Lawyer says power in numbers will help the cause

“Lawyers for the people who filed a lawsuit over the cost of electricity in Batavia urged a crowd of about 90 people Thursday to join in the class action to strengthen their case.

‘We believe there is power in numbers,’ said Michael Childress, a partner in the Childress Duffy law firm of Aurora.

 

Attendees picked up all the 225 signup packets his firm had brought to the meeting at the Batavia Public Library. Some said they would hand them out to neighbors. At least 25 people turned their applications in that night.

Nine Batavia utility customers filed the suit Tuesday against consultants who had advised Batavia when city officials were considering whether to have Northern Illinois Municipal Power Agency, to which Batavia belongs, buy a stake in the Prairie State Energy Campus. PSEC, in Washington County, is a coal mine and electricity plant….

He said there is no cost to join the class, and no liability or bills to class members if it loses.

The first object of the suit, he said, is to get information about the deal that has been kept secret due to confidentiality agreements. That, he said, may reveal what Batavia officials were told, and whether things were kept from those officials….”

By Susan Sarkauskas, Daily Herald

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BILKED? Legitimate question exists on whether PPS was misled

logoPADUCAH – “We’ll grant that some of those behind a class action lawsuit related to power rates from the Prairie State Energy Campus may have ulterior motives.

The lawsuit was filed on behalf of ratepayers in the city of Batavia, Illinois, which like Paducah invested in the power generating project and contracted to buy power from it. The suit accuses consultants on the project of misleading Batavia officials about costs and likely power rates from the Prairie State project.

Paducah Power System General Manager Dave Clark takes umbrage at the lawsuit’s claims, saying the law firm leading the suit is affiliated with the Institute for Energy Economics and Financial Analysis, an anti-coal group. He says it is the latest effort by environmental groups who opposed Prairie State every step of the way to shutter the plant. Clark also says that Paducah used different consultants than the ones named as defendants in the lawsuit.

While we’re generally not in sympathy with efforts by environmental groups to shut down the coal industry, we do think there is a legitimate question as to whether cities that invested in Prairie State were misled and have been harmed as a result. A trip through the archives of our news stories on Prairie State over the years certainly gives that impression as far as Paducah is concerned.

In a March 21, 2010 Paducah Sun article, Paducah Power System board chairman Ray McLennan said power rates in Paducah would decline slightly when Prairie State became fully operational. PPS at the time was buying power on the open market, having just ended its supply contract with the Tennessee Valley Authority three months earlier.

But by January 8, 2012, that narrative began to change. Clark said in a Paducah Sun article on that date that, ‘Starting out of the gates, our rates won’t be cheaper. The good part of it is, the rates will be very stable going forward.’ He continued, ‘We’re looking at the long haul. We’re not expecting Prairie State power to go up but maybe a percent a year.’

That story changed markedly over the next 18 months. Part of the reason was that PPS increased its power purchase commitment to more than 100 percent of its needs from Prairie State, believing it could sell the excess power on the open market for a profit. That proved incorrect.

In December of 2012 PPS announced an ‘interim’ rate hike of 8.2 percent. Then in March of 2013 PPS announced two further rate hikes – one in April of 2013 and another for April of 2014 – totaling 12.5 percent. The increases were due to unexpected costs related to the financing and operation of Prairie State.

Then came the ruinous 3.59 cents per kilowatt hour Power Cost Adjustment in early 2014 – a surcharge of more than 20 percent on the base city electric rate. That charge stemmed largely from the PPS’ bizarre contract arrangement requiring it to pay for its allotment of Prairie State power whether that power is generated or not. In this case, due to an accident at the plant, a significant portion of the power was not generated. PPS had to pay for it anyway, plus pay for replacement power on the open market. That cost was passed on to ratepayers by way of the PCA.

While PPS’ purchase of the excess power capacity muddles the picture, it still strikes us from a review of this history that PPS officials were misled with regard to the financial risks and eventual cost of power from Prairie State. They obviously genuinely believed they would pay lower-than-market costs to buy power from Prairie State and even after the project ran into problems, they were publicly predicting stable rates, based we presume on what consultants were telling them.

What they got instead were some of the highest, if not the highest, power rates in the state, to the great detriment and harm of their ratepayers. PPS officials were advised all along the way by consultants who apparently persuaded them this was a good deal and a reasonable risk. That turned out to be far from the truth. While we don’t believe the answer to every problem is to sue somebody, we have to ask ourselves whether there’s not professional liability here against which ratepayers have some recourse.

It looks to us like Paducah Power was sold a bad bill of goods.

We think it would be appropriate for the Kentucky Attorney General’s office to take a look to see if there’s not legal relief to be had for local power consumers.”

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Energy lawsuit seeks 400 ratepayers to create a class action

Duffy said the 137-page lawsuit is aimed at consultants that Batavia officials relied on to tell them what power would cost.

‘Promises that were not kept. Promises that were not delivered,’ Duffy said. ‘Not only in terms of development but also in the way things were constructed and the way power was delivered.’

‘We are not seeking money damages [from Batavia] but what we are seeking is the truth,’ Duffy said. ‘We intend to ask for agreements, contracts, correspondence, emails. … We understand that there are a lot of confidential agreements between and among a lot of entities as this was developed and came to pass. We’d like to see what all that’s about.’

With 400 or so people signing on, a local judge would be inclined to certify it as a class, Childress said. Signing on to a class action does not put anyone at risk and the attorneys only get paid if there is a judgment in their favor.

By BRENDA SCHORY, Kane County Chronicle

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Meeting on electric rate lawsuit draws more than 80 people in Batavia

photo links to video

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“Attorneys seeking monetary damages from consultants they allege provided misinformation about a downstate coal plant that ultimately has cost Batavia consumers higher electric rates encouraged residents and business owners to join their class-action suit at a public meeting Thursday night.

The more people who sign up, the attorneys said, the better chance the suit has in court.

‘If you participate in the lawsuit (and it is successful) what you would receive at the end of the day is a check,’ said attorney Michael Childress, of Chicago-based law firm Childress Duffy, which is representing nine Batavia residents and business owners listed as plaintiffs in the suit filed Tuesday. ‘The more voices and the more avenues pursued the better.’

The more than 80 people in attendance at the Batavia Public Library seemed to get the message, some signing up right there and others leaving with extra envelopes containing information about the suit to give to their friends and neighbors. Within minutes of the meeting’s close, all 225 envelopes were taken.

‘Today, I decided that I was going to join this class,’ Betsy Zinser, a Batavia resident who has spent years researching Prairie State, said during the meeting. ‘Whether the city asks for it or not, they need our support and this is my way to help do something about a problem that they cannot seem to be able to solve on their own.’…”

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Letter: We deserve to know the truth

Screen Shot 2014-02-11 at 6.20.25 PMBy Deborah McGrath, Kane County Chronicle – “As a longtime resident of Batavia and a member of Sierra Club, I am more than concerned about the city’s contract involving Peabody Energy that binds the rate-payers to buy electrical power with steadily rising costs for the next 30 years from a coal plant that is far from clean.

It may well be true that when negotiations were being made between the city, Prairie State and Peabody Energy that it looked like a good deal for Batavia residents, but what was promised – low cost, clean electricity – never materialized. Now we are stuck in this very expensive contract and are left wondering how this could have happened.

The rate-payers of Batavia need to know if Peabody knowingly misrepresented the facts. I urge the Batavia City Council to request an investigation from the attorney general regarding this contract.

We all deserve to know the truth and to find out if there was any wrongdoing on anyone’s part, and the only way to find out is to launch a thorough investigation.”

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Peabody refutes cost claims in Prairie State lawsuit

Government_probe_into_power_plant_trigge_382920001_20130307232651_640_480Louisville, Kentucky—”Peabody Energy on Wednesday refuted claims by Illinois plaintiffs in a lawsuit who accuse promoters of the 1,600-MW Prairie State Energy Campus of misrepresenting the costs and benefits of the controversial baseload coal-fired power plant in southwestern Illinois…

The suit alleges negligent misrepresntation by five consultants to Batavia and names 19 other entities as respondents in discovery, including Peabody, which originated the nearly $5 billion project more than a decade ago…. Over the years, the project was delayed and costs nearly tripled. The plant’s two 800-MW units went into commercial operation in 2012.

Prairie State extremely competitive: Peabody

According to the suit, Batavia was not informed that a ‘capped’ price for electricity from Prairie State had been removed from the city’s contract. As a result, Batavia’s power costs climbed to more than $100/MWh and reached a delivered high of $179.82/MWh in November 2013, far exceeding the $46/MWh it had been promised, the suit said….

Vic Svec, Peabody senior vice president of global investor and corporate relations, said the suit’s allegations that Prairie State is not good for consumers are baseless. ‘Sound long-term forecasts show electricity costs from Prairie State will be extremely competitive with other fuels over the long term,’ he said.…”

— Bob Matyi, Platts

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MISTAKE City should seek an out on PPS power plant deal

Mapa-de-la-Ciudad-de-Paducah-Kentucky-Estados-Unidos-1919-10662PADUCAH – “The predicament Paducah Power System now finds itself in with its investment in the Prairie State Energy Campus is a lesson in why municipally owned utilities should not try to be venture capitalists.

Private companies have shareholders, and if they make a bad investment it is the shareholders who pay the price. Further, shareholders have options. They can fire management and directors for bad decisions. And they can always dump the stock.

But when a municipal utility makes a bad investment, it’s the ratepayers who are stuck. In the case of Paducah Power’s investment in Prairie State, they are stuck for 30 years. The only way out of the investment for them is to move. And in a city that already is struggling with population loss, that’s a serious concern.

As a story in Sunday’s Paducah Sun notes, the power rates now charged by Paducah Power are among the highest if not the highest in the state. They are the highest regionally by a lot.
The all-in rate for 1,000 kilowatt hours in Paducah is $147.78. In most of McCracken County, where service is provided by Jackson Purchase Energy Corp., the rate for the same amount of power is $95.58, more than one-third less. If you happen to live in the small sliver of the county served by Kentucky Utilities it is lower still at $94.29. The rate for 1,000 kilowatt hours is (rounded) $28 cheaper in Mayfield, $35 cheaper in Owensboro and Murray, $66 cheaper in Metropolis and $70 cheaper in Henderson…

But the devil was in the details. Several months ago it was learned that Paducah Power bought more power capacity than it needed at Prairie State, ostensibly to provide for future growth. The plan apparently was to sell surplus power on the open market, theoretically for a profit, thus further stabilizing rates. That gambit was turned on its ear when the shale gas boom and competition from gas-fired power plants caused wholesale power rates to fall below levels coal-fired plants could profitably match on the open market.

The kicker, though, and this is what is currently hammering Paducah ratepayers, is that Paducah Power contracted to buy a set amount of power from Prairie State whether that power is generated or not. Put another way, if Prairie State operates at below capacity or if as recently happened, an accident forces one of its two generators to shut down, Paducah Power must pay for power that wasn’t even generated, plus go out on the open market to buy replacement power.

Editorial, Paducah Sun

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Batavia businessman files lawsuit over Prairie State electric project

Close up view of the smokestack at the Prairie State Energy Campus facility.

Close up view of the smokestack at the Prairie State Energy Campus facility.

BATAVIA – “Batavia businessman Joe Marconi on Tuesday filed a class-action lawsuit in Kane County Circuit Court over the city’s investment in the downstate Prairie State Energy Campus.

‘We filed it because the electric rates in this town are so high,’ Marconi said Tuesday. ‘Our main objective is to get Batavia out of the contract they signed with Prairie State.’…’They misled us,’ Marconi said.

A copy of the suit is posted at the website www.prairiestateenergycampusclassaction.com. Marconi is hosting a community meeting about the lawsuit at 6:30 p.m. Thursday at the Batavia Public Library, 10 S. Batavia Ave….

Batavia aldermen in March voted 11-3 to approve an electric rate hike to address the electric utility’s increased purchase power costs and the need for additional revenues. The hike raises electric rates in 2014 and 2015 in combination with a half-cent increase to the city’s home-rule sales tax….

At that time, Batavia Public Works Director Gary Holm told aldermen the option would provide sufficient revenues and maintain comparable electric rates with surrounding utilities. Under the option, residents this year will see a 6.5 percent increase in their electric rates, plus a $4-a-month increase to the customer charge. In 2015, residents also will see a 6.5 percent increase in their electric rates.

Holm had said Batavia needed to increase electric rates for many reasons, including higher-than-anticipated construction costs related to the Prairie State project, the economic downturn and an associated unprecedented drop in the price of natural gas, to which wholesale electric prices closely follow.”

By Eric Schelkopf, Kane County Chronicle

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Class-action suit filed over Batavia energy deal

batavia holm“A class-action suit filed in Kane County Tuesday alleges misinformation was provided about a downstate coal plant that ultimately has cost Batavia consumers higher electric rates.

Nine Batavia residents and business owners listed as plaintiffs in the suit allege that consultants hired by the city made negligent misrepresentations ‘with respect to the construction, operation and other aspects’ of the Prairie State Energy Campus and the cost of electricity generated at the coal plant, according to the 37-page complaint. They also claim the consultants made negligent investigations into the financial risks associated with the plant when the city agreed to help finance the project.

The suit lists five consultants — the Indiana Municipal Power Agency; IMPA Services Corp.; Rajeshwar G. Rao, president and chief executive officer of the Indiana agency; Sargent & Lundy LLC; and Skelly and Loy Inc. — as defendants and names 19 other entities, including Peabody Energy, the company that built the plant, and the City of Batavia, as respondents in discovery…

In March, the Batavia City Council voted to raise the city’s sales tax a half percent and raise rates on residential customers 6.5 percent in both 2014 and 2015, with a $4 increase to the monthly customer charge, to help make up for electric utility fund shortfalls related to its involvement in the Prairie State project.

Information about how other Batavia utility users can join the suit is available online at prairiestateenergycampusclassaction.com and will be provided at the Thursday meeting.”

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Illinois customers file lawsuit against Prairie State coal plant over power costs

“The 1,600-­MW Prairie State Energy Campus, one of the last coal-­fired plants built before federal greenhouse gas regulations made such projects
difficult to pursue, is the target of a class action lawsuit alleging that the Indiana Municipal Power Agency, one of Prairie State’s co-­owners, and various consultants misrepresented the cost of the plant’s power.

The promotion of ultimately illusory benefits from Prairie State caused Batavia ‘to be bound, for at least decades, to an unaffordable and unreliable source of power that is draining the city’s resources,’ the plaintiffs said in the lawsuit.

The head of the Institute for Energy Economics and Financial Analysis, or IEEFA, a group that frequently supplies economic testimony against coal projects across the country, said the case is a bellwether, indicating that more municipalities buying power from Prairie State will make similar protests. ‘Batavia is the first sign,’ IEEFA Executive Director Sandy Buchanan said….

More recently, an IEEFA study concluded that Batavia specifically will pay about $118 million in “excess power costs” from 2014 to 2023 due to Prairie State. Batavia buys power from the plant through the Northern Illinois Municipal Power Agency, or NIMPA…

NIMPA’s cost of power from January 2012 to May 2014 was $52.3 million higher than if the price had been $46 per MWh, and $19.8 million of these costs have been passed on to the city of Batavia, leading to higher rates for the nine residents named as plaintiffs in the lawsuit.”

By Matthew Bandyk, SNL Financial

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