On January 21, 2009, FERC determined that the city of Corona, California must pay costs associated with its interconnection to Southern California Edison (“SoCal Edison”) even though SoCal Edison failed to provide the invoice within the twelve-month deadline in its Interconnection Facilities Agreement (“Facilities Agreement”).
In October 2005, FERC ruled that SoCal Edison billed the city too late under the terms of the Facilities Agreement. On appeal, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) found that FERC erroneously disregarded state law in reaching its decision, and remanded the case. The D.C. Circuit directed the Commission to determine whether SoCal Edison’s twelve-month deadline to provide an invoice to Corona is a condition precedent under California law to Corona’s obligation to pay for actual costs that were greater than estimated costs.
The Facilities Agreement specified the terms and conditions for the installation and maintenance of facilities necessary to interconnect SoCal Edison’s distribution system to Corona’s wholesale distribution load. Corona paid the full cost based on SoCal Edison’s best estimate. Once the new facilities went into service, SoCal Edison was to determine actual costs for the interconnection facilities and provide Corona with a final invoice within twelve months. The Facilities Agreement also included a “choice of law” clause, which stated that the contract shall be governed by the laws of the state of California “[e]xcept as otherwise provided by federal law.”
The facilities went into service on January 4, 2003, and SoCal Edison was due to bill Corona for any cost overages, or reimburse Corona for any excess payment, by January 4, 2004. A year and a half later, on August 17, 2005, SoCal Edison made a true-up filing under its Wholesale Distribution Access Tariff to collect $17,957.13 from Corona, which is the amount by which the actual costs exceeded the estimated costs.
Corona argued that SoCal Edison violated the Facilities Agreement and therefore forfeited its right to seek additional cost recovery from Corona. SoCal Edison argued that under California law, the late invoice was not a material breach of the contract, and therefore Corona did not have a right to refuse further performance (payment) under the contract.
On remand, the Commission ruled that, under California law, the deadline was not a condition precedent because it was not an act that must be performed or an uncertain event that must occur before some right or duty becomes binding. In addition, the Commission cited case law, which stated that a deadline is part of a condition precedent where “time is of the essence.” However, the Commission ruled that time is not of the essence just because a date is mentioned before which something should be done. The Commission also found that although SoCal Edison’s failure to provide the invoice within the twelve-month deadline was a breach of the Facilities Agreement, it was not a material breach.
The Order is available at: http://www.ferc.gov/EventCalendar/Files/20090121153952-ER05-1357-002.pdf.