## Facts

- Tanner Electric Cooperative and Puget Sound Power & Light entered a 1966 territorial service-area agreement establishing exclusive service territories.
- The agreement barred Puget from distributing or selling electricity within Tanner’s territory, except if Tanner failed, refused, or was unable to serve an applicant customer; Tanner would not be deemed unable if it made a “bona fide offer” to serve.
- Nintendo acquired property spanning the utilities’ boundary and built a large distribution facility physically located within Tanner’s service area.
- Tanner met with Nintendo, evaluated projected load, and proposed a customized rate schedule and service plan to obtain the account.
- Nintendo doubted Tanner’s ability to reliably serve a large load and requested service from Puget.
- While the agreement remained in effect, Puget notified Tanner it intended to serve Nintendo and began providing service to the facility from Puget’s system in January 1991, delivering power for use at the facility inside Tanner’s territory.
- Tanner sued for breach of contract and for a violation of Washington’s Consumer Protection Act (CPA), seeking damages for loss of the Nintendo load.
- The trial court granted partial summary judgment to Tanner on breach, applied a “point-of-use” territorial test, found Tanner made a bona fide offer, and awarded roughly $2.9 million in damages; Puget appealed.

## Issues

1. Whether the territorial service-area agreement was breached when Puget supplied power for use at a facility located within Tanner’s exclusive service territory.
2. Whether the agreement is interpreted by a “point-of-use” approach (location of consumption) rather than an approach focused on delivery point or routing.
3. Whether Tanner made a “bona fide offer” to serve, preventing Puget from invoking the agreement’s failure/refusal/inability exception.
4. Whether Puget’s conduct constituted an unfair or deceptive act affecting the public interest under the Washington CPA.

## Decision

- The Washington Supreme Court affirmed that Puget breached the territorial agreement by supplying electricity for use at Nintendo’s facility located within Tanner’s territory.
- The Court approved the point-of-use interpretation as consistent with the agreement’s allocation of exclusive territorial service rights.
- The Court upheld the finding that Tanner made a bona fide offer to serve, defeating Puget’s reliance on the contract’s exception.
- The Court rejected Tanner’s CPA claim, concluding the dispute was primarily private and lacked the required public interest impact.
- The contract damages award in Tanner’s favor was allowed to stand, subject to any noncentral adjustments.

## Legal Principles

- A territorial service-area agreement allocating exclusive electric service rights may be enforced according to where electricity is used; supplying power for use within another utility’s exclusive territory can breach the agreement.
- Contract interpretation should give effect to territorial boundaries and the agreement’s purpose of avoiding duplicative facilities; interpretations that allow circumvention by rerouting or characterizing service differently are disfavored.
- Where a territorial agreement provides that a utility is not “unable” to serve if it makes a bona fide offer, a good-faith, concrete offer can foreclose an “inability to serve” exception even if the customer questions capability.
- A breach of a territorial agreement between utilities does not, without proof of public interest impact, establish a violation of Washington’s Consumer Protection Act.

## Conclusion

The court enforced the utilities’ territorial allocation by applying a point-of-use test and held Puget liable for serving a customer’s facility located in Tanner’s exclusive area despite Tanner’s bona fide offer to serve; however, the conduct did not support CPA liability because Tanner failed to show the required public interest effect.


Tanner Electric Coop. v. Puget Sound Power & Light Co., 128 Wash. 2d 656, 911 P.2d 1301 (1996)