The Chelan County Public Utility District, uncertain whether power sales to a subsidiary of Washington Water Power Co. are legal, is paying the legal expenses of a ratepayer challenging the transactions.
Fruit industry lawyer Jim Brown filed the lawsuit Monday in Chelan County Superior Court. Avista Energy Inc., formed by WWP last spring, was named as a defendant along with the PUD.
“The state law regarding public utility districts is 60 years old and doesn’t contemplate our current market. We want to find out more clearly what we can do,” Roger Braden, general manager of the PUD, said in explaining why the agency asked Brown to sue.
With the uncertainty of power industry deregulation on the horizon, the PUD formed its alliance with Avista in April to earn more money from power sales on the open market and to keep rates to home customers low.
One part of the agreement covers mutual sales of power and support services to Northwest public utilities. That effort remains dormant because most of the targeted customers are under contracts to buy power from the Bonneville Power Administration.
But in August the PUD and Avista began buying and selling what is called “real-time power” - hour-by-hour excess power from sources including the PUD’s dams. So far, the two have done little business, Braden said.
State law clearly allows the PUD to hire Avista for marketing expertise, but the actual partnership between public and private entities is in doubt.
“When it comes to sharing revenues and losses between a private company and a public entity, there is no clear state authority. Nothing says we can or can’t,” Braden said. “So when we did this contract with Avista, we said this was a question mark we wanted a court to look at.”
Avista Energy President Lloyd Meyers said officials from the two companies discussed the possible need for litigation to resolve legal concerns even before the sales agreement was signed.
“We’re pretty confident the agreement we have with them now will stand,” he said, adding that the companies will continue to do business while the lawsuit is pending.
He said a positive outcome would clear the way for more business with Chelan as well as other public utilities.
Braden said a state Supreme Court ruling in the Washington Public Power Supply System case in the early 1980s implies that public entities cannot do anything that is not explicitly allowed in the law.
“But since then, there have been four to five state Supreme Court cases which we believe (say) the opposite, … that public utilities have broad discretion to associate in proprietary activities - activities that can be done by any business,” Braden said.
But the PUD wants to obtain clear authority so it doesn’t face something like the WPPSS default case, in which courts ruled that 88 public utilities had exceeded their authority in becoming involved in the construction of nuclear power plants.
Brown, who has followed PUD affairs since the WPPSS controversy, said he agreed to sue the agency because he believes the scope of its authority is a serious question.
“I don’t necessarily agree with the PUD that it will win this issue. If I thought they were 100 percent correct, I wouldn’t have agreed to litigate it,” he said.
He said he believes state law prohibits the PUD from selling to anyone other than another utility, which would leave out Avista, a private electrical energy broker.
Brown hired lawyer Phil Johnson to represent him. Johnson’s fees are expected to reach between $15,000 and $20,000 over the six months the case is expected to last, Braden said.