Home » City files lawsuit over utility contract

City files lawsuit over utility contract

by David Specht

Agreement with SWEPCO called ‘unjust and unreasonable’

The City of Minden has filed a lawsuit with the Federal Energy Regulatory Commission (FERC) against Southwestern Electric Power Company (SWEPCO) seeking relief from “unjust and unreasonable” terms of the City’s Power Supply Agreement (PSA) with the company.

The lawsuit, which was filed Feb. 28, seeks for the FERC to issue the following judgments:

Reduce SWEPCO’s Return On Equity (ROE) from 11.1 percent to no higher than 8.20 percent. The lawsuit states the 11.1 percent ROE, a guarantee not subject to any market forces, is “unjust and unreasonable.”

Enforce the PSA’s requirement that SWEPCO “implement the effective hedging strategy for congestion charges for transmission service to Minden from SWEPCO’s location in the Southwest Power Pool.” Due to changes which took place in 2014, Minden is located in Midcontinent Independent System Operator Inc. (MISO) service area. Additionally, if the PSA does not require SWEPCO to implement the effective congestion hedging strategy, the PSA should be terminated, the lawsuit said.

The City of Minden has received electricity from SWEPCO since 1995. However, Minden and SWEPCO entered a long-term agreement in 2008 in which both parties reached a settlement, including the 11.1 percent ROE. The agreement was approved by the FERC.

In 2014, the PSA was amended to reflect the change in transmission of service, due to the formation of SPP and MISO respectively. It was amended again in 2017 in settlement of transmission charges from Dec. 2013 – May 2017.

The current contract terminates in 2028 unless SWEPCO terminates early on three-years’ notice. “Minden enjoys no reciprocal early termination right,” the lawsuit said.

That lawsuit goes on to question how SWEPCO figures depreciation expense, how it is handling the windfall from tax cuts it has received due to federal legislation, and the effect of SWEPCO’s proposed “Wind Catcher” initiative.

In all, the 52-page lawsuit seeks the terms of City’s PSA with SWEPCO to be amended to be “just and reasonable,” and provide stipulations to ensure things remain that way.

According to experts commissioned by the City and its attorneys in the this matter, correcting these issues in the PSA would save an estimated $645,169 annually, the lawsuit said. Those savings would be passed on to consumers.

“While I cannot comment about pending litigation, I want the citizens of Minden to know their City has been diligent about addressing utility costs,” Minden Mayor Tommy Davis said.

SWEPCO has until 5 p.m. Friday, March 30 to answer the lawsuit.

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