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LCRA sues co-op over alleged breach of power contract

Friday, November 16, 2012 by Michael Kanin

The Lower Colorado River Authority (LCRA) has filed a suit in state district court to stop Guadalupe Valley Electric Cooperative from violating a long-term power supply contract.

 

Wednesday’s filing is the most recent in a string of legal action between the wholesale power producer and eight of its electric customers. The parties have exchanged salvos and court filings since this summer, when the utilities began to back out of their respective contracts that were set to expire in June 2016.

 

The immediate issue is pricing. Ten of the LCRA’s wholesale electric customers informed the organization in 2010 that they would not renew their respective wholesale purchase power contracts in an effort to buy less expensive power on the open market. LCRA’s 33 remaining wholesale electric buyers decided to stay with LCRA and extended their power supply contracts until 2041.

 

Most of the departing 10 utilities –  the Fayette, Central Texas, Guadalupe Valley and San Bernard electric co-ops, as well as city-owned electricity providers in Georgetown, Boerne, Seguin, and Kerrville  accused LCRA of breach of contract, citing unfair pricing schemes in the wake of their announced departures. LCRA disputed this claim, and everyone ended up in court.

 

A 2011 internal LCRA memo from the organization’s General Manager Becky Motal, illustrated the dramatic revenue loss that the departure of the 10 utilities would represent to her utility. “(E)lectric revenues, which make up approximately 72 percent of LCRA’s overall revenue, could drop by as much as 50 percent when the current electric contracts expire in 2016,” she wrote. (See In Fact Daily, Aug. 30, 2011.)

 

As a result, LCRA has undergone major cost-cutting and structural changes in its operations, and also in the wake of the sale of 30-plus retail water and wastewater systems. The changes  included the departures of veteran employees, and a restructuring of many departments. (See In Fact Daily, Jan. 24, 2012.)

 

In its petition filed with the 261st District in Travis County, LCRA attorneys argued that the Guadalupe cooperative’s allegations of breach of contract are not correct. They ask, among other things, that the court declare that GVEC is the party that breached the contract and that LCRA did not break the deal with respect to pricing.

 

LCRA said its lawsuit comes less than a week after GVEC said it plans to buy some of its electric power from other providers beginning Dec. 1. But LCRA said GVEC agreed to purchase all of its energy needs from LCRA until 2016.

 

For its part, the Gonzales-based GVEC did not reply to In Fact Daily‘s request for comment.

 

LCRA has taken legal action against each of the utilities that have tried to escape their deals.

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