Chemical Bank v. Washington Public Power Supply System

Utter, J.

(dissenting) — I dissent. The majority, by its narrow reading of municipal authority to provide electric power, places constraints on municipalities not intended by the Legislature. Municipal authority in this area must be read broadly to provide the flexibility which is absolutely crucial in furnishing such a capital-intensive service. The contractual arrangement in the present case is a form of purchase which, viewed at the time the contract was made, may well have been the most economically advantageous for all concerned. While the result has been tragic, the decision here today may not free municipalities of all potential costs in even the present case, will bar them from potentially advantageous contracts in the future, and may well make financing of future projects more costly.

It is natural for anyone viewing the enormity of the mismanagement in this project and the calamitous impact of its failures on utilities and ratepayers to seek ways to negate the impact. Nonetheless, I cannot agree that the approach taken by the majority is either a proper or necessary way to solve the problem.

Initially, it is important to characterize exactly what it is that the participants contracted for. As the majority points out, the contract cannot be characterized as purchase of an ownership interest in a power plant, for the interest held by the participants lacks several important indicia of ownership. Neither does the contract represent a purchase, in the *811 ordinary sense, of actual electric power, for it expressly provides for the possibility, which in fact has materialized, that no power would be produced.

Instead, the contracts are best characterized as a purchase of a possibility of power. In return for consideration in the form of guaranty of the revenue bonds, the participants received not guaranteed power but an exclusive right to power which might or might not materialize. The advantage to the participants was that this power might be significantly cheaper than available alternatives or might even be the only alternative available. While the contract has the disadvantage of requiring payment for a potential "dry hole”, this is true of other standard contracts as well. For example, the buyer in an option contract may well end up paying something for nothing if, when the time comes for it to exercise the option, it chooses not to do so because the terms are no longer economically advantageous.

The majority concedes, as it must, that all of the participants have the authority to "enter into contracts or compacts . . . for the purchase and sale of electric energy". RCW 43.52.410. The issue before us is whether a proper construction of this language includes the purchase of a possibility of electric power. The majority simply concludes that it does not. I find the issue more difficult.

Statutes such as RCW 43.52.410 are to be liberally construed so as to further their purpose of furnishing power to the people. State ex rel. PUD 1 v. Wylie, 28 Wn.2d 113, 146 , 182 P.2d 706 (1947); RCW 43.52.910. See generally Pacific Cy. v. Sherwood Pac., Inc., 17 Wn. App. 790, 795 , 567 P.2d 642 (1977) (statutes relating to the public health and welfare should be liberally construed). As was noted by another court in a similar case:

The legislature has clearly pointed up that it intended to extend liberally to municipal electric utilities the same benefits and efficiency available to other utilities, through combined ownership of a generating system. It would be an impossible and impracticable demand for us to insist on the legislature providing every little detail on how to *812 go about carrying out an authority bestowed. In the absence of some good reason to do so, we should not apply a construction which would nullify, destroy or defeat the intention of the legislature.

Frank v. Cody, 572 P.2d 1106, 1115 (Wyo. 1977).

In light of this rule of liberal construction, I believe this court should construe RCW 43.52.410 to authorize purchase of a possibility of power as well as more typical purchase contracts. Such contracts may in some circumstances be highly advisable. Option contracts, especially when used in an unpredictable market in which periodic gluts and shortages are common, are a good example. Several years ago, for example, a municipality operating an oil-burning power plant seemingly might have been well advised, in the face of escalating oil prices, to enter a long-term contract to purchase oil at the then prevailing price. Yet in light of recent price declines, such a contract would have left the municipality bound to pay significantly more than the current price. The solution — an option contract which would permit the municipality, by exercising its option, to avoid any price increases and yet still, by choosing not to exercise its option, take advantage of any price declines.

The purchase of a possibility of power in the present case no doubt seemed equally advisable in 1974, when steadily rising energy prices were predicted and the costs of the proposed power plants seemed manageable. That a loose market and other economic factors made completion of the plants infeasible and required their termination is no different from a fall in oil prices which might make the hypothetical purchase option described above economically worthless. The participants are no more entitled to a refund of their consideration here, i.e., relief from their bond guaranties, than they would be entitled to a refund of the consideration paid for the option contract. As RCW 43.52.410 should permit option contracts, so it should permit agreements such as that in the present case.

Further support for this conclusion is provided by the Legislature's failure to react at all to the well publicized *813 contracts at issue here. WPPSS is a public entity which is purely a creature of statute. See RCW 43.52. Legislative acquiescence in such an entity's interpretation of the statutes under which it operates is a significant indication of legislative intent. Cf. Washington Educ. Ass'n v. Smith, 96 Wn.2d 601, 606 , 638 P.2d 77 (1981) (legislative acquiescence in Attorney General interpretation); Spokane Methodist Homes, Inc. v. Department of Labor & Indus., 81 Wn.2d 283, 287 , 501 P.2d 589 (1972) (legislative acquiescence in court interpretation); Morin v. Johnson, 49 Wn.2d 275, 279 , 300 P.2d 569 (1956) (legislative acquiescence in interpretation by administrative agency). The various purchasers of bonds undoubtedly relied on legislative acquiescence in this case.

Other courts which have considered the validity of contracts containing comparable "dry hole" provisions have reached conclusions similar to mine. While most of those cases are factually distinguishable, they are unanimous in upholding such provisions. See Board of Comm'rs v. All Taxpayers, Property Owners, & Citizens, 360 So. 2d 863 (La. 1978); State ex rel. Mitchell v. Sikeston, 555 S.W.2d 281 (Mo. 1977); Johnson v. Piedmont Mun. Power Agency, _ S.C. _, 287 S.E.2d 476 (1982); State ex rel. Grimes Cy. Taxpayers Ass'n v. Texas Mun. Power Agency, 565 S.W.2d 258 (Tex. Civ. App. 1978); Frank v. Cody, supra. State ex rel. Mitchell v. Sikeston, supra, actually involved a fact situation almost identical to that in the present case. There, four cities entered into contracts with a neighboring city whereby they agreed to pay for a specified quantity of electric power whether or not actually needed and whether or not actually available. Mitchell, at 283-84. Despite this "dry hole" provision and a complete lack of any ownership interest at all, the court did not even question the authority of the purchaser cities. See Mitchell, at 291.

We should reject the majority's narrow interpretation of RCW 43.52.410. Municipalities exercising their authority to provide electric power to their citizens must be given the freedom and flexibility to use all advisable means. Their *814 determinations of advisability, moreover, are not subject to judicial review, except to the extent that they are arbitrary and capricious. See State ex rel. PUD 1 v. Schwab, 40 Wn.2d 814, 829-31 , 246 P.2d 1081 (1952). I would hold that the participants did possess authority to enter into the contracts at issue here.

I will not respond to the concurring opinion. There are compelling reasons for determining the issues of law addressed in that opinion in a different manner. Some of these were stated by the trial court; others were presented to us in oral argument and in the briefs of the parties.

Because the majority has deliberately chosen to refrain from addressing these remaining issues (see majority opinion at 781, footnote 1), I do so as well. However, our silence should not be mistaken for acquiescence in the views of the writer of the concurring opinion. RAP 13.7(b) expressly authorizes us to limit the issues which we address in reviewing an opinion of the Court of Appeals and this must encompass the power to so limit our review at any time prior to issuing a decision. While RAP 2.4, which governs direct discretionary review, does not expressly allow such limitation, such power must be implied in light of RAP 13.7(b) and the nature of discretionary review. See also RAP 18.8(a) (appellate court may waive or alter Rules of Appellate Procedure). To hold otherwise would allow a party seeking discretionary review to force an appellate court to choose between reviewing none or all of numerous issues that party might present. This would conflict with the basic concept of discretionary review, that it is discretionary.

I dissent.

Dolliver, J., concurs with Utter, J.

Reconsideration denied July 22, 1983.