Southern Nebraska Rural Public Power District v. Nebraska Electric Generation & Transmission Cooperative, Inc.

546 N.W.2d 315, 249 Neb. 913, 1996 Neb. LEXIS 90
CourtNebraska Supreme Court
DecidedApril 25, 1996
DocketNo. S-94-275
StatusPublished
Cited by25 cases

This text of 546 N.W.2d 315 (Southern Nebraska Rural Public Power District v. Nebraska Electric Generation & Transmission Cooperative, Inc.) is published on Counsel Stack Legal Research, covering Nebraska Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Southern Nebraska Rural Public Power District v. Nebraska Electric Generation & Transmission Cooperative, Inc., 546 N.W.2d 315, 249 Neb. 913, 1996 Neb. LEXIS 90 (Neb. 1996).

Opinions

Connolly, J.

The appellants, Southern Nebraska Rural Public Power District (Southern), Elkhorn Rural Public Power District (Elkhorn), and Niobrara Valley Electric Membership Corporation (Niobrara), brought this action for declaratory judgment pursuant to Neb. Rev. Stat. § 25-21,149 et seq. (Reissue 1995). The appellants seek to have their wholesale electric power contracts with the appellee Nebraska Electric Generation and Transmission Cooperative, Inc. (NEG&T), declared void as against the public policy of this state. At trial, the action was submitted on stipulated facts. The district court found in favor of the appellees and dismissed the appellants’ third amended petition. Southern, Elkhorn, and Niobrara appeal.

Upon the authority granted to us by Neb. Rev. Stat. § 24-1106 (Reissue 1995) to regulate the caseloads of the appellate courts of this state, we remove the appeal to this court. We conclude that the wholesale electric power contracts between the appellants and NEG&T are not void as against the public policy of this state. We therefore affirm.

BACKGROUND

Historical Background

The appellants Southern and Elkhorn are rural public power districts organized as public corporations and political subdivisions. The appellant Niobrara is a nonprofit corporation. Each of the appellants owns and operates electrical distribution [915]*915facilities and is a retail supplier of electrical energy to consumers in its district. The appellee NEG&T is an electrical cooperative corporation. The appellee Nebraska Public Power District (NPPD) is a public corporation and political subdivision that supplies wholesale electrical energy to various public power districts and nonprofit corporations throughout this state.

A brief history of the development of electrical energy transfers in this state will be helpful for an understanding of the current wholesale power supply contracts between the appellants and NEG&T. Rural electrics in Nebraska receive the hydropower they distribute to their customers from the federal government. This federal hydropower, known as WAPA power, is marketed by the Western Area Power Administration and is brought into Nebraska from other states. At the time of the creation of NEG&T in May 1956, each of the appellants was contracting with Loup River Public Power District and Platte Valley Public Power and Irrigation District, doing business as Nebraska Public Power System, for the intrastate purchase of all its wholesale electric power requirements.

Prior to the incorporation of NEG&T, power districts in Nebraska could not obtain federal hydropower because state law did not authorize public power districts to do business outside the state. Furthermore, the cost of transmitting this power through the individual action of state primary users was prohibitive.

In October 1958, NEG&T’s cooperative structure enabled it to enter into a loan contract for low-cost, long-term financing with the federal government, as represented by the Rural Electrification Administration (REA), in order to construct an electric system. Mortgages were given to secure the loans in which NEG&T assigned to the REA all of NEG&T’s right, title, and interest in the wholesale power contracts it had with its members. NEG&T, with funding from the REA, then contracted for the construction of a 230-kilovolt transmission line from Fort Randall, South Dakota, to Columbus, Nebraska, which line was energized on July 1, 1960. This 230-kilovolt line was the first of its size in Nebraska interconnecting with the Federal Transmission System. After the Fort Randall to [916]*916Columbus line was constructed, NEG&T financed and contracted to build, with loans from the REA, transmission lines from Mission, South Dakota, to Valentine, Nebraska, and from Hinton, Iowa, to west of Dakota City, Nebraska.

Assignment of Appellants’ Interests to NEG&T

In 1965, the appellants assigned their wholesale power contracts with Loup River Public Power District and Platte Valley Public Power and Irrigation District to NEG&T in order to “unify their efforts and to secure low cost federal hydropower. ” The following year Southern and Elkhom, and in 1971 Niobrara, entered into requirements contracts with NEG&T for the purchase of all their wholesale power. In January 1972, NEG&T entered into a power purchase contract with NPPD. Under the contract, NEG&T leased its transmission lines to NPPD, and all the wholesale power requirements contracts previously assigned to NEG&T were combined to provide for the purchase by NEG&T and the sale by NPPD of the quantities of electric power required by NEG&T for the appellants and NEG&T’s other members.

The wholesale power contracts between the appellants and NEG&T have been supplemented at various times in response to the REA’s insistence that NEG&T take steps to ensure that its loan from the REA will be repaid. More specifically, as a condition to the extension of credit by the REA, NEG&T was required to amend its wholesale power contract with the appellants and other members to extend the term of the agreement to a date no less than 35 years from October 1, 1970. As a result, NEG&T’s wholesale power contracts with the appellants now extend through the year 2006.

Current Distribution and Billing System

The current distribution system operates such that electric power produced by NPPD is transmitted by NPPD to the appellants for distribution by the appellants to their respective customers. NPPD then reads the appellants’ meters monthly and submits the power bills for the appellants, as well as 20 other members of NEG&T, to NEG&T. NEG&T then bills the appellants for the power supplied by NPPD after adding dues and assessment charges for membership in NEG&T. The [917]*917appellants and other members of NEG&T then send their payment checks to NEG&T. After deducting the amount charged for membership dues and assessments from each payment received, NEG&T then forwards a check to NPPD for payment of the power used by the appellants and other NEG&T members.

During the last 10 years, the administration expense of NEG&T has been more than $3,000,000. During this 10-year period of time, Southern was assessed dues and assessments totaling $241,167, Elkhorn was assessed dues and assessments totaling $87,048, and Niobrara was assessed dues and assessments totaling $63,024. All of said dues and assessments were used by NEG&T in paying administration expenses.

There are other rural public power districts within Nebraska, such as Norris Public Power District and Cedar-Knox County Rural Public Power District, which contract directly with NPPD for the purchase of all their wholesale power requirements under the same wholesale power rate schedules which are applicable to wholesale purchases made by NEG&T. By contracting directly with NPPD, these power districts avoid the dues and assessments charged to the appellants by NEG&T.

ASSIGNMENT OF ERROR

The appellants allege the trial court erred in failing to declare their wholesale electrical power contracts with NEG&T void as against the public policy of the State of Nebraska.

STANDARD OF REVIEW

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Bluebook (online)
546 N.W.2d 315, 249 Neb. 913, 1996 Neb. LEXIS 90, Counsel Stack Legal Research, https://law.counselstack.com/opinion/southern-nebraska-rural-public-power-district-v-nebraska-electric-neb-1996.