Opinion
Opinion By: Jack Conway, Attorney General; Amye L. Bensenhaver, Assistant Attorney General
Open Records Decision
The question presented in these consolidated appeals 1 is whether Kentucky Municipal Power Agency, Paducah Power System, and Princeton Electric Plant Board properly relied on KRS 61.878(1)(c)1. 2 in partially denying Glenn D. Denton's requests for records relating to the Prairie State Generating Company, LLC, the Prairie State Energy Campus, and each of the agencies. Having considered the arguments advanced by the agencies in support of the partial denial of Mr. Denton's request, we find that they did not violate the Open Records Act.
Mr. Denton submitted his six part records applications to each of the agencies on July 30, 2010. Requests numbers one through five of his applications were identical and were as follows:
1. A copy of all contracts between Prairie State Generating Company, LLC and Bechtel Corporation. . .includ[ing] the original contract and the new fixed cost contract;
2. A copy of all labor and material payment and/or performance bonds benefiting Prairie State Generating Company, LLC;
3. A copy of all financial statements and/or balance sheets of Prairie State Generating Company, LLC;
4. A copy of all monthly progress or cost reports regarding the construction of the Prairie State Energy Campus and/or Prairie State Generating Company, LLC; and
5. A copy of all correspondence and/or reports from R. W. Beck, Inc. to you regarding the progress of the Prairie State Energy Campus and/or Prairie State Generating Company, LLC.
Additionally, Mr. Denton requested audited financial statements for each of the agencies from 2005 to the present.
The agencies partially denied Mr. Denton's requests in a consolidated response issued on August 16, 2010. 3 Although they agreed to afford him access to all audited financial statements responsive to his request, the payment and performance bonds relating to contractor Bechtel Power Corporation after redacting terms revealing the amount of the bonds, 4 and consulting engineer's reports prepared by R. W. Beck, Inc., in January 2009, August 2009, and May 2010, the agencies invoked, inter alia, KRS 61.878(1)(c)1. in support of their denial of records confidentially disclosed to them, generally recognized as confidential and proprietary, the disclosure of which would permit an unfair advantage to competitors of the entity that disclosed them.
In their original response, the agencies described the Prairie State Energy Campus as "a mine mouth pulverized coal-fired power generation facility under construction on a site in Washington and St. Clair Counties, Illinois." The agencies explained that although KMPA is a participant and co-owner of the project along with eight other public and private entities, neither PPS nor PEPB is a participant. Nevertheless, PPS and PEPB are parties to "certain long-term Power Sales Agreements with KMPA for the purchase of power to be generated by the project." KMPA is represented in the project's management committee by David R. Clark, KMPA's and PPS's General Manager, and his alternate is John A. Humphries, KMPA's Assistant General Manager and PEPB's General Manager. In this capacity, Clark and Humphries regularly receive records relating to the projects. Thus, Prairie State Generating Company, LLC, "exists as a means through which the management committee . . . implement[s] its decisions and operate[s] the project."
Continuing, the agencies described the wholesale electric power market, in which the requested records are generated, as "an intensely competitive market that is extremely sensitive to many variables, including power plant project costs and schedules." They describe the records themselves as "replete with commercial terms, proprietary information, and trade secrets . . .that has actual and potential economic value to . . . the participants by virtue of its not being generally known to, and not being readily ascertainable through proper means by . . .competing power generators and other electric industry participants . . .who can derive economic value from the disclosure . . ." of the information the records contain.
With reference to Mr. Denton's request for contracts between Prairie State Generating Company, LLC, and Bechtel Corporation, for example, the agencies located and identified with specificity two records responsive to his requests and described the confidential content thereof as including, but not being limited to, "compensation terms, performance guarantees (including emissions), availability guarantees for the generating units, liability limits, liquidated damages categories and amounts, warrant provisions, intellectual property provisions, and functional test provisions." The agencies emphasized that they are "contractually obligated to one another to maintain the confidentiality of and to not disclose information of a technical, commercial, or business nature regarding the project except as otherwise agreed by the parties or required by law." 5
We find that the agencies' contractual obligation to maintain the confidentiality of the disputed records is statutorily supported by KRS 61.878(1)(c)1. That statute authorizes public agencies to withhold:
records confidentially disclosed to an agency or required by an agency to be disclosed to it, generally recognized as confidential or proprietary, which if openly disclosed would permit an unfair commercial advantage to competitors of the entity that disclosed the records[.]
In interpreting this provision, the courts have recognized that "if it is established that a document is confidential or proprietary, and that disclosure to competitors would give them substantially more than a trivial unfair advantage, the document should be protected from disclosure . . . ."
Southeastern United Medigroup, Inc. v. Hughes, 952 S.W.2d 195, 199 (Ky. 1997), abrogated in part on other grounds,
Hoskins v. Maricle, 150 S.W.3d 1 (Ky. 2004)). Thus, in
Marina Management Services, Inc. v. Cabinet for Tourism, 906 S.W.2d 318 (Ky. 1995), the Supreme Court held that Tourism properly withheld audited financial statements of a privately owned corporation submitted to it pursuant to a license agreement, observing:
These are records of a privately owned marina operator, disclosure of which would unfairly advantage competing operators. The most obvious disadvantage may be the ability to ascertain the economic status of the entities without the hurdles systematically associated with acquisition of such information about privately owned organizations. Further, the facts on the record indicate that the audit statements were disclosed confidentially to Tourism . . . . On these facts alone, the exemption clearly applies.
Marina Management at 319.
Similarly, in
Hoy v. Kentucky Industrial Revitalization Authority, 907 S.W.2d 766 (Ky. 1995), the Supreme Court affirmed a public agency's denial of access to General Electric's application for tax credits. The application contained financial information that included the corporation's financial history, the projected cost of the project, the specific amount and timing of capital investment, financial statements, and a "detailed description of the company's productivity, efficiency, and financial stability." Hoy at 768. "It does not take a degree in finance," the Court declared, "to recognize that such information concerning the inner workings of a corporation is 'generally recognized as confidential or proprietary' and falls within the wording of KRS 61.878(1)(c)2." Id. The Attorney General has reached the same conclusion in a number of open records decisions issued over time. See, e.g. 08-ORD-083 (recognizing that KRS 61.878(1)(c)1. "is aimed at protecting records of private entities which, by virtue of involvement in public affairs must disclose confidential or proprietary records to [the] public agenc[ies], if disclosure of those records would place the private entities at a competitive disadvantage. ")
Bearing in mind that the Attorney General is constrained by time and resources from conducting an in-depth inquiry into the issue presented, and that on occasion, the application of the Open Records Act must be determined by a court of law, an avenue that remains open to Mr. Denton if he disagrees with our decision, we affirm the agencies' partial denial of his requests on the basis of KRS 61.878(1)(c)1. Their original response to his requests contains a remarkably detailed description of existing responsive records, the terms of confidentiality under which those records were disclosed to them, their continuing efforts to maintain that confidentiality, and the contents of each of those records.
In addition to confidential information appearing in the requested contracts, information generally described above, the agencies note that disclosure of the amounts of bonds would disadvantage the PSGC and its participants in negotiations with contractors on future contracts on this project and on other projects undertaken by one or more of them in the future. Financial statements and balance sheets, the agencies argue, "constitute a company's most sensitive proprietary information," a position with which Kentucky's courts obviously agree. Marina Management, above; Hoy, above. So too, the agencies explained, monthly progress reports and correspondence confidentially shared with the agencies track "the cost, performance, and completion date of the Prairie State Project." The cost of power under the power sales agreement, the agencies emphasize, is directly related to that information.
We find that the agencies successfully established that those records withheld were confidentially disclosed to them by private entities, that their contents are generally recognized as confidential or proprietary, a position with which Kentucky's courts agree, and that disclosure of the records would permit an unfair advantage to competitors of the private entities in the highly competitive wholesale electric power market. As in Hoy, above, we remind the parties that "[d]espite its manifest intention to enact a disclosure statute, the General Assembly has determined that certain public records should be excluded from disclosure, " and that "from the exclusions we must conclude that with respect to certain records, the General Assembly has determined that the public's right to know is subservient to . . . the need for governmental confidentiality. "
Beckham v. Board of Education of Jefferson County Board of Education, 873 S.W.2d 575, 577-578 (Ky. 1994). In partially denying Mr. Denton's request, Kentucky Municipal Power Agency, Paducah Power System, and Princeton Electric Plant Board satisfied their burden of proving that the records in dispute "should be excluded from disclosure. " Id.
A party aggrieved by this decision may appeal it by initiating action in the appropriate circuit court pursuant to KRS 61.880(5) and KRS 61.882. Pursuant to KRS 61.880(3), the Attorney General should be notified of any action in circuit court, but should not be named as a party in that action or in any subsequent proceeding.
Glenn D. DentonDavid R. ClarkG. Kent Price
Footnotes
Footnotes
1 The appellant, Glenn D. Denton, submitted three separate appeals from the actions of each of these agencies. Because his appeals involve a common nucleus of fact and law, we have consolidated them for purposes of review.
2 The agencies also invoked KRS 61.878(1)(l), incorporating the Uniform Trade Secrets Act, KRS 365.880 et seq., in partially denying Mr. Denton's request. Because we affirm the agencies' partial denial based on KRS 61.878(1)(c)1., we do not address the applicability of the Uniform Trade Secrets Act except to note that the Act does not "prohibit[], restrict[], or otherwise ma[k]e confidential public records or information" but instead provides for injunctive relief in the case of actual or threatened misappropriation of trade secrets.
3 Mr. Denton agreed to an extension of time for the agencies' response.
4 The agencies provided Mr. Denton with an 11-page list of the bonds and security instruments responsive to his request and invited him to designate the bonds he wished to inspect. Mr. Denton thereafter requested performance bond and payment bond Reference No. 387003331 relating to Bechtel.
5 In the interest of brevity, we will not delineate each of the arguments under KRS 61.878(1)(c)1. advanced by the agencies, but incorporate these arguments, in full, into our decision.