E-15 Commissioner Christie’s Dissent to Blue Ridge Declaratory Order Concerning APCO Full Requirements Power Agreements, EL21-97

Docket No. EL21-97-000

No doubt the Commission has concurrent jurisdiction in this matter, but the exercise is purely discretionary.  We should exercise that discretion by showing a respectful deference to the civil courts of Virginia and allowing what amounts to a routine dispute over contract language to be decided in those civil courts, especially given that the parties themselves have already contractually agreed to settle such disputes in Virginia courts.[1]  The fact that the subject of the contract dispute happens to be battery storage units instead of bucket trucks or office equipment is no reason for us to assert jurisdiction and impose a preferred result.  

As today’s order recognizes, neither Blue Ridge Power Agency (Blue Ridge) nor Appalachian Power Company (APCO) disagree “that the Commission shares concurrent jurisdiction over this dispute with the Virginia courts.”[2]  Moreover, both Blue Ridge and APCO appear to agree that given concurrent jurisdiction, the Commission has discretion to determine whether or not to assert primary jurisdiction.[3] 

In Shell, a recent decision addressing arguments on rehearing, the Commission noted that “Arkla describes the factors that the Commission must weigh in determining whether, in particular cases, it ‘should assert jurisdiction over contractual issues otherwise litigable in state court.’”[4]  In Transco, another recent Commission order

addressing arguments on rehearing, the Commission recognized that Commission precedent cited by a party in that case “deferred jurisdiction over disputes primarily related to the general interpretation of state contract law.”[5]  The Commission concluded that it correctly exercised jurisdiction in Transco because the “threshold contract question was essentially undisputed and the tariff interpretation question was the primary question at issue.”[6]  Both the Shell and Transco orders emphasize that the matter of the Commission’s exercise of jurisdiction over contract interpretation is discretionary.  Moreover, the Transco order states that application of the Arkla balancing test is flexible and notes that all of the factors need not be met.[7]

Here, each of the Arkla factors demonstrates that (i) the Commission should not exercise its discretion to assert jurisdiction; and (ii) this dispute should be decided by Virginia courts.  Regarding the first Arkla factor, that the issue in this matter involves “battery storage” does not magically turn this contract interpretation dispute into something more that would require the Commission’s “special expertise” or make the matter “peculiarly appropriate” for Commission decision.[8]  As noted above, the issue in this matter is whether battery storage is provided for in the bargain struck by the parties to these Full Requirements Electric Service contracts.  Contrary to the suggestion in today’s order,[9] the fact that the contracts involve jurisdictional wholesale power contracts does not mean that the Commission alone has some special expertise to interpret them.  In Shell, the Commission plainly explained, “State courts may entertain contract disputes arising from Commission jurisdictional agreements.”[10]

As to the second Arkla factor, Arkla stated that “[the Commission] consider[s] the need for uniformity in light of the policies Congress has charged this Commission to administer.”[11]  While the Arkla matter arose under the Natural Gas Act, the issue involved a favored nations clause:  “In this regard we must consider that transactions subject to the Natural Gas Act rest in large part on private contracts and that the Commission’s role with respect to such contracts should intrude no further into doctrines of state contract law than necessary to carry out the responsibilities under the Natural Gas Act.”[12]  

In applying the facts to the second factor in Arkla, the Commission considered the meaning of terms that might otherwise sound particularly Commission-oriented:  “purchase [of gas] from another party-seller” and “sale.”  The Commission noted:

[W]hether a ‘purchase’ occurred within the meaning of the contract depends upon what type of transactions the parties to the contract intended ‘purchase’ to include.  What ‘purchase from another party-seller’ means in one gas supply contract does not necessarily mean the same thing in another gas supply contract.  The makers of one contract may have intended the favored nation clause to be triggered by events other than those intended to trigger[] the clause in another contract. Since the meaning of a favored nation clause depends upon the intentions of the parties to the contract, we see no need for uniform interpretation of all favored nation clauses.  Indeed, uniform interpretation would seem to be impossible.[13]

The Commission in Arkla made a similar finding with regard to the interpretation of the word “sale.”  The Commission rejected the argument that the interpretation of the word “sale” would cause a state court to define a term that was directly Commission jurisdictional:  “We undisputedly have jurisdiction over the gas involved in this case.  This case involves contract interpretation.  And it is clear that the word ‘sale’ may have a different meaning in a contract than it does under that section of the Natural Gas Act conferring jurisdiction upon this Commission.  ‘The same words, in different settings, may not mean the same thing.’”[14]

So too here:  whether or not battery storage may be used by Blue Ridge members under the contracts depends upon what type of transactions the parties to the contract included and excluded.  As recognized by Arkla, this may vary among the makers of such contracts, and there is therefore no need for uniformity.  Moreover, simply because interpretation of whether or not “battery storage” is included in these Full Requirements Electric Services Agreements would be determined by the courts of Virginia does not result in forsaking Commission jurisdiction over matters regulated by the Federal Power Act. 

The third Arkla factor also weighs in favor of deferring jurisdiction to the Virginia courts.  As the analyses of the first and second factors demonstrate, the issue of contract interpretation in this dispute is not important to the regulatory authority of this Commission but rather relates to the benefit of the bargain struck by the parties to the Full Requirements Electric Services Agreements as to what was and what was not included in those agreements.

Having explained why the Commission’s exercise of discretion to assert jurisdiction here is wrong, let me also note that each of the four Agreements addressed in Blue Ridge’s filing contains the exact same provision, in the exact same section, under the exact same heading and paragraph number: 

16.4 Interpretation.  The interpretation and performance of this Agreement shall be in accordance with and controlled by the laws of the Commonwealth of Virginia, without giving effect to its conflict of laws provisions.  If any civil action on or respecting this Agreement is brought by one of the Parties against another Party, such action shall be brought only in the Commonwealth of Virginia.[15]

Rather than style this as a “Choice of Law” provision, the parties styled this provision as “Interpretation” and made clear that their bargained-for agreement dictates that any interpretation and performance questions arising under each of these Agreements “shall” be interpreted under Virginia law, without regard to conflicts of law provisions, and any civil action “shall . . . only” be filed in the courts of Virginia.  These Agreements are crystal clear on this issue.  Therefore — especially in light of the application of the Arkla factors — what the Commission does today flies in the face of the plain language of the Agreements and affirmatively denies the respective parties of the benefits of their bargain.  This exercise of discretionary jurisdiction in this matter — one which should have been left to the Virginia civil courts — is plainly wrong.

For these reasons, I respectfully dissent.