ARPA Settlement Case May Be Decided by July




Both parties in Case 31 have decided on a self-imposed deadline of July 17, 2017 to secure unanimous approval of ARPA’s member municipalities and to come to an agreement between Arkansas River Power Authority as Defendant and the Plaintiff in the case, the City of Lamar.

The Senior Judge in the lawsuit, Scott Bradford Epstein, noted in the joint status report on April 25th, 2017, that both parties in the lawsuit mediated on February 22, 2017 and reached a settlement in principle and their counsels agreed on the language of a final settlement.  The next step in the case is to have all member municipalities of ARPA also agree on the settlement.  ARPA member municipalities (Holly, Las Animas, Trinidad, La Junta, Springfield and Lamar) are each voting on their resolutions to approve the settlement of certain litigation in Case 31.

That suit, begun in 2014, asserted various breaches of contract against ARPA under the Organic Contract which created ARPA in 1979. It included a power supply agreement, joint operating agreement and lease agreement.  The City of Lamar wanted out of the lease agreement and sued to recover damages for the loss of its Unit 6 power plant.  Lamar was the only ARPA member that refused to re-affirm the Organic Contract in lieu of a cash settlement.  Had Lamar signed the re-affirmation, the city would not have been able to have their day in court.  After almost three years of costly negotiations, ARPA and the City of Lamar reached a ‘settlement in principle’ this past February during mediations held in Pueblo.  In order to be effective, all the member municipalities of ARPA must vote in agreement with the settlement.

The Lamar Repowering Project, begun in 2004, planned to convert the natural gas power plant in Lamar into a coal fired plant. The joint operating agreement between Lamar and ARPA called for using the 25MW natural gas plant with the addition of a coal-fired boiler and additional steam turbine and generator to bring the power output to 44MW.    The city allowed the use of equipment from its gas-fired plant for the project which developed significant cost overruns and required the issuance of additional construction bonds.  Problems with the new boiler kept the project from developing sufficient electricity while remaining within the limits of its state-issued air quality permit.  The boiler never performed to expectations which prompted a separate suit between ARPA and the manufacturer, Babcock & Wilcox.  An environmental group, WildEarth Guardians successfully brought suit against the plant based on its performance problems.  The court ruled a settlement payment to WildEarth Guardians as well as a ruling that the plant could not operate until 2023 prompting ARPA to purchase power for its member cities off the grid, a cost, along with the construction bonds, that was passed on to its customers.

The court determined in June, 2013, that the utilities groups would pay $450,000 in the settlement; of that, $225,000 will be paid to Denver University, $100,000 to WildEarth Guardians and $125,000 to low cost lighting installations which would benefit ARPA member communities.

The parties in the suit have now told the judge they expect to have a status report by July 17th, giving member communities enough time to decide that the final settlement agreement will be in their best interests and each community will adopt a resolution to that effect.  The ARPA board members, comprised from each municipality will also be directed to vote on the settlement.

By Russ Baldwin

Filed Under: City of HollyCity of LamarConsumer IssuesCountyEconomyFeaturedHot TopicsUtilities


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