III. Authority of Purchasing Parties

This application was filed by PacifiCorp and Nor-Cal, the latter entity having been organized as a joint exercise of powers authority consisting of two members - Del Norte, a California county, and Yreka, a city in Siskiyou County. At the time of filing, a validation action was pending in the county of Del Norte to determine whether a city and county could combine their powers to jointly purchase, own, and operate PacifiCorp's electric facilities as proposed in the application.

On March 3, 2000, the Judge of the Superior Court decreed that Nor-Cal had failed to state a claim for validation. The Judgment states, in part, as follows:

"(A) The County of Del Norte lacks the common power with The City of Yreka to sell electrical power at the retail level;

"(B) Nor-Cal, as a joint Powers Authority including Del Norte, does not have the authority to operate the System; and

"(C) Nor-Cal does not have authority to undertake the transaction to finance and operate the System to sell electric power at the retail level.

"(D) Nor-Cal lacks power under Government Code Section 6546(e) to issue revenue bonds to acquire and operate the System in the manner sought to be validated."

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"ACCORDINGLY, IT IS HERBY ORDERED, ADJUDGED and DECREED that the Asset Purchase Agreement, the Indenture, the bonds and Resolution Numbers 99-005, 99-006, 99-007 and 99-008 adopted by Nor-Cal on July 13, 1999, are not validated."

During the Superior Court proceeding, Nor-Cal and Siskiyou, parties to the court proceeding, requested the court to give an advisory opinion on other matters at issue. Although the court complied with that request, it refused to include any advisory material in the final judgment.

Nor-Cal, believing that the PacifiCorp transaction could be validated if only cities, and not the county, were empowered to operate the business of selling electricity at retail, then formed an entity called the Jefferson Public Power Authority (Jefferson). Jefferson is composed of the City of Yreka and the City of Dunsmuir, and states that it is a joint powers agency created under the same statute as Nor-Cal. Nor-Cal and Jefferson offer the Commission an unsigned agreement under which Nor-Cal grants a license for retail electric operations to Jefferson so as to comply with its view of the advisory material given in the validation action.

Siskiyou and Modoc question whether the two JPAs tied together by the proposed Licensing Agreement are legally appropriate and suggest that another validation action be filed to review/validate the JPA licensing agreement. They suggest that the Licensing Agreement may be found judicially to be an attempt by Del Norte to do indirectly that which it cannot do directly; i.e., sell electricity at retail.

Nor-Cal argues that this unresolved legal issue should be decided by the Commission in the course of its consideration of the Settlement Agreement.