Watson Cogeneration Co. v. Southern Cal. Edison Co. CA2/1

FACTS AND PROCEEDINGS BELOW

The following facts are undisputed. Watson owns a cogeneration facility that produces energy for refining petroleum and running electricity-generating turbines. In 1984, Watson entered into a contract to sell the excess energy it produced to SCE at the agreed-on price for a period of 20 years. (The parties refer to this agreement as the Power Purchase Contract or PPC.) The PPC provided in section 1.8 that it “shall continue in effect for a period of 20 years beginning on the Firm Operation Date.” The “Firm Operation Date” was defined in section 2.15 of the contract as: “The date agreed on by the Parties on which each generating unit(s) of the Generating Facility is determined to be a reliable source of generation and on which such unit can be reasonably expected to operate continuously at its effective rating (expressed in kW).” The PPC further provided in section 1.7 that the “Firm Operation Date for the Generating Facility will be on or before December 31, 1988.” In 1986, SCE sent Watson some proposed modifications of the PPC including a modification of the definition of “Firm Operation Date” in section 2.15. (We show the proposed language in italics…