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Crucible Materials Corp. v. New York Power Authority

October 20, 2009

IN THE MATTER OF CRUCIBLE MATERIALS CORPORATION ET AL., RESPONDENTS,
v.
NEW YORK POWER AUTHORITY, APPELLANT.



The opinion of the court was delivered by: Graffeo, J.

This case involves a controversy between the New York Power Authority (NYPA) and manufacturers that participate in the Power for Jobs (PFJ) Program. At issue is the proper interpretation of certain 2006 amendments to Economic Development Law § 189.

The Power for Jobs program was originally enacted in 1997 to ameliorate the effects of energy deregulation, which had led to increases in energy costs and unpredictable price fluctuations. The initiative authorizes NYPA to procure electricity from power producers and make it available to businesses that elect to enter into PFJ contracts; the contracts ensure that the businesses will receive a certain quantity of power at a pre-determined price during a prescribed time-period. In exchange for receiving electricity at guaranteed prices, the businesses agree to remain in New York and, in some cases, commit to the creation of additional jobs. The objective of the program is to assist manufacturers and other commercial enterprises in their efforts to remain competitive despite New York's relatively high-priced energy market. Although the legislative expectation is that NYPA will supply power at below-market rates, the contracts do not guarantee that result.

The program, which is codified at Economic Development Law § 189, was initially scheduled to continue for only three years but has been repeatedly extended and amended by the Legislature. When the program commenced, businesses entered into contracts with NYPA for a three-year term and each of the first three years was referred to as a "phase" with participants deemed phase one, two or three depending on the year of their first contract. In 2000, the program was amended to add a fourth phase that permitted phase one participants -- whose three-year contracts were expiring -- to extend their contracts. As a result of 2002 legislation, a fifth phase was authorized whereby phase two and three customers were similarly offered contract extensions. Although the PFJ program has been extended since 2002, the Legislature has not characterized these subsequent extensions as new sequential "phases" and, as a result, the last phase was phase five, which ended in December 2005 (see Economic Development Law § 189[e][3]).

In 2004, the Legislature again continued the program but made significant changes so that participants were given the option of either extending their contracts or letting them expire in order to join an "electricity savings reimbursements" program, referred to as the Rebate Program (see Economic Development Law § 189[a][5]; L 2004, ch 59, Pt. T, § 3). Under this alternative to the PFJ contract, a business would purchase power directly from a local power company and would be reimbursed by NYPA for costs paid to the local provider that exceeded the unit cost of power that the business had paid under phase four or five of the program. In other words, the rates paid under the PFJ contract would become the baseline that prospective power costs would be measured against and NYPA would have to cover -- in the form of a rebate -- any excess energy costs the businesses incurred when purchasing from local providers. This Rebate Program ensured that businesses that had previously participated in the PFJ contract program could obtain specified amounts of electricity at prices at least as favorable as those they paid under their expired contracts.

In 2006, due to market fluctuations, some PFJ contract businesses incurred higher costs for energy secured through NYPA than they would have paid if they had purchased power directly from their local providers. To address this situation, in August 2006, Economic Development Law § 189 was amended yet again (see L 2006, ch 645). As had occurred in the past, the amendment continued the PFJ contract program by allowing extensions of contracts for an additional six months (setting a new sunset date of June 30, 2007) and authorized businesses to let their contracts lapse and opt instead to participate in the Rebate Program.

But the 2006 legislation added an additional paragraph to Economic Development Law § 189(a)(5) that accomplished two things. First, it created a new Restitution Benefit for participants that had paid higher energy costs under their PFJ contracts than they would have paid by purchasing from local providers. The Legislature required NYPA to reimburse such participants for the difference in costs retroactive to January 1, 2006. Second, it provided a specific benefit to a subset of PFJ participants -- manufacturers -- allowing manufacturers that had renewed their contracts to withdraw their renewals and convert to the Rebate Program without having to wait until their contracts expired. What the 2006 amendment did not do, however, was amend the rebate calculation language from the 2004 legislation, meaning that it continued to use the rates charged in the last year of the phase four and five contracts as the baseline for determining rebates.

After the effective date of the 2006 amendments, NYPA -- which had opposed this legislative proposal (see NYPA ltr in opposition, Bill Jacket, L 2006, ch 645, at 20-24) -- advised PFJ participants of the change in the law and gave its interpretation of the statutory amendments. In November 6, 2006 correspondence, NYPA notified manufacturers with PFJ contracts that they had 10 days to make a choice between continuing their contracts and obtaining the Restitution Benefit or ending their contracts and joining the Rebate Program. NYPA further explained how rebates would be calculated, stating that it intended to use the price that participants paid under their contracts during the 12 months preceding conversion to the Rebate Program -- which would be calendar year 2006 for most participants -- to determine the baseline against which new energy costs would be compared to determine whether a rebate was warranted. Finally, NYPA informed participants that restitution payments would not be made until the last quarter of 2007.

Petitioners Crucible Materials Corp. and Syracuse Castings Sales Corp., along with other similarly-situated manufacturers, immediately objected to NYPA's interpretation of the 2006 amendments, arguing that NYPA had incorrectly read the legislation to require participants to elect between the Restitution Benefit and the Rebate Program when the Legislature had intended that manufacturers should be able to take advantage of both benefits. They also complained about the use of calendar year 2006 as the baseline for determining whether payments would be forthcoming under the Rebate Program, contending that NYPA's view was inconsistent with the language in the statute and severely undermined the value of the Rebate Program because 2006 was the year contract participants paid above-market prices. And they further disagreed with NYPA's decision to delay restitution payments until late 2007. Given the short deadline provided by NYPA, however, Crucible Materials and Syracuse Castings both chose to continue their contracts and obtain the Restitution Benefit, albeit under protest.

In February 2007, petitioners commenced this timely Article 78 proceeding challenging NYPA's determination under Economic Development Law § 189(a)(5), repeating the points asserted in the letter of complaint. After NYPA answered, Supreme Court dismissed the petition in its entirety, crediting NYPA's interpretation of the amendments. The Appellate Division modified by granting the petition in part. It agreed with petitioners that the 2006 amendments authorized manufacturers to take advantage of both the Restitution Benefit and the Rebate Program. It further concluded that NYPA erred in selecting 2006 as the baseline for calculating rebates, resting its decision on the language of the rebate calculation provision. However, the Appellate Division upheld as neither arbitrary nor capricious NYPA's decision to defer payment of the Restitution Benefit until the last quarter of 2007, reasoning that the agency had discretion to determine the timing of payments since the legislation did not contain a payment schedule.*fn1 This Court granted NYPA leave to appeal and we now affirm.

NYPA's Election of Benefits Determination: Both parties agree that the dispute concerning whether manufacturers could receive both restitution and rebate benefits or had to choose between the two turns on language that was added to Economic Development Law § 189(a)(5) in 2006. NYPA does not contend that its interpretation of the statute is entitled to deference, nor is this the type of case where deference to an administrative agency would be appropriate as it does not involve "specialized knowledge and understanding of underlying operational practice or entail[] an evaluation of factual data and inferences to be drawn therefrom" (see Matter of KSLM-Columbus Apts., Inc. v New York State Div. of Hous. and Community Renewal, 5 NY3d 303, 312 [2005][internal quotation marks and citations omitted]). When interpreting a statute, "[i]t is fundamental that a court... should attempt to effectuate the intent of the Legislature. The starting point is always to look to the language itself and where the language of a statute is clear and unambiguous, courts must give effect to its plain meaning" (Pultz v Economakis, 10 NY3d 542, 547 [2008], quoting State of New York v Patricia II, 6 NY3d 160, 162 [2006]).

Turning to the statutory scheme, since 2004 the Rebate Program has been addressed in the first paragraph of Economic Development Law § 189(a)(5). The 2006 amendment added the following paragraph to that section:

"Provided further that, notwithstanding any provision of law to the contrary, for the period beginning [January 1, 2006], for recipients who choose to elect a contract extension, and whose unit cost of electricity under such contract extension exceeds the unit cost of electricity of the [local electricity provider], the power authority shall reimburse the recipient for all dollars paid in excess of the unit cost of electricity of the [local electricity provider]. In addition, a recipient that is a manufacturer that elected a contract extension, may choose to withdraw such election and instead may choose to elect an electricity savings reimbursement upon notice to the power authority. Such electricity savings reimbursement shall be calculated according to the formula for the basic reimbursement as explained in this paragraph" (L 2006, ch 645, § 3 [emphasis added]).

The first sentence created a new Restitution Benefit that allowed PFJ contract participants to recoup from NYPA overpayments they made under their contracts retroactive to the beginning of January 2006. The second sentence provided a special advantage to PFJ participants engaged in manufacturing, permitting them to withdraw from their contracts and join the Rebate Program during the contract term, meaning they were not locked into contract extensions. And the third sentence clarified that rebates would continue to be calculated under the formula that was added to the statute in 2004 when the Rebate Program was first created.

Based on the language and organization of this provision, we see no evidence that the Legislature contemplated that manufacturers would be required to choose between the two programs -- to either select the Restitution Benefit or opt out of their contracts and participate in the Rebate Program. The language of the amendment contains no terminology suggesting that such an election must be made. The second sentence -- allowing manufacturers that have extended their contracts to withdraw the extensions and join the Rebate Program -- begins with the words "in addition." This is hardly the language we would expect to see if the Legislature intended that manufacturers must make a choice between the benefit granted in the first sentence and the benefit defined in the second. If such an election of benefits had been the objective, the second sentence would have included a clause conditioning the "opt out" benefit; for example, it might have read "in lieu of being reimbursed for overpayments" manufacturers may join the Rebate Program or "manufacturers may opt instead" to withdraw from their contracts and participate in the Rebate Program. NYPA asserts that the phrase "in addition" is merely a transition and was not meant to have any substantive effect. But even if we credited this argument -- and we ...


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