In re Dept. of Public Service
Annotate this Case
NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40
as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
that corrections may be made before this opinion goes to press.
No. 88-266
Petition of Department of Public Supreme Court
Service for Relief in Regard to
Small Power Production under On Appeal From
PSB Rule 4.100 Public Service Board
April Term, 1990
Richard H. Cowart, Chair
Abell, Kenlan, Schwiebert & Hall, P.C., Rutland, for appellant
Paterson & Walke, P.C., Montpelier, for appellee Green Mountain Power
Corporation
Robert V. Simpson, Jr., Special Counsel, and James Volz, Director for
Public Advocacy, Montpelier, for appellee Department of Public Service
PRESENT: Allen, C.J., Peck, Gibson, Dooley and Morse, JJ.
DOOLEY, J. Appellant Ryegate is a small power producer seeking to
overturn a decision of the Public Service Board (PSB) denying it rates set
forth in an executed letter of intent with the Vermont Power Exchange, Inc.
(VPX). We affirm.
Ryegate is the successor-in-interest to Decker Energy International,
Inc. On December 30, 1985, Decker entered into a letter of intent to sell
to VPX power Decker would produce at a facility to be built in Randolph.
The company's plan was tailored to benefit from the federal Public Utility
Regulatory Policies Act of 1978 (PURPA), 16 U.S.C. {{ 2601-2645 (1988),
enacted to combat oil shortages and to encourage alternative forms of energy
production. See In re Vicon Recovery Systems, 153 Vt. 539, 543, 572 A.2d 1355, 1357 (1990) (discussing objectives of the Act). The states are
charged with implementing PURPA, under rules promulgated by the Federal
Energy Regulatory Commission (FERC). In Vermont, implementation of the
statute has been assigned to the Public Service Board. See 30 V.S.A. {
209(a)(8); In re Vicon, 153 Vt. at 547, 572 A.2d at 1359. The PSB's plan
implementing PURPA created a single purchasing agent to contract on behalf
of all Vermont utilities for the purchase of power from qualifying small
power production facilities. Vt. Pub. Serv. Bd. Rule 4.100, {{ 4.103(A)(8),
4.104(A) (as revised Aug. 28, 1985). Under authority of the Rule, PSB has
designated VPX to function as the purchasing agent.
Under Rule 4.100, the Department of Public Service determines rates
utilities pay for power generated by qualifying facilities, subject to the
approval of the PSB. The rates and rate order at issue in this case were
approved by the Board on November 18, 1985, in Docket No. 4933, providing
for qualifying facilities to sell up to 150 megawatts of power through long-
term contracts of up to thirty years (as late as 2018). The rates were
calculated on the basis of "avoided cost," which means the "incremental cost
to electric utilities of electric energy or capacity or both, which, but for
the purchase from the qualifying facility, such utilities would generate
themselves or purchase from another source." Rule 4.100, { 4.103(A)(1); see
18 C.F.R. {{ 292.101(b)(6), 292.304(b)(2) (1990).
VPX established procedures detailing the general process set forth in
Rule 4.100, and, on June 25, 1984, issued a Producer's Guide for Power Sales
Under Public Service Board Rule 4.100. The guide states in relevant part:
As an option, VPX will sign a Letter of Intent with
producers who are awaiting the necessary Board
approvals. This offer will set out deadlines for
application to the Public Service Board, signing a
Purchase Agreement with VPX, and project completion.
The signed Letter will hold a producer's place in the
first 25 MW decrement of power committed to the agent so
long as the producer meets the agreed to development
schedule.
. . . .
Producers needing PSB approval for a 248 Certificate
and/or levelized rates have the option of applying for a
Letter of Intent. The letter will state, for the sales
option selected, a minimum price for the power generated
by the project and a date for filing Board petitions for
permits and rate approval, and a project completion
schedule. The Letter of Intent will hold the producer's
place in the decrement. The Letter of Intent is
conditioned upon final Board approval of the rate option
selected and remains valid so long as the producer meets
the agreed to development schedule. (Emphasis added.)
Ryegate's predecessor signed a letter of intent with VPX on December
30, 1985. The letter of intent is an agreement to enter into a long-term
power purchase and sale contract if certain conditions are satisfied. It
provides that the producer's first 8.855 megawatts of power would be sold at
the "appropriate 30 year rate approved by the Vermont Public Service Board
in docket number 4933." The rate for the balance of the power does not
involve Docket No. 4933 and is not in issue. The agreement is conditioned
on the producer applying to the PSB for a certificate of public good within
forty-five days, commencing construction within six months of receiving the
certificate, and completing construction within twenty-four months
thereafter. It is also conditioned on the PSB determining an applicable
rate and the producer entering into the purchase and sale agreement within
sixty days thereafter.
The letter of intent was restated and signed by Ryegate and VPX in May
of 1987. The site of the project was changed from Randolph to Ryegate.
None of the relevant terms were changed.
PURPA rates were approved in Docket No. 4933 on November 11, 1985. The
order contains extensive rate schedules, depending upon the length of the
purchase and sale contract (up to 30 years) and the decrement (that is,
block of 25 megawatts) within which the project falls. The applicable rate
also depends upon the start date of the project. The schedules provide for
start dates from the summer of 1985 through the winter of 1987-1988. There
are no rate schedules applicable to projects that started to deliver power
after April 30, 1988.
On September 24, 1986, the Department petitioned the PSB for a
declaratory ruling that rate options being offered to producers and certain
other VPX practices were illegal. The catalyst for the Department's action
was that, due to an unexpected fall in world oil prices, the rates approved
in Docket No. 4933 represented significant overestimates of the avoided cost
of energy. Part of the Department's position was that the VPX letters of
intent did not foreclose the PSB from denying Docket No. 4933 rates to
projects like Ryegate's if they did not start delivering power by April 30,
1988.
On August 26, 1987, the PSB issued an order concluding that the VPX
letters of intent were not binding obligations given the involuntary nature
of the letters vis-a-vis the utilities and that "[c]ontract analysis,
therefore, is simply inapposite." It also concluded that "because the
letters are contingent, they are not 'binding obligations' within the
meaning of the FERC regulations." It ruled, however, that qualifying
facilities that came on line by April 30, 1988 -- the date the relevant
Docket No. 4933 rate schedule was to begin -- should receive the rates.
Although the rate order in Docket No. 4933 had not explicitly declared that
it was limited to qualifying facilities coming on line by April 30, 1988,
the PSB concluded that such a deadline was implied in the temporal
framework of the schedule. Finally, it concluded that no claims of
equitable entitlement under the letters of intent would follow unless the
"sole substantial purpose" of the letters had been to secure a particular
rate. Because there were other significant purposes for the letters of
intent, it concluded that they did not create equitable rights.
Ryegate advances three main theories under which it claims the right to
Docket No. 4933 rates irrespective of when it starts delivering power: (1)
it is entitled to those rates under PURPA; (2) it has an enforceable
contract with VPX for those rates; and (3) it has a vested right to those
rates. We take these arguments in turn.
I. PURPA RIGHTS
The parties appear to agree that the relevant law in determining
whether Ryegate has a right to Docket No. 4933 rates is contained in
regulations issued by the Federal Energy Regulatory Commission with respect
to "Small Power Production and Cogeneration." See 18 C.F.R. {{ 292.101-
292.602 (1990). The operative section of these regulations is { 292.304(d)
which provides:
Purchases "as available" or pursuant to a legally
enforceable obligation. Each qualifying facility shall
have the option either:
(1) To provide energy as the qualifying facility
determines such energy to be available for such
purchases, in which case the rates for such purchases
shall be based on the purchasing utility's avoided costs
calculated at the time of delivery; or
(2) To provide energy or capacity pursuant to a
legally enforceable obligation for the delivery of
energy or capacity over a specified term, in which case
the rates for such purchases shall, at the option of the
qualifying facility exercised prior to the beginning of
the specified term, be based on either:
(i) The avoided costs calculated at the time of
delivery; or
(ii) The avoided costs calculated at the time the
obligation is incurred.
The two rate options contained in { 292.304(d)(2) correspond to the rate
options available under the VPX letter of intent. The second option is for
the rates specified in Docket No. 4933. These rates are available as a
matter of federal law, however, only as of the date Ryegate incurs "a
legally enforceable obligation for the delivery of energy or capacity over a
specified term." { 292.304(d)(2). The question under federal law reduces
to whether Ryegate incurred such an obligation when it signed the VPX letter
of intent.
The obligation specified in the federal regulation is Ryegate's
obligation to deliver energy over a specified term. See Snow Mountain Pine
Co. v. Maudlin, 84 Or. App. 590, 599, 734 P.2d 1366, 1370-71 (1987). We
have examined carefully the letter of intent in the context of the entire
Vermont scheme to implement PURPA and the VPX producer's guide. The letter
clearly binds VPX as a matter of allocation of the power purchase
obligations and rates available to it. Nowhere, however, has Ryegate
assumed a legally enforceable obligation to deliver any energy to VPX and
through it to the utilities and consumers in the state. At best, Ryegate
has obligated itself to go through a number of development and regulatory
steps that may lead to an obligation to deliver energy, if all goes well.
Ryegate appears to make three arguments to respond to the wording of
the regulation. First it notes that the failure to find it is entitled to
Docket No. 4933 rates undermines the intent of FERC "to ensure that a
qualifying facility which has obtained the certainty of an arrangement is
not deprived of the benefits of its commitment as a result of changed
circumstances." 45 Fed. Reg. 12224 (1980). The FERC intent is applicable,
however, only when there is the "certainty of an arrangement" as defined in
the regulation. Having never provided that certainty, Ryegate has no
entitlement to be immune from changed circumstances.
The second argument is that the PSB violated PURPA by not providing
Ryegate a legally binding obligation to sign. We find nothing in the
federal law that imposes that obligation on the PSB. Nor has Ryegate made
any showing that it was prepared to sign such an agreement. Ryegate can
obtain the benefit of federal law only by "tendering an agreement that
obligates it to provide power." Snow Mountain Pine Co., 84 Or. App. at 600,
734 P.2d at 1371.
Third, Ryegate argues that the PSB violated PURPA by terminating the
availability of Docket No. 4933 rates without creating an alternative, thus
taking away its rights to rates calculated on avoided costs on the date it
incurs its obligation to provide power. Apparently there was a gap between
April 30, 1988 -- the date by which a project had to be in operation to
qualify for Docket No. 4933 rates -- and the date on which the PSB issued a
new rate order. Nothing in the record indicates that Ryegate tendered a
legally binding obligation to deliver power during that gap. Further, there
is no indication that the PSB was unwilling to calculate rates on a case-by-
case basis during the gap period. We see no violation of Ryegate's rights
under PURPA.
II. CONTRACT RIGHTS
Ryegate next argues that the VPX letter of intent gave it a
contractual right to Docket No. 4933 rates and that the right could not be
diminished by a PSB order. The PSB answered this claim by concluding that
Ryegate's rights were derived wholly from regulatory law and not from
contract. To understand this point, we must look at the nature of VPX.
The PSB created VPX to serve as an intermediary between small power
producers and private utilities who are obligated under PURPA to purchase
power from the small producers. The purpose of VPX is to insure proper
financial and power accounting so every utility takes on its fair share of
the state's PURPA obligation. See Vt. Pub. Serv. Bd. Rule 4.100, {{
4.103(A)(8), 4.104(A). VPX is not a utility. Its agreements are binding on
utilities only to the extent provided by law and PSB regulations. In no
sense have the utilities agreed to any actions of VPX. Their obligation to
purchase power pursuant to VPX contracts is entirely created by the PURPA
laws and associated regulations.
The power of VPX to agree and bind the utilities exists only to the
extent PURPA and federal and state implementing regulations create that
power. Thus, we agree with the PSB that this case is about regulatory law,
not VPX contracts. See Snow Mountain Pine Co., 84 Or. App. at 598, 734 P.2d
at 1370. In this light, Ryegate's argument that it has a binding obligation
with VPX is of no assistance to it. Any agreement of VPX is binding on the
PSB or on the utilities only to the extent that PURPA and the applicable
regulations make it so. As we discussed above, Ryegate has no rights under
PURPA.
III. VESTED RIGHTS
Finally, analogizing the letter of intent to a building permit, Ryegate
argues that it has a vested right to Docket No. 4933 rates. Thus, it seeks
to invoke the vested rights doctrine as developed in Preseault v. Wheel, 132
Vt. 247, 315 A.2d 244 (1974), and Smith v. Winhall Planning Comm'n, 140 Vt.
178, 436 A.2d 760 (1981). While we recognize the similarities giving rise
to the analogy, we are more persuaded by the differences. The question here
is whether we can require electricity consumers to pay rates above those
established by the marketplace to protect the producer's investment in
facilities and development costs. Ordinarily, the private producer of any
commodity must take the risk that the price available at the time of
production will result in a sufficient profit. Ryegate's risk in this case
is no different.
In this special case, however, we are willing to reduce the
marketplace risk to achieve a public benefit of increased reliance on
renewable energy sources. The equation of public benefit and public burden
is set out in PURPA and its implementing regulations. We will not apply
vested rights doctrine to change the equation to expand private rights at
the expense of an added public burden.
We have, in fact, recognized similar limits on the applicability of
vested rights even in permit cases. Thus, in In re Ross, 151 Vt. 54, 56,
557 A.2d 490, 491 (1989) we held: "Smith should not be interpreted as an
open-ended right to 'freeze' the applicable regulatory requirements by
proposing a development with inadequate specificity." The FERC requirement
for a legally enforceable obligation can be viewed as a requirement for
adequate "specificity" to give the producer a vested right to the rate
option contained in the regulation. Ryegate failed to provide the necessary
specificity.
To the extent Ryegate is raising an estoppel claim against the PSB, we
note that the PSB allowed individual producers who could not meet the April
30, 1988, deadline to show that "their unique circumstances have created an
entitlement to 4933 rates." Ryegate attempted to make the requisite showing
in a separate proceeding but the PSB found that its failure to achieve
commercial operation by April 30, 1988, resulted not from administrative or
regulatory delay but from Ryegate's own conduct. That order was appealed
to this Court, and the appeal was voluntarily dismissed by Ryegate. Ryegate
is now foreclosed from showing an estoppel. (FN1)
In view of our disposition of Ryegate's argument, we need not reach the
alternative rationale for the PSB's order that Docket No. 4933 rates were
always limited to projects in operation by April 30, 1988.
Affirmed.
FOR THE COURT:
Associate Justice
FN1. Because of the dismissal of the appeal in the separate proceeding,
Green Mountain Power Corp. moved to dismiss "the claim of error" based on
its estoppel argument. We have addressed the merits of the argument and
deny the motion to dismiss.
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Dissenting
NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40
as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 111 State Street, Montpelier, Vermont 05602 of any errors in order
that corrections may be made before this opinion goes to press.
No. 88-266
Petition of Department of Public Supreme Court
Service for Relief in Regard to
Small Power Production under On Appeal From
PSB Rule 4.100 Public Service Board
April Term, 1990
Richard H. Cowart, Chair
Abell, Kenlan, Schwiebert & Hall, P.C., Rutland, for appellant
Paterson & Walke, P.C., Montpelier, for appellee Green Mountain Power
Corporation
Robert V. Simpson, Jr., Special Counsel, and James Volz, Director for
Public Advocacy, Montpelier, for appellee Department of Public Service
PRESENT: Allen, C.J., Peck, Gibson, Dooley and Morse, JJ.
MORSE, J., dissenting. The Court says "this case is about regulatory
law, not VPX contracts" and concludes that regulatory law does not mandate
enforcement of the letter of intent because it is not a "legally enforceable
obligation." I respectfully depart from the Court's interpretation of the
language "legally enforceable obligation for the delivery of energy or
capacity over a specified term" found in FERC regulation { 292.304(d)(2). I
believe Ryegate obligated itself to provide power in the letter of intent so
long as certain conditions were met. Conditional "obligations" may be
"legally enforceable," and nothing in the regulations says they are not. I
would reverse.
I.
For purposes of this case, I read the words "legally enforceable
obligation for the delivery of energy or capacity over a specified term"
simply to mean a contract "for the delivery of energy or capacity over a
specified term." How can the words "legally enforceable obligation" mean
anything less in this context?
The phrase "legally enforceable obligation" has been interpreted
expansively. In Snow Mountain Pine Co. v. Maudlin, 84 Or. App. 590, 599,
734 P.2d 1366, 1370-71 (1987), the mere tender of a contract by a
qualifying facility to provide power was a "legally enforceable obligation"
because under FERC regulations a "facility's self-imposed obligation to
deliver energy triggers a utility's obligation to purchase energy."
(Emphasis in original.) Thus, contrary to the Court's analysis that
"regulatory law" restricts the common law of contracts, the common law is
expanded. Therefore, at the very least, "legally enforceable obligation"
means a contract. Why this case isn't about contract law is bewildering.
Furthermore, the Court's opinion flatly contradicts an important policy
set forth in the regulatory law. As the introduction to the regulations
found at 18 C.F.R. { 292.304(b)(5) states:
The import of this section is to ensure that a quali-
fying facility which has obtained the certainty of an
arrangement is not deprived of the benefits of its
commitment as a result of changed circumstances. This
provision can also work to preserve the bargain entered
into by the electric utility; should the actual avoided
cost be higher than those contracted for, the electric
utility is nevertheless entitled to retain the benefit
of its contracted for, or otherwise legally enforceable,
lower price for purchases from the qualifying facility.
(Emphasis added.)
Because "certainty of an arrangement" can be achieved by the mere
tender of a contract, the Court turns the regulatory landscape upside down
by holding that not even a contract provides "certainty of arrangement." I
suspect, given this approach, the Court does not think the letter of intent
is a contract. Its analysis of the validity of the letter of intent is as
follows:
We have examined carefully the letter of intent in the
context of the entire Vermont scheme to implement PURPA
and the VPX producer's guide. The letter clearly binds
VPX as a matter of allocation of the power purchase
obligations and rates available to it. Nowhere, how-
ever, has Ryegate assumed a legally enforceable obli-
gation to deliver any energy to VPX and through it to
the utilities and consumers in the state. At best,
Ryegate has obligated itself to go through a number of
development and regulatory steps that may lead to an
obligation to deliver energy, if all goes well.
Under applicable precedent, however, I believe the Court is wrong.
In the letter of intent, VPX and Ryegate agreed to enter into a long-
term contract for the purchase and sale of a specified amount of power at a
specified rate provided certain conditions were met. The parties exchanged
promises: VPX to buy and Ryegate to sell power. A party's promise is
consideration for the other party's promise. H. P. Hood v. Heins, 124 Vt.
331, 337, 561 A.2d 561, 565 (1964). The contract was conditioned on four
events happening: (1) within 45 days, Ryegate must have applied for a
certificate of public good, 30 V.S.A. { 248; (2) within six months of
receiving the certificate (excluding winter months), Ryegate must have begun
construction of its power facility; (3) Ryegate must then have completed
construction of the facility and be prepared to deliver power within twenty-
four months after construction commenced; and (4) Ryegate must have executed
a long-term agreement within sixty days of rate approval by PSB. If Ryegate
failed to meet all these conditions, the obligations to sell and to buy
would have terminated.
In this technological age when lead time between planning, financing,
and construction is considerable and critical to the success of major con-
struction, projects are often undertaken under conditional agreements.
Restatement (Second) Contracts { 224 (1981) defines a "condition" as "an
event, not certain to occur, which must occur . . . before performance under
a contract becomes due." Cases upholding such contracts are legion. See
id. (cases collected in appendix).
The asymmetry of obligation inherent in the letter of intent does not
undermine its enforceability. What apparently bothers the Court is that the
letter of intent is, as the Board stated, "not founded on mutual voluntary
undertakings," that is, VPX promised certain rates but Ryegate was not bound
to produce any power. "Mutuality of obligation," however, is not essential
to an enforceable contract; any independent meaning that this term may once
have had has been subsumed into the concept of adequacy of consideration.
Restatement (Second) Contracts { 79(c) and comment a (1981). Further, the
requirement that there be consideration is not synonymous with a requirement
of equal or coextensive promises. See Hood, 124 Vt. at 338, 205 A.2d at
566; 1 S. Williston, Law of Contracts { 105A, at 425 (3d ed. 1957). Even if
one party has options not provided to the other party -- e.g., to cancel or
renew the contract or to determine the extent of performance -- the contract
is not per se unsupported by consideration. Rather, a contract is
incomplete only if one party's obligations are so attenuated as to render
consideration merely illusory. Id. at 424-25.
Although Ryegate could have put an end to the venture by failing to
meet one of the conditions and VPX had no corresponding power to end it if
Ryegate continued to meet the conditions, consideration (the exchange of
promises) was not illusory. A promise is illusory only if the promisor's
future action is not limited in any way. 1 A. Corbin, Corbin on Contracts {
149, at 657 (1963). See, e.g., Scott v. Moragues Lumber Co., 202 Ala. 312,
314, 80 So. 394, 396 (1918), which Corbin uses to illustrate this principle.
If A promises to charter a boat to B on specified terms and the promise is
conditioned on A buying the boat, then A is bound either to buy the boat and
charter to B or not to buy the boat at all; A cannot buy the boat and not
charter to B. Although a letter of intent does not obligate a producer to
build a plant or to produce any power, once a producer performs, it must
sell the agreed upon amount of power to VPX at the agreed upon rate.
That a "locked-in" rate was critical to Ryegate in going forward with
its project cannot be doubted. Would a producer undertake the planning, the
financing, the regulatory process, and the construction of a power plant,
knowing that anytime along the way the "certainty of the arrangement" on
rates was in doubt depending on economic fluctuations in the electric
utility market? Indeed, the assumption behind PURPA is that without a
locked-in rate ensuring a basis for economic planning and profit, small
producers would not be induced reasonably to enter the market. See, e.g.,
18 C.F.R. { 292.304(d)(2) (small power producers contracting to deliver
energy may choose to have purchase price based on avoided costs calculated
either at the time of delivery or at the time of contract). The producer's
promise is not merely illusory, and therefore the letter of intent is an
enforceable contract.
The Department is candid that its action is based on changed conditions
in the energy marketplace since the letter of intent with Ryegate and
similar letters with others were signed. The Department's position, how-
ever, denies small power producers like Ryegate the very sense of stability
and predictability that the PURPA and the Board's rule were intended to
promote. I cannot doubt that the letter of intent is an enforceable
agreement fulfilling the very purposes that the Board intended for it, at
least viewed from the moment of the adoption of Rule 4.100, rather than with
the benefit of hindsight viewed from atop the remains of a collapsed oil
market.
In sum, the letter of intent was a "legally enforceable obligation" by
Ryegate "for the delivery of energy," 8855 kilowatts, "over a specified
term," 30 years. The plain meaning of the applicable regulation was met.
II.
Because I would reverse the Board's decision, I address the issue
raised by the date of on-line capability as it relates to the thirty-year
rate schedule. A reason for denying Ryegate the 4933 thirty-year rates was
the Board's view that being on-line by April 30, 1988, was a condition
precedent for receiving them. The Board and Department do not contend that
adjustments in the rate schedule for 4933 would be theoretically impossible
or practically unmanageable. Rather, they argue that to make adjustments in
a particular case would result in a rate that was not a "docket 4933 rate"
and hence would not be what Ryegate bargained for. This is a brittle view
of contract law in the face of the complexity of forecasting "avoided costs"
into the distant future. The Board is correct that a 4933 rate adjusted to
the date of appellant's actual commencement of operations is not literally
the "same" schedule as that ordered in the proceeding. But that position,
if determinative, would bar the equitable adjustment of contract provisions
to allow for changes in circumstances and to fulfill the intention of the
parties.
I agree that the Board could have set a coming-on-line deadline in
docket 4933 or VPX could have included a deadline as a condition in its
letter of intent. Neither was done, and reference to docket 4933 in the
letter of intent does not necessarily imply such a deadline.
The Board stated that producers like Ryegate "do not deny that the
temporal limitation of 4933 rates is inherent in the rate structure or that
they were unaware of it," but constructive knowledge of the rate schedule's
temporal nature cannot be bootstrapped into becoming a contract condition
where none previously existed.
A qualifying facility executing a letter of intent with VPX with
respect to the rates in docket 4933 would be aware that these rates were
lagged to six different periods, with a concluding date for the last period
of April 30, 2018. Such knowledge, however, simply does not define the
reasonable expectation of a qualifying facility agreeing expressly to lock
in 4933 rates.
The Board's position is basically that time was of the essence: if
Ryegate was to benefit from the terms of the letter of intent, it had to
meet the time requirements specified in the contract. See Mouat v. Wolfe,
150 Vt. 637, 639, 556 A.2d 99, 101 (1989), quoting 6 S. Williston, Law of
Contracts { 846, at 181 (3d. ed. 1962). Even if the parties had expressly
stated a deadline, time would not necessarily be of the essence. Colony
Park Associates v. Gall, 154 Vt. 1, 4, 572 A.2d 891, 893 (1990). Rather,
[t]he general rule in equity is that time is not of the
essence of the contract, and equity will not treat it as
of the essence of the contract unless it affirmatively
and clearly appears that the parties to so regarded it.
. . . It is not enough that a specific time be named in
the contract; the court is to look at the whole scope of
transaction to see whether the parties really meant the
time named to be of the essence of the contract.
Id. (quoting McLean v. Windham Light and Power Co., 85 Vt. 167, 182, 81 A. 613, 619 (1911)).
Here no coming-on-line deadline was specified. Although the contract
contains some intermediate deadlines presumably intended to keep the project
on track, it notably omits a specific closing date. Nothing in the parties'
conduct at the time of signing the contract or subsequently indicates that
they were operating under a deadline. There is no indication that VPX
checked up on Ryegate's progress or warned it that it was in danger of
losing its rates by falling short of a deadline. See id. at 4-5, 572 A.2d
at 893-94.
That docket 4933 rates ended on April 30, 2018, does not mandate
interpreting the letter of intent to include a coming-on-line deadline.
More plausible interpretations are that once 4933 rates were exhausted, say,
for example, in twenty-nine years, either new rates could be formulated
consistent with 4933 projections to cover the thirtieth year or rates from
whatever docket was then in effect could be substituted. Further, under
appellant's letter of intent, the 4933 rates apply only to the first 8855
kilowatts of power produced (less than half of the total contracted for).
As a practical matter, Ryegate would have switched over to another docket
rate well before its thirtieth year. The inconsistency between the length
of the docket and the length of the contract would then not be an issue. In
short, the fact that Ryegate may be subject to only twenty-nine or so years
of the 4933 thirty-year rate schedule is not a large enough tail to wag the
dog. The Department is obviously not concerned with the thirtieth year of
the contract; rather, it is concerned that producers who signed letters of
intent referenced to docket 4933 will be receiving rates that now look
inflated. But that was precisely the risk that both parties took.
The Board legitimately should be concerned that letters of intent not
be open-ended. It is reasonable that producers must take action within
specified time frames or lose the benefit of the rates stated in the letter
of intent. This case does not present an open-ended schedule. So long as
Ryegate proceeded in good faith, it had a reasonable time to open its
plant.
The Court's hands-off approach to the Board's sleight of hand may serve
as a blessing to ratepayers in this case, but, in my opinion, is bad
utility law. If a contract is not a contract when ratepayers are adversely
affected, would-be power producers will think twice before committing
capital to projects, and that will eventually drive up energy costs for
everyone. The Court's analysis reminds me of the "curdled cliche" that an
oral promise isn't worth the paper it's written on.
I dissent.
____________________________
Associate Justice
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