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Mxenergy Inc. v. Rochester Gas & Electric Corp.

March 10, 2006

MXENERGY INC., AND MXENERGY ELECTRIC, INC., PLAINTIFFS,
v.
ROCHESTER GAS & ELECTRIC CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Charles J. Siragusa United States District Judge

DECISION and ORDER

INTRODUCTION

Siragusa, J. This diversity case is before the Court on plaintiffs' motion for a preliminary injunction. Previously, the Court issued a temporary restraining order ("TRO"), and then replaced it with a modified TRO, after which the parties engaged unsuccessfully in mediation. In connection with the preliminary injunction application, the parties completed limited, expedited discovery, and on March 6, 2006, the Court heard oral argument. The Court now makes the following findings of fact and conclusions of law, based upon which, it issues the preliminary injunction detailed below.*fn1

FINDINGS OF FACT

Each plaintiff (collectively referred to herein as "MxEnergy") is an Energy Supply Company ("ESCO"), incorporated in Delaware, with its principal place of business in Connecticut. Defendant Rochester Gas and Electric Corporation ("RG&E"), is a distribution utility, selling natural gas and electricity, incorporated in New York with its principal place of business in Rochester, New York.*fn2 The New York State Public Service Commission ("PSC") qualified MxEnergy as an ESCO authorized to solicit business in the Rochester area in direct competition with RG&E. As an energy distribution utility, RG&E is obligated to distribute natural gas and electricity sold by MxEnergy to customers in its territory. Currently, MxEnergy has about one-and-one-half percent of the market share in the area serviced by RG&E.

The parties entered into Operating Agreements ("Agreements"), which, by their terms, incorporated a ruling from the PSC. This ruling, commonly referred to as the UBP*fn3, details the procedure required to be used by RG&E to seek discontinuance of MxEnergy as an ESCO. In that respect, section 2(F)(2) of the UBP states:

To initiate the discontinuance process, a distribution utility shall send a non-EDI*fn4 discontinuance notice by overnight mail and verified receipt, to the ESCO or Direct Customer and DPS.*fn5 The notice shall contain the following information:

a. the reason, cure period, if any, and effective date for the discontinuance; b. a statement that the distribution utility shall notify the ESCO's customers of the discontinuance if the ESCO fails to correct the deficiency described in the notice within the cure period, unless the DPS directs the distribution utility to stop the discontinuance process;

c. the distribution utility may suspend the ESCO's right to enroll customers until correction of the deficiency; and

d. correction of the deficiency within the cure period, or a DPS directive, will end the discontinuance process.

UBP section 2(F)(2). Additionally, section 2(F)(7)(f) states:

Upon a distribution utility determination that an ESCO or Direct Customer failed, except in force majeure conditions, to comply with any other applicable provision of the distribution utility's . operating agreement, . the distribution utility may initiate a discontinuance process no sooner than ten business days (cure period) after receipt by the ESCO . of a discontinuance notice. If the ESCO . provides adequate assurances and a description of any necessary process changes that ensure compliance on or before the expiration of the cure period, the distribution utility shall stop the discontinuance process. Upon a determination to continue the discontinuance process because the assurances and proposed process changes are inadequate, the distribution utility shall notify the ESCO . that it will discontinue participation no later than 15 business days from the expiration of the cure period. The distribution utility shall notify the ESCO's customers that it will discontinue participation on or before the expiration of 15 business days after the end of the cure period.

UBP section 2(F)(7)(f). Moreover, section 25 of the Agreements, reads in pertinent part as follows:

This Agreement and the Contract Documents are not intended, and shall not be construed, to create any association, joint venture, agency relationship or partnership between the Parties or to impose any such obligation or liability upon either Party. Neither Party shall have any right, power or authority to enter into any agreement or undertaking for, or act on behalf of, of to act ...


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