Bu y er, by fir st -cl as s m ai l, an in vo ic e fo r th e am ou nt du e Sel le r by Bu y er fo r th e Ren ewab l e En e rg y

pr ov id ed by Sel le r an d pu rch as ed by Bu y er, un de r th is REPA, du rin g th e

pr ev io us cal en da r m on th bi ll in g pe rio d. S e l l er’s in vo ic e wil l sh ow al l
bi ll in g pa ram et ers , rat e s an d fact or s, an d an y ot he r da ta reas on ab ly

pe rti ne nt to th e cal cu la ti on of m on th ly pay m en ts du e to Sel le r.

Sect io n 9 .3 s pe ci fie s:

Refund s i n E ve nt of Emergen cy Curta il m ent. Upo n th e

oc cu rren ce o f an Em erg en cy Cu rta il m en t, Bu y er sh al l su bm it to Sel le r do cu m en ta ti on reas on ab ly sa ti sf act or y to Sel le r ev id en ci ng th e da te an d
du rat io n of su ch Em erg en cy Cu rta il m en t. Upo n acce pt an ce by Sel le r of

su ch do cu m en ta ti on , Sel le r sh al l refu nd to Bu y er su ch pa y m en t rel at ed

to th e Em erg en cy

Cu rta il m en t o n t he ne xt m on th ly inv oi ce.

The REPA sp eci fic al ly no te s t h a t th e REPA was ne go ti at ed at arm s le ng th

be twee n pa rti es of eq ua l ba rg ai ni ng po wer by st at in g at se ct io n 1.1 (E): “ Thi s REPA

was ne go ti at ed an d pr ep ared by bo th Part ie s wit h th e a d v i c e an d pa rti ci pa ti on of

co un se l. The Pa r t i e s h av e ag reed to th e wor di ng of th is REPA an d no ne of th e

pr ov is io ns he reo f sh al l be co ns tru ed ag ai ns t on e Part y on th e gr ou nd th at su ch Part y

is th e au th or of th is REPA or an y pa rt he reo f.” Sect io n 1.1 (F) req ui res th e pa rti es to

“ act reas on ab ly an d in acco rd an ce with th e p rin ci pl es of g oo d fait h and fai r de al in g

in th e p erfo rm an ce o f th is REPA.”

Sm ok y Hil ls II be ga n de li ve rin g en erg y to In de pe nd en ce in la te 20 08 or earl y

20 09

. Fro m th e st art th e pa rti es fo ll owe d th e bi ll in g an d pa y m en t sc he du le ou tl in ed

in A r t i c l e 9. Fo r so m e ti m e th e pa rti es di d no t ex pe rie nc e an y cu rta il m en t or de rs

.

-6

-Beg in ni ng in Mar ch 20 12

, Sm ok y II be ga n to rece iv e or de rs fro m S P P t o cu rta il

.

Sm ok y II was aware of th e cu rta il m en ts at th e ti m e th ey oc cu rred bu t fai le d to bi ll fo r

cu rta il ed en erg y as th e cu rta il m en ts oc cu rred

. In th e f al l of 20 12 Sm ok y II no ti ced

th at t h e c ur ta il m en ts were be co m in g m or e si gn ifi can t an d rep res en ta ti ve s of th e

co m pa ny be ga n to lo ok in to th e reas on s fo r th e cu rta il m en ts

. Sm ok y II co nt act ed SPP

to at te m pt to di sc ern whe th er th e cu rta il m en ts were “ Em erg en cy Cu rta il m en ts ” as

de fin ed by th e REPA. On J a n u a r y 3

, 20 13

, Sm ok y II se nt In de pe nd en ce a le tt er

in fo rm in g it th at Sm ok y II ha d r e c ei ve d “ an in crea se d nu m be r of cu rta il m en t

di rect iv es ” an d th at In de pe nd en ce “ m ay in cu r so m e, po s s i b l y si gn ifi can t, fin an ci al

ob li ga ti on s.”

On Mar ch 12

, 20 13

, Sm ok y II fo ll owe d up by te ll in g In de pe nd en ce th a t it

in te nd ed to is su e rev is ed in vo ic es fo r 20 12 be cau se it be li ev ed th e cu rta il m en ts were

no t th e res ul t of an em erg en cy un de r th e REPA an d th at In de pe nd en ce was ob li ga te d

to pa y fo r th e cu rta il ed en erg y

. On Mar ch 26

, 20 13

, Sm ok y II is su ed th e fir st in vo ic e

to In de pe nd en ce fo r cu rta il m en ts

. The in vo ic e was fo r c u r t a i lm en ts fro m Mar ch

th ro ug h Decem

be r 2 0 1 2

, an d to ta le d $3 31 ,99 0.9 1. Thi s in vo ic e al on g wit h el ev en

su bs eq ue nt in vo ic es are th e su bjec ts di sp ut ed at tri al

. The fo ll owi ng ch art refl ect s th e

twel ve di sp ut ed in vo ic es :

Curta il m ent Da te In vo ic e Dat e Am ou nt I nv oi ced f or

Curta il m ents

1. M arch - Decem

be r

20 12 Mar ch 26 , 20 13 $3 31 ,99 0.9 1

2. J an ua ry

- Mar ch 20 13 Apr il 18 , 20 13 $1 10 ,83 2.5 6

3. Ap ril 20 13 May 7, 20 13 $1 1,0 97 .22

4. M ay 20 13 Ju ne 7, 2 01 3 $7 ,58 1.5 6

5. J un e 2 01 3 Ju ly 9, 20 13 $6 ,30 3.4 1

-7

-6. Se pt em

be r 20 13 Octo be r 9, 2 01 3 $4 ,00 4.6 0

7. No ve m be r 20 13 Ja nu ary 7, 2 01 4 $1 0,1 11 .58

8. Dec em be r 20 13 Ja nu ary 8, 2 01 4 $8 ,78 4.9 2

9. J an ua ry

20 14 Feb ru ary 7, 2 01 4 $4 2,0 74 .16

10 . Feb ru ary 20 14 Ju ne 9, 2 01 4 $1 7,2 94 .41

11 . Jan ua ry

20 14

ad jus tm en ts Aug us t 1 5, 2 00 4 $8 ,63 8.0 0

12 . Ju ly 201 4 Sep te m be r 3, 2 01 4 $4 ,48 7.9 3

At th e en d of th e tri al th e di st ric t co ur t co nc lu de d th at no ne of th e cu rta il m en ts

at is su e was an em erg en cy cu rta il m en t as de fin ed in th e REPA’s pl ai n la ng ua ge

. As

a res ul t, th e tri al co ur t co nc lu de d th at In de pe nd en ce was li ab le to Sm ok y Hil ls II fo r

th e ti m el y -b il le d i nv oi ces

.

The co ur t de ni ed In de pe nd en ce’s co un te rcl a i m f o r br each of co nt ract fo r

un ti m el y b i l l i ng , co nc lu di ng : “ Bas ed up on th e pl ai n la ng ua ge of th e Pu rch as e Agr eem en t, Sect io n 9.1 do es no t ap pl y to c u r t a i le d en erg y

. Rat he r, th e Pu rch as e Agr eem en t co nt ai ns no ex pr es s ti m e li m it wit h res pe ct to in vo ic es fo r cu rta il m en ts .”

The co ur t th en ap pl ie d Kan sa s la w req ui rin g th at pe rfo rm an ce m us t oc cu r

wit hi n a “ reas on ab le ” ti m e. The co ur t weig he d th e e v i d e n c e a nd fo un d th at th e

in vo ic es th at were is su ed m or e th an fif te en da y s aft er t he m on th in whi ch th e

cu rta il m en ts oc cu rred were no t iss ue d wi th in a reas on ab le ti m e. In a fo ot no te to it s

co nc lu si on s of la w, th e di s t r i ct co ur t in di cat ed th at whi le it ha d reject ed th e

ap pl ic at io n of se ct io n 9.1 to bi ll in g fo r cu rta il ed en erg y , it “ ul ti m at el y de te rm in ed th at

fif te en bu si ne ss da y s is a reas on ab le ti m e to su bm it in vo ic es fo r cu rta il m en ts .” Thu s,

th e c o ur t de ci de d th at In de pe nd en ce m us t pa y th at po rti on of th e in vo ic e de sc rib ed

-8

-at No. 2 at tri bu ta bl e to cu rta i l ment s in Mar ch 20 13 an d th e to ta l am ou nt s of th e

in vo ic es de sc rib ed at No s. 3 , 4, 5 , 6, 8 , and 9.

II . DISCUSSI ON

A. TIMEL INE SS UNDER THE REPA

Sm ok y II pr im ari ly co nt en ds th at th e di st ric t co ur t “ ne ga te d” th e in te nt of th e

pa rti es whe n it im

pl ie d a “ reas on ab le ti m e” de ad li ne fo r bi ll in g In de pe nd en ce fo r th e

cu rta il m en t co st s. It al so ob jects to th e co ur t’s ap pa ren t eq ua ti ng of a “ reas on ab le

ti m e” wi th th e fi fte en -d ay ti m el y -b il li ng req ui rem en t fo un d i n t he co nt ract

.

In de pe nd en ce to ok th e po si ti on at tri al th at th e bi ll in g req ui rem en ts of Arti cl e

9 of th e REPA ap pl ie d to bi ll in g fo r bo th cu rta il ed en erg y an d en erg y a c t u a l ly

de li ve red

. On ap pe al

, In de pe nd en ce ap pe ars to ab an do n th is arg um en t by st at in g in

it s bri ef tha t “ aft er con cl ud in g th at th e REPA’s ex pr es s fif te en -d ay de ad li ne di d no t

ap pl y to cu rta il m en t i n v o i c e s , ” t he tri al co ur t’s fin di ng th at Sm ok y II ha d a du ty t o

bi ll in a reas on ab le ti m e was su pp or te d by t he la w a nd th e fact s. Howe v e r , l a te r in

th e b rie f, In de pe nd en ce tak es is su e wit h S m ok y II’s co nt en ti on th at “ REPA se ct io n

9.1 ap pl ie s on ly to en erg y in vo ic es , no t cu rta il m en t in vo ic es .” I n d e pe nd en ce

sp eci fic al ly argu es :

Fi r s t

, th ere is no ba si s fo r read in g th e “ Ren ewab le Ene rg y ” li m it at io n th at ap pe ars in th e se co nd se nt en ce of se ct io n 9.1 in to th e fir st se nt en ce of se ct io n 9.1

. If th e pa rti es ha d in te n d e d to ha ve m on th ly bi ll in g

pe rio ds fo r en erg y in vo ic es on ly, th ey co ul d ha ve eas il y s a i d so by
si m pl y ad di ng “ fo r Ren ewab le Ene rg y ” aft er “ m on th ly bi ll in g p eri od ”

in th e fir st se nt en ce. And th ey ch os e no t to do so

. Seco nd

, th e arg um en t ig no res th e ot he r ev id en ce of th e pa rti es ’ i n t e n t th at a m on th ly bi ll in g

pe rio d sh ou ld ap pl y to cu rta il m en t in vo ic es ( e.g

. , th e im po rta nc e of th e

rev en ue st ream to Sm ok y Hil ls an d Smo k y Hil ls ’ co ur se of co nd uc t),

ev id en ce t ha t t he tri al co ur t fo un d p ers ua si ve

.

-9

-The pa rti es ag ree th at th e REPA’s ch oi ce-o f-l aw pr ov i s i o n at se ct io n 19 .13

req ui res th at th e REPA “ sh al l be go ve rn ed an d co ns tru ed in acco rd an ce wit h th e la ws

of th e St at e of Kan sa s.” Acco rd Gate way Cu st om er So lu ti on s, LLC v. GC Serv ic es

Ltd

. P’sh ip

, 82 5 F.3 d 50 2 (8 th Ci r. 20 16 ) ( a p p l yi n g Dela ware la w to in te rp ret an d

co ns tru e co nt ract pr ov is io ns pu rs ua nt to th e pa rti es ag reem en t an d th e ch oi ce-o f-l aw

pr ov is io n i n t he co nt ract ).

“ W e m ay affi rm th e jud gm en t of th e di st ric t co ur t ‘on an y ba si s di sc lo se d in th e

reco rd

, whe th er or no t th e di st ric t co ur t ag reed wit h or ev en ad dr es se d th at gr ou nd .’ ”

W arn e r B r o s. Ent ert ai nm en t, In c. v. X One X Pro du ct io ns , 64 4 F.3 d 58 4, 59 1 (8 th

Ci r. 20 11 ) (q uo ti ng PFS Dis tri bu ti on Co

. v. Radu ech el

, 57 4 F.3d 58 0, 59 1 (8t h Cir.

20 09 ). Und er Kan sa s la w, ap pe ll at e co ur ts “ ex erci se un li m it ed rev ie w o ve r th e

in te rp re t a t i on an d le ga l effe ct of writ te n in st ru m en ts

, an d

. . . are no t bo un d by th e

lo wer co ur ts ’ in te rp ret at io ns of th os e in st ru m en ts

. ” Prai rie Lan d Elec

. Co -o p v.

Kan sa s Elec

. Po wer Co -o p, In c., 32 3 P.3 d 12 70

, 12 74 (Kan

. 20 14 ) (ci ti ng Ost erh au s

v. Tot h, 24 9 P.3 d 88 8, 89 6 (Kan

. 20 11 )). “ The pr im ary ru le fo r in te rp ret in g writ te n

co nt ract s is to as cert ai n th e pa rti es ’ in te nt ” an d w he n th e te rm s of th e co nt ract are

cl ear, “ th e in te nt of th e pa rti es is to be de te rm in ed fro m th e la ng ua ge of th e co nt ract

wit ho ut ap pl y in g ru le s o f co ns tru ct io n.” And ers on v. Dill ard ’s, In c., 15 3 P.3d 55 0,

55 4 (Kan

. 20 07 ) (ci ti ng Lig ga tt v. Em pl oyers Mu tu al Cas u a l t y C o ., 46 P.3 d 11 20

, 11 25 (Kan . 2 00 2) ). “ A do cu m en t’s m ean in g s ho ul d b e g le an ed fro m th e d oc um en t

as a who le rat he r th an ‘the cri ti cal an al y si s of a si ng le or is ol at ed pr ov is io n.’” W at er

Dis tri ct No. 1 of Jo hn so n Cou nt y v. Prair ie Cen te r Dev el op m en t, L.L.C., et al ., 37 5

P.3 d 30 4, 31 2 (Kan

. 20 16 ) (q uo ti ng Mar qu is v. St at e Farm Fi re & Cas

. Co

., 96 1 P.2 d

12 13 , 12 19 (Kan . 19 98 )).

The REPA is a de ta il ed do cu m en t th at pr eci se ly in di cat es th e res po ns ib il it ie s

of th e Sel le r (Sm ok y II) an d th e B uyer (In de pe nd en ce). The en ti ret y of th e bi ll in g

an d pa y m en t res po ns ib il it ie s of th e pa rti es is fo un d in Arti cl e 9 of th e REPA, whi ch

is en ti tl ed

, “ Bi ll in g an d Paym en t.” Sect io n 9.1 sp eci fic al ly pr ov id es fo r cal en da r

-1 0-m on th bi ll in g. Tha t se ct io n fu rth e r r e q ui res th at “ Sel le r sh al l pr ov id e to Bu y er, by

fir st -cl as s m ai l, an in vo ic e fo r th e am ou nt du e Sel le r by Bu y er fo r th e Ren ewab le

Ene rg y pr ov id ed by Sel le r an d pu rch a s ed by Bu y er, un de r th is REPA, du rin g th e

pr ev io us cal en da r m on th bi ll in g pe rio d.” If th is were th e so le co nt en t of Arti cl e 9, we

m ig ht be sym

pa th et ic to Sm ok y II’s co nt en ti on th at se ct io n 9.1 ap pl ie s on ly to act ua l

ren ewab le en erg y de li ve red to In d ep en de nc e an d th at it do es no t ap pl y to cu rta il ed

en erg y

. Howev er, Kan sa s la w req ui res us to lo ok at th e co nt ract as a who le an d no t

is ol at e a si ng le pr ov is io n an d in te rp ret it ou t of co nt ex t. The res t of th e REPA,

in cl ud in g t he res t o f 9.1 , lea ds us to co nc lu de th at Arti cl e 9 co nt ro ls

.

Sect io n 9.1 sp eci fic al ly req ui res th at “ Sel le r’s in vo ic e wil l sh ow al l bi ll in g

pa ram et ers , rat es an d fact or s, an d a n y o th er da ta reas on ab ly pe rti ne nt to th e

c a l c u la ti on of m on th ly pa y m en ts du e to Sel le r.” Fu rth er, se ct io n 9.3 sp eci fic al ly

ad dr es se s curt ai lm en ts

. Tha t sect io n an ti ci pa te s th at in th e ev en t of an “ Em erg en cy

Cu rt a il m en t” In de pe nd en ce “ sh al l su bm it to Sel le r do cu m en ta ti on reas on ab ly

sa ti sf act or y to Sel le r ev id en ci ng th e da te an d du rat io n” of th e em erg en cy cu rta il m en t

a n d t h e n be en ti tl ed to a refu nd “ on th e ne xt m on th ly in vo ic e.” The in cl us io n o f

la ng ua ge req ui rin g t ha t t he in vo ic es sh ow “ al l b il li ng pa ram et ers , rat es an d fa ct or s,

an d o th er d at a” i n s ect io n 9 .1 an d t he in cl us io n o f th e ref un d p ro vi si on in 9.3 m ak e

i t c le ar th at th e pa rti es in te nd ed th at th e m on th ly b il li ng in vo ic es wou ld in cl ud e al l

pa y m en ts owe d to Sm ok y II, fo r re n e w a b l e e ne rg y , fo r cu rta il ed en erg y , or fo r

an y th in g e ls e wit hi n t he bi ll in g p aram et ers

. 3

Sm ok y II arg ue s th e co ur t erre d by no t co ns id eri ng th at In de pe nd en ce was no t

pr ejud ic ed by th e de la y in bi ll in g. Thi s arg um en t la c k s mer it

. The tri al co ur t

care fu ll y weig he d th e ev id en ce, in cl ud in g th e im po rta nc e of m on th ly bi ll in g an d th e

The ev id en ce at tri a l

, i nc lu di ng th e te st im on y of Ene l’s Ass oc ia te Vice 3

Pres id en t, Mar k McGra il

, pl ai nl y es ta bl is he d th at Sm ok y II w a s a b l e to m eet th e fif te en bu si ne ss da y de ad li ne on ce it sa ti sf act or il y pe rfo rm ed it s du ti es un de r se ct io n 8.2 of t he REPA.

-1 1-im

po rta nc e of reas on ab le pe rfo rm an c e o f co nt ract ua l ob li ga ti on s. The co ur t

sp eci fic al ly no te d th at th e co nt ract req ui red a twen ty-y ear co m m it m en t of th e pa rti es

an d th e dr am at ic al ly hi gh bi ll in g am ou nt s res ul ti ng f r om de la y ed bi ll in g. The se

fin di ng s o f fac t ar e n ot cle arl y erro ne ou s.

B. NATURE OF CURTAIL MENTS: ECONOMI C OR EMERGE NCY

In it s cro ss -ap pe al

, In de pe nd en ce co nt en ds th at th e di st ric t co ur t erre d in it s

in te rp ret at io n of th e m ean in g of “ Em erg en cy Cu rta il m en t” in th e REPA. W e

di sa gr ee. The pl ai n l an gu ag e o f th e REPA s up po rts th e d is tri ct co ur t’s co nc lu si on

.

The la ng ua ge in th e REPA de fin in g eco no m ic an d em erg en cy cu rta il m en ts is

pr eci se an d cl earl y in co rp or at es kn own te rm s an d st an da rd s in th e po wer pr od uc ti on

an d di st rib ut io n in du st ry

. The la ng ua ge sp eci fic al ly de f i n es an em erg en cy

cu rta il m en t as on e or de red by SPP du e to an em erg en cy whi ch “ m ean s an em erg en cy

c o n d i t i o n as de fin ed as ‘T LR Lev el 6
- Em erg en cy Pro ced ur es ’ in th e SPP OATT

Att ach m en t R Tran s mi s si on Loa di ng Rel ie f Pro ced ur e.” At tri al

, Sm ok y II arg ue d

th at a cu rta il m en t was no t an em erg e n c y cu rta il m en t un le ss SPP de cl ared it to be a

TLR Lev el 6 cu rta il m e n t

. In de pe nd en ce arg ue d th at em erg en cy cu rta il m en ts were

an y cu rta il m en ts of Sm ok y II’s ge ne rat io n or an y cu rta il m en t in ci de nt to cert ai n

ci rcu m st an ces li st ed in on e se ct io n of TLR Lev el 6
- Em erg en cy Pro ced u r e s

. Th e

di st ric t co ur t was co rrec t i n re jecti ng th es e arg um en ts

.

The di st ric t co ur t lo ok ed to th e pl ai n la ng ua ge of th e co nt ract an d to NERC’s

de fin it io n of TLR Lev el 6
- Em erg en cy Pro ced ur es

. The co ur t reco gn iz ed th at th e

te rm “ ‘T LR Lev el 6
- Em erg en cy Pro ce d u r e s ’ i s de fin ed in NERC’s pr oc ed ur es ,

ou ts id e of th e co nt ract

, an d is ge ne ral ly un de rs to od wit hi n th e el ect ric in du st ry to be

a pr oc ed ur e us ed whe n th ere is a cri ti cal co nd it i o n on th e bu lk el ect ric gr id .” The

co ur t co nc lu de d:

-1 2-th at th e p r o pe r in te rp ret at io n of Em erg en cy Cu rta il m en t gi ve n th e

Pu rch as e Agr eem en t’s p la in lan gu ag e an d TLR Lev el 6's acce pt ed us e wit hi n th e el ect ric in du st ry is an y SPP cu rta il m en t th at is du e to a cri ti cal

co nd it i o n on th e bu lk el ect ric gr id

. Fu rth er, SPP, as th e en ti ty

res po ns ib le fo r im

pl em en ti ng NERC’s TLR Pro ced ur es , de sc rib es cri ti cal co nd it io n to m ean “ca s cad in g ou ta ge s” an d a “ do om sd ay ”

sc en ari o wh ere g en erat io n i s i m m ed ia te ly curt ai le d t o z ero

.

C. ENERGY ALLO CATIO N

In de pe nd e n ce fu rth er arg ue s on ap pe al th at th e di st ric t co ur t erre d whe n it

fai le d to fin d th at Sm ok y II ha d ov er- a l l o c a t e d en erg y to In de pe nd en ce be y on d th e

10 .1 pe r cen t sh are pr ov id ed in th e REPA. We d i sa gr ee. “ W he th er a co nt ract ha s

be en bre ach ed is a qu es ti on of fact .” W as te Co nn ect io ns of Kan sa s, In c. v. Ri tc hi e

Co rp ., 29 8 P.3 d 25 0, 26 5 (Kan

. 20 13 ). W e rev ie w th e di st ric t co ur t’s fin di ng s of fact

fo r cl ear erro r, bu t we rev ie w d e no vo m ix ed qu es ti on s of la w a nd fac t t h a t r e q u i r e

co ns id erat io n of le ga l co nc ep ts

. St in e Seed Co . v . A & W Agr ib us in es s, LLC, 86 2

F

. 3 d 10 94 , 1 09 9 (8 th Ci r. 20 17 ) (“ In an ‘app eal fro m a ci vi l be nc h tri al , we re v i e w

th e tri al co ur t’s fin di ng s of fact for cl ear erro r. Its co nc lu si on s of law are su bjec t to

de no vo rev ie w. Mi xe d qu es ti on s of la w an d fact th at req u i r e th e co ns id erat io n of

le ga l co nc ep ts

. . . are al so rev ie wed de no vo .’ ”) (q uo ti ng Dars t-Web be Ten an t Ass ’n

Bd . v. St . Lou is Hou si ng Aut h., 3 39 F.3d 70 2, 7 10 -1 1 (8 th Cir . 20 03 )).

The ev id en ce at tri al di d no t su pp or t a fin di ng th at Sm ok y II was pe rm it te d to

ad jus t th e a l l o cat io n of en erg y to In de pe nd en ce if an ot he r of f-t ak er cu rta il ed it s

al lo tm en t. The co ur t sp eci fic al ly fo un d th at “ [t]he ev i d e n c e s h ows th at th e pa rti es

were aware th at th ey wou ld ha ve to ag ree on a d d i t i o na l da y -to -d ay op erat in g

pr oc ed ur es , and th e p art ie s fi ll ed in th e g ap s re la te d t o t he ir c ur ta il m en t p ro ced ur es

so th at In de pe nd en ce’s al lo cat io n of en erg y wou ld be un affe ct ed by a cu rta il m en t

or de red by an ot he r of

f-t ak er du rin g ti m es of ne ga ti ve LMP, or ot he rwis e, an d wou ld

no t res ul t in a red uc ti on of In de pe nd en ce’s meg a watt sh are of en erg y to a st ric t

-1 3-pe rcen ta ge of th e rem ai ni ng ou tp ut

. ” The co ur t fu rth er no te d th at “ In de pe nd en ce pa id

al l o f it s i nv oi ces , exc ep t fo r th os e fo r th e Cu rta il m en ts , wit h fu ll kn owl ed ge of th e

ex act am ou nt of e ne rg y

it was a ll oc at ed , ho w m

uc h ot he r of

f-t ak ers were all oc at ed

, th e to ta l win d pr ojec t pr od uc ti on fo r e a c h al lo cat io n, an d ha d acce ss to th e le ve l of

LMP at th e g iv en ti m es .”

The di st ric t co ur t fu rth er reco gn iz ed th at “t h e pr oc ed ur e no w ad vo cat ed by

In de pe nd en ce wou ld le av e In de pe nd en ce at th e m ercy of th e ot he r of f-t ak ers ” whe n

th e REPA’s cl ear in te nt was to al lo w In de pe nd en ce to co nt ro l “ it s own al lo cat io n of

en erg y fro m Sm ok y II so th at it can m ak e an eco no m ic de ci si on ab ou t wha t it wan ts

to do wit h Sm ok y II’s ou tp ut —wh et he r to rece iv e th e en erg y or se lf- cu rta il .” The

tri al ev id en ce cl earl y su pp or ts th e di st ric t co ur t’s reject io n of In de pe nd en ce’s th eo ry

reg ard in g o ve r-al lo cat io n o f en erg y

.

D. SUBSTANTI AL PERFORMANCE

Fo r th e fir st ti m e on ap pe al

, Sm ok y II al le ge s th at th e di st ric t co ur t erre d by no t

co ns id eri ng it s su bs ta nt ia l pe rfo rm an ce un de r th e co nt ract

. W e do no t or di na ril y

co ns id er argu m en ts rai se d for th e fir st ti m e on ap pe al

. Uni te d Stat es Secu rit ie s and

Exc ha ng e Co m

m is si on v. Co ll y ard

, 86 1 F.3 d 76 0, 76 5 (8 th Ci r. 20 17 ). Sm ok y II ha s

no t pe rs ua de d us to ab an do n th is ge ne ral ru le

. Acco rd id

. Bec au se Sm ok y II ha s

waiv ed th e is su e o f su bs ta nt ia l p erfo rm an ce, we d o n ot ad dr es s i t.

II I. CONCLUSI ON

W e aff irm th e jud gm en t o f th e d is tri ct co ur t.

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __

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