Pacificorp v. Portland General Electric Co.

Citations: 770 F. Supp. 562; 1991 U.S. Dist. LEXIS 9793Docket: Civ. 90-524-FR, 90-592-FR

Court: District Court, D. Oregon; July 3, 1991; Federal District Court

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Pacificorp, operating as Pacific Power and Light Company, filed a lawsuit against Portland General Electric Company, Columbia Steel Casting Co. Inc., and the Public Utility Commission of Oregon. In a separate action, Columbia Steel Casting Co. Inc. sued Portland General Electric Company, Pacificorp, and individuals Myron B. Katz, Nancy Ryles, and Ronald Eachus. The cases were heard in the United States District Court for the District of Oregon on July 3, 1991.

The court addressed two motions: Columbia Steel Casting Co. Inc.'s motion for partial summary judgment and Portland General Electric Company's cross-motion for summary judgment. The undisputed facts revealed that on July 18, 1972, Pacific Power and Portland General Electric entered into an agreement to exchange electric distribution properties and customer accounts in designated areas around Portland, referred to as the 1972 Agreement. 

The agreement stipulated the following key points: 

1. Pacific was to transfer all its electric distribution assets in specific areas (designated as the Rainier service district and Parcel C) to Portland General, while retaining certain facilities in the downtown core area and specific duct lines extending to that area.
   
2. Conversely, Portland General was to convey its electric distribution assets in designated areas (Parcels A and B) to Pacific, excluding certain facilities related to street lighting and specific duct lines extending to the downtown core.

The distribution substations involved in these transactions were detailed in an attached Exhibit D.

The transfer of customer accounts between Portland General Electric Company and Pacific Power & Light Company will begin on July 24, 1972, ensuring that revenue from electricity sales remains steady throughout the transition. Both companies are required to exchange lists of transferred customers along with associated accounting, billing, service, and sales records. Final bills for these customers will be issued by each party on the transfer date, and the company that issues the final bill will retain accounts receivable. 

The City of Portland approved this exchange through Ordinance 134416 on April 26, 1972, which aims to reduce the duplication of poles and wires, enhancing visual aesthetics and safety while aiming to lower rates for consumers. The ordinance acknowledges that both companies serve the City under non-exclusive franchises and emphasizes the need for efficient service delivery without unnecessary infrastructure duplication.

Furthermore, the Public Utilities Commission (PUC), by Order 72-870 on December 15, 1972, approved the transfer of certain territories in the Rainier area from Pacific Power to Portland General Electric. This order allows for the transfer of various utility properties and facilities, with specific areas detailed in attached appendices, excluding facilities in the Portland downtown core area.

Portland General Electric Company (PGE) is authorized to transfer its electric distribution infrastructure, including substations, poles, lines, transformers, meters, and easements, to Pacific Power Light Company for service within specified parcels, excluding certain facilities related to street lighting and specific duct lines. The transfer process and conditions will follow an agreement made on July 18, 1972, which also allows for the conveyance of necessary real property and easements. Columbia, a customer of PGE, has been in negotiations with Pacific since 1990 to obtain electricity directly from them, citing lower rates. PGE contested this, claiming it would breach the 1972 Agreement, asserting Columbia must purchase electricity exclusively from PGE. In response, Columbia requested PGE to provide electricity pending litigation resolution after PGE's announcement of potential legal action against Pacific. Pacific subsequently filed a lawsuit seeking a judicial declaration regarding the rights under the PGE Agreement, the 1972 Agreement, and antitrust implications. Columbia filed a related action to affirm its right to terminate the PGE Agreement and receive service from Pacific, challenging PGE's exclusive service claim and asserting that local laws permit Pacific to serve Columbia. These lawsuits were consolidated for resolution.

On October 11, 1990, the court issued an Opinion and Order staying all discovery related to a dispute between Pacific, Columbia, and PGE, except for issues concerning PGE's claim of exclusive rights to provide electric services to Columbia and potential defenses against antitrust laws. Following a settlement agreement between Pacific and PGE, Pacific moved to voluntarily dismiss the initial action, Civil No. 90-524-FR, which was granted. Columbia is now seeking partial summary judgment, asserting: 1) PGE does not hold exclusive rights to provide electricity to Columbia; 2) Columbia can seek electric power services from Pacific; and 3) a PUC order does not authorize PGE to monopolize electric service to Columbia or prevent Pacific from serving Columbia.

Columbia argues that the 1972 Agreement does not allocate exclusive service territories in Portland and that the PUC order does not approve such allocations, which are prohibited by the City Charter. Columbia cites O.R.S. 758.470(1) as barring the PUC from granting territorial allocations in Portland, emphasizing that the 1972 Agreement only involved the transfer of equipment and customer accounts without establishing exclusive service territories. The language of the Agreement lacks terms indicating territorial allocation intent, and Columbia points out that the 1972 PUC application sought approval solely for property exchanges under Chapter 757, not for exclusive territories under Chapter 758, thus limiting the PUC's authority to make such allocations. Columbia contends that the PUC's failure to reference the statutes governing territorial allocations in its order was intentional, reinforcing their position that no exclusive service territories were established.

Columbia asserts that prior agreements between PGE and the PUC included explicit language regarding the allocation of service territories and customers, contrasting this with the more general language in the 1972 Agreement, which aims to eliminate duplicative facilities. Columbia argues that the court should not add missing terms to the 1972 Agreement and contends that the PUC's order allowing a limited exchange of facilities does not grant a perpetual monopoly, as PGE and Pacific did not seek exclusive rights in competitive areas. If the court finds an exclusive territorial allocation, Columbia claims it is invalid under the Sherman Antitrust Act, arguing that the state action doctrine does not shield PGE from federal antitrust liability due to a lack of clear state policy against competition in Portland and insufficient state supervision over territorial allocations.

In response, PGE has filed a cross-motion for summary judgment, seeking a court declaration that the 1972 Agreement lawfully allocates service territory in Portland, grants PGE exclusive rights to serve customers in this territory, and provides immunity from antitrust liability. PGE contends that the absence of specific terms like "exclusive territorial allocation" does not invalidate the agreement, which it argues is a lawful contract under Oregon law designed to delineate service areas and eliminate service duplication.

PGE asserts that the 1972 Agreement delineates customer allocation and territories for contracting parties, as outlined in Section 7, which was intended to create exclusive service territories. PGE claims that the absence of the phrase "exclusive service area" was due to the agreement's drafting by engineers rather than legal professionals and that this exclusivity aligns with the Charter of the City of Portland. Furthermore, PGE argues that state action doctrine protects these exclusive territories from federal antitrust regulations, supported by the PUC's clear policy endorsement and active supervision of territorial allocations under Oregon law. Although PGE acknowledges a technical oversight in referencing Chapter 758 in its PUC application—attributed to a renumbering—PGE argues this should be disregarded by the court as the PUC still exercised jurisdiction under Chapter 758 despite the mislabeling.

The PUC does not take a position on Columbia's summary judgment motion but counters Columbia’s arguments by asserting that territorial allocation statutes apply to Portland, aim to eliminate competition statewide, and allow for active supervision of such displacements. The applicable standard for summary judgment indicates that it is appropriate when there are no material facts in dispute, shifting the burden to the opposing party to show otherwise. The legal precedent establishes that state actions are not restrained by antitrust laws if they are clearly articulated as state policy and actively supervised.

The Oregon legislature enacted O.R.S. 758.400 to 758.475 to regulate the allocation of territories and customers among utility providers, aiming to prevent the duplication of utility facilities statewide. O.R.S. 758.405 outlines that efficient utility service delivery and public safety necessitate such regulation. O.R.S. 758.410 allows utility service providers to contractually allocate territories and customers, specifying which provider serves which area, based on existing service capabilities or reasonable extensions. This regulatory framework removes market competition as the basis for customer allocation, with the Public Utility Commission (PUC) supervising compliance. A lawful contract under these statutes provides immunity from antitrust violations. The critical issue in this case is whether the 1972 Agreement qualifies as a valid allocation contract under O.R.S. 758.410(1). O.R.S. 758.400(1) defines "allocated territory" as areas defined by a commission-approved contract or order. To displace competition for customer allocation legally, utility companies must contract and obtain PUC approval. The 1972 Agreement and the PUC’s order emphasize the goal of eliminating duplicate facilities for efficiency. The PUC noted that both Portland General and Pacific had overlapping service facilities, and the agreement aimed to enhance operational efficiency by reducing redundancies.

State statutes mandate that the allocation of territory must be established through a commission order approving such allocation, as per O.R.S. 758.400(1). The relevant order from the Public Utility Commission (PUC) indicates that on August 8, 1972, a joint application from Pacific Power and Light Company (Pacific) and Portland General Electric Company (PGE) was accepted for the exchange of electric utility properties and service facilities in Multnomah and Columbia Counties. The PUC order allows Pacific to transfer all electric distribution plants within specified boundaries (Parcels A and B) to PGE, and vice versa, strictly for the exchange of facilities, not for allocating territories or customers for exclusive service. The 1972 Agreement between the parties did not constitute a contract for territorial allocation or customer designation. The doctrine of state action aims to permit state authorization of acts that private parties cannot undertake independently, emphasizing that monopolistic claims by private entities must be explicitly authorized by statute. Consequently, the court concludes that Columbia is entitled to a declaration that PUC Order 72-870 does not grant PGE the authority to monopolize electric power service to Columbia. Columbia's motion for partial summary judgment is granted, while PGE's cross-motion for summary judgment is denied. The Oregon legislature's intent behind these statutes was to manage statewide utility issues, preserving a city’s right to approve or deny utility operations within its jurisdiction. The court finds no reason to exclude the application of O.R.S. 758.400 to utilities operating in Portland.