Opposition Brief — Massachusetts Municipal Wholesale Electric Co. v. Vermont Department of Public Service

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No. 88-1769 10 1989 |

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IN THE — nat nmes

Supreme Court of the United States

OCTOBER TERM, 1989

MASSACHUSETTS MUNICIPAL WHOLESALE

ELECTRIC COMPANY,

Petitioner,

VERMONT DEPARTMENT OF PUBLIC SERVICE, et al..

Respondents.

On Petition for a Writ of Certiorari to the

Supreme Court of Vermont

BRIEF IN OPPOSITION OF RESPONDENT

VERMONT DEPARTMENT OF PUBLIC SERVICE

Of Counsel: SAMUEL H. PREss *

CLAYTON P. GILLETTE Vermont Department of

Boston University Law School Public Service

765 Commonwealth Avenue 120 State Street

Boston, Massachusetts 02215 Montpelier, Vermont 05602

(802) 828-2383

July 10, 1989 * Counsel of Record

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

"BEST AVAILABLE COPY

QUESTIONS PRESENTED

Should the Court deny certiorari under 28 U.S.C.

§ 1257(a) in a case where the petitioner did not prop-

erly present its constitutional issues to the state court?

Does refusal to allow reargument on a new issue,

according to consistent Vermont practice, constitute

adequate and independent state grounds which may

not be reviewed under 28 U.S.C. § 1257(a)?

Has a litigant, which presented extensive materials

and filings in a state action under the rules of civil

procedure, been denied due process of law by the re-

fusal of the highest state court to hear reargument

on constitutional issues raised then for the first time?

Is a judicial decision, which holds in a case of first

impression that a novel contractual arrangement is

invalid under state law, a state action contrary to the

Due Process Clause?

Does a judicial decision, which voids a public contract

because it delegated authority contrary to state law,

discriminate against interstate commerce because a

nonresident is a party to the contract?

TABLE OF CONTENTS

QUESTIONS PRESENTED ................. Teoeaiatconevecnaeaces

ee Ge A ty yi 4 od ea

Neen caasiusbuscamsunons

SUPPLEMENTAL STATEMENT OF THE CASE .....

A. The Power Sales Agreements ..................-...ow.....

II.

Il.

IV.

B. Proceedings Below ........... gies ice rea idaeadebatacecds

REASONS WHY THE PETITION SHOULD BE

Ng pdeanneahaichk lineation eshasieoas dacncvencescs

The Petitioner Did Not Properly Present Its

Constitutional Issues to the Vermont Courts ....

The Decision Below Rests On Adequate and In-

dependent State Grounds ......000000002022eeeeee eee.

MMWEC Enjoyed Full and Fair Opportunity to

Litigate Its Constitutional Defenses Below in

Accordance with High Standards of Procedural

NN I oo vicivn conan cacasoxcevesensccecensssss ee eee ;

The Petitioner’s Federal Constitutional Claims

Lack Substantive Merit and Require No Further

Consideration in the State Court System ....

A. Judicial invalidation of a Contract in a Case

of First Impression Does Not Constitute a

Deprivation of Property or Otherwise Impli-

cate the Due Process Clause .........-............

B. Invalidation of the PSAs Does Not Discrimi-

nate Against Interstate Commerce ....

ene nee bax geiasaelicda

(iil)

Page

TABLE OF CONTENTS—Continued

APPENDICES: Page

APPENDIX A

Power Sales Agreement MMWEC Project

ae ects caedeaacesauatmoreats la

APPENDIX B

MMWEC Memorandum in Support of Motion

for Reargument (Constitutional parts) _...... 37a

TABLE OF AUTHORITIES

Federal Cases ee Page

A & H Manufacturing Co. v. Contempo Card Co.,

576 F. Supp. 894 (D.R.I. 1983) _............c—— a 11

—.

Arkansas Electric Cooperative Corp. v. Arkansas

Public Service Commission, 461 U.S. 375 ....... a2

Bankers Life & Casualty Co. v. Crenshaw, ——

US. » 108 S.Ct. 1646. (1988) ......................... 9

Board of Directors of Rotary Int’l v. Rotary Club

of Duarte, 481 U.S. 587 (1987) 9,14

Boddie v. Connecticut, 401 U.S. 371 (1971) ........ 16

Cardinale v. Louisiana, 394 U.S. 437 (1969)... 9

Clark v. Jeter, U.S. ——-, 108 S.Ct. 1990

CRIED ino ticdisalcuakedgrmeen ant ee 9,10

District of Columbia Court of Appeals v. Feldman,

MP USAR, GE CI cesses desseanene cc, 9

Duquesne Light Co. v. Barasch, —— ‘US. —,

oe 8s S| ee eee 19

Estate of Wilson v. Aiken Industries, Inc., 439 U.S.

iS Ae 8. | RSD rennin mT ee OER 13

Golden Oil Co. v. Exxon Co., 543 F.2d 548 (5th

ARE | «| ER ARR Se RO MO SNR ny Reco DCN SI 11

Hathorn v. Lovorn, 457 U.S. 255 (1982) 15

Heath v. Alabama, 474 U.S. 82 (1985) 9

Hilton v. Mumaw, 522 F.2d 588 (9th Cir. 1975)... 11

Hughes v. Washington, 389 U.S. 290 (1967) ........ 19

Keystone Bituminous Coal Association v. De Bene-

dictis, 480 US. 470 (1987) ...........:..................... 19

Michigan v. Long, 463 U.S. 1032 (1983)... 14

Middle South Energy, Inc. v. Arkansas Public

Service Commission, 772 F.2d 404 (8th Cir.

BUD sei ciaksonice dss han cciescomoeilena dina Geena ee 23

Minnesota v. Clover Leaf Creamery Co., 449 U.S.

mee (E0G8? ee ee 21, 23

Mississippi Power & Light Co. v. Mississippi ex

rel. Moore, US. , 108 S.Ct. 2428

GRE citsetrdncentericpncdecas teat ce Lee ee 23

New England Power Co. v. New Hampshire, 455

i ES; Re EE Micra Pein SUN AR! 23

TABLE OF AUTHORITIES—Continued

Page

~ Oklahoma v. F.E.R.C., 494 F.Supp. 636 (W.D.

Okla. 1980) ceneaanmiiee 11

Penn Central Transportation Co. vy. New York

City, 488 U.S. 104 (1978). we RAE 19

Pike v. Bruce Church, Inc., 397 U Ss. 137 (1970). 22

Prudential Federal Savings & Loan Association v.

Flanigan, 478 U.S. 1311 (1986)..........................- 13

PruneYard Shopping Centerev. Robbins, 447 U.S.

74 (1980) .. 5 ain ud cistern eggs spteoaeabdaneaaeah vente 13, 19

Radio Station WOW, Inc. v. Johnson, 326 U. S. 120

(1945) _ —_ sea ' ieicnaedial 13

Street v. New York, 394 U.S. 576 (1969) ... 19

Tayler v. Illinois, 484 U.S. ——, 108 S.Ct. 646

(1988) ... ... iSekeniiebcanaceans . 10,14

Tidal Oil Co. v. Flanagan, 263 U.S. 444 (1924) 18

Webb v. Webb, 451 U.S. 493 (1981) ; 9

Yapalater v. Bates, 494 F.Supp. 1349 (S.D.N.Y.

1980) ; ; ; és ee 1]

State Cases

Asson v. City of Burley, 105 Idaho 432, 670 P.2d

839 (1983) 20

Black River Associates, Inc. v. Koehler, 126 Vt.

394, 233 A.2d 175 (1967) 15

Brouha v. Postman, 145 Vt. 449, 491 rt 2d 1038

(1985) .. ; le 10

Bourne v. Lajoie, 1 49 Vt. 45, 540 A. 2d 3! 59 (1987) ) 15

In re Central Vermont Public Service Corp., 83

P.U.R. 4th 5382 (Vt. P.S.B. 1987) 2

Coolidge v. Coolidge, 130 Vt. 132, 287 A.2d 566

(1972) 15

Corey v. Furgat Tractor & Equipment, Inc., 147

Vt. 477, 520 A.2d 600 (1986) 15

Chemical Bank v. Washinaton Public Power Sup-

ply System, 99 Wash.2d 772, 666 P.2d 329

(1983) 20

Chemical Bank v. Washington Public Power Sup-

nly System, 102 Wash.2d 874, 691 P.2d 524

(i984) .. 7 - a 20

vii

TABLE OF AUTHORITIES—Continued

Page

DeFazio v. Washington Public Power Supply Sys-

tem, 296 Or. 550, 679 P.2d 1316 (1984)... 20

Frank v. City of Cody, 572 P.2d 1106 (Wyo.

i | Oe aE EPR TR ORC EE = WE SINE ree te SL 20

Johnson v. Piedmont Municipal Power Agency, 287

S.E.2d 476 (S.C. 1982) . sp epiiee edema 20

In re Mozley’s Will, 103 ‘Vt. 100, 152 A. 713

9. | EERE GRRDN DEN SEILEEPERE? EEE AGREEMENT, Be 15

Prescott v. Smits, 146 Vt. 430, 505 A.2d 1211

UEP cctsecnnckncsnchcetasticnstan eee eee nie 11

Ryan v. Orient Insurance Co., 96 Vt. 291, 119 A.

Ue UA RENN. cacrecattiactonsce nen eeee ee . 15

State ex rel. Mitchell v. Cit y of Sikeston, 555

8 of 8 et DC yp oe nen 21

State v. Jewett, 146 Vt. 221, 500 A.2d 233 (1985)... 12

State v. Percy, 149 Vt. 623, 548 A.2d 408 (1988). 15

State v. Taylor, 145 Vt. 437, 491 A.2d 1034 (1985)... 12

Swanton Village v. Town of Highgate, 128 Vt. 402,

264 A.2d 804 (1970) 00 12

Thompson v. Smith, 119 Vt. 488, 129 A.2d 638

(1957) ginancasteahiiasustdagechesentee aaa 22

Town of Fairlee v. Beaten & Maine Corp., 127 Vt.

215, 244 A.2d 53 (1968) , 15

Van Dyke v. Cole, 81 Vt. 399, 70 A. 1103 (1908) 15

Constitutions, Statutes and Court Rules

U.S. Const. art. I, § 8, cl. 3 (“commerce”) 21, 22, 23

U.S. Const. art. I, § 10, cl. 1 (“contracts”) 17, 18, 19

U.S. Const. amend. V (“takings”) ee yah

U.S. Const. amend. XIV, § 1 (“due process”) ...... 17, 18, 19

28 U.S.C. § 1257 (a) ...... ooo... eee cence oc coceeecee ee naugtateeas 9,14

Me. Rev. Stat. Ann. tit. 35, § 4103(1) (B) . 20

Mass. Comp. Laws Ann. ch. 164 App., § 1-6 (a) .... 20

N.C. Gen. Stat. § 159B-12 erent es 20

S.C. Code Ann. § 6-23-110 20

Vt. Stat. Ann. tit. 30, $5013 20

Ya. Code §§ 15.1-1611 _... = : . 20

a A Re Beer eA 10

viii

TABLE OF AUTHORITIES—Continued

Fe i a cca eitisateetscamweneienaness

V.R.A.P. 40

Vt. R. Civ. P. 8

Other Authorities

E. McQuillan, Municipal Corporations (3d ed. rev.

1988) Sc RADON eT

. Wright & A. Miller, Fed: ral Practice & Pre-

cedure (1969)

Reporter’s Notes to Vt.R.Civ.P. 1

IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

No. 88-1769

MASSACHUSETTS MUNICIPAL WHOLESALE

ELECTRIC COMPANY,

. Petitioner,

VERMONT DEPARTMENT OF PUBLIC SERVICE, et al.,

Respondents.

On Petition for a Writ of Certiorari to the

Supreme Court of Vermont

BRIEF IN OPPOSITION OF RESPONDENT

VERMONT DEPARTMENT OF PUBLIC SERVICE

Respondent, Vermont Department of Public Service

\“VDPS”), respectfully requests that this Court deny

the petition for a writ of certiorari dated May 1, 1989

submitted by Massachusetts Municipal Wholesale Elec-

tric Company (““MMWIC’”’).

JURISDICTION

A writ of certiorari should not issue because the case

does not meet the prerequisites for review of a state

judgment under 28 U.S.C. § 1257(a). The pertinent part

of section 1257(a) authorizes review if a “title, right,

privilege, or immunity” has been “set up or claimed un-

der the Constitution” by the petitioner in the state action.

This case fails to meet the requirements for such review

under the jurisprudence of the Court in two ways: 1) Pe-

titioner failed to properly raise its constitutional issues

in the Vermont courts (see pages 9-14 below); and 2)

the decision of the Vermont Supreme Court to deny re-

argument rests on adequate and independent state grounds

(see pages 14-15 below).

SUPPLEMENTAL STATEMENT OF THE CASE

Petitioner MMWEC’s lengthy Statement of the Case

contains surprisingly little about the pertinent provisions

of the contracts at issue here or the course of the litiga-

tion to this point. The result is a fragmentary (and at

points inaccurate) version of the obligations to which the

Vermont Supreme Court objected and an incomplete re-

view of the procedural history that glosses over Peti-

tioner’s failure to raise its constitutional claims in a

timely and proper manner (see pages 4-8 below).

A. The Power Sales Agreements

This case involves the validity of contracts, denominated

Power Sales Agreements (“PSAs”), between MMWEC

and six public-owned utilities created under Vermont law

(the “Vermont Participants’). The question of the

PSAs’ validity was one of first impression before the

Vermont Supreme Court; no Vermont court or regula-

tory body had previously considered arrangements even

remotely similar to the PSAs, or construed the Vermont

statutes at issue.’

In this initial test of the PSA’s, the Vermont Supreme

Court found two defects sufficiently substantial to re-

quire that the contracts be declared void ab initio: lack

1MMWEC wrongly implies that the PSAs were approved by the

Vermont Public Service Board (““PSB’’) under its General Order

No. 45. Petition at 9-10. This regulation required the Vermont

Participants only to give notice of the PSAs, and has no provision

for PSB approval. In re Central Vt. Pub. Serv. Corp., 88 P.U.R.

4th 532, 542 n.13 (Vt. P.S.B. 1987). The PSB studied the involve-

ment of only one of the six Vermont Participants.

of statutory authority (Petitioner’s App. 6a to 1la, citing

30 V.S.A. sec. 4002) and impermissible redelegation of

authority to MMWEC (Petitioner’s App. lla to 22a).

The Vermont Supreme Court summarized the offending

provisions of the PSAs as follows:

Under the provisions of the PSAs, all decision-

making power with regard to the project rests with

MMWEC; the Vermont participants retain no voice

in decisions to incur debt, to commence operation of

the plant, or to decommission the plant. They have

abdicated all management responsibility for and have

obtained no ownership interest in the project. Peti-

tioner’s App. lla.

MMWEC is a partial owner of the Seabrook nuclear

power plant in New Hampshire. In 1979, MMWEC pro-

posed to the Vermont Participants that they purchase

“Project Capability” from MMWEC’s share of Seabrook.

“Project Capability” is basically the amount of electric

capacity and energy, “if any,” that Seabrook is capable

of producing at any particular time. PSA §1(q), App.

lla. Thus, the Vermont Participants were not simply

purchasing electricity, but were gambling on a chance

that electricity would be produced. In return, the Ver-

mont Participants were obligated to pay MMWEC amounts

that did not reflect the amount of electricity made avail-

able to them, but instead reflected the costs incurred by

MMWEC in constructing and operating the project, re-

gardless of the operating status of the project (or even

its completion). This payment obligation was incorpo-

rated in the “take-or-pay, hell-or-highwater” provision of

the PSAs, § 5(d):

(d) The Participant shall make the payments to

be made to MMWEC under this Agreement whether

or not the Project . . . is undertaken, completed,

operable or operating and notwithstanding the sus-

pension, interruption, interference, reduction or cur-

tailment of the output of the Project... . (App.

17a)

In short, the PSAs required the Vermont Participants

to make payments in respect of MMWEC’s costs for a

plant not yet constructed and which might never be cap-

able of producing electricity. Notwithstanding the nature

of this risk, the PSAs denied the Vermont Participants

any role in the planning, construction, financing, or oper-

ation of the project. MMWEC was empowered to make

all decisions concerning issuance of bonds, decommission-

ing, termination, operation or expansion of the project

without consulting the Vermont Participants.

The Vermont Supreme Court concluded that there is

no basis in Vermont law for Vermont publicly-owned util-

ities to enter into these extraordinary provisions. Follow-

ing similar decisions in other jurisdictions, the court

determined that where the legislature had intended to

allow Vermont municipalities to enter contracts so far

afield from the ordinary purchase of capacity and energy,

it had passed explicit authorizing legislation. The court

further determined that the contractual abdication by the

Vermont Participants over the fiscal] and legislative af-

fairs of their utility systems ran afoul of time-honored

restraints on the conduct of municipal affairs. In par-

ticular, the court followed its own precedents in finding

that a municipality that had been delegated authority to

operate in the public trust could not redelegate that au-

thority without explicit legislative permission. The court

concluded that an arrangement that permitted MMWEC

unilaterally to fix the amount of the Vermont Partici-

pants’ payment obligations and to constrain Participants’

exercise of their borrowing power constituted such an

unlawful delegation.

B. Proceedings Below

A complete procedural history shows that VDPS re-

peatedly urged that the PSAs be voided. MMWEC, how-

ever, failed at every step---in pleadings, on summary

judgment, and on appeal—to present its constitutiona! ar-

guments to defend against this remedy.

Pleadings: In the first thirteen of its fourteen counts

the VDPS complaint alleged that the PSAs )

invalid, ineffective and unenforceable.’ Petitioners A)

46a-55a. VDPS made claims based on common law, stats

statute, and the Vermont and Federa! Constitutio1

) aS rave th; t the Verm mn? ~ ner) r | 17 1ec i+

the PSAs “void, invalid, ineffective and unenforce

and enjoin the Vermont Participants from making pav-

ments to MMWEC under the PSAs. (Petitioners Ap,

55a £

MMWEC had more than six months to consider its d

fenses before filing its answer. In the meantime, MMWEC

availed itself of many of the protections provided und:

the Vermont Rules of Civil Procedure.” MMWEC twice

moved to enlarge time to file a responsive pleading under

Rule 6‘b); and unsuccessfully moved to dismiss the com-

plaint on a host of grounds under Rule 12(‘b). ( Petition-

er’s App. 58a). The answer raised seven affirmative de-

fenses under Vermont law in addition to the eighth

through fourteenth defenses reprinted in Petitioners App.

at 57a-58a. From the outset, MMWEC was represented

by experienced Vermont and Boston counsel. Petitioners

App. 27a, 58a, 63a-64a.

MMWEC did not plead that to void the PSAs would

violate the Constitution; rather, MMWEC pleaded that

commencement of the civil action by VDPS did so. Each

of MMWEC’s ninth through fourteenth defenses branded

as unconstitutional the “conduct of the Vermont Depart-

2 The Vermont Rules of Civil Procedure, adopted in 1971, are

very closely modeled on the Federal Rules of Civil Procedure.

Even the numbering of the rules is parallel. “Federal cases inter-

preting the Federal Rules are an authoritative source for the in-

terpretation of identical provisions of the Vermont Rules.” Re-

porter’s Notes to Vt. R. Civ. P. 1.

ment of Public Service, by prosecution of the present

litigation and otherwise.” Statements by MMWEC that

it pleaded constitutional affirmative defenses to invalida-

tion of the PSAs are simply not true. Questions Pre-

sented 92, Petition at i; Statement of the Case, Peti-

tion at 11.

Summary Judgment: MMWEC did not pursue any

constitutional defenses after filing its answer. VDPS

and MMWEC exchanged extensive filings on their cross-

motions for summary judgment, including pre-filed testi-

mony, proposed and agreed statements of fact, pre-trial

briefs, memoranda, and reply memoranda. MMWEC filed

a 45 page “Defendants Joint Pre-Trial Brief”, May 30,

1986; a 55 page “Defendants’ Joint Brief on Cross-

Motions for Summary Judgment”, September 22, 1986

(Printed Case at 267-324) ; and “Defendants’ Joint Reply

Memorandum on Cross-Motions for Summary Judgment”

(October 1, 1986) (Printed Case at 413-430). In none

of these did MMWEC present evidence or argument on

any constitutional affirmative defenses. Indeed, MMWEC

did not even so much as mention them. Accordingly, the

Superior Court had no occasion to discuss or decide any

affirmative defense, including those MMWEC raises here.*

Appeal: VDPS sought reversal on the grounds that the

PSAs are void. Brief of Appellant, January 30, 1987, at

2 20, 82, 112. MMWEC’s brief to the Vermont Supreme

Court, however, is completely silent on affirmative de-

fenses to voiding the PSAs. MMWEC’s 67 page brief

below is devoid of argument, and indeed all mention, of

its constitutional defenses. The lengthy “Table of Au-

3In contrast, VDPS and MMWEC actively briefed VDPS consti-

tutional causes of action to void the PSAs. See VDPS filings dated

11/26/85 at 26-45; and 9/22/86 (Printed Case at 237-245) ;

MMWEC filings dated 1/28/86 at 27-29; and 9/22/86 (Printed

Case at 322). In its Opinion and Order granting summary judgment

in favor of MMWEC against VDPS, the Superior Court decided the

constitutional claims presented by VDPS. Petitioners App. 82a-84a.

Lend

‘

thorities Cited” in MMWEC’s brief does not contain a

single citation to the Federal Constitution, or to any case

cited to the Court in the Petition. Joint Brief of the

Defendants-Appellees, March 1987, at ii-viii.

Although silent on affirmative defenses of its own,

MMWEC’s brief below referred to the state law affirma-

tive defenses of its co-defendants. These statements are

all that MMWEC briefed about affirmative defenses.

In describing the Superior Court proceedings, MMWEC

apprised the Vermont Supreme Court that “the de-

fendant villages and WEC [Washington Electric Co-

operative] . . . also asserted a number of affirmative

defenses to DPS’s claims, including inter alia, waiver,

estoppel, and res judicata, none of which was decided

below.” Jd. at 3. At no point did MMWEC refer the

Vermont Supreme Court to any purported constitutional

defense. In its “Statement of Issues,’ MMWEC did

touch on the disposition of claims and defenses not de-

cided by the Superior Court:

A number of issues raised below by the DPS and

other plaintiffs have not been briefed and therefore

must be deemed waived.'* Certain issues that have

been briefed by the DPS were not reached by the

trial court and need not be reached by this Court if

it affirms the judgment below.’® If this Court does

not affirm the judgment, the case should be remanded

for determination by the trial—court of the issues

not previously addressed.

MMWEC’s footnotes 18 and 19 state in their entirety:

'’ These include various state and federal constitu-

tional claims as well as the contention that the PSA’s

conflict with 30 V.S.A. §§ 225-227 authorizing the

PSB to regulate electric rates.

These include certain affirmative claims of the

DPS as well as the affirmative defenses raised by the

defendant villages and WiC. /d. at 20-21.

The Vermont Supreme Court noted MMWEC’s attempt

to reserve nonconstitutional affirmative defenses for re-

mand, but declined to order consideration on further

proceedings. Petitioners App. 23a. “Our holding that the

PSAs are ultra vires and void ab initio obviates any such

necessity.” Jd. The Vermont Supreme Court had no oc-

easion to consider or decide any constitutional argument

or affirmative defense by MMWEC.

The Vermont Supreme Court reversed the Superior

Court and entered judgment for the plaintiffs on the

grounds that the PSAs were void ab initio under Ver-

mont law. Petition App. 3a, 24a. Only then, in a “Mo-

tion for Reargument” under V.R.A.P. 40, did MMWEC

for the first time argue that voiding the PSAs would

violate the Constitution. Petition App. 25a Paragraph

8 of MMWEC’s motion for reargument makes a bare

assertion of violation of the Commerce, Takings, and Due

Process clauses. Petition App. 27a. MMWEC’s grounds

for the assertions appear in its memorandum in support

of reargument. App. 88a-39a. The Vermont Supreme

Court denied reargument on the ground that MMWEC

failed “to identify points of law or fact previously over-

looked or misapprehended.” Petitioners App. 28a. This

reason follows the requirement in V.R.A.P. 40 that a

motion for reargument state “the points of law or fact,

presented in the briefs upon the original argument, which

-. . the Court has overlooked or misapprehended.”

REASONS WHY THE PETITION SHOULD BE DENIED

I. The Petitioner Did Not Properly Present Its Consti-

tutional Issues to the Vermont Courts

Review under 28 U.S.C. § 1257(a) requires that the

petitioner have timely and adequately presented its issues

to the lower court. Clark v. Jeter, USS. , 108

S.Ct. 1910, 1918 (1988). The Court has declared its

“practice, when reviewing decisions by state courts, not

to decide federal claims that were not presented or passed

upon below.” Id.; quoting Bankers Life & Casualty Co. v.

Crenshaw, US. , 108 S.Ct. 1645, 1651 (1988).!

When, as is the case here, “the highest state court has

failed to pass upon a federal question, it will be assumed

that the omission was due to want of proper presentation

in the state courts, unless the aggrieved party in this

Court can affirmatively show the contrary.” Board of

Directors of Rotary Int'l v. Rotary Club of Duarte, 481

U.S. 537, 550 (1987) (citations omitted). To make this

showing, “[a]lt the minimum .. . there should be no

doubt from the record that a claim under a federal

statute or the Federal Constitution was presented in the

state courts and that those courts were apprised of the

federal claim at the time and in the manner required by

the state law.” Webb v. Webb, 451 U.S. 493, 501 (1981),

followed in Bankers Life v. Crenshaw, 108 S.Ct. at 1650.

The record below reveals an abdication by MMWEC

of its responsibility to raise and press its arguments un-

der the federal constitution. It is not surprising that both

4 Many of the Court’s decisions hold that Section 1257 does not

confer jurisdiction to hear such cases. E.g., Cardinale v. Louisiana,

394 U.S. 437, 439 (1969). See District of Columbia Court of Ap-

peals v. Feldman, 460 U.S. 462, 482 n.16 (1983) (citing cases).

Even if the Court “‘were not jurisdictionally barred from consid-

ering claims not pressed or passed upon in the state court... the

longstanding rule that this Court will not consider such claims

creates, at the least, a weighty presuraption against review.”

Heath v. Alabama, 474 U.S. 82, 87 (1985).

the Superior Court and the Supreme Court did not men-

tion, let- alone pass upon these issues, for at every stage

of the case—from pleading, through summary judgment,

and on appeali—MMWEC did not properly bring its argu-

ments as reasonably required under Vermont law.

Pleading: MMWEC set forth no affirmative defense

that the judicial voiding of the PSAs would violate the

Constitution. Its ninth through fourteenth defenses as-

serted a wholly different matter, that the actions of

VDPS as plaintiff violated the Constitution. This bizarre

assertion, at best, would sound as a counterclaim. It

hardly served to apprise the Vermont trial court of the

nature and substance of constitutional argument with

the “fair precision” required. Street v. New York, 394

U.S. 576, 584 (1969). To raise a federal question ade-

quately, both the act complained of, and the constitu-

tional doctrine said to be involved, should be identified

with reasonable particularity. See Clark v. Jeter, 108

S.Ct. at 1913-14; Taylor v. Illinois, 484 U.S. , 108

S.Ct. 646, 651 n.9 (1988).

Vermont procedure requires that an affirmative defense

be pleaded, or it is waived. Under Vt. R. Civ. P. 8(c),

which is almost identical to the parallel federal rule, ‘‘un-

less an affirmative defense is specifically raised in the

pleadings, it is not generally available at trial or appeal.”

Brouha v. Postman, 145 Vt. 449, 452, 491 A.2d 1038

(1985). Vermont practice is the same as under Fed. R.

Civ. P. 8(c). See 5 C. Wright & A. Miller, Federal

Practice and Procedure § 1278 and n.29 (1969 & Supp.

1987) (gathering cases).

Summary Judgment: MMWEC presented no support-

ing material or argument whatsoever on its affirmative

defenses to the Superior Court. Therefore, without re-

gard to the adequacy of its pleading, MMWEC abandoned

the defenses under Vermont law by failing to introduce

evidence, and to bring them to the attention of the trial

court. Prescott v. Smits, 146 Vt. 480, 483, 505 A.2d

1211 (1986).

Here too Vermont follows federal practice. “The de-

fenses initially raised but not thereafter briefed or ar-

gued are, of course, deemed to have been abandoned.”

A & H Manufacturing Co. v. Contempo Card Co., 576

F.Supp. 894, 896 n.1 (D.R.I. 1983). Such affirma-

tive defenses are not open on appeal. Golden Oil

Co. v. Exxon Co., 548 F.2d 548, 551 (5th Cir. 1976) ;

Hilton v. Mumaw, 522 F.2d 588, 595 (9th Cir. 1975).

Even the claimed violation of a constitutional right is

deemed abandoned if it is not pursued after pleading.

Oklahoma v. F.E.R.C., 494 F.Supp. 636, 651, n.13 (W.D.

Okla. 1980), aff'd, 661 F.2d 832 (10th Cir. 1981), cert.

denied, 457 U.S. 1105 (1982); Yapalater v. Bates, 494

F.Supp. 1349, 1369 n.15 (S.D.N.Y. 1980}, aff'd mem.,

644 F.2d 131 (2d Cir. 1981), cert. denied, 455 U.S. 908

(1982).

MMWEC seeks to excuse the abandonment of its con-

stitutional defenses by implying that the parties agreed

to forego constitutional claims in order to focus on state

law issues. MMWEC suggests that the parties volun-

tarily confined themselves to state law issues in the Su-

perior Court. Petition at 11. In reality, VDPS repeat-

edly raised and briefed its constitutional claims to the

Superior Court, and MMWEC responded to them. (Supp.

Statement of the Case at 6 n.8 above). Any implication

that the parties agreed to restrict the range of issues is

wrong. MMWEC then states that, because the range of

issues was restricted, the Vermont “courts did not ad-

dress the federal law claims asserted in the pleadings.”

Petition at 12. To the contrary, the Superior Court ruled

on VDPS constitutional claims. Petitioners App. 82a-84a.

The Vermont Supreme Court discussed no constitutional

issues simply because the parties did not brief them on

appeal.

Appeal: Even if MMWEC had not waived and aban-

doned its constitutional issues in the Superior Court, it

did so by its total failure to raise, brief, or even mention

them on appeal. Vermont rules reasonably require that

an appellate brief state concise and specific issues.

V.R.A.P. 28. In two recent opinions, the Vermont Su-

preme Court has alerted counsel that the burden to raise,

develop, and maintain a constitutional argument lies with

the proponent, and the court will not consider a constitu-

ticnal issue not presented in “a clear and concise man-

ner.” State v. Jewett, 146 Vt. 221, 229, 500 A.2d 233

(1985) (state constitution); State v. Taylor, 145 Vt.

437, 439, 491 A.2d 1034 (1985).

If MMWEC thought it had no opportunity to develop

its constitutional defenses before the Superior Court, it

could and should have brought them to the attention of

the Vermont Supreme Court. MMWEC could have raised

them to support the judgment in its favor, or to urge re-

mand to consider them. MMWEC instead waived them

by its silence. Swanton Village v. Town of Highgate, 128

Vt. 402, 403, 264 A.2d 804 (1970). MMWEC itself recog-

nized this rule in brushing aside VDPS’ constitutional

claims. It assured the Vermont Supreme Court that

“issues raised below by the DPS .. . have not been

briefed and therefore must be deemed waived.” (Joint

Brief of the Defendants-Appellees at 20) (quoted above at

7).

MMWEC instead mentioned in passing the nonconsti-

tutional affirmative defenses of its co-defendants. (Supp.

Statement of the Case at 7 above). By its reference

to some but not all affirmative defenses, MMWEC directed

the Vermont Supreme Court away from the issues it

raises now. The Vermont Supreme Court duly addressed

those affirmative defenses despite MMWEC’s passing

reference to them. That the court took up the arguments

it saw establishes that MMWEC’s constitutional defenses

were passed over precisely because MMWEC did not pre-

sent them to the Vermont court.

Motion for Reargument: The motion for reargument

did not timely or adequately raise the issues in the Peti-

tion that voiding the PSAs would violate the Constitution.

The Court’s long-established rule is dispositive: “Ques-

tions first presented to the highest State Court on a

petition for rehearing come too late for consideration

here... .” Radio Station WOW, Inc. v. Johnson, 326

U.S. 120, 128 (1945). This rule has recently been fol-

lowed to deny relief under very similar procedural cir-

cumstances. See Prudential Federal Savings & Loan

Association v. Flanigan, 478 U.S. 1811 (Rehnquist, Cir-

cuit Justice 1986) (constitutional issues not presented to

state court until petition for rehearing, which was denied

without comment). The decision below granted the relief

sought (voiding the PSAs), on the plaintiffs’ state law

theories, in a case of first impression. MMWEC does not

and cannot contend that it was unfairly surprised by

relief that could not have been anticipated, or by a sud-

den reversal of controlling precedent. Under these cir-

cumstances, MMWEC could not raise constitutional issues

for the first time on motion for reargument. PruneYard

Shopping Center v. Robins, 447 U.S. 74, 85 n.9 (1980);

Estate of Wilson v. Aiken Industries, Inc., 439 U.S. 877,

879 (1978) (Blackmun, J., concurring in denial of certio-

rari).

Even if timely, MMWEC’s motion for reargument did

not adequately raise the issues it-asserts here. The Peti-

tion gives one ground for certiorari: that MMWEC’s pro-

cedural due process rights were violated by denying the

opportunity “to assert and prove substantial federal con-

stitutional affirmative defenses.’ Petition at i. MMWEC

did not raise this issue in seeking reargument. Its memo-

randum in support of reargument mentions purported vio-

lations of the Takings and Commerce Clauses, but no-

where argues that its procedural due process rights were

violated. MMWEC cites the Due Process Clause, but

only to explain that the “Takings Clause is made ap-

plicable to the states through the Due Process Clause.”’

App. 39a. An unelaborated citation cannot be sufficient

to apprise the state courts of the nature and substance

of any one of the many doctrines under the Due Process

Clause. The Court properly requires more, especially of

a sophisticated litigant like MMWEC represented by

counsel at all stages. Cf. Taylor v. Illinois, 108 S.Ct. at

651 n.9 (“generic reference to the Fourteenth Amend-

ment is not sufficient to preserve a constitutional claim

based on an unidentified provision of the Bill of Rights”) ;

Rotary International, 481 U.S. at 550 n9 (a “casual

reference to a federal case, in the midst of an unrelated

argument, is insufficient to inform a state court’).

II. The Decision Below Rests On Adequate and Inde-

pendent State Grounds

The decision by the Vermont Supreme Court to deny

MMWEC’s motion for reargument rests on an adequate

and independent state ground, so that the Court has no

jurisdiction under 28 U.S.C. §1257(a) to review the

decision. Michigan v. Long, 463 U.S. 1032, 1038 (1983).

The decision rests on MMWEC’s failure “to identify

points of law or fact previously overlooked or misappre-

hended.” Petition App. 28a. As is evident from the

discussion above at 6-7, MMWEC did not present its

constitutional issues to the Vermont Supreme Court in its

brief on appeal. The ground for decision is exactly

MMWEC’s failure to satisfy the prerequisites for re-

argument under V.R.A.P. 40. That rule provides in part:

The motion shall state with particularity the points

of law or fact, presented in the briefs upon the

original argument, which in the opinion of the movy-

ing party the Court has overlooked or misapprehended

and which would probably affect the result. (em-

phasis addee )

Failure to present a federal guestion in conformance

with state procedure constitutes an adequate and _ inde-

pendent ground, provided that the state rule is con-

sistently followed. Hathorn v. Lovorn, 457 U.S. 255, 262-

63 (1982). The Vermont court has steadfastly denied re-

argument, both before and since the adoption of V.R.A.P.

40 in 1971, to address issues not presented in the briefs

on the original argument. “Rehearing is not available to

afford a new opportunity to present questions that were

not presented-in the tribunal from which the appeal was

taken and were not briefed nor argued on review.”

Town of Fairlee ». Boston & Maine Corp., 127 Vt. 215,

219, 244 A.2d 53 (1968) (Holden, C.J.). See e.g., State

v. Percy, 149 Vt. 623, 642, 548 A.2d 408 (1988) ; Black

River Associates, Inc. v. Koehler, 126 Vt. 394, 404, 233

A.2d 175 (1967); In re Mowley’s Will, 103 Vt. 100, 115-

116, 152 A. 713 (1931).

Vermont denies reargument to any party seeking to

raise a new issue, whether sought by the appellant or the

appellee, like MMWEC. “A rehearing is not granted for

the purpose of affording opportunity to present new ques-

tions. And where there was occasion and opportunity for

raising the point at the hearing, the rule applies equally

to one not the excepting party.” Ryan v. Orient Insur-

ance Co., 96 Vt. 291, 305, 119 A. 422 (1923) (citations

omitted). Recent instances of reargument denied to an

unsuccessful appellee seeking to raise new issues are

State v. Percy, 149 Vt. at 642: Bourne v. Jajoie, 149 Vt.

45, 538, 540 A.2d 359 (1973): and Corey v. Furgat

Tractor & Equipment, Ine., 147 Vt, 477, 480, 520 A.2d

600 (1986). The rule applies as well to bar reargument

to raise a constitutional affirmative defense to the judg-

ment for the first time. Coolidge v. Coolidge, 130 Vt.

132, 135, 287 A.2d 566 (1972) (impairment of con-

tracts) ; Van Dyke v. Cole, 81 Vt. 399, 70 A. 1103 (1908)

(same).

III. MMWEC Enjoyed Full and Fair Opportunity to Liti-

gate Its Constitutional Defenses Below in Accordance

with Hight Standards of Procedural Due Process

Due process in a civil action requires that a party have

fair notice of the issues and a reasonable opportunity to

litigate them. See generally Boddie v. Connecticut, 401

U.S. 371 (1971). The procedural history (above at 5-7)

shows that MMWEC had plain notice that the validity of

the PSAs was at stake, and that MMWEC had ample

opportunity at trial and on appeal to raise and press its

constitutional defenses. Yet MMWEC did not present

these issues for decision by the Vermont courts. Rather,

MMWEC failed to set up these affirmative defenses in its

pleadings: did not pursue them at trial; and did not

even mention them on appeal until seeking reargument.

MMWEC’s plaint that it was denied procedural due

process wrongly blames the Vermont courts for its own

abject failure to litigate its defenses below.

Indeed, the procedural record is a testament to the high

standard of procedural due process afforded MMWEC.

MMWEC complains of no aspect of Vermont’s civil pro-

ceeding which prevented it from litigating its constitu-

tional defenses. There is no suggestion or inference that

Vermont procedure—almost identical to the Federal rules

approved by this Court—contains arcane rules, traps for

unwary counsel, or arbitrary restrictions which unfairly

restricted MMWEC’s case. MMWEC was represented by

three law firms to protect its interests at all stages of

the action. MMWEC mentions no instance when it was

allowed less than ample time, hearings, and filings to pre-

sent evidence and argument.°

5 MMWEC’s brief assured the Vermont Supreme Court: “The

cross-motions for summary judgment were heard and determined

on a record consisting of an extensive stipulation of facts, together

with five volumes of exhibits, and prefiled testimony and oral

cross-examination of the parties’ experts.” Jd. at 3-4 (footnote

omitted).

The Petition cites, with no discussion, decisions in

which state procedure operated to cut off reasonable at-

tempts to raise a federal issue. Petition at 13. These

cases are fairly characterized as instances of trumped up,

extreme, and often racially motivated procedural rulings,

where the Court properly reached out to review plain

error in order to prevent fundamental unfairness. None

of them stand for the proposition that due process is

denied a litigant like MMWEC which didn’t bother to

raise and press its claims in a readily available forum.

IV. The Petitioner’s Federal Constitutional Claims Lack

Substantive Merit and Require No Further Ad judica-

tion in the State Court System

A. Judicial Invalidation of a Contract in a Case of

First Impression Does Not Constitute a Depriva-

tion of Property or Otherwise Implicate the Due

Process Clause

Petitioner’s substantive arguments lack sufficient merit

to require further adjudication in the state courts. Peti-

tioner’s first claim is that, even though the Vermont Su-

preme Court had never before determined the validity of

a hell-or-high water contract like the PSAs, MMWEC was

deprived of property in violation of the Due Process

Clause by a judicial declaration of invalidity. Oddly,

Petitioner does not explain its claim in terms of due proc-

ess, but by reference to Takings Clause and Contracts

Clause jurisprudence. At the same time, Petitioner seeks

to avoid the limitations this Court has placed on those

clauses.

The holding of the Vermont Supreme Court rests on

the well-established doctrine of non-delegation: a Ver-

mont municipality or cooperative may_not, without ex-

plicit legislative permission, redelegate all authority to

make financial or legislative decisions. See ‘6A E. Mc-

Quillan, Municipal Corporations § 24.21 (3d ed. rev.

1988). The PSAs obligate Vermont entities to pay pro

rata costs to construct a generating plant, even if the

plant is never finished or operating. The-PSAs exclude

them, however, from the planning, construction, or opera-

tion of the plant that might cause or avoid the risk that

the project will be a “dry hole’. The Vermont Supreme

Court held that this was an impermissible delegation of

authority.

By its holding, the Vermont court has done nothing

more than require politically accountable officials of

political subdivisions to exercise the discretion with which

they have been entrusted. Any deviation from this prin-

ciple requires an explicit legislative authorization. See

Petition App. 12a, n.2; 18a, n.3. Petitioner nowhere con-

tends that the Vermont Supreme Court’s finding of im-

proper delegation under the PSAs was erroneous. It is

difficult to comprehend that the Due Process Clause pro-

hibits judicial application of the non-delegation doctrine

to invalidate a contract that conflicts with the doctrine.

The thrust of Petitioner’s argument is that a judicial

decision has impaired the value of the PSAs. One would

imagine that if any relief existed under the Federal Con-

stitution for abrogation of a contractual right, it would

fall within the Contracts Clause. U.S. Const. art. I, § 10,

cl. 1. But, as even the Petitioner acknowledges, the Con-

tracts Clause is not violated by a judicial decision. Sec

Tidal Oil Co. v. Flanagan, 263 U.S. 444 (1924); Petition

at 20 n.5.° The Contracts Clause was intended to enjoin

the legislature from abrogating established rights in or-

der to favor particular interest groups. The primary

focus of the Contracts clause has been “upon legislation

that was designed to repudiate or adjust pre-existing

6 Indeed, the Court rejected such a claim in Tidal Oi! notwith-

standing the allegation that the state court had announced a sud-

den change in state law from its previous declarations. The claim

is all the weaker where, as here, the state judicial opinion addresses

an issue of state law—the validity of “hell-or-high water” obliga-

tions—in the first instance.

; |

debtor-creditor relationships that obligors. were unable to

satisty.” Keystone Bituminous Coal Association v. De-

Benedictis, 480 U.S. 470, 503 (1987) (emphasis added).

The Commerce Clause was never intended as a check on

the judicial power to determine the validity of contracts,

or the capacity of courts to interpret what rights exist

for parties to contracts. Thus, even to the extent that

Contracts Clause criteria have been “assimilated” into

Due Process standards, see Petition at 15 n.3, those cri-

teria are not applicable to judicial declarations of law.

Petitioner invokes the “takings” standard of ‘“‘invest-

ment-backed expectations” to support its ostensible due

process argument. It relies on cases decided under the

Federal Takings Clause, U.S. Const., amend. V. Petition

at 14.7 This Court has never held that judicial interpre-

tations of law are implicated in the Takings Clause, or

that the judgment in a civil action creates a claim for

compensation by those against whom law is construed.*

Moreover, the mere fact that governmental action caused

a loss of economic expectation is not in itself a basis for

a takings claim; the claimant must first establish that it

had settled rights and expectations. See Duquesne Light

Co. v. Barasch, —— U.S. , 109 S. Ct. 609 (1989).

Unlike traditional takings cases in which governmental

action interferes with settled property rights, here we

7 [Tronically, the primary cases on which Petitioner relies actually

found no taking to exist. See PruneYard Shopping Center v. Rob-

bins, 447 U.S. 74 (1980); Penn Central Transportation Co. v. New

York City, 438 U.S. 104 (1978).

8 Justice Stewart once intimated in a concurring opinion that a.

taking could occur by judicial interpretation of law to the extent

that it “constitutes a sudden change in state law, unpredictable in

terms of the relevant precedents.” Hughes v. Washington, 389

U.S. 290, 294, 296-97 (1967) (Stewart, J., concurring). Even if

that concurrence became law, it has no applicability to a case of

first impression, such as this one, and where the basis for decision

(the non-delegation doctrine) had strong roots in judicial decisions

of the state.

find only a judicial interpretation of law that determines

the existence and scope of rights under a contract pre-

sented to the court in a case of first impression. The judi-

cial act of determining what rights exist in the first place

triggers no constitutional claim.

Even if the judicial interpretation of a contract impli-

cates a “takings” analysis, MMWEC has no claim because

it had no “reasonable” investment-backed expectaticns.

Hell or high water arrangements were novel in Vermont

and elsewhere. Courts have divided over their validity.®

Many states have deemed them so unlike traditional util-

ity financing arrangements that special enabling legisla-

tion was enacted. See e.g., S.C. Code Ann. § 6-23-110

(Law Co-op. Supp. 1982); Me. Rev. Stat. Ann. Titl. 35,

§ 4103(1)(B) (Supp. 1982); N.C. Gen. Stat. § 159B-12

(1982); Va. Code § 15.1-1611 (1981). Vermont had indi-

eated the extraordinary nature of these obligations by

enacting specific legislation, although it does not apply to

the Vermont Participants. See 30 Vt. Stat. Ann. § 5013

(1986). Indeed, the authority of MMWEC itself to make

such arrangements is conferred by its enabling legislation

in Massachusetts. See Mass. Comp. Laws Ann., ch. 164

App., § 1-6(a) (1976). Others have brought test cases to

confirm the validity of these arrangements. See e.v.,

Johnson v. Piedmont Municipal Power Agency, 287 S.E.2d

476 (S.C. 1982); Frank v. City of Cody, 572 P.2d 1106

9 See Chemical Bank v. Washington Public Power Supply System,

99 Wash.2d 772, 666 P.2d 329 (1983); Chemical Bank v. Washing-

ton Public Power Supply System, 102 Wash.2d 874, 691 P.2d 524

(1984), cert. denied, 471 U.S. 1065, 1075 (1985); Frank v. City of

Cody, 572 P.2d 1106 (Wyo. 1977); DeFazio v. Washington Public

Power Supply System, 296 Or. 550, 679 P.2d 1316 (1984); Asson

v. City of Burley, 105 Idaho 432, 670 P.2d 839 (1983). While cases

denying the validity of take-or-pay contracts were decided subse-

quent to execution of the PSAs, the fact that in other jurisdictions

cases were brought to test their validity prior to execution of

similar documents suggests a general unease in the public power

community about the validity of such arrangements in the absence

of specific enabling legislation.

(Wyo. 1977); State ex rel. Mitchell v. City of Sikeston,

555 S.W.2d 281 (Mo. 1977).

MMWEC and its representatives—underwriters, bond

counsel, and financial advisors—were sophisticated par-

ticipants in the area of public power. Given the novelty

of hell-or-high water arrangements in Vermont, it was

forseeable that a reviewing court could find the PSAs

invalid, and MMWEC cannot now claim any loss of

reasonable expectation."®

B. Invalidation of the PSAs Does Not Discriminate

Against Interstate Commerce

Petitioner does not cite a single case in which any

court has deemed the judicial act of declaring law to fall

within, much less violate, the Commerce Clause. None

of the cases of protectionism cited by Petitioner involves

judicial decisions at all, much less one interpreting a

novel and controversial financing scheme that sought to

curtail the authority of a state’s localities. To the con-

trary, this Court’s pronouncements on the scope of the

Commerce Clause consistently refer to state legislative or

administrative action. See, e.g., Minnesota v. Clover Leaf

Creamery Co., 449 U.S. 456, 473 n.17 (1981) (in-state

firms provide a “powerful safeguard against legislative

abuse” of out-of-state firms with similar interests).

Even if the Commerce Clause did implicate judicial de-

cisions, no violation arises simply because the action

happens to involve a party from another state. The Ver-

mont Supreme Court imposed no burden on MMWEC

that it does not apply with equal force to domestic en-

tities which contract with political subdivisions. No

contracting party may, without explicit legislative

authorization, usurp local fiscal and legislative au-

10 Note that Petitioner does not claim that it received or relied

on any assurances by the Vermont Participants of the validity of

the hell-or-high water obligation.

thority. This limitation prevails whether the contract-

ing party is the Attorney General of Vermont, see

Thompson v. Smith, 119 Vt. 488, 501, 129 A.2d 638

(1957) (non-delegation doctrine is a “deep-rooted prin-

ciple of law’’) ; a privately-owned utility within the state;

or a foreign corporation such as MMWEC. The non-

delegation doctrine protects local residents by requiring

that elected officials exercise the discretion entrusted to

them, and guards the integrity of the democratic process

by ensuring that important local decisions are made by

those politically accountable. Application of the doctrine

is unequivocally not the kind of protectionist act that sug-

gests a state is favoring its own residents over those of

another jurisdiction to gain economic advantage. Noth-

ing in the Vermont Supreme Court’s opinion, and nothing

Petitioner points to in Vermont law, prohibits MMWEC

from selling electric capacity and energy to Vermont

localities on the exact same terms available to Vermont

suppliers or otherwise imposes on MMWEC burdens not

applied to in-state corporations.

There would be no claim here even if the judicial de-

cision of the Vermont Supreme Court were the sort of

state action that affected interstate commerce. The Com-

merce Clause does not bar all conduct that affects inter-

state commerce. Rather, “(w)here [a] statute regulates

evenhandedly to effectuate a legitimate local public in-

terest, and its effects on interstate commerce are only in-

cidental, it will be upheld unless the burden imposed on

such commerce is clearly excessive in relation to the

putative local benefits.” Arkansas Electric Cooperative

Corp. v. Arkansas Public Service Commission, 461 U.S.

374, 393-94 (1983), quoting Pike v. Bruce Church, Inc.,

397 U.S. 1387 (1970)... Vermont has a compelling inter-

est to maintain accountability between the officials of its

11 Note that this Court’s statement again refers to potential Com-

merce Clause violations that arise from policies embodied in ‘“‘stat-

ute,” not common law.

——————rlrlrt—“‘i‘OCSC;C;COC

political subdivisions and their constituents. The related

burden is minimal; those who would contract with Ver-

mont localities but who fear that the need to respect the

autonomy of those localities increases contractual risks

may seek prices that compensate fairly for any risks they

perceive. They may not, however, contractually usurp the

authority of those localities. Since these principles apply

“even handedly” to siutations wholly intrastate in charac-

ter as well as those that incidentally affect interstate

commerce, any incidental effect on interstate commerce

is an acceptable burden. See e.g., Minnesota v. Clover

Leaf Creamery Co., 449 U.S. at 471-72.

The cases cited by Petitioner to demonstrate a Com-

merce Clause violation are simply inapposite. New

England Power Co. v. New Hampshire, 455 U.S. 331

(1982), involved an attempt by New Hampshire to retain

for itself the benefits of state resources to the exclusion of

non-residents. The embargo on export of the state’s re-

sources stands in marked contrast to the instant case.

Here, of course, Vermont is an importer of power, not

an exporter. Thus it is difficult to discern the type of

“exportation ban” that comprised the unconstitutional

protectionist regulation in New England Power. See 455

U.S. at 339. Nothing in the Vermont Supreme Court

opinion bars or disadvantages interstate trade in energy

and capacity.

Middle South Energy, Inc. v. Arkansas Public Service

Commission, 772 F.2d 404 (8th Cir. 1985), cert. denied,

474 U.S. 1102 (1986), provides no greater support for

Petitioner. While that opinion does apply the Commerce

Clause to the importation of electricity, it does so under

circumstances with little analogue to the instant situa-

tion.’? The Eighth Circuit found evidence in the record

i2 The result in Middle South is better explained on preemption

grounds. See Mississippi Light & Power Co. v. Mississippi ex rel.

Moore, U.S. , 108 S. Ct. 2428 (1988). Middle South and

Mississippi Light are parallel cases which involved the same whole-

that made the state public service commission’s discrim-

inatory purpose of economic protectionism ‘abundantly

plain.” See 772 F.2d at 416. The sole basis for the

commission’s rejection of the contracts involved in that

case was to shift the economic impact of the transaction

from Arkansas to out-of-state ratepayers. The record

here is empty of any similar purpose. Indeed, the Ver-

mont trial court upheld the PSAs, notwithstanding the

financial burden they imposed on Vermont ratepayers.

The Supreme Court of Vermont reversed on reasoning

that disavowed any distinction between projects that re-

turn benefits to Vermont commensurate with burdens and

those that do not. Petition App. 22a-23a.

CONCLUSION

The petition for a writ of certiorari to the Supreme

Court of Vermont should be denied.

Respectfully submitted,

Of Counsel: SAMUEL H. PREss *

CLAYTON P. GILLETTE Vermont Department of

Boston University Law School Public Service

765 Commonwealth Avenue 120 State Street

Boston, Massachusetts 02215 Montpelier, Vermont 05602

(802) 828-2383

July 10, 1989 * Counsel of Record

sale electric purchase arrangements subject to the same FERC

order. In Mississippi Light, the Court made clear that the state

actions in question were invalid because they were preempted by

the FERC order.

APPENDICES

APPENDIX A

[EXECUTIVE Copy |

MASSACHUSETTS MUNICIPAL WHOLESALE

KLECTRIC COMPANY

(A Publie Corporation )

PROJECT NO. 6

POWER SALES AGREEMENT

TABLE OF CONTENTS

Section Heading

. Sale of Excess Participant’s Share

. Relationship to Other Instruments

. Arbitration

. Applicable Law .

Definitions

Term of Agreement

Financing, Design, Acquisition, Construction, Op-

eration and Maintenance of the Project

Sale and Purchase of Participant’s Share

Payments by the Participant; Sources of Such

Payments

Accounting

Dispatch; Metering; Deliveries; Transmission

Insurauce

Training

End of the Project; Termination Settlement

Obligations in the Event of Default

Development Work

Issuance of Bonds for Renewals, Etc., and for Re-

funding

Modification and Uniformity of Agreements

BO ee ee ert ee

Severability

. Assignment of Agreement sss

MASSACHUSETTS MUNICIPAL WHOLESALE

ELECTRIC COMPANY

POWER SALES AGREEMENT

THIS AGREEMENT is executed by the Massachusetts

Municipal Wholesale Electric Company (“MMWEC’’), a

political subdivision of the Commonwealth of Massachu-

setts, and the city or town of the Commonwealth of Mas-

sachusetts, or other electric utility, which has executed

this Agreement (the “Participant’’).

WHEREAS, MMWEC has heretofore been duly organized

as a body politic and corporate and political subdivision

of the Commonwealth of Massachusetts under the laws of

said Commonwealth (Mass. Stats. 1975, Ch. 775) and is

authorized, among other things, jointly or separately to

plan, finance, acquire, construct, improve, purchase, op-

erate, maintain, use, share costs of, own, lease, sell, dis-

pose of or otherwise participate in electric power facili-

ties or portions thereof within or without said Common-

wealth, to sell electric power and energy and other prod-

ucts of electric power facilities to member and non-

member cities and towns having municipal electric de-

partments established under Chapter one hundred and

sixty-four of the General Laws or a special act and to

other utilities, public and private, within or without said

Commonwealth and, subject to the approval of the De-

partment of Public Utilities of the Commonwealth, to

borrow money by the issue of bonds for any of its cor-

porate purposes; and

WHEREAS, the Participant owns, operates and main-

tains one or more plants for the manufacture or distribu-

tion of electricity;

WHEREAS, MMWEC proposes to obtain an ownership

interest in electric power facilities (the “Project’”) de-

scribed in Exhibit B, attached hereto; and

WHEREAS, MMWEC proposes to sell, and the Partici-

pant proposes to purchase, its Participant’s Share (here-

inafter defined) of Project Capability (hereinafter de-

fined), all as hereinafter provided:

Now, THEREFORE, the parties hereto mutually agree as

follows:

1. Definitions.

The singular of any term defined in this Agreement

shall encompass the plural, and the plural the singular,

unless the context indicates otherwise.

(a) “Annual Budget” means the budget adopted by

MMWEC pursuant to Section 5(a) of this Agreement

which itemizes the estimated Monthly Power Costs of the

Project during a Contract Year, or, in the case of an

amended Annual Budget, during the remainder of a

Contract Year.

(b) “Billing Statement” means the written statement

prepared monthly by MMWEC and delivered to the Par-

ticipant which shows the amounts-te—be—paid for such

month to MMWEC by the Participant as the Partici-

pant’s Share of the Monthly Power Costs as set forth in

an Annual Budget or an amended Annual Budget.

of indebtedness issued from time to time pursuant to and

under authority of the Bond Resolution, (i) to pay the

Costs of Acquisition and Construction of the Project, and

(ii) for the purposes authorized by Section 14 of this

Agreement.

(d) “Bond Resolution” means the General Bond Reso-

lution of MMWEC, adopted August 26, 1976, as from

time to time amended or supplemented by Supplemental

Resolutions.

(e) “Contract Year” means the 12-month period com-

mencing 2400 hours Local Time on June 30 of each year

during the term of this Agreement and ending 2400

hours Local Time on the June 30 next following, pro-

vided, that the first Contract Year shall commence at

2400 hours Local Time on the date immediately preced-

ing (i) the earliest of the Dates of Commercial Operation

of the Facilities, or (ii) the date to which interest is

capitalized on all of the Bonds issued to finance the Costs

of Acquisition and Construction of the Project but not

later than one year prior to the first principal install-

ment date for such Bonds, or (iii) the date one year

after the date of termination of any of the Facilities as

provided in Section 10, whichever is earliest, and the last

Contract Year shall end at 2400 hours Local Time on the

date of termination of this Agreement as provided in

Section 2 of this Agreement.

(f) “Costs of Acquisition and Construction” shall

mean, to the extent not included in Monthly Power Costs,

all costs of determining the feasibility of and acquiring,

constructing, financing, carrying out and placing in op-

eration the Project, heretofore or hereafter paid or in-

eurred by MMWEC, and shall include, but shali not be

limited to, funds required for:

(1) working capital and reserves in such amounts

as may be deemed necessary by MMWEC;

(2) interest accruing in whole or in part on Bonds

prior to and during acquisition and construction and

for such additional period as MMWEC may reason-

ably determine;

(3) acquisition of fuel including land, rights,

leases and options therefor and working capital,

equipment, structures, facilities or prepayments and

reserves therefor ;

(4) the deposit or deposits from the proceeds of

Bonds in any fund or account established pursuant

to the Bond Resolution to meet reserve requirements

for Bonds;

(5) the deposit or deposits from the proceeds of

Bonds in any funds or accounts established pursuant

to the Bond Resolution as reserves for renewals, re-

placements and contingencies, and for decommission-

ing or termination;

(6) all federal, state and local taxes and payments

in lieu of taxes legally required to be paid in connec-

tion with the acquisition and construction of the

Project;

(7) all costs relating to injury and damage claims

arising out of the acquisition and construction of the

Project;

(8) the payment of the principal of and premium,

if any, and interest on notes or other evidences of

indebtedness issued in anticipation of the issuance of

Bonds for the payment of the Costs of Acquisition

and Construction of the Project;

(9) preliminary survey, investigation and develop-

ment costs, engineering, contractors’ fees, permits,

licenses and approvals, Jabor, materials, equipment,

lands, rights of way, franchises, easements and other

interests in land, utility services and supplies, pay-

ments to other public agencies, training and testing

costs, insurance premiums, fees and expenses of trus-

tees and paying agents, legal and financing costs,

administrative and general costs, and all other costs

incurred by MMWEC and properly allocable to the

acquisition and construction of the Project and car-

rying out and placing the same in operation; and

(10) All costs relating to the study and develop-

ment of Electric Power Facilities listed in paragraph

2 of Exhibit B; provided, that (i) an aggregate

amount not in excess of the amount listed in Exhibit

B derived from the proceeds of Bonds issued to fi-

nance the Costs of Acquisition and Construction of

the Project may be expended for such costs, (ii) any

such amount expended for such Electric Power Fa-

cilities for which bonds, notes or other evidences of

indebtedness are issued pursuant to and under au-

thority of the Bond Resolution shall be reimbursed

to the Project from the first such bonds, notes or evi-

dences of indebtedness issued, and (iii), subject to

the preference rights of MMWEC members set forth

in Article I. Section 5, of the By-Laws of MMWEC,

the Participants shall have the first right to pur-

chase all electric capacity and energy generated by

any such Electric Power Facility, pro rata among

those exercising such right, before such a disposition

is made to an electric utility which is not a Partici-

pant. All Participants who are members of MMWEC

hereby waive any preference right set forth in said

By-Laws and not otherwise provided herein. Addi-

tionally, MMWEC will use its best efforts to obtain

similar waivers of preference rights from its mem-

bers who are not Participants or agreements with

such members for the advancement of funds for the

purposes listed in paragraph 2 of Exhibit B.

Any amounts received pursuant to clause (ii) of

the preceding paragraph shall be applied to payment

of Costs of Acquisition and Construction of the Proj-

ect or, at the option of MMWEC, to payment of addi-

tional costs for the purposes listed in paragraph 2 of

Exhibit B, if received prior to the date the construc-

tion fund for the Project to be established pursuant

to the Bond Resolution is closed, or to the purchase

or earliest possible redemption of Bonds issued for

the Project, if received thereafter.

(g) “Date of Commercial Operation” and words of

like import shall mean the date upcn which a Facility

is first ready for normal continuous operation as deter-

mined pursuant to an ownership agreement applicable

thereto, in the case of any Facility jointly owned, if any,

and by MMWEC in the case of any Facility solely owned

by MMWEC.

(h) “Electric Power Facility” shall mean any system

or facilities for the generation, transmission or transfor-

mation of electric power and energy by any means what-

soever, including, without limiting the generality of the

foregoing, facilities for processing refuse or other ma-

terials into fuel, with or without other by-products.

(i) “Facility” means any one of the Electric Power

Facilities described in paragraph 1 of Exhibit B, attached

hereto.

(j) “Monthly Power Costs” shall mean all of

MMWEC’s costs, to the extent not included in the Costs

of Acquisition and Construction, resulting from the own-

ership, operation, maintenance and termination of, and

necessary repairs, renewals, replacements and additions

to, the Project, including but not limited to the following

items of cost that are paid or incurred by MMWEC dur-

ing each month of each Contract Year in connection with

the Project:

(1) the amount (calculated without reference to

acceleration for default under the Bond Resolution)

which MMWEC is required under the Bond Resolu-

tion to pay or deposit during such month from the

Revenue Fund into the Bond Fund established by

the Bond Resolution for the credit of the Interest Ac-

count, Principal Account or Bond Retirement Ac-

count for the payment of the principal of and pre-

mium, if any, on the Bonds when due, and interest

on principal until such principal is due:

(2) the amount equal to 10% of the amount in

item (1) above (calculated before credit for invest-

ment earnings) which may be deposited in funds

created under the Bond Resolution and be available

under circumstances described therein for the Proj-

ect and other projects in which the Participants may

not have an interest;

(3) the amount to be paid in such month under

Section 13 hereof into the Study and Development

Fund established by the Bond Resolution and the

amount to be paid or set aside in such month with

respect to the Project in a fuel fund, if any, estab-

lished by the Bond Resolution;

(4) the amount which may be required by

MMWEC during such month to pay the costs of (i)

renewals, extraordinary repairs, replacements, mod-

ifications, additions and betterments for the Project

necessary to achieve design capability, or required by

any governmental agency or authority, (ii) any re-

newals, extraordinary repairs, replacements, mod-

ifications, additions and betterments for the Project

which in the opinion of the Consulting Engineer

appointed and retained by MMWEC under the Bond

Resolution are necessary or desirable to improve

operating reliability or to reduce unit power costs,

and any acquisition of fuel for the Project, (iii) re-

newals, extraordinary repairs, replacements, modifi-

cations, additions and betterments for the Project

for which MMWEC shall be responsible under any

ownership agreement relating to the Project, and

(iv) extraordinary operation and maintenance costs

of, including extraordinary costs of fuel, and the cost

of preventing or correcting any unusual loss or dam-

age (including major repairs) to, the Project or

any part thereof, all to the extent that MMWEC is

not reimbursed for the payment of the costs set forth

in clauses (i)-fiv) from the proceeds of insurance,

or funds for such payment are not available to

MMWEC therefor from any funds set aside with

respect to the Project in the Reserve and Contingency

Fund established under the Bond Resolution or funds

for such payment are not provided or to be provided

10a

by the issuance of Bonds pursuant to Section 14 of

this Agreement;

(5) the payment of the principal of and premium,

if any, and interest on notes or other evidences of

indebtedness issued in anticipation of the issuance

of Bonds for the payment of the Costs of Acquisition

and Construction of the Project or for the purposes

specified in Section 14 of this Agreement;

(6) the costs of producing and delivering power

and energy from the Project during such month (in-

cluding, but not limited to, fuel, ordinary operation,

maintenance and repair costs and working capital

and reserves deemed necessary therefor by MMWEC,

administrative and general expenses, insurance and

overhead) not included in the costs hereinbefore spe-

cified and properly chargeable to the Project;

(7) the retirement from service, decommissioning

and termination of the Project; and

(8) At the option of MMWEC, in the event the

Date of Commercial Operation of a Facility occurs

prior to the date to which interest is capitalized on

any Bonds issued to finance the Costs of Acquisition

and Construction of the Project, an amount not to

exceed the interest accruing from such Date of Com-

mercial Operation to such date to which such interest

is capitalized, and the Participant agrees pursuant

to Section 5.4 of the Bond Resolution that, notwith-

standing Section 5(h) of this Agreement, any such

amount which is excess under said Section 5.4 shall

be applied as soon as practicable to payment of Costs

of Acquisition and Construction or, at the option of

MMWEC, to the purchase or eariiest possible re-

demption of Bonds issued for the Project.

(k) “New England Power Pool’ means the power pool

created by the New England Power Pool Agreement.

lla

(1) “New England Power Pool Agreement” means a

contractual agreement among electric utilities in New

England which agreement constitutes the central dis-

patching and primary pooling arrangement for electric

utilities in the New England states.

(m) “Participants” means those entities which are

specified in Exhibit A, attached hereto, and which enter

into a Power Sales Agreement.

(n) “Participant’s Share’ means the percentage of

Project Capability set opposite the name of the Partici-

pant in Exhibit A, attached hereto, adjusted as provided

in Sections 3 and 12 of this Agreement.

(o) “Power Sales Agreements” means this Agreement

and all other agreements substantially identical to this

Agreement entered into by MMWEC and the Partici-

pants with respect to the Project.

(p) “Project” means MMWEC’s ownership interest in

the Electric Power Facilities described in paragraph 1

of Exhibit B, attached hereto.

(q) “Project Capability” means the amounts of elec-

tric capacity and energy, if any, which the Project is

capable of producing at any particular time (including

times when the Project is not operable or operating or

the operation thereof is suspended, interrupted, inter-

fered with, reduced or curtailed, in each case in whole

or in part for any reason whatsoever), less Project sta-

tion use and losses, and shall be determined in accordance

with the New England Power Pool Agreement, if any,

and otherwise in accordance with Prudent Utility Prac-

tice.

(r) “Prudent Utility Practice” at a particular time

means any of the practices, methods and acts (including

but not limited to the practices, methods and acts en-

gaged in or approved by a significant portion of the

electrical utility industry prior thereto) which, in the

12a

exercise of reasonable judgment in the light of the facts

known at the time the decision was made, would have

been expected to accomplish the desired result at the

lowest reasonable cost consistent with reliability, safety

and expedition. Prudent Utility Practice shall apply not

only to functional parts of the Project but also to appro-

priate structures, landscaping, painting, signs, lighting,

or facilities and public relations programs reasonably de-

signed to promote public enjoyment, understanding and

acceptance of the Project. Prudent Utility Practice is not

intended to be limited to the optimum practice, method

or act, to the exclusion of all others, but rather to be a

spectrum of possible practices, methods or acts. In eval-

uating whether any matter conforms to Prudent Utility

Practice, the parties shall take into account (i) the fact

that MMWEC is a body politic and corporate and a po-

litical subdivision under the iaws of the Commonwealth

of Massachusetts, with the statutory duties and responsi-

bilities thereof (ii) the objectives to integrate the Proj-

ect Capability with the generating resources of the Par-

ticipants, including such resources and electric capacity

and energy purchased under contract, to achieve optimum

utilization of the resources and achieve efficient and eco-

nomical operation of each system, ‘iii) the New England

Power Pool Agreement, if any, and (iv), in the case of

any Facility jointly owned, the applicable ownership

agreement between the owners of the Facility.

2. Term of Agreement.

This Agreement shall be effective upon execution and

delivery of Power Sales Agreements by MMWEC and

Participants whose Participants’ Shares total 100.0%.

This Agreement shall terminate when (i) all of the Fa-

cilities have been terminated as provided in Section 10

of this Agreement, (ii) the principal of and premium,

if any, and interest on all of the Bonds have been paid

or funds set aside for the payment or retirement thereof

——

13a

in acordance with the Bond Resolution and (iii) all other

obligations and liabilities hereunder have been paid or

provided for.

3. Financing, Design, Acquisition, Construction, Op-

eration and Maintenance of the Project.

(a) MMWEC, in good faith and in accordance with

Prudent Utility Practice, shall, subject, however, in the

case of any jointly owned Facility, to the provisions of

the applicable ownership agreement between the owners

of the Facility, use its best efforts: (i) to arrange for

the financing, planning, engineering, design, acquisition,

construction, operation and maintenance of the Project;

(ii) to obtain, or arrange for obtaining, permits and

other rights and regulatory approvals necessary for the

financing, planning, engineering, design, acquisition, con-

struction, operation and maintenance of the Project; and

(iii) to issue and sell Bonds to finance the Costs of Ac-

quisition and Construction of the Project, and to finance

the costs of any necessary renewals. extraordinary re-

pairs, replacements, modifications, additions and _ better-

ments for the Project, not otherwise provided for, pro-

vided, that in each such case Bonds may then be legally

issued and sold.

(b) In order to enable MMWEC to issue and sell

Bonds to finance the Costs of Acquisition and Construc-

tion of the Project, each Participant must satisfy the

criteria established in subparagraphs (1), (2) and (3)

of paragraph F of Section 2.3 of the Bond Resolution.

MMWEC may from time to time request from the Par-

ticipants such information or documents as MMWEC

deems to be required to demonstrate the Participants’

ability to satisfy such criteria and so as to enable Bonds

to be issued on such issuance date as shall be specified

by MMWEC concurrently with the request. MMWEC

will provide assistance to the Participants in obtaining

such information and documents. The Participants shall

l4a

deliver to MMWEC all such information and documents

by no later than thirty days after the date of such ~e-

quest. If the Board of Directors of MMWEC finds with

respect to a Participant either that all such information

and documents were not delivered as aforesaid or that

the same demonstrates that such Participant will, on or

within a reasonable time after the specified issuance date,

be unable to satisfy the criteria necessary under said

subparagraphs (1), (2) and (3) so as to enable the

Bonds to be issued on or within a reasonable time after

such date, then in such event the Participant agrees that

all of its interest herein (including its Participant’s

Share of Project Capability) may be assigned, trans-

ferred and sold by MMWEC on behalf of the Partici-

pant to one or more other electric utilities and upor any

such disposition the Participant shall be relieved of all

liability and shall have no further obligations hereunder,

except as to accrued liabilities and obligations, anything

in Section 21 of this Agreement to the contrary notwith-

standing; provided, that (i) no such disposition shail be

effective if the Bonds are not issued within four months

of the specified issuance date, (ii) the other Participants

shall have the first right to accept each such disposition,

pro rata among those exercising such right, before such

a disposition is made to an electric utility which is not a

Participant and (iii) no such disposition shall be made

if in the opinion of counsel to MMWEC the same would

adversely affect the exemption from Federal income tax-

ation of the interest on the Bonds. If a Participant ac-

cepts a disposition as aforesaid, its Participant’s Share

as so increased shall be its Participant’s Share for all

purposes of this Agreement, including but not limited to

Section 12(d) of this Agreement. Any reference in this

paragraph to subparagraphs (1), (2) and (3) of para-

graph F of Section 2.3 of the Bond Resolution and to

Bonds shal! also be deemed to refer to any comparable

provisions of any bond resolution or similar document

pursuant to which MMWEC may issue bonds, notes or

15a

other obligations to finance electric generation or trans-

mission facilities.

mate of the Costs of Acquisition and Construction of the

Project, a copy of which estimate is on file with the Par-

ticipant. MMWEC shall deliver revised estimates of the

Costs of Acquisition and Construction of the Project to

the Participant from time to time to reflect substantial

changes in construction schedules, plans, specifications,

or costs, subject, however, in the case of any jointly

owned Facility, to the provisions of the applicable own-

ership agreement between the owners of the Facility.

(d) MMWEC shall, subject, however, in the case of

any jointly owned Facility, to the provisions of the ap-

plicable ownership agreement between the owners of the

Facility, operate and maintain the Project, or cause the

Project to be operated and maintained, in accordance with

Prudent Utility Practice and so as to meet the require-

ments of government agencies having jurisdiction.

4. Sale and Purchase of Participant’s Share.

MMWEC hereby sells, and the Participant hereby

purchases, its Participant’s Share of Project Capability.

The amounts to be paid for each Contract Year by the

Participant to MMWEC for its Participant’s share of

Project Capability shall be its Participant’s Share of the

Monthly Power Costs for such Contract Year.

5. Payments by the Participant; Sources of Such Pay-

ments.

(a) At least 90 days prior to each Contract Year,

MMWEC shall deliver to the Participant an Annual

Budget for the Contract Year. During each Contract

Year, MMWEC shall review at least quarterly its An-

nual Budget for the remainder of the Contract Year. In

the event such or any other review indicates that such

l6a

Annual Budget will not substantially correspond with

actual Monthly Power Costs, or if at any time during

such Contract Year there are or are expected to be ex-

traordinary receipts, credits or costs substantially affect-

ing the Monthly Power Costs, MMWEC shall prepare

and deliver to the Participant an amended Annual

Budget applicable to the remainder of such Contract

Year. The Annual Budgets shall, in the case of any

jointly owned Facility, conform to the applicable owner-

ship agreement between the owners of the Facility.

(b) On or before the 1st day of each month of each

Contract Year, MMWEC shall prepare and deliver to the

Participant a Billing Statement showing the amount pay-

able by the Participant as the Participant’s Share of the

Monthly Power Costs, as shown in the Annual Budget

for such Contract Year or in an amended Annual Budget

for the remainder of such Contract Year. The amounts

shown in the Billing Statement to be paid to MMWEC

by the Participant shall be due and payable on the twen-

tieth day of the month, and any amounts due and not

paid by the Participant on or before the close of business

on the 20th day of the month shall bear interest until

paid at the rate of 1!4% per month. Remittances re-

ceived by mail will be accepted without assessment of said

charges, provided that the postmark indicates that the

payment was mailed on or before such day. If the 20th

day of the month is a Sunday or cther non-business day

of the Participant, the next following business day shall

be the last day on which payment may be mailed without

addition of said charges. ‘a

Fuel charges shall be shown on the Billing Statement

as a separate line item providing the necessary informa-

tion with respect thereto is available to MMWEC.

(ec) The Participant shall not be required to make any

payments to MMWEC under this Agreement except from

the revenues and other moneys derived by the Participant

17a

from its electric department or system. The Participant

covenants and agrees that it will fix, revise and collect

fees or charges for electric power and energy and other

services, facilities and commodities sold, furnished or sup-

plied through its electric department or system at least

sufficient to provide revenues adequate to meet its obli-

gations under this Agreement and to pay any and all

other amounts payable from or constituting a charge and

lien upon such revenues, including amounts sufficient to

pay the principal of and interest on all bonds issued by

the Participant for electric purposes.

(d) The Participant shall make the payments to be

made to MMWEC under this Agreement whether or not

the Project or any Facility thereof is undertaken, com-

pleted, operable or operating and notwithstanding the

suspension, interruption, interference, reduction or cur-

tailment of the output of the Project or any Facility

thereof for any reason whatsoever in whole or in part.

Such payments shall not be subject to any reduction,

whether by offset or otherwise, and shall not be condi-

tioned upon the performance by MMWEC or any other

Participant under this or any other agreement or in-

strument, the remedy for any non-performance being lim-

ited to mandamus, specific performance or other legal or

equitable remedy.

(e) The Participant shall not have the right to chal-

lenge any bill, invoice or statement rendered by MMWEC,

invoke arbitration of the same or bring any court or ad-

ministrative action of any kind questioning the propriety

of the same after a period of twenty-four months from

the date of rendering. In the case of a bill, invoice or

statement containing estimates, the Participant shall not

have the right to challenge its accuracy after a period of

twenty-four months from the date of its adjustment to

reflect the actual amounts due.

(f) The Participant shall not issue bonds, notes or

other evidences of indebtedness payable from and secured

18a

by a lien on the revenues derived from the ownership or

operation of its electric system without providing for the

payment of operating expenses (including Monthly Power

Costs hereunder) from such revenues ahead of debt serv-

ice on such bonds, notes or other evidences of indebted-

ness unless an independent consulting engineer or engi-

neering firm or corporation having a national and favor-

able reputation for special skill, knowledge and experi-

ence in analyzing the operations of electric utility sys-

tems certifies that the facilities, for the financing of

which the bonds, notes or other evidences of indebtedness

are being issued, are (or were when the Participant com-

mitted itself to them by contract or financing) reason-

ably expected to properly and advantageously contribute

to the conduct of the business of the electric system of

the Participant in an efficient and economical manner

consistent with prudent management. This paragraph

(f) shall not apply to bonds, notes or other evidence of

indebtedness issued to meet obligations under joint own-

ership agreements to which the Participant is a party on

the date hereof, or to refund bonds, notes or other evi-

dences of indebtedness heretofore issued, or hereafter is-

sued in compliance herewith, payable from and secured

by a lien on revenues in priority to operating expenses.

(¢) MMWEC shall apply, as a credit against Monthly

Power Costs, all available receipts, revenues and other

moneys received by it from insurance proceeds, the sale

of surplus Project equipment, materials and supplies, in-

terest earned on investments if and to the extent not

credited against the Cost of Acquisition and Construc-

tion and any other moneys to be credited thereto under

the Bond Resolution.

(h) On or before one hundred twenty days after the

end of each Contract Year MMWEC shall submit to the

Participant a statement of the actual aggregate Monthly

Power Costs for such Contract Year. If the Participant’s

Share of such actual aggregate Monthly Power Costs and

19a

any other amounts payable for such Contract Year ex-

ceed the amounts on the basis of which the Participant

has been billed, the deficiency shall be added to the next

succeeding Billing Statement or at MMWEC’s discretion

spread over the remainder of the then current Contract

Year. If the actual aggregate Monthly Power Costs or

other amounts payable for such Contract Year are less

than the amounts on the basis of which the Participant

has been billed, MMWEC shall credit such balance on

the next succeeding Billing Statement, or by agreement

of the Participant and MMWEC on the Billing State-

ments delivered to the Participant for the remainder of

the then current Contract Year.

(i) In the event of the application of amounts allocated

to the Project in the Reserve and Contingency Fund un-

der the Bond Resolution to the payment of costs allocable

to other projects, amounts thereafter paid on account of

such other projects for deposit in the Reserve and Con-

tingency Fund shall be credited pro rata on the next

succeeding Billing Statements delivered to the Partici-

pants to the extent necessary to reimburse the Partici-

pants (without interest) from surplus moneys under the

Bond Resolution for any credit lost by the Participants

as a result of such event. If any credit under this Agree-

ment exceeds the amount due from the Participant in

any month, the excess shall be paid to the Participant.

In the event of the application of moneys allocable to

other projects in the Reserve and Contingency Fund to

costs allocable to the Project, the Participants shall con-

tinue to make payments for deposit in the Reserve and

Contingency Fund without reduction on account of any

termination or reduction of debt service or otherwise un-

til the participants in such other projects have been sim-

ilarly reimbursed. To the extent practicablee MMWEC

shall inelude a similar requirement in other power sales

agreements for the benefit of the Participants. Subject

to the Bond Resolution, MMWEC shall generally exercise

20a

its powers, insofar as practicable, so as to restore to the

Participant any credit or other benefit lost as the result

of any default by any other person or as the result of

the use of moneys attributable to the Project under the

Bond Resolution for the purposes of other projects.

6. Accounting.

MMWEC shall keep accurate records and accounts for

the Project substantially in accordance with the rules

and regulations of the Department of Public Utilities of

the Commonwealth, separate and distinct from its other

records and accounts. Such records and accounts shall con-

tain information supporting the allocation of MMWEC’s

indirect costs associated with the Project. Such records

and accounts shall be audited annually by a firm of cer-

tified public accountants, experienced in electric utility

accounting and of national reputation, to be employed

by MMWEC. Such records and accounts and such an-

nual certified audit, including all written comments and

recommendations of such accountants, shall be made avail-

able for inspection by the Participant at any reasonable

time.

The Participant shall, at the time of the filing of the

return required by law and the rules and regulations of

the Department of Public Utilities of the Commonwealth,

of any similar regulatory agency of any other State or

of any other appropriate regulatory agency, file a copy

of such return with MMWEC.

The Participant shall, in each fiscal year, file with

MMWEC financial statements for the first six months

and for the entire twelve months of such year. Such

statements shall be so filed within sixty days after the

close of the applicable period or, in the case of the twelve-

month statements, within any longer period permitted for

the filing thereof with the Department of Public Utilities

21a

of the Commonwealth or similar regulatory agency of any

other State.

The Participant shall provide to MMWEC such other

certificates, statements and information as MMWEC

shall reasonably require, including those required in con-

nection with its financings.

7. Dispatch; Metering; Deliveries; Transmission.

The Project shall be dispatched in accordance with the

New England Power Pool Agreement, if any, and other-

wise in accordance with Prudent Utility Practice. If the

Participant is not a member of the New England Power

Pool, it shall arrange with the New England Power Pool,

or other electric utilities, for dispatch services related to

the Participant’s Share of Project Capability. If and to

the extent that outage informatior is not available to the

Participant from the New England Power Pool, MMWEC

shall promptly notify the Participant of the outage.

Electric power and energy to be furnished hereunder

shall be alternating current, three phase, sixty hertz.

The point(s) of delivery, point(s) of measurement, me-

tering ownership and special conditions of service shall

be as set forth in Exhibit C hereto attached. Exhibit C

may be amended from time to time to include such other

point or points of delivery and measurement and any

other provisions pertaining to conditions of service as

may be agreed upon by MMWEC and the Participant.

To the extent metering information is not directly avail-

able to the Participant. MMWEC shall furnish such me-

tering information as may be reasonably requested by

the Participant to the extent such information is avail-

able to MMWEC.

The Participant shall be responsible and arrange for

the transmission of capacity and energy sold under this

agreement between the Electric Power Facility and its

system, including the installation and maintenance of

22a

facilities required for it to receive such electric capacity

and energy into its system. MMWEC may, at its option,

elect to deliver the capacity and energy from the Project

or a portion thereof to a delivery point on the Partici-

pant’s system. In any event, the Participant shall be re-

sponsible for all transmission and transformation losses

and costs incurred with respect to the Participant’s Share

of Project Capability between the Project and its system.

8. Insurance.

MMWEC shall maintain in force, for the benefit of the

Project and the Participants as their respective interests

shall appear, as a Project expense, such insurance as will

satisfy the requirements of the Bond Resolution and ap-

plicable statutes and regulations thereunder, and such

other insurance as MMWEC may deem desirable. Sub-

ject to Section 10 of this Agreement and the provisions

of the Bond Resolution, any proceeds of such insurance

received by MMWEC for loss or damage to the Project

shall be used to repair the Project.

9. Training.

MMWEC shall earry out a familiarization and train-

ing program to maintain adequate staff for the Project

and the expenses thereof shall be part of the direct or

indirect Costs of Acquisition and Construction or Monthly

Power Costs as appropriate.

10. End of the Project; Termination Settlement.

As to any Facility solely owned by MMWEC, MMWEC

shall comply with the provisions of subparagraphs (i),

(ii) and (iii), and as to any Facility jointly owned by

MMWEC, subject to the agreement between the owners

of such Facility, MMWEC shall comply with the provi-

sions of subparagraphs (i), (ii) and (iii) in substan-

tially the same manner as if the Facility were wholly

owned by MMWEC.

23a

(i) A Facility shall be terminated and MMWEC

shall cause it to be salvaged, discontinued, decom-

missioned, and disposed of or sold in whole or in

part in such manner as MMWEC may determine

when:

(A) MMWEC determines that it is unable to

construct, operate or proceed as owner of such

Facility due to licensing, or operating conditions

or other causes which are beyond its control.

(B) MMWEC determines that such Facility

is not capable cf producing energy consistent

with Prudent Utility Practice.

The date of termination shall be the earlier

of the dates of the termination under subpara-

graphs (A) and (B).

(ii) After such termination, MMWEC shall un-

dertake the decommissioning of such Facility.

MMWEC shall make monthly accounting statements

to the Participant of all costs associated therewith.

Such monthly accounting statements shall continue

until such Facility has been salvaged, discontinued,

decommissioned and finally disposed of hereunder, at

which time a final accounting statement shall be

made by MMWEC and such final accounting state-

ment shall be made at the earliest reasonable time.

The costs of decommissioning shall include, but shall

not be limited to, all of MMWEC’s accrued costs and

liabilities resulting from MMWEC’s ownership, con-

struction, operation ‘including cost of fuel), mainte-

nance of and renewals and replacements to such Fa-

cility and the costs of salvage, discontinuance and

disposition or sale thereof.

(iii) The final accounting statement shall credit

to the Participants, and deduct from any amount

otherwise chargeable to them, the fair market value

of any assets related to any Facility then retained

24a

by MMWEC. If the final accounting statement shows

that the costs referred to in subparagraph (ii) above

exceed such credits after application by MMWEC of

all other funds available for such purpose, the Par-

ticipant shall pay MMWEC a sum determined by

multiplying the amount shown to be due in

MMWEC’s final accounting statement by the Partici-

pant’s Share. If the final accounting statement shows

a balance of credits to the Participants, MMWEC

shall pay the same to the Participants.

11. Sale of Excess Participant's Share.

In the event that the Participant shall determine that

all or any part of the Participant’s Share of the Project

Capability is in excess of the requirements of the Partici-

pant, the Participant shall notify MMWEC of such de-

termination and MMWEC shall use its best efforts to

sell and transfer for any period of time all or part of

such excess. The other Participants shall have the first

right to accept each such disposal pro rata among those

exercising such right before a transfer is made to an

electric utility which is not a Participant. If all or any

portion of such excess of the Participant’s Share of Proj-

ect Capability is sold pursuant to this section, the Par-

ticipant’s Share shall not be reduced, and the Participant

shall remain liable to MMWEC to pay the full amount

of its Participant’s Share of Monthly Power Costs as if

such sale had not been made, except that such liability

shall be discharged to the extent that MMWEC shall re-

ceive payment for such excess Project Capability from

the purchaser or purchasers thereof.

12. Obligations in the Event of Default.

(a) Upon failure of the Participant to make any pay-

ment in full when due under this Agreement or to per-

form any obligation herein, MMWEC shall make demand

upon the Participant, and if said failure is not cured

—————————————

25a

within 20 days from the date of such demand it shall

constitute a default at the expiration of such period.

Notice of such demand shall be provided to the other

Participants by MMWEC.

(b) If the Participant in good faith disputes the legal

validity of said demand, it shall make such payment or

perform such obligation within said 20 day period under

protest directed to MMWEC. Such protest shall specify

the reasons upon which the protest is based.

(ec) Upon the failure of any Participant to make any

payment which failure constitutes a default under this

Agreement, MMWEC shall use its best efforts to sell and

transfer all or a portion of such Participant’s Share for

all or a portion of the remainder of the term of this

Agreement. The other Participants shall have the first

right to accept each such disposal pro rata among those

exercising such right before a transfer is made to an

electric utility which is not a Participant. If all or any

portion of the Participant’s Share is transferred pursu-

ant to this paragraph, the Participant’s Share shall not

be reduced, and the Participant shall remain liable to

MMWEC to pay the full amount of its Participant’s

Share of Monthly Power Costs as if such sale had not

been made, except that such liability shall be discharged

to the extent that MMWEC shall receive payment from

the purchaser or purchasers thereof.

(d) Upon failure of any other Participant(s) to make

any payment which failure constitutes a default under

this Agreement, and except as transfers_are made pur-

suant to paragraph (c), the Participant’s Share shall be

automatically increased for the remaining term of this

Agreement pro rata with that of the other non-defaulting

Participant(s) and the defaulting Participant’s(s’)

Share(s)} shall be reduced correspondingly; provided, that

no such reduction shall reduce the defaulting Partici-

pant’s(s’) obligations under paragraph (e); and further

provided, that the sum of such increases for the Partici-

26a

pant pursuant to this paragraph shall not exceed, with-

out consent of the Participant, an accumulated maximum

of 25% of the Participant’s Share prior to any such in-

creases.

(e) If the Participant shall fail or refuse to pay any

amounts due to MMWEC hereunder, the fact that other

Participants have assumed the obligation to make such

payments shall not relieve the Participant of its liability

for such payments, and any Participants assuming such

obligation, either individually or as a member of a group,

shall have a right of recovery from the Participant (di-

minished to the extent such Participants have received

value from the concomitant rights and _ interests).

MMWEC or any Participant as their interests may ap-

pear, jointly or severally, may commence such suits, ac-

tions or proceedings, at law or in equity, including suits

for specific performance, as may be necessary or appro-

priate to enforce the obligations of this Agreement

against the Participant.

13. Development Work.

The Billing Statement may also show, as an amount to

be paid as part of the Monthiy Power Costs in the month

to which the Billing Statement applies, a sum to be used

to pay the cost of work in connection with the development

of Electric Power Facilities to serve the needs of cities

and towns of the Commonwealth having municipal elec-

tric departments, including, but not limited to, planning,

engineering, siting, environmental, financial and economic

surveys, studies and work; the acquisition of options to

acquire real estate; payments with respect to fuel; and

any other costs and expenses incurred in connection with

the planning, construction and acquisition of any Electric

Power Facility or an ownership interest therein and

the placing of the same in operation (herein referred to

as “Development Work’). Such amount shall be shown

in the Annual Budget and may not exceed 1% of the

27a

Participant’s Share of the amount described in subpara-

graph (1) of paragraph {j) of Section 1 hereof (calcu-

lated before credit for investment earnings). Such

amounts when received by MMWEC shall be deposited

in the Study and Development Fund established by the

Bond Resolution and administered in accordance there-

with.

14. Issuance of Bonds for Renewals, Etc., and for

Refunding.

In addition to the issuance of Bonds to pay the Costs

of Acquisition and Construction as provided in Section 3

of this Agreement, MMWEC may issue Bonds in accord-

ance with the provisions of the Bond Resolution at any

time and from time to time in the event funds are re-

quired to pay the costs of (i) renewals, extraordinary

repairs, replacements, modifications, additions and better-

ments for the Project necessary to achieve design ca-

pability, or required by any governmental agency or au-

thority, (ii) renewals, extraordinary repairs, replace-

ments, modifications, additions and betterments for the

Project which in the opinion of the Consulting Engineer

appointed and retained by MMWEC under the Bond Res-

olution are necessary or desirable to impreve operating

reliability or to reduce until power costs, and any acquisi-

tion of fuel for the Project, and any decommissioning or

termination of the Project, and (iii) renewals, extraordi-

nary repairs, replacements, modifications, additions and

betterments for the Project for which MMWEC shall be

responsible under any ownership agreement relating to

any jointly owned Facility, all to the extent that MMWEC

is not reimbursed for payment of the costs set forth in

clauses (i) through (iii) from the proceeds of insurance.

The Annual Budget delivered to the Participant for the

Contract Year in which such Bonds are issued, or an

amended Annual Budget for such Contract Year, shall

also set forth the financing plan and budget of expendi-

tures with respect to such Bonds and the proceeds thereof.

28a

Bonds may also be issued to refund any Bonds in order

to reduce the Monthly Power Costs or in the event, in

the opinion of MMWEC, it may otherwise be advantage-

ous.

15. Modification and Uniformity of Agreements.

(a) This Agreement shall not be subject to termina-

tion by any party under any circumstances, whether

based upon the default of any other party under this

Agreement, or any other instrument, or otherwise, except

as specifically provided in this Agreement.

(b) This Agreement shall not be amended, modified, or

otherwise changed by agreement of the parties in any

manner that will materially and adversely affect the

security afforded by the provisions of this Agreement for

the payment of the principal of and premium, if any,

and interest on any of the Bonds, and any other obgliga-

tions of MMWEC ranking pari passu therewith as to

the security afforded by the provisions of this Agree-

ment, as they respectively become payable, so long as any

of the Bonds and such obligations are outstanding and

unpaid or funds are not set aside for the payment or

retirement thereof in accordance with the Bond Resolu-

tion.

or replaced so that it contains terms and conditions dif-

ferent from those contained in this Agreement. MMWEC

shal! notify the Participant and upon timely request by

the Participant shall amend this Agreement to include

similar terms and conditions.

16. Notices.

Any notice, demand, approval, proposal, protest, direc-

tion or request provided for in this Agreement to be

delivered, given or made to the Participant shall be

deemed delivered, given or made if delivered in writing

Pa Se

29a

in person or mailed by registered or certified mail, postage

prepaid, return receipt requested, addressed to the person

and at the address designated in writing filed with

MMWEC by the Participant. The Participant may

change such designation, at any time and from time to

time, by giving notice to MMWEC as below provided.

Any such notice, demand or request to be delivered, given

or made to MMWEC shall be deemed delivered, given or

made if delivered in writing, in person, or sent by mail

as above provided to the following address:

General Manager

Massachusetts Municipal Wholesale Electric Company

Stony Brook Energy Center -

Westover Industrial Airpark

P.O. Box 426

Ludlow, Massachusetts 01056

or such other address designated as provided above.

17. Relationship to Other Instruments.

It is recognized by the parties hereto that MMWEC in

the ownership, construction, acquisition and operation of

the Project must comply with the requirements of any

ownership agreements relating thereto, the Bond Resolu-

tion and all licenses, permits and regulatory approvals

necessary for such ownership, construction, acquisition

and operation, and it is therefore agreed that this Agree-

ment is made subject to the terms and provisions of said

ownership agreements, the Bond Resolution and all such

licenses, permits and regulatory approvals.

18. Arbitration.

Any dispute under this Agreement shall be submitted

to arbitration at the request of either MMWEC or the

Participant. Copies of any such request shall be given to

all other Participants and it shall specify the issue or

issues in dispute. Within ten days after receipt of such

30a

a request MMWEC and the Participant shall confer and

attempt to agree upon appointment of a single arbitra-

tor. If such agreement is not accomplished, MMWEC or

the Participant may reqeust the American Arbitration

Association to appoint an arbitrator. The arbitrator shall

conduct a hearing in Ludlow, Massachusetts, and within

thirty days thereafter, unless such time is extended by

agreement of MMWEC and the Participant, shall notify

the parties of his decision, stating his reasons for such

decision and separately listing his findings of fact and

conclusions of law. The arbitrator shall not have power

to amend or add to this Agreement. Subject to such

limitation, the decision of the arbitrator shall be final

and binding on MMWEC and the Participant except that

either party may petition a court of competent jurisdic-

tion for review of errors of law. The pendency of arbitra-

tion shall affect neither the obligation of the Participant

to make any payment in full when due under this Agree-

ment nor the obligations of this Agreement upon the

failure of the Participant to make any payment in full

when due under this Agreement.

19. Applicable Law.

This Agreement is made under and shall be governed

by the law of the Commonwealth of Massachusetts.

20. Severability.

If any section, paragraph, clause or provision of this

Agreement shall be finally adjudicated by a court of com-

petent jurisdiction to be invalid, the remainder of this

Agreement shall be unaffected by such adjudication and

all of the remaining provisions of this Agreement shall

remain in full force and effect as though such section,

paragraph, clause or provision or any part thereof so

adjudicated to be invalid had not been included herein. -

3la

21. Assignment of Agreement.

This Agreement shall inure to the benefit of, and shall

be binding upon, the respective successors and assigns of

the parties to this Agreement; provided, that neither this

Agreement, nor any interest herein (including Project

_ Capability), shall be assigned or transferred or sold by

the Participant, except as provided herein, without the

written consent of MMWEC, nor if in the opinion of

counsel to MMWEC such assignment or transfer or sale

would adversely affect the exemption from Federal In-

come Taxation of the interest on the Bonds. No such as-

signment or transfer or sale shall relieve the Participant

of any obligation hereunder.

IN WITNESS WHEREOF, the parties hereto have executed

this Agreement as of the 27th day of September, 1979.

MASSACHUSETTS MUNICIPAL WHOLESALE

ELECTRIC COMPANY

By /s/ Phillip L. Otness

Title: General Manager

Participant’s Name

Title:

32a

EXHIBIT A

PARTICIPANTS AND PARTICIPANTS’ SHARES (1)

PROJECT NO. 6

Approximate

Share of % Share

Project of Project

Participant Capability( KW) Capability

Town of Ashburnham 737 0.4238

Town of Boylston 833 0.4790

Town of Danvers 14,071 8.0909

Town of Georgetown 1,115 0.6411

Town of Groton 1,711 0.9838

Town of Hingham 5,658 3.2534

Town of Holden 5,000 2.8750

City of Holyoke 3,312 1.9044

- Pown of Hudson 26,000 14.9502

Town of Hull 1,992 1.1454

Town of Mansfield 9,548 5.4902

Town of Middleborough 2,541 1.4611

Town of Middleton 4,630 2.6623

Town of North Attleborough 3,056 1.7572

Town cf Paxton 937 0.5388

City vf Peabody 18,340 10.5456

Town of Reading 25,400 14.6052

Town of Shrewsbury 6,160 8.5420

Town of Sterling 1,100 0.6325

Town of Templeton 2,327 1.3380

Town of Wakefield 3,812 2.1919

Town of West Boylston 849 0.4882

Subtotal for MMWEC Members 139,129 80.0000

Village of Ludlow, Vermont (2) 1,382 0.7947

Village of Lyndonville, Vermont (2) 1,500 0.8625

Village of Morrisville, Vermont (2) 1,800 1.0350

Village Northfield, Vermont (2) 500 0.2875

Village of Stowe, Vermont (2) 3,500 2.0125

Village of Swanton, Vermont (2) 2,264 1.3018

Washington Electric Co-operative,

Inc. (2) (3) 2,700 1.5525

Vermont Electric Cooperative,

Inc. (2) (3) 10,000 5.7501

Pascoag Fire District, Rhode Island (4) 2,000 1.1500

Eastern Maine Electric Cooperative,

Inc. (3) 5,000 ¢.8751

New Hampshire Electric Cooperative,

Inc. (3) 4,136 2.3783

Subtotal for MMWEC Non-Members 34,782 20.0000

TOTAL 173,911

100.0000

33a

(1) If (i) the Towns of North Attleborough and Reading, Massa-

chusetts, the City of Holyoke, Massachusetts, and New Hampshire

Electric Cooperative, Inc., or any of thern, do not execute this Agree-

ment by October 12, 1979, or if the respective vote or resolution au-

thorizing such execution authorizes the purchase of a share of

Project Capability less than the respective approximate share of

Project Capability (KW) specified above, or (ii) this Agreement,

as to any Participant, is subject to approval or disapproval by or

lapse of a particular period of time after filing with the State of

Vermont Public Service Board or the State of Rhode Island Public

Utilities Commission, and such Board or Commission, as the case

may be, has not approved or disapproved this Agreement. or the

particular period of time has not elapsed, as the case may be, by

December 21, 1979, or such later date as shall be agreed to by

MMWEC (but not later than December 31, 1979), or (iii) any Par-

ticipant is a party to an agreement or other instrument pursuant to

which approval of this Agreement by the Administrator of the Rural

Electrification Administration is required and such Administrator

or his delegate has not approved this Agreement by November 1,

1979, or such later date as shall be agreed to by MMWEC (but not

later than December 31, 1979), or (iv) the percentage ownership

interest of MMWEC in Seabrook Units Nos. 1 and 2 is decreased

pursuant to Exhibit B, then and in each such case each Participant’s

percentage share of Project Capability specified above shall be

changed to equal the proportion which its approximate share of

Project Capability (KW) specified above bears to the total of all

remaining Participants’ approximate share of Project Capability

(KW) specified above; provided, however, that to the extent any

such change results in the total percentage shares of Project Capa-

bility for MMWEC Members being equal to less than 80% of the

total percentage shares of Project Capability for all Participants,

then the percentage shares of Project Capability of all MMWEC

Non-members shall be reduced pro-rata. Anything in this Agree-

ment to the contrary notwithstanding, in the event of any such

failure by the Administrator of the Rural Electrification Adminis-

tration or his delegate, the State of Vermont Public Service Board,

or the State of Rhode Island Public Utilities Commission to approve

or disapprove this Agreement, or any such failure of a particular

period of time to elapse after filing with such Board or Commis-

sion, as the case may be, the applicable Participant shall thereupon

no longer be or be deemed to be or to have been a Participant for

any and all purposes hereof. MMWEC shall notify the Participants

promptly, in writing, of any change in the Participants or their

shares of Project Capability pursuant to the foregoing provisions,

and each such notification shall be a part of this Agreement.

[ Continued ]

34a

[ Continued]

(2) Approval or disapproval by or lapse of a particular period

of time after filing with the State of Vermont Public Service Board

is required.

(3) Approval of the Administrator of the Rural Electrification

Administration is required.

(4) Approval or disapproval by or lapse of a particular period

of time after filing with the State of Rhode Island Public Utilities

Commission is required.

35a

EXHIBIT B

PROJECT DESCRIPTION

PROJECT NO. 6

1. Project No. 6 is to consist of ownership interests

of up to 7.56135% (or such lesser portion as MMWEC,

prior to December 31, 1980, may notify the Participants

is available) in each of the proposed nuclear generating

units known as Seabrook Unit No. 1 and Seabrook Unit

No. 2. Public Service Company of New Hampshire is

constructing the Seabrook plant on a site in Seabrook,

New Hampshire. Each of Seabrook Units Nos. 1 and 2

is a nuclear generating unit of approximately 1,150,000

KW net capability. Such units, each a Facility, are ten-

tatively scheduled to commence commercial operation in

April 1983 and February 1985, respectively.

2. The costs described in Section 1(f)(10) of this

Agreement relate to study and development activity for

implementing sources of renewable energy. Such activ-

ity’s funding shall not exceed $5,000,000 derived from the

proceeds of Bonds issued to finance the Costs of Acquisi-

tion and Construction of the Project to be utilized for

preliminary survey, feasibility, investigation and develop-

ment costs, engineering and licensing activities, acquisi-

tion of interests in land or property, related administra-

tive and other costs, and such other purposes as may be

voted by the Board of Directors of MMWEC, leading to

a future MMWEC construction project. Renewable en-

ergy sources shall include, but not be limited to, hydro-

electric development and refuse fueled yenerating proc-

esses. The selection of projects under this paragraph

shall be under the direct control of the MMWEC Board

of Directors.

36a

EXHIBIT C

METERING AND DELIVERY POINT

PROJECT NO. 6

The Participant’s Share of Project Capability will be

metered and delivered at the low side of the station

transformer at the unit site.

37a

IN THE SUPREME COURT

OF THE STATE OF VERMONT

Supreme Court Docket No. 86-555

VERMONT DEPARTMENT OF PUBLIC SERVICE, VILLAGE OF

STOWE; and VERMONT ELECTRIC COOPERATIVE, INC.,

Plaintiffs-A ppellants,

MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC COM-

PANY; VILLAGE OF LUDLOW; VILLAGE OF LYNDONVILLE;

VILLAGE OF MORRISVILLE; and VILLAGE OF NORTH-

FIELD,

Defendants-A ppellees.

MEMORANDUM IN SUPPORT OF MASSACHUSETTS

MUNICIPAL WHOLESALE ELECTRIC COMPANY’S

MOTION FOR REARGUMENT

Massachusetts Municipal Wholesale Electric Company

(“MMWEC”) moves pursuant to V.R.A.P. 40 for rear-

gument of the Court’s decision entered September 27,

1988. The Court overlooked or misapprehended a num-

ber of points of law which, if properly considered, would

require a reversal of the Court’s decision. The most

glaring, although by no means the only, oversight in the

Court’s decision is its inexplicable failure to uphold

Lyndonville’s PSA even after citing the statute that

explicitly authorizes Lyndonville to enter into take-or-pay

contracts. As discussed in detail below, the authority of

Lyndonville is one of a number of issues raised by the

Court’s decision that must be addressed on reargument.

* * * *

38a

E. The Court’s Decision Violates The Commerce Clause,

The Takings Clause And The Due Process Clause of

the United States Constitution.

If permitted to stand, the Court’s sudden and unpre-

dictable change in state law invalidating the PSAs be-

tween all Vermont participants and MMWEC will result

in violations of the Commerce Clause, Takings Clause and

the Due Process Clause of the United States Constitution.

U.S. Const. Art. I, § 8; amend. V. cl. 4 and amend. XIV,

§ 1, el. 3.?

Under the commerce clause “states are barred from

regulating interstate commerce in a manner which sig-

nificantly interferes with the national economy.” Hyde

Park Partners, L.P. v. Connolly, 839 F.2d 837, 843 (1st

Cir. 1988) and cases cited. Using the commerce clause

the United States Supreme Court has “consistently re-

buffed attempts of states to advance their own commercial

interests by curtailing the movement of articles of com-

merce....” H.P. Hood & Sons v. DuMond, 336 U.S. 525,

535 (1949).

In the instant case, the decision of the Court dramati-

cally interferes with the movement of a critical article of

interstate commerce in modern society—electricity. It

effectively prohibits Vermont participants from entering

into any future wholesale power contracts with out-

of-state participants. It also provides a basis for Vermont

municipalities and cooperates to invalidate pre-existing

energy contracts with out of state utilities, which the

Vermont participants now find uneconomical or otherwise

undesirable. The effect of the Court’s ruling is to create

a special set of limitations on interstate power agree-

ments which apply only to Vermont utilities. Such a re-

1 MMWEC pleaded by affirmative defense various federal consti-

tutional defenses to plaintiffs’ claims in this case. In light of this

Court’s decision on state law issues, at a minimum MMWEC is

entitled to have the case remanded to the Superior Court for con-

sideration of the constitutional issues.

39a

sult impermissibly delays and inconveniences interstate

Commerce. See, e.g., Kassel v. Consolidated Freightways

Corp. 450 U.S. 662 (1981).

The Takings Clause is made applicable to the states

through the Due Process Clause. See Penn Central

Transportation Co. v. New York City, 438 U.S. 104, 122

(1977). A key consideration in determining whether a

state has impermissibly “taken” property is “[t]he eco-

nomic impact of the regulation on the claimant, and par-

ticularly, the extent to which the regulation has inter-

fered with distinct investment-backed expectations. .. .”

Id, at 124.

Here MMWEC issued hundreds of millions of dollars

in bonds and invested this money in the Seabrook project

based on written promises by municipal and cooperative

utilities that they had an unconditional obligation to

make monthly payments to MMWEC. The Court’s deci-

sion, by making a sudden change in Vermont law that

was unpredictable in terms of the relevant precedents,

ignored MMWEC’s reasonable reliance on the PSAs, thus

resulting in the frustration of reasonable “investment-

backed expectations” which cannot be taken without com-

pensation. See Kaiser Aetna v. United States, 444 U.S.

164, 179 (1979).

40a

Respectfully submitted,

/s/ Jeffrey F. Jones

/s/ William Lahey

DANIEL O. MAHONEY

JEFFREY F.. JONES

WILLIAM L. LAHEY

PALMER & DODGE

One Beacon Street

Boston, MA 02108

(617) 573-0100

/s/ John Parker

JOHN PARKER >

PARKER, LAMB & ANKUDA, P.C.

P.O. Box 519

Springfield, Vermont

Dated: October 10, 1988

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.