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Ruling limits AMP
In damages from halted power plant

Thursday, April 3, 2014

By MICKEY POWELL - Bulletin Staff Writer

A federal judge’s order earlier this week means Martinsville will not be able to get out of paying some of the development costs toward a discontinued power plant project in Ohio, according to City Attorney Eric Monday.

Martinsville’s share of those costs is about $951,000, city Utilities Director Dennis Bowles has said.

Judge Michael Watson of the U.S. District Court for the Southern District of Ohio Eastern Division ruled that a limitation of liability clause applies in a suit filed by American Municipal Power (AMP) against Bechtel Power Corp.

Martinsville buys wholesale electricity through AMP, which is based in Ohio.

AMP’s lawsuit, filed in 2011, sought $97 million in damages from Bechtel, a contractor, related to the coal-fired AMP Generating Station (AMPGS) project in Meigs County, Ohio. AMP ceased the project in 2009 after cost estimates suddenly increased sharply.

As a result of the judge’s determination, the most for which AMP can hold Bechtel liable is $500,000, according to Monday and the order.

In turn, “the city will be on the hook for its share of the (costs incurred toward developing the) AMPGS project,” Monday said.

Had AMP been able to recoup more than $500,000 from Bechtel, the city’s share might have decreased, he said.

As things stand now, “it’s not going to go down,” Monday added.

AMP spent about $200 million toward developing the project before it was stopped.

Owing part of the “sunk costs” was partly why Martinsville City Council last week increased city electric department customers’ rates effective with bills issued May 1 and thereafter. The increase is slightly more than 5 percent for customers using 1,000 kilowatt hours of electricity a month — what officials have said is about what the average household uses.

The rate hike is intended to generate $200,000 to put toward the sunk costs, officials have said.

Monday and Mayor Kim Adkins said they do not yet know what AMP’s next step will be, but Adkins indicated that AMP and Bechtel might try to reach a settlement.

Adkins said she thinks the city will not be liable for more than $951,000. Based on information she received from Bowles, she said she understands that amount is “a worst-case scenario” if no settlement is reached.

Asked if he thinks the amount may increase, Monday said, “I certainly hope not.” If it were to rise, he said, he would question how AMP members’ shares are calculated at that time.

However, “there are many legitimate questions the (AMP) members could ask about this whole ... (power plant) debacle and how much money AMP is going to charge” localities, said Sandy Buchanan, executive director of the Institute for Energy Economics and Financial Analysis (IEEFA).

Cleveland, Ohio-based IEEFA researches and analyzes financial and economic issues related to energy and the environment, according to its website.

To her understanding, Buchanan wrote in an email, AMP has said “they will pass along all of their legal fees on this case to the communities.”

Kent Carson, AMP’s senior director of communications, and Martinsville City Manager Leon Towarnicki could not be reached for comment. Bowles said he had received an email about the judge’s decision from attorneys involved in the litigation but he had not yet been able to scrutinize it.

Adkins said she received a copy of the email. She and Bowles declined to provide a copy to the Martinsville Bulletin, citing attorney-client privilege.

Virginia’s Freedom of Information Act allows localities to decline to release legal correspondence pertaining to litigation.

Watson’s 41-page order shows he took issue with AMP’s claim there was a breach of contract by Bechtel that caused AMP damages.

“As both parties have presented conflicting testimony,” the order reads, “as to whether the surprise price increase, which allegedly resulted from Bechtel’s failure to trend similar project information, caused AMP’s damages, a genuine issue as to that fact exists.”

Michelle Michael, Bechtel’s communications director, said she was aware of the court case but had not known about the judge’s order. She said she did not feel comfortable commenting on the order because she is not a lawyer.

 

 
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