City maintains electric rates after court dismisses IFG lawsuit

BONNERS FERRY – Last month, the Boundary County district court dismissed a years-long lawsuit filed by Idaho Forest Group against the city of Bonners Ferry, ruling that IFG failed to prove its claim that the city's electric rates for the Moyie Springs Mill were "unjust, unreasonable, and discriminatory,” according to court records. 

The ruling allows the city to maintain its existing electric rates for all customers. Had the judgement favored IFG, electric costs for some city customers would have increased to offset IFG's reduced rate. 

District Judge Lamont Berecz dismissed the case on Feb. 28 after reviewing expert testimony from both sides and evidence, including the city’s audited financial statements and a rate study that led to the disputed rates increase. 

“The mere difference between the rate IFG is charged as a member of the large industrial class and rates other customer classifications are charged is not sufficient to establish justifiable discrimination,” Berecz ruled. “The city is operating a nonprofit utility which must provide service at rates that are fair, just, and reasonable not only to IFG but also to thousands of other customers, whereas IFG is a for-profit entity whose goal is to pay the lowest rate possible.” 

IFG filed its initial complaint in June 2023 alleging five counts against the city. However, the court found only one of the five – that the city’s 2023 electric rates for IFG potentially violated Idaho Code – had cause to be tried, according to court records. 

The dismissal came after close to two years of litigation, considering the history of electric service agreements between the city and the lumber manufacturer that dates back to 2010, when the parties signed off on a 10-year deal. 

In 2020, the parties agreed verbally to a two-year extension of the agreement. Around that time, the city consulted with FCS Group, a third-party company, to perform a rate study based on three annual audits and budget forecasting data. 

In 2022 the city and the lumber manufacturer began to negotiate a 2023 extension. 

During the negotiation, the city sent a letter informing IFG of its new rate proposal for 2023, with an increase of about 9% from 2022. The city wrote the increase is negligible due to inflation, according to court records. 

Then in November, the city adopted a resolution to establish a “Large Industrial rate class” for electric service, which exclusively applied to the IFG Moyie Mill. 

IFG officials disagreed with the rate increase and new classification, so the following June, they filed a lawsuit on grounds of "unjust, unreasonable, and discriminatory” pricing. 

In its decision, the court considered allegations that the financial data used for the audits was unreliable because the city treasurer was incompetent. 

The court found that the financial statements were accurate and reliable, and the alleged incompetence had no impact on the rate study. 

During his testimony, IFG official Michael Gorman opined that the city’s 2023 budget forecast and cost of service analysis were not based on historical data. 

However, the court found that the forecasted data cannot reasonably be expected to precisely match the actual data. 

Additionally, the court ruled the classification change was not discriminatory against IFG because the rate class is generally applicable to any large industrial customer, not just IFG.  

The court also found that the relative rates increase from 2022 to 2023 was not unreasonable. 

“Based on the foregoing, the court further finds that IFG failed to carry its burden of proving that the increase in IFG’s FY 2023 rates over FY 2022, and the relative increase of IFG’s rates over rates for other rate classes, is unreasonable,” the court wrote in its memorandum decision. 

A hearing to determine costs and attorney fees will be held May 21.