IOCHEM CORPORATION v. OKLAHOMA CORPORATION COMMISSION

Citation: 2021 OK CIV APP 28

Court: Court of Civil Appeals of Oklahoma; February 7, 2021; Oklahoma; State Appellate Court

Original Court Document: View Document

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The case IOCHEM Corporation v. Oklahoma Corporation Commission involves an appeal regarding the Oklahoma Corporation Commission's decision to bar Oklahoma Gas and Electric Company (OG&E) from providing electrical service to IOCHEM Corporation’s facility, which is located outside OG&E's certified territory. The central legal issue pertains to the interpretation of the Retail Electric Supplier Certified Territory Act (RESCTA). The Oklahoma Corporation Commission (OCC) ruled in favor of Northwest Electric Cooperative, Inc. (NWEC), which had originally served IOCHEM but lost service due to IOCHEM's decision to switch back to OG&E for economic reasons.

Background details reveal that NWEC, established in 1940, serves multiple counties, while OG&E is an investor-owned utility. IOCHEM produces medical grade iodine and has operated its facility near Vici since 1997 using OG&E's service under a prior exemption due to a large connected load. In 1997, NWEC began supplying power to some of IOCHEM's wells, but in 2018, IOCHEM attempted to reconnect all its wells to OG&E without proper authorization, leading NWEC to claim that IOCHEM violated RESCTA's exclusive territory provisions. The OCC allowed IOCHEM to intervene in the proceedings initiated by NWEC against OG&E. The court ultimately affirmed the OCC’s decision, supporting NWEC’s position.

NWEC argued that OG&E had an obligation to prevent IOCHEM from using electricity supplied by OG&E to the Sweet well, despite IOCHEM's exclusive control over its operation. OG&E acknowledged that the Sweet well fell within NWEC's certified territory. After NWEC's complaint, OG&E sought IOCHEM’s compliance to disconnect the Sweet well, but IOCHEM did not comply. OG&E concurred with NWEC regarding its duty under RESCTA but claimed that disconnecting from the Sweet well would require disconnecting IOCHEM’s entire brine recovery project.

An Administrative Law Judge (ALJ) concluded that the OCC lacked jurisdiction over NWEC's service conditions and IOCHEM's contract defenses. The ALJ emphasized that determining an invasion of certified territory hinges on where electricity is delivered, typically at the metering point. The OCC, however, rejected the ALJ's findings and asserted that the Sweet well had been lawfully served by NWEC before IOCHEM disconnected NWEC’s service. The OCC ruled that OG&E was prohibited from supplying electricity to the Sweet well and must cease any service unless directed otherwise by the Commission.

Upon IOCHEM's request, the OCC modified its Final Order to permit a stay contingent on a supersedeas bond of $212,677.11, reflecting NWEC's projected revenue from IOCHEM over 18 months, minus fuel costs. The standard for reviewing appeals from the OCC includes de novo review for constitutional and statutory issues, with substantial evidence criteria for factual findings. The court holds the OCC’s decisions in high regard, presuming their correctness unless they contravene the law or lack substantial evidence. The OCC confirmed that the Sweet well was an electric-consuming facility that had previously received lawful service from NWEC.

Under 17 O.S. 2011, § 158.25A, each retail electric supplier has the exclusive right to provide retail electric services within its certified territory and cannot extend services to consumers in another supplier's territory, with certain exceptions. None of these exceptions apply to the current case, including the "One Megawatt Exception," which previously allowed OG&E to service IOCHEM's private distribution system. The term "electric consuming facilities," defined under 17 O.S. 2011, § 158.22(6), encompasses all entities using electric energy from a central station source. Legislative intent is prioritized in statutory interpretation, emphasizing that statutory language should be understood in its ordinary sense unless stated otherwise. The verb "utilize" is interpreted to mean the point of use or consumption, not where electricity is metered or sold. This aligns with § 158.31, which mandates a liberal construction of the Retail Electric Supplier Certification and Territorial Act (RESCTA), although such liberal interpretation does not lessen a party's burden of proof in legal proceedings.

The purpose of the Retail Electric Service Territorial Act (RESCTA) under 17 O.S. 2011, 158.23 is to facilitate organized statewide retail electric service, reduce redundant distribution facilities, preserve the Oklahoma landscape, and minimize conflicts between retail electric suppliers to enhance consumer service efficiency and reduce costs. In the case presented, the Oklahoma Corporation Commission (OCC) determined that the Sweet well operated as an electric-consuming facility, supported by substantial evidence indicating its operational status since 2000 and its location within the certified territory of NorthWestern Electric Cooperative (NWEC). The Sweet well had no electricity supply from other providers from May 2000 to May 2018 and was interconnected with other IOCHEM facilities through pipelines, despite significant distances and independent operations among the wells. 

The OCC's findings were deemed lawful and substantiated. IOCHEM's claims regarding NWEC's alleged inequitable conduct were rejected as the enforcement action originated from a complaint by NWEC against OG&E, and IOCHEM, as a customer, sought intervention without a valid contract allowing supplier switching. The Electric Restructuring Act of 1997 prohibits such switches unless agreed upon in writing, which was not the case here. Allowing IOCHEM to use equitable defenses would have altered the nature of the case into a private dispute, beyond the jurisdiction of the Corporation Commission, which is tasked with enforcing compliance with RESCTA and regulating retail electric service within certified territories. The Act is to be interpreted liberally.

The document clarifies that the enumeration of specific powers or objects does not exclude similar ones, as per 17 O.S. 2011, 158.31. The Oklahoma Corporation Commission (OCC) holds comprehensive powers (legislative, executive, and judicial) in regulating public utilities, functioning akin to a court of record. The OCC's adjudicatory role includes equitable powers to assess the conduct of parties involved. In a case involving IOCHEM, the court found substantial evidence supporting the OCC’s decision to disregard IOCHEM's claims of waiver and equitable estoppel. The court noted that the OCC has broad discretion in its duties, and it cannot be overruled unless findings are legally unsound or lack substantial evidence. IOCHEM contested the determination of the supersedeas bond amount set by the OCC, which is authorized under Oklahoma Constitution Article 9, § 21. The OCC’s process for determining the bond amount is characterized as an adjudicative inquiry, requiring consideration of the nature of the order and the protection of competing interests. In this case, the OCC's final order prevented one electric service provider from serving an area already certified to another provider, necessitating a bond amount that reflected potential revenue losses for the non-appealing party, NWEC. The OCC's decision on the bond amount was thus deemed supported by substantial evidence. IOCHEM claimed the OCC exceeded its jurisdiction by mischaracterizing the case as a private dispute and by treating the bond as an award of damages.

The OCC has extensive authority under RESCTA to enforce compliance and regulate retail electric suppliers within their certified territories. This includes the ability to prohibit any retail electric supplier from providing service outside its designated area. The OCC's jurisdiction is affirmed by case law, which grants it supervisory authority to establish rules affecting regulated entities and to enforce compliance with the Act. In a specific case, the OCC upheld territorial boundaries, preventing OG&E from providing service outside its certified area, thereby acting within its jurisdiction.

IOCHEM challenged the OCC's Final Order, claiming it violated substantive due process by imposing an excessive burden on its operations related to the Sweet well. However, the court rejected this argument, stating that substantive due process does not prevent the OCC from regulating service territories. Furthermore, the relationship between IOCHEM and the brine owners is governed by the Brine Development Act, which outlines processes for unitization and management of brine production. Under this Act, IOCHEM is designated as the unit operator, responsible for managing the brine operation and securing necessary electric services, without substantive due process interests arising for the brine owners in this context.

The Final Order of the Oklahoma Corporation Commission (OCC), issued on January 24, 2019, and modified on February 7, 2019, is affirmed. No party has disputed that the Sweet well's capacity is less than one megawatt. The document references several cases from the Oklahoma Court of Civil Appeals and the Oklahoma Supreme Court that were discussed or cited, indicating a legal context surrounding the decision. Additionally, it includes citations to relevant statutes from Title 17 concerning the OCC's authority and responsibilities. The judges, GOREE and MITCHELL, concur with the affirmation of the order.