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IN THE COURT OF APPEALS OF IOWA No. 6-836 / 06-0276 Filed March 14, 2007

WINDWAY TECHNOLOGIES, INC., WELCH MOTELS, INC., GREGORY SWECKER, and BEVERLY SWECKER, Plaintiffs-Appellants, vs. MIDLAND POWER COOPERATIVE, Defendant-Appellee. ________________________________________________________________

Appeal from the Iowa District Court for Hamilton County, David R. Danilson, Judge.

Plaintiffs appeal from a district court summary judgment ruling that dismissed their claims against the defendant. AFFIRMED.

Wallace L. Taylor, Cedar Rapids, for appellants. Thomas W. Polking and John A. Gerken of Wilcox, Polking, Gerken, Schwarzkopf & Copeland, P.C., Jefferson, for appellee.

Heard by Sackett, C.J., and Zimmer and Eisenhauer, JJ.

2 ZIMMER, J. Plaintiffs Windway Technologies, Inc. (Windway), Welch Motels, Inc. (Welch), and Gregory and Beverly Swecker (Sweckers) appeal from a district court summary judgment ruling that dismissed their claims against defendant Midland Power Cooperative (Midland). We affirm the district court. I. Background Facts and Proceedings. The Sweckers and Welch purchased wind-powered generators from Windway. They sought to reduce their energy expenses by producing their own power and hoped to sell any excess energy to Midland, a nonregulated utility. Customers who buy from and sell energy to a utility are known as cogenerators or small power production facilities (QFs). 1 The present dispute arose when the Sweckers and Welch sought to connect their generators to the electric distribution system operated by Midland. Midland took the position that

purchases and sales of energy by and to QFs should be separately measured and billed. The Sweckers and Welch took the position that Midland was required to provide "net metering," where one meter measures the total energy flow to and from a QF, and only the net purchase or sale is billed. When no agreement could be reached, the plaintiffs filed suit against Midland. The plaintiffs made multiple claims against the utility, most of which were based on an allegation that Midland's tariffs violated the Public Utility

1

In various orders relating to this matter the Federal Energy Regulatory Commission (FERC) uses the term "qualifying facility," or "QF," to refer to the Sweckers' windpowered facility. For ease of reference, we will use this term in relation to the generating facilities of both the Sweckers and Welch.

3 Regulatory Policies Act (PURPA). 2 The parties agreed to bifurcate the issues for trial, and a bench trial was held on the limited issue of whether the tariffs violated federal or state law. In relevant part, the plaintiffs requested an order requiring Midland to comply with PURPA by (1) providing net metering and (2) purchasing excess power generated by the Sweckers and Welch at its own avoided cost rather than the avoided cost of Corn Belt, which supplied power to Midland in the area affecting Welch, and Cipco, which supplied power to Midland in the area affecting the Sweckers. In a June 2002 decree, the district court determined net metering was consistent with PURPA's regulations and concluded Midland was required to offer net metering. It determined PURPA required Midland to purchase excess power at its own avoided costs, but that as to Corn Belt this requirement had been preempted by a waiver. The court determined Midland's avoided cost in the Cipco area was 2.5394 cents per kilowatt hour, and directed Midland to file with the Federal Energy Regulatory Commission (FERC), at least every two years, data from which Midland's avoided cost could be derived. The court

ordered that, in the Cipco area, Midland's avoided cost "shall be 2.5394 cents per kilowatt hour until it provides data to support a different avoided cost for it." Midland sought an interlocutory appeal, which was granted by our supreme court. Windway Techs., Inc. v. Midland Power Coop., 696 N.W.2d 303 (Iowa 2005) (Windway I). The supreme court considered two issues:

(1) whether net metering was required under either PURPA or state law and

2

The petition also included a claim asserting that Midland's general manager had defamed the Sweckers. However, this claim is not at issue on appeal.

4 (2) whether state courts have the authority to impose upon Midland obligations that are not required under either federal or state law. Id. at 306. The supreme court concluded that net metering was not required by state or federal law and therefore Midland's tariffs did not violate PURPA. Id. at 309. The court determined PURPA did not require net metering, either explicitly or implicitly. Id. at 307. The court noted the absence of any statute, rule, federal case, or regulatory decision indicating that PURPA required a nonregulated utility to use net metering, and the fact the "FERC has repeatedly stated that it would leave the implementation of PURPA to state regulatory authorities and nonregulated utilities, including the determination as to whether to institute net energy billing for [QFs]." Id. The court rejected the plaintiffs' contention that, even absent any authority requiring net metering, it was appropriate for the court to exercise its own "discretion" to order Midland to provide net metering. Id. The court concluded that "[t]o exercise discretionary authority over a nonregulated utility's implementation of PURPA would place the Iowa courts in the position of acting as a regulatory board for such utilities," a "role that is neither advisable nor necessary" in light of the FERC's enforcement authority. Id. at 308. The supreme court also affirmed the district court's decision ordering Midland to produce avoided-cost date for the plaintiffs' examination, to be updated every two years. Id. at 309. The court concluded, contrary to Midland's assertion, that such an order was within a state court's authority to review a nonregulated utility's implementation of PURPA. Id. It did, however, modify the district court's decision, directing that the information may be made available at Midland's principal place of business rather than filed with the FERC. Id.

5 The matter was remanded to the district court for disposition of the remaining claims. Midland filed a motion for summary judgment, seeking

dismissal of all claims in the petition. Following an October 2005 hearing, the court granted Midland's summary judgment request. The court concluded, in relevant part, that in light of the supreme court's opinion in Windway I, the plaintiffs could not establish any claim for damages based on an allegation that Midland's refusal to provide net metering violated PURPA or Iowa law. The court also concluded that res judicata barred

relitigation of the amount of Midland's avoided cost, as that figure had been preclusively determined by its prior decree and the subsequent appeal. While the district court recognized it might be appropriate to recalculate the avoided cost amount as it applied to plaintiffs' claims for ongoing damages, it determined the plaintiffs had failed to provide any evidence Midland's avoided costs had changed since entry of its prior decree. The plaintiffs filed a motion pursuant to Iowa Rule of Civil Procedure 1.904(2), raising a number of issues relating to the interpretation of the district court's prior decree, the supreme court's opinion in Windway I, and the summary judgment record. They also asserted the district court had ignored a June 2005 FERC enforcement order, entered after procedendo issued in Windway I, which required Midland to provide net metering to the Sweckers and other similarly situated QFs. 3 In ruling on the motion, the district court enlarged some of its

3

The plaintiffs in fact pointed to a 2003 FERC order, as well as the 2005 FERC order. However, as the 2003 order predates the supreme court's decision in Windway I, we presume it was considered by the supreme court in reaching its determination that net metering was not required under federal law.

6 conclusions but declined to modify its judgment. The court stated it was aware of the FERC order, and the fact Midland had sought reconsideration of the order, but that it declined to give the order retroactive application. The plaintiffs appeal. They assert the district court erred in concluding they could not state a cause of action based on either Midland's refusal to provide net metering, or its failure to pay full avoided costs. II. Scope and Standards of Review. Summary judgment rulings are reviewed for the correction of errors at law. Iowa R. App. P. 6.4; General Car & Truck Leasing Sys., Inc. v. Lane & Waterman, 557 N.W.2d 274, 276 (Iowa 1996). Where no genuine issue of

material fact exists and the moving party is entitled to judgment as a matter of law, summary judgment is appropriate. Iowa R. Civ. P. 1.981(3); City of West Branch v. Miller, 546 N.W.2d 598, 600 (Iowa 1996). The court reviews the

pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any. City of West Branch, 546 N.W.2d at 600. All facts are viewed in the light most favorable to the party opposing summary judgment. Bearshield v. John Morrell & Co., 570 N.W.2d 915, 917 (Iowa 1997). However, a party

resisting a properly supported summary judgment motion may not simply rely on the pleadings, but must "set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered." Iowa R. Civ. P. 1.981(5). III. Net Metering. The plaintiffs assert that the crux of the supreme court's opinion in Windway I was that it was the role of the FERC to impose net metering, and

7 further that by the time of the summary judgment hearing the FERC had required Midland to provide net metering to the Sweckers and Welch. They point to the June 2005 FERC order entered pursuant to an enforcement petition filed by Gregory Swecker shortly after the supreme court rendered its opinion in Windway I. See Swecker v. Midland Power Coop., 111 FERC P61,365 (2005). There, the FERC found that, although PURPA did not explicitly require net metering, providing net metering to small generators such as Swecker was consistent with PURPA and Midland must offer net metering to Swecker and other similarly situated QFs. Id. at 14. The plaintiffs assert the FERC order was entitled to retroactive application and the district court erred in concluding otherwise. They contend that, in light of the FERC order, their claims based on Midland's failure to provide net metering are viable. Midland points out that in Windway I the supreme court expressly held net metering was not required under state or federal law and asserts that the district court did no more than properly apply the supreme court's holding. Midland contends the district court was correct in concluding that the FERC order operated prospectively only, and that the order could not support a claim for preexisting damages. Finally, Midland points out that in February 2006 the

FERC entered an order granting Midland's request for reconsideration of the June 2005 order. See Swecker v. Midland Power Coop., 114 FERC P61,205 (2006). In the February 2006 order, the FERC determined it would reconsider the June 2005 order and would not pursue enforcement as requested by Swecker, primarily because of a recent amendment to PURPA. Id. at 8. The FERC noted

8 that, under the amendment, Congress directed nonregulated utilities such as Midland to consider whether to adopt net metering, and to complete such consideration within three years. Id. at 9. The FERC determined that in light of this specific guidance from Congress . . . we should not further intrude. Our prior decision to seek enforcement on Mr. Swecker's behalf was made pursuant to the provision of PURPA that gives the Commission discretion to enforce PURPA generally. Accordingly, we do not believe it appropriate that we go to court to require Midland to provide net metering when Congress enacted a specific provision of law that directs Midland to consider whether or not to provide net metering on its own. In this case, the specific direction from Congress should prevail over the general. Id. at 9-10. We note the February 2006 FERC order was entered after the plaintiffs filed their notice of appeal. The plaintiffs do not, however, challenge

consideration of the order by this court, and in fact have included the order in the appendix. Rather, the plaintiffs contend the February 2006 reconsideration order "did not mean that the prior enforcement order[ ] was incorrect," and that the prior order was in effect "at the time the district court ruling on the Motion for Summary Judgment and up until the time the [amendment to PURPA] took effect." Upon reviewing the relevant sections of PURPA, we conclude that we need not consider whether to give effect to the February 2006 order or whether the June 2005 order was entitled to retroactive application. Significantly, the amendment discussed in the February 2006 order was in effect at the time of the summary judgment hearing. Pursuant to 16 U.S.C

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