Syncora Lawsuit Against ARPA Ratepayers Dismissed

Syncora Guarantee Corp. of New York, a bond insurer for the Lamar Repowering Project, has seen its lawsuit against the Ratepayers recently dismissed in court. The lawsuit was filed in August 2015 against Colorado Mills, the Ports to Plains Truck Plaza and the Rodeway Cow Palace Inn.  The suit alleged that the defendants, through their earlier suit against Syncora, had undermined the ability of ARPA, Arkansas River Power Authority, to pay its bondholders for construction costs on the failed coal powered plant.

The initial lawsuit also named the City of Lamar, as Syncora claimed the city’s efforts to withdraw from the ARPA member municipalities were financially harmful as the power authority would not be able to fully repay bondholders should Lamar withdraw its membership with ARPA. Syncora had claimed the three ratepayers brought the city into their lawsuit under threats they would sue the city if it didn’t join the ratepayers in their legal action.  The city is continuing its lawsuit against ARPA/Syncora as it wants to eliminate payments on bonds used to finance the defunct power plant, approximately $110M, which is being paid off by ARPA customers, residents of the City of Lamar.

The ratepayer’s case against ARPA was dismissed in May, 2015 by a district court judge, who ruled the ratepayers case against the organization either had no standing or failure to state a claim upon which relief could have been granted. When that happened, Syncora filed a lawsuit in federal court against the three ratepayers.

The claims that remain for the city of Lamar’s court action include: a breach of the organic contract with ARPA, the power supply agreements, operating agreement and the lease agreement as well as damages arising from those points.  The city has the ability to bring their case to a jury trial to end its obligation to ARPA as a separate ratepayer and an ARPA member.  They also have a chance to prevent ARPA from passing along its debt to the city, the Lamar Utility Board or to ratepayers in general.

Rick Robbins, General Manager of Colorado Mills, one of the three ratepayers who brought suit against ARPA, said he was pleased at the court’s decision. “I’m still concerned about the city’s remaining lawsuit as there is a lot riding on the outcome,” he stated.  Robbins added that the city still needs to be made whole because when the proposal for the Repowering Project was made, the city put in the existing 25MW generator which was supposed to be returned from ARPA and the city got nothing back for its investment.  The generator no longer exists and residents have to pay off the cost of the bonds in their monthly utility bills.  He added that Syncora has insured the bondholders who will get all their investment back, however.  He felt there should be some alternative to recoup that loss.

The ratepayers and the city paid an equal share of legal fees, and when the suit against the ratepayers was dropped, he said, “The city, to its credit, continued with the suit which now runs into the summer between them and ARPA.” Robbins expected that depositions in the case will begin sometime in June and there will be calls for discovery for a lot of communications and paperwork for all the parties involved.  In retrospect, he said there should have been a general contractor appointed to oversee the total construction of the Repowering Project and there wasn’t.  Had there been, performance bonds would have been required to guarantee payback if the project failed.  That was the way in which all of ARPA’s customers would have not been obligated to pay for the project when it failed.

Robbins explained, “We brought the suit because this was costing all of our employees some of their livelihood and was a detriment to local economic growth. We have some people who are paying an additional hundred dollars a month in utility fees for something they don’t even receive.  I could install a generator or solar panels on our property to lower our rates at the plant, but that doesn’t do anything for the employees.”  He added that if you take just $50 a month per electric meter in town, about 3,000 on average, “That comes to $150,000 a month that leaves our community and that’s $1,800,000 a year that leaves this town when it could be spent locally.  That would have been great for economic incentives for all of us.”

By Russ Baldwin