Steels Pond Case

Case: New Hampshire Water Resources Council v Steels Pond Hydro, Inc. & a.

Background/ Facts

New Hampshire Water Resources Council (WRC), the plaintiff, owns the Steels Pond Dam and the Pittsfield Mill Dam. The said dams, used for hydro-electricity production, are leased by defendants, Steels Pond Hydro, Inc. (Steels Pond) and Pittsfield Hydropower Company, Inc. (Pittsfield Hydro).

Each company entered into 50-year lease agreements with WRCÐ'--Pittsfield Hydro in 1981 and Steels Pond in 1983. The lease between WRC and Pittsfield Hydro requires the lessee to pay rent equal to a percentage of "adjusted gross operating revenue (AGR) received from power sales at the facility." The percentage rises over the lease term, capping at "10% of AGR for years 16 through 50, inclusive." On the other hand, the rent is "20% of the Gross Revenue (GR) received from power sales at the facility for years 11 through 50, inclusive" for Steels Pond. Further, under the lease agreements, "Gross Revenue" has been defined as "income received from the sale of electrical power produced by the facility at the premises."

The defendants sold power to Public Service of New Hampshire (PSNH) in conformance to a rate order approved by the New Hampshire Public Utilities Commission. (PUC). In 2002, the defendants signed agreements with PSNH that provided for lump sum payments from PSNH in exchange for lower rate orders which the PUC then approved. The defendants gave the WRC a percentage of the original PSNH rate orders pursuant to the lease agreements until 2002. There is no provision in the lease agreements for adjustments of rate orders.

Issue/s

The WRC contends that the lump sum payments from PSNH are monies received from power sales and so WRC is entitled to a percentage of the payments under the lease agreements. On the other hand, the defendants argue that the said payments are consideration for the defendant's lowering the rate orders and thus, are not revenue received from power sales under the plain meaning of the agreements. There was also an issue on the lease being ambiguous.

Decision of the Trial Court

The trial court granted the defendants' motions for summary judgment. They found the language in the lease unambiguous and that the term "power sales" in the lease agreements does not apply to the lump sum payments. The court found that the plain meaning of the term power sales is the exchange of power for consideration and PSNH did not pay the defendants for power.

Appeal/ Arguments

WRC appealed the decision of the superior court. It argues that the "revenue received from power sales" includes any income received by Steels Pond and Pittsfield Hydro that is "tied to the product sold using the State's resources" This then includes the dam, impounded water and flowage rights. WRC's argument is that the lump sum paid is directly tied to revenue from power sales as they were conditioned on a total reduction in future payments. Also, WRC argues that the said lump sum payments were "calculated to be equal to the difference between what PSNH would have paid the defendants for power under the existing rate orders/ power contracts and what it will not pay for the same amount of replacement power" under the new rate orders. Thus, WRC's main argument is that the lump sum payments are for "future power production" and thereby must be considered when calculating the percentage of the revenues owed.

Also, WRC argues that the term "power sales" in the lease agreement is ambiguous because WRC and the defendants can't agree as to the rental language in the lease agreements. On the other hand, defendants are arguing that the superior court properly found that "the plain and unambiguous language of the lease says that rent is calculated using a percentage of the money from power sales" and that "the plain meaning of the term power sale is the exchange for power for consideration". The defendants said there was no exchange of power, PSNH simply paid money to terminate the rate orders to reestablish the rates they will use to sell power in the future.

Appellate Court's Decision and Reasons for Such Decisions

The appellate court studied the lease agreements in order to determine whether WRC is entitled to a percentage of the lump sum payments. Since the lease is a form of contract, the court applied the standard rules