Fifth District reverses Madison County ruling over electric service contracts

Bethany Krajelis Aug. 16, 2012, 7:59am


A Highland business had the right to change its electric delivery service from Ameren to a municipally-owned utility after its contract with the utility giant expired, the Fifth District Appellate Court held this month.

The opinion of the appeals panel reverses a ruling from Madison County Associate Judge Clarence Harris, who had entered summary judgment in favor of Ameren based on his construction of the terms of its contracts with Highland Supply Corp.

The appellate court, however, read the terms differently.

It said Ameren's assertion that the business that manufactures and markets decorative packaging couldn't switch its electric delivery service after its contracts ended "is essentially the same as asserting that Highland Supply's failure to exercise its right to choose resulted in a waiver of the right to choose."

At issue before the appeals panel was whether the parties' contracts gave Highland Supply a right to choose a different electric delivery and if so, whether the business had to exercise the right within a certain amount of time after the contracts expired.

In 1995, Highland Supply entered into an electric service contract with Ameren to purchase bundled electric service for its two facilities. Prior to this contract, which was not at issue in this case, Highland Supply bought its service from an electric utility owned and operated by the City of Highland.

Two years later, the Illinois General Assembly enacted the Electric Service Customer Choice and Rate Relief Law of 1997. Also known as the Customer Choice Law, the law intended to make the electric industry a more competitive marketplace.

The law amended the Public Utilities Act to create alternative retail electric suppliers or ARES to sell and market electricity to customers. Under the law, eligible customers can buy electric supply from an ARES and delivery service from a different entity.

One day after the law was enacted, Highland Supply entered into contracts with Ameren for electric service for its two facilities. These contracts were at the crux of the controversy between the parties in this case.

Under the contracts, Ameren agreed to provide electric service and delivery to Highland Supply, which agreed to buy its electric energy exclusively from Ameren during the terms of the contracts.

At the heart of the dispute over the contract was a provision that said the contracts would become null and void when they expired in 2000, and thereafter, Highland Supply "may take electric service from any source, or may take electric service under any of [Ameren's] generally available service classifications for which [Highland Supply] qualifies by virtue of its load and usage characteristics."

According to the appellate court opinion, Highland Supply didn't notify Ameren that it intended to get electric service source before the contracts expired and after the contracts expired, continued to receive and pay for service from Ameren.

In 2008, Highland Supply entered into a contract with the City of Highland. The following year, it filed a complaint seeking declaratory judgment, alleging that under its contracts with Ameren, it had the right to take electric service from a different source after their contracts expired.

Both parties sought summary judgment.

Ameren claimed that under the Customer Choice Law, Highland Supply could purchase its electric supply from a competing ARES, but that it was allowed to maintain its monopoly over services to the business' facilities in its service area.

The utility company also claimed that because the contracts gave Highland Supply the option to change its delivery service at the end of the three-year contracts, Highland Supply needed to exercise the option immediately when the contracts expired in 2000.

In 2010, Harrison granted Ameren's motion for summary judgment, saying that the parties' contracts "did not create an ongoing or unlimited option to make other or additional choices after the agreements had terminated."

Highland Supply appealed and this month, a panel of the Fifth District Appellate Court reversed Harrison's ruling in favor of Ameren.

"The language of the contracts between Highland Supply and Ameren unquestionably granted Highland Supply the right to make some sort of a selection relevant to electric service after the contracts expired," Justice Bruce Stewart wrote for the court.

Stewart added that "by the express terms of the contracts, Highland Supply's contractual right to make a choice must, by necessity, survive for some period of time after the expiration of the contracts."

"We will not construe the contractual language in a way that provides for Highland Supply's right to ripen and expire at the exact same moment in time," Stewart wrote. "That would be an illogical construction of the language of the clauses, and a court will not place an illogical and ridiculous construction upon the language of a contract."

The interpretations of the contracts by Ameren and Harrison, Stewart wrote, would give Highland Supply "only a fleeting moment to choose, at the precise moment that the contracts expired" if they wanted to buy electric service from a different utility.

That, he wrote, is not a reasonable construction of the language in the contracts. Stewart also said the contracts do not provide a limitation on when Highland Supply had to make its choice once the contracts expired.

"Had the parties intended to impose a time limit on Highland Supply's right to choose, they could have incorporated a limitation into the plain language of the agreements," Stewart wrote.

He added that, "Contrary to the circuit court's ruling, we do not believe that the courts should impose a time limitation when the parties have not agreed to a time limitation within the plain and ordinary meaning of the terms of their contracts."

Justices Stephen Spomer and James Wexstten concurred in Stewart's opinion.

The citation for the case is Highland Supply v. Illinois Power Co., 2012 IL App (5th) 110014.

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