Most Favored Nation Decision
Addressing an issue of first impression, the Ohio Supreme Court recently held that a "most favored nation" clause in an electric power supply agreement did not apply only to the price to be paid for power, but also to the term of the agreement. In Sunoco, Inc. (R&M) v. Toledo Edison Co., Sunoco had entered into a power agreement with Toledo Edison that provided, in part:
If the Company provides an arrangement, rates or charges which is or may be in effect at any time during the term of this Agreement, to a Comparable Facility within its certified territory, then the Customer will have the right to utilize that arrangement, rates or charges for its Facility. The Customer must comply with all other terms and conditions of the arrangement including firm and interruptible load characteristics/condition.
When a competitor's term extended, Sunoco claimed a similar extension for itself - with a value of more than $13 million.
The Public Utilities Commission found that this provision applied only to rates and charges for electric service, and on appeal the Supreme Court disagreed. Examining the plain meaning of the language, and in particular the word "arrangement," the Court stated: "[I]t is apparent from the face of the clause that an 'arrangement' means something other than 'rates or charges.' Rates and charges are clear price terms of the contract. Thus, it is reasonable to construe 'arrangement' to encompass other, nonprice terms of the contract. *** Because contract duration is a nonprice term, an 'arrangement' would include the duration of the contract."
Very interesting. For a copy of the case, see here (Case No. 2009-0880, Slip Op. No. 2011-Ohio-2720).
