QF or to seek a declaratory order that the facility is no longer a QF." Id. at 859.
Remedies for Breach
The facts set forth above warrant issuance of a TRO. In addition, the terms of the PPA itself suggest that RG&E's actions purporting to "terminate" the contract ignore the specific terms of the contract relating to breaches of the contract and remedies provided for an alleged breach. RG&E has not presented any persuasive reason why it should be allowed, in effect, to modify the PPA unilaterally.
The PPA contains specific provisions that expressly deal with the parties' rights and obligations in the event of a breach.
Article XII(d) of the PPA states that upon a material breach by either party, the non-breaching party must notify the breaching party in writing. If the breaching party fails to cure the breach within thirty days, either party may bring the dispute to the PSC for resolution, subject to judicial review, "and this Agreement shall not be terminated by the party claiming the breach prior to such resolution by the Commission or, if the Commission declines to act, judicial review ..."
Article XII(b) deals with termination of the agreement if it is established that a party made a false material representation which influenced the other party's willingness to enter into the agreement. But, the determination as to whether a breach occurred is left to "the determination by the Commission ... subject to final judicial review." What this section does not allow is for one of the parties to unilaterally determine that there had been a breach and terminate the agreement.
Here, both parties sought PSC resolution of their dispute, and the PSC declined to act on the ground that the dispute was outside its jurisdiction. Under the terms of Article XII(d), then, the next step was not termination, but judicial review. In fact, that is exactly what RG&E did by filing the action in state court (albeit before the PSC has issued its order). Rather than await the Court's ruling, RG&E then went ahead and unilaterally terminated the PPA while the matter was still pending in state court.
Even assuming arguendo that Kamine has breached various terms of the PPA in exactly the manner alleged by RG&E, there does not appear to be any support in the PPA itself for RG&E to do what it has done i.e., to terminate the agreement.
RG&E also argues that Kamine has not shown a likelihood of success on its antitrust claims because RG&E and Kamine are not in "competition," and because the PPA is not the result of competitive bidding or otherwise related to competition. While the premises for this argument are true in some ways, RG&E's conclusions do not necessarily follow, and I remain convinced that Kamine has shown that its antitrust claims do present a fair ground for litigation.
In some senses, traditional utilities and QFs are not competitors. QFs sell to utilities, who in turn sell to retail users. Thus, their customer bases are different.
In a broader sense, however, it must be recognized that the ultimate effect of PURPA is to introduce new energy producers into the marketplace. FERC has "emphasized that 'a basic purpose of section 210 of PURPA [ 16 U.S.C. § 824a-3] is to provide a market for the electricity generated by small power producers and cogenerators ...'" American Paper Inst. v. American Elec. Power Serv. Corp., 461 U.S. 402, 410, 76 L. Ed. 2d 22, 103 S. Ct. 1921 (1983) (quoting 45 Fed. Reg. 12221 (1980)). While Congress's purpose was primarily to foster energy conservation rather than competition as such, the fact remains that PURPA tends to broaden the energy market as a whole. If traditional utilities were successful in excluding QFs, then, the long-range effect could be to reduce competition.
Congress also recognized when it enacted PURPA that "traditional electricity utilities were reluctant to purchase power from, and to sell power to, the nontraditional facilities." FERC v. Mississippi, 456 U.S. 742, 750, 72 L. Ed. 2d 532, 102 S. Ct. 2126 (1982). It is not inconceivable, then, that traditional utilities like RG&E could try to prevent nontraditional facilities like Kamine from entering the market.
Moreover, the fact that RG&E and Kamine do not directly compete with each other does not mean that RG&E's actions cannot be anticompetitive. Some of Kamine's claims in this action are based on a monopsony theory, i.e., that as the single buyer for wholesale power within its territory, RG&E is able to control the price that it will pay. If RG&E prevents Kamine from entering the market, there would be reduced competition among its energy suppliers.
There remains the question of the rate that RG&E must pay for power purchased under the PPA. That depends in part on which of the three periods of the PPA is currently in effect. Under Article V of the PPA,
The "First Period" shall consist of the period from the date the Plant commences Commercial Operation until the balance in the Adjustment Account first reaches zero. The "Second Period", if any, shall consist of the period between the end of the First Period and the end of the fifteenth (15th) year after the date upon which the Plant commences Commercial Operation.
The balance in the adjustment account is determined by reference to RG&E's avoided cost. The PPA states that the avoided cost during the first period is the "Avoided Cost as set forth on Exhibit D," which is a list of the 1988 LRACs through the year 2008. The avoided cost during the second period is RG&E's "actual cost of producing electricity (appropriately adjusted for losses) avoided by reason of this Agreement, as defined in Service Classification Number 5 (SC5)," the tariff filed by RG&E with the PSC.
During the first period, RG&E is to pay $ .06 per KWH for electricity. During the second period, RG&E is to pay its "Avoided Cost as set forth on Exhibit D [the 1988 LRACs] multiplied by 95%." PPA Art. V(b).
The parties dispute whether Kamine ever commenced commercial operation, and thus whether the first period ever began. Kamine claims that it began commercial operation immediately after the final test was completed on December 21, 1994. RG&E alleges that one necessary test was never properly completed. The significance of this lies in RG&E's argument that if commercial operation begins for the first time now in 1995, Kamine will never be entitled to more than $ .06 per KWH under the PPA. See Ruganis Aff. (RG&E Exhibit Book in Opposition to TRO Ex. A), PP 108-13.
I do not believe that this matter must be resolved at this time and in the context of this motion. Regardless of whether commercial operation began in 1994 or begins now, the parties would now be in the first period, and RG&E's initial payments would be at the six-cent rate. That is the rate that will be applied under this Order. Any further determination of whether and when the second period will begin is essentially a matter of contract interpretation, which is the subject of the action now in state court. That is the appropriate forum to resolve these rate disputes.
Rule 65(c) states that "no restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined or restrained." Although the rule thus seems to require the posting of a bond for all TROs, a number of cases have held that the court's discretion to set the amount of the bond includes the discretion to waive the bond entirely. In particular, "the district court may dispense with security where there has been no proof of likelihood of harm to the party enjoined." International Controls Corp. v. Vesco, 490 F.2d 1334, 1356 (2d Cir. 1974).
Similarly, in United States v. Bedford Associates, 618 F.2d 904 (2d Cir. 1980), cert. denied, 456 U.S. 914 (1982), the court found no error in the district court's refusal to require a bond from a building owner, who was involved in a dispute with a government tenant over the provision of certain services for the building. The court noted that the parties had an ongoing relationship, and said that even if the government had been wrongfully ordered to make certain rent and utility payments, it could recoup any excess payments out of future rents due. Id. at 917 n. 23. See also Clarkson Co., Ltd. v. Shaheen, 544 F.2d 624, 632 (2d Cir. 1976) (no error in dispensing with filing of bond where no request for bond was made, and there was little likelihood of harm to enjoined parties under facts of the case); Holborn Oil Trading Ltd. v. Interpetrol Bermuda Ltd., 658 F. Supp. 1205, 1211-12 (S.D.N.Y. 1987) (no bond ordered since there was no demonstration of harm to defendant as result of injunction).
Here, it does not appear that RG&E would suffer any long-term harm if the TRO is later found to have been issued wrongfully. The only way that RG&E could be wrongfully harmed by the issuance of a TRO is if RG&E's contract claims are accepted and if it is determined that it should not be paying the full PPA price. The amount of such an "overpayment" during this purely temporary period of injunctive relief is unlikely to be so substantial that it could not be rectified at a later date. There is no reason to think, then, that RG&E could not recoup the amount of this potential overpayment in its state-court action, or by negotiation with Kamine.
Although my primary reason for imposing no bond in this case is the lack of harm to RG&E, I also note that the record indicates that Kamine is not in a position to post a bond in an amount that RG&E would consider satisfactory at this time. A party's ability to pay a bond has also been held relevant with respect to whether to require security. See, e.g., Kulakowski v. Rochester Hosp. Serv. Corp., 779 F. Supp. 710, 717 (W.D.N.Y. 1991); La Plaza Defense League v. Kemp, 742 F. Supp. 792, 807 n. 13 (S.D.N.Y. 1992).
It is true that these cases frequently involve indigent plaintiffs or public-interest lawsuits, situations not present here. It should be noted, though, that the whole purpose of the TRO in this case is to provide some cash flow to Kamine so that it may avert the loss of its business. Under these circumstances, it would seem anomalous to require it to post a substantial bond, and I therefore decline to do so.
Plaintiff's motion for a temporary restraining order is granted. Defendant Rochester Gas and Electric Corporation is hereby enjoined from refusing to accept electric power from plaintiff under the terms of the Power Purchase Agreement between the parties that was approved by the New York Public Service Commission on October 31, 1990. Defendant is further enjoined from paying plaintiff less than six cents per kilowatt hour for electric power delivered to defendant by plaintiff pursuant to the Power Purchase Agreement.
This temporary restraining order shall expire ten (10) business days after its date of entry (Fed. R. Civ. P. 6[a]; 65[a]), unless within that ten (10) days the Court extends its duration, or unless the parties stipulate to an extension.
IT IS SO ORDERED.
DAVID G. LARIMER
UNITED STATES DISTRICT JUDGE
Dated: Rochester, New York
March 18, 1995.