Struggling with rising costs and sagging consumer demand, the Emerald People’s Utility District received a piece of good news earlier this month: The district has won an expensive legal dispute against a Washington utility from which EPUD buys wind power.
A panel of arbitrators ruled that LL&P Wind Energy, a subsidiary of Lakeview Light & Power in Eastern Washington, had incorrectly been requiring EPUD to pay an extra annual fee of about $250,000 a year as part of the wind-power purchase.
The three-member panel of the American Arbitration Association ruled on July 20 that Lakeview must refund to EPUD about $900,000 in past payments plus interest, and that EPUD is no longer on the hook for paying the $250,000 annual fee, through to the end of the contract, which expires in 2027.
The arbitration ruling is binding, EPUD spokeswoman Amber Fossen said.
Lakeview will not contest the ruling and will make the payment, Lakeview General Manager Robin Rego said on Thursday.
EPUD said it sought the arbitration after repeated unsuccessful attempts to persuade Lakeview to stop levying the extra charge.
“We filed for arbitration because we knew this charge wasn’t part of the negotiated agreement,” EPUD General Manager Frank Lambe said. “We didn’t believe Emerald’s customer-owners should pay for it.”
EPUD serves more than 20,000 customers, the vast majority residential, in rural communities outside the Eugene-Springfield urban area.
The ruling and the reimbursement will help EPUD fill a gap in its budget between rising costs and lagging revenues, the utility said.
To try to balance its budget, EPUD earlier this month eliminated 10 jobs. The utility also expects to raise electric rates 3 percent next year and 2 percent for each of the two following years, on top of this year’s 4 percent increase, Lambe has said.
EPUD spent heavily on legal services for the long legal battle with Lakeview, and under the arbitration ruling, Lakeview is not required to cover those costs. EPUD spent $41,200 on the mediation, $520,700 on attorney fees and $25,000 on expert witnesses, Fossen said.
Lakeview is one of four utilities that developed, owns and gets power from the 89-tower White Creek Wind project near Goldendale in Eastern Washington.
Even with the arbitration ruling, EPUD’s contract to buy some of Lakeview’s share of the wind farm’s power remains an albatross around the neck of EPUD ratepayers.
EPUD signed to buy wind power from Lakeview in 2007 for 20 years, and in a simultaneous deal to sell that power to a California electricity trader through September 2011 at about the same price, to cover EPUD’s cost of buying the wind power.
EPUD has said it was expecting that by late 2011 its customer base would have grown and customers would need that extra power.
But they don’t, and the California buyer doesn’t want it either, meaning EPUD now must keep buying the power from the wind farm at contract rates and sell it on the open market, where prices have plunged, EPUD said.
EPUD expects that this year it will sell the wind power for $1.3 million less than EPUD pays for it, Fossen said.
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