On February 28, 2001, Idaho Governor Dirk Kempthorne signed into law H.B. 142, which amended the Electric Supplier Stabilization Act of 1970 (1970 Act). The 1970 Act permitted electric utilities to enter into agreements with other electric suppliers to allocate service territories and customers. The 1970 Act also permitted utilities to allow other electric suppliers access to their customers, but only with the consent of the utilities involved. On October 3, 2000, the Ninth Circuit Court of Appeals ruled that, as a result of these provisions in the 1970 Act, the state’s utilities were subject to federal anti-trust law. H.B. 142 was enacted in response to the Ninth Circuit’s ruling and amended the 1970 Act to require approval of such allocation agreements by the Idaho Public Utilities Commission (IPUC). H.B. 142 also added new provisions to the 1970 Act, including provisions addressing wheeling of power and consumer access to alternative electric suppliers.
The Ninth Circuit ruling arose from a situation where an electricity aggregator sought to deliver power to customers of a utility. Under the 1970 Act, the utility refused to give consent to deliver the power. The aggregator brought an action in federal district court, alleging that the utility violated federal anti-trust laws. The federal district court ruled against the aggregator, but the Ninth Circuit reversed, holding that the 1970 Act did not shield the states’ utilities from federal anti-trust law.
Snake River Valley Electric Association (SRVEA), a non-profit cooperative organized to buy electricity at wholesale rates for its members, is the plaintiff in the Ninth Circuit case. Most of SRVEA’s members reside in Idaho in the service territory of Utah Power and Light, a subsidiary of PacifiCorp (PacifiCorp). SRVEA entered into a contract with Enron for the wholesale purchase of electricity, and sought access to PacifiCorp’s facilities to wheel its power through PacifiCorp’s territory to its members. SRVEA also sought permission from PacifiCorp to serve PacifiCorp’s customers. PacifiCorp refused to consent, and SRVEA filed the federal court action.
PacifiCorp filed a motion for summary judgment, stating that the 1970 Act permitted it to engage in the conduct alleged to be anti-competitive conduct. The district court agreed, finding that PacifiCorp’s compliance with the 1970 Act shielded it from regulation under federal anti-trust laws. The Ninth Circuit stated that the state action immunity doctrine can immunize anti-competitive conduct from federal anti-trust laws if that conduct is engaged in pursuant to state laws restricting competition. The state action immunity doctrine involves a two-part test for determining whether the state law restricting competition is an act of government and not a mere authorization by government for parties to violate anti-trust laws. The two-part test requires that the anti-competitive conduct challenged be: (1) clearly articulated in state law, and (2) actively supervised by the state.
The Ninth Circuit found that PacifiCorp’s refusal to provide consent for SRVEA to service customers in PacifiCorp’s territory was clearly articulated in the 1970 Act. Therefore, the first prong of the test was met. The Ninth Circuit also found, however, that the second prong of the test, requiring the active supervision of the anti-competitive conduct by the state, was not met. The second prong requires the state to exercise ultimate control over the conduct to ensure that only anti-competitive conduct which furthers state regulatory policy is protected. The Court noted that the policy behind this part of the test is designed to ensure that rates are established not as a result of private agreements but as a result of deliberate state intervention. The Ninth Circuit found the 1970 Act prohibited state review of agreements, between electric suppliers to divide up their service territories. As a result of this finding, the Ninth Circuit held the 1970 Act did not immunize utilities from federal anti-trust scrutiny for their alleged anti-competitive conduct.
H.B. 142 left in place the 1970 Act provision enabling electric suppliers to enter into agreements to allocate service territories and customers. It added, however, a provision requiring the IPUC to reject or approve such agreements after notice and opportunity for a hearing. To approve such an agreement, the IPUC must find the allocation of territories or customers designated in the agreement conforms to the purposes of the amended Act, which are to promote harmony among electric suppliers, prohibit "pirating" of customers, discourage duplication of electric facilities, actively supervise certain electric supplier conduct, and stabilize electric suppliers’ territories and customers.
H.B. 142 added a new section to the 1970 Act which states that electric suppliers are not required to wheel power over their systems if such service results in "retail wheeling and/or a sham wholesale transaction." A supplier who refuses to wheel under this provision is required to seek IPUC review of its decision. H.B. 142 also permits electric suppliers and consumers to petition the IPUC for an exception to the provision which maintains that electric suppliers shall not supply electric service to customers who are or have been connected to another supplier’s facilities. The IPUC may grant such an exemption if it finds the request is consistent with the purposes of the amended Act.
The stated legislative intent of H.B. 142 is to confer anti-trust immunity under the state action immunity doctrine. H.B. 142 also includes a legislative finding that a negative judicial ruling would have the effect of repealing provisions of the 1970 Act. Additionally, H.B. 142 adds a new section to the 1970 Act which provides that electric suppliers are immune from actions under state law where the suppliers are acting (or not acting) in compliance with the 1970 Act, as amended.