Tanner Electric Cooperative v. Puget Sound Power & Light Co.

In July 1966, Tanner Electric Cooperative (Tanner) (plaintiff) and Puget Sound Power & Light Company (Puget) (defendant) entered a territorial-service-area agreement that established the boundaries of Tanner’s and Puget’s service areas. The agreement provided that Puget would not distribute, transfer, or sell electric energy within Tanner’s service area. The agreement also provided that if Tanner failed, refused, or was unable to serve a customer within its service area, and the customer applied to Puget, Puget could serve the customer. Under the agreement, if Tanner made a bona fide offer to serve the customer, Tanner would not be deemed to have failed, refused, or been unable to provide service. In 1990, Nintendo of America, Inc. (Nintendo) purchased land straddling the boundary between Tanner’s and Puget’s service areas. Nintendo constructed a large distribution facility within Tanner’s service area. Tanner’s manager and Nintendo officials discussed Nintendo’s power needs, and Tanner’s manager provided a customized proposed rate schedule. However, Nintendo officials worried that Tanner could not provide adequate service because Tanner ran a small-scale operation and had never served a large customer. In September 1990, while the 1966 agreement was still in effect, Puget told Tanner that Puget would be servicing Nintendo’s distribution facility at Nintendo’s request. Puget began providing service in January 1991. Tanner sued Puget, asserting claims including breach of contract. The trial court granted partial summary judgment for Tanner on the breach-of-contract claim, concluding that the 1966 agreement incorporated a point-of-use test for resolving service disputes. Under the point-of-use test, only the utility authorized to serve a territory could provide power to facilities in that territory. The test required finding in Tanner’s favor because Nintendo’s distribution facility was in Tanner’s service area. The trial court also found that Tanner had made a bona fide offer to provide service to Nintendo and thus that evidence of Tanner’s inability to provide adequate service did not raise a material factual issue that would preclude summary judgment. The trial court ultimately entered a $2.9 million judgment in Tanner’s favor, and Puget appealed.