Opinion ID: 1348656
Heading Depth: 1
Heading Rank: 4

Heading: event of termination or reduction

Text: B-1 GENERAL PROVISIONS (A) This Appendix shall be applicable in the event there is a Contract Termination or a Capacity Sale Reduction (B) The parties agree that the amount of the payment which [Idaho Power] is to make to [Afton] for Capacity is based on the agreed value to [Idaho Power] of [Afton's] performance of its obligation to provide Dispatchable Capacity during the Term of the Agreement. The parties further agree that in the event [Idaho Power] does not receive such full performance by reason of a Contract Termination or a Capacity Sale Reduction, (1) [Idaho Power] shall be deemed damaged by reason thereof, (2) it would be impracticable or extremely difficult to fix the actual damages to [Idaho Power] resulting therefrom, (3) the reductions, offsets and refund payments as provided in this Appendix, as applicable, are in the nature of adjustments in Capacity prices and liquidated damages, and not a penalty, and are a reasonable endeavor by the parties to estimate a fair compensation for the reasonable losses that would result from such termination or reduction. (C) [Afton] shall be invoiced by [Idaho Power] for all refund payments due under this Appendix and shall pay such amounts to [Idaho Power] within thirty (30) days after the invoice date. (D) [Idaho Power] shall have the right to offset any amount due it against any present or future payments due [Afton]. B-2 TERMINATION OR REDUCTION DUE TO [AFTON'S] FAILURE TO PERFORM Except in the event of Force Majeure as defined in Article VIII of this Agreement, if [Afton] fails to provide the amount of energy and Capacity specified in Article III, such failure shall be grounds for Contract Termination or a Capacity Sale Reduction in accordance with the following: (A) [Idaho Power] may immediately suspend or reduce the Capacity payments to [Afton] for a probationary period not to exceed twelve (12) months. Such reduction or suspension of payments will be calculated so that [Idaho Power] will recover the total amount of the overpayments made to [Afton] in equal monthly amounts over the term of the probationary period. All such amounts recovered by reduction or suspension will be retained by [Idaho Power]. (1) If, during the probationary period [Afton] meets or satisfies [Idaho Power] that it can meet its obligation to supply Capacity, [Idaho Power] shall, following the probationary period, reinstate the Capacity payment. (2) If [Afton] fails to satisfy its obligation to supply Capacity during the probationary period, [Idaho Power] may permanently derate the Capacity appropriately or terminate the Capacity purchases if no Capacity is supplied during the probationary period. (B) In the event of a Capacity Termination [Afton] shall refund to [Idaho Power] an amount equal to seventy-five percent (75%) of the difference between the Capacity payments already paid by [Idaho Power] (based on the original term of the Agreement) and the total Capacity payments which would have been paid if the Capacity Price had been based on the period from the Operation Date to the actual date of termination. (C) If at any time, based on appropriate tests, studies or prior performance, [Idaho Power] determines that [Afton] will be unable to provide the agreed-upon Capacity, [Idaho Power] may immediately reduce the Capacity or terminate Capacity purchases. (D) REPLACEMENT POWER If, as a result of any of the events specifically defined as exceptions to Force Majeure in Article VIII [labor disputes, failure of other power companies to transfer Afton's power, and lack of fuel for Afton's facility], [Afton] will be unable to meet its obligation to provide the Capacity, [Afton] will notify [Idaho Power] and [Idaho Power] may purchase power from another source to replace the power [Afton] had agreed to provide. Such replacement power will, for purposes of satisfying [Afton's] Capacity obligation, be deemed to have been delivered by [Afton]. [Afton] will reimburse [Idaho Power] for the difference, if any, between the amount which [Idaho Power] would have paid to [Afton] and the actual cost of the replacement power, including losses, wheeling and load factoring. [Idaho Power] will bill [Afton] monthly for the reimbursement amount. Unless otherwise agreed, [Idaho Power] will not be obligated to attempt to procure replacement power for a period longer than six months. In no event will [Idaho Power] pay [Afton] for Capacity not actually provided by [Afton]. (E) The foregoing remedies are not exclusive and [Idaho Power] reserves all rights it may have against [Afton] as a result of [Afton's] failure to perform this Agreement. On February 1, 1985, one month before the end of the first year of Afton's performance under the Agreement, Idaho Power sent Afton a letter, which included the following statements: Based on the facility's performance to date, it is now clear that Afton will not provide the energy and capacity it agreed to provide. Therefore, pursuant to the terms of the Agreement, it is [Idaho Power's] intention to reduce the monthly payments to be made Afton. This adjustment to the payment will be in accordance with paragraph B-2(A) of Appendix B to the Agreement. Under that section, [Idaho Power] is electing to place Afton on probation for a twelve-month period commencing March 1, 1985. During this probationary period, payments to Afton will be reduced to correspond to the average kilowatts actually provided during the March 1, 1984 to March 1, 1985 period and to recover, in twelve equal monthly deductions, the total amount of overpayments made to Afton during the March 1, 1984 to March 1, 1985 period. Afton and Idaho Power tried unsuccessfully for several weeks to resolve how to deal with Afton's failure to provide all the firm energy and dispatchable capacity required by the Agreement during the first year of Afton's operation. Finally, on May 6, 1985, Idaho Power paid Afton for the first month of Afton's operation during the second year. Idaho Power paid Afton for the firm energy Afton delivered in March 1985, plus a reduced payment for dispatchable capacity as specified in Appendix B-2(A) of the Agreement, compensating Afton for the average monthly amount of dispatchable capacity Afton provided during the first year. From the total of these amounts, Idaho Power deducted one-twelfth of the overpayment Idaho Power made to Afton for dispatchable capacity during the first year. Idaho Power explained the calculation of this payment in a schedule that accompanied the letter transmitting the payment: Calculation of March 1985 payment including reduced capacity payment and prior period overpayment recoveries. Capacity Payment (3,414 Kw × $350.00/Kw/Yr)/12 = $ 99,575.00 Energy Payment (3,686,000 Kwh × 22.65 Mills/Kwh) = 83,487.90 Overpayment Recoveries (12 month recovery period) (169,479.06) ------------ Net Payment $ 13,583.84 During the remainder of Afton's second year of operation, Idaho Power continued to pay Afton according to similar calculations. In the spring of 1985, Afton applied to the PUC for an order clarifying Afton's obligation to repay capacity overpayments made by Idaho Power to Afton pursuant to the Agreement. The PUC denied Afton's application. On April 15, 1986, Afton and Idaho Power signed an amendment to the Agreement (the Amendment) providing for an extension of the probationary period. The Amendment stated that during Afton's second year of operation  March 1, 1985, through February 28, 1986  Afton provided 44,148,000 kilowatt-hours of firm energy and 7,753 kilowatts of dispatchable capacity. Afton brought this lawsuit seeking to recover damages from Idaho Power based on several theories. Foremost among these theories was the allegation that Idaho Power breached the Agreement by exercising an illegal double recovery under both Appendix B-2(A) and Appendix B-2(C) of the Agreement: (1) Idaho Power withheld the amount it contends it overpaid Afton for dispatchable capacity during the first year of Afton's operation, pursuant to Appendix B-2(A); and (2) Idaho Power reduced the amount of dispatchable capacity for which Idaho Power was obligated to pay Afton during the second year of Afton's operation, pursuant to Appendix B-2(C). Afton also alleged Idaho Power: (1) breached the covenant of good faith and fair dealing, (2) violated the PUC's orders, (3) retained liquidated damages under the Agreement as an unconscionable penalty, (4) was quasi-estopped to retain the amounts it withheld from Afton, (5) tortiously interfered with Afton's other contracts, and (6) violated the Idaho antitrust laws. Idaho Power moved to dismiss Afton's claims on the ground that the PUC's decision was res judicata. The trial court dismissed Afton's claim that Idaho Power violated the PUC's orders on the ground that the PUC had the primary jurisdiction to determine the alleged violations. The trial court denied Idaho Power's motion to dismiss Afton's other claims. Subsequently, the trial court granted Idaho Power's motions for summary judgment dismissing Afton's other claims, but denied Idaho Power costs, attorney fees, and prejudgment interest. Afton appealed the dismissal of its claims. Idaho Power cross-appealed the denial of its motion to dismiss and the denial of costs, attorney fees, and prejudgment interest.