A wind-energy company claims in court that six South Dakota energy co-ops cost it nearly $800 million by refusing to enter into good-faith agreements to buy its electricity, as required by federal law.
Prelude, a Wisconsin-based wind company, claims the defendants acted in concert to defame it, interfere with contract, and told landowners not to work with it or to demand “sizeable advance payments” because Prelude is an “outlander” that could not be trusted.
In doing so, Prelude and South Dakota landowner Edward Dostal claim, Basin Electric Power Cooperative and five other South Dakota companies violated the Public Utility Regulation Policies Act, enacted by Congress in 1978.
The South Dakota Wind Energy Association says South Dakota has the “fourth best wind in the country.”
“Standing out here you can feel the continental wind energy just blowing across the Great Plains,” Prelude’s attorney Robert Lorge told Courthouse News. “My clients are trying to harness that. We filed a billion-dollar case, but South Dakota has a trillion-dollar wind.”
Basin Electric is one of the largest electric generation and transmission co-ops in the United States, providing power to customers in Colorado, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, South Dakota and Wyoming.
Also sued are the Rosebud, Butte, Grand, Moreau-Grand and Rushmore Electric Power Co-ops, in the Sept. 16 complaint in Tripp County Court.
The Public Utility Regulation Policies Act, or PURPA, provides for judicial review in state courts.
Prelude accuses the defendants of “thwarting” it from “developing its wind farm projects in South Dakota, all to its loss, and to the detriment of the consumers and general public of South Dakota and adjacent states engaged in interstate commerce that benefit from and use the electricity produced and consumed in South Dakota.”
At the heart of the 81-page lawsuit is Basin’s alleged violations of PURPA.
“The purpose of PURPA is basically to promote the production of alternative energy in the United States, and to give alternative wind energy developers the chance to play on an ‘even playing field’ with the major utilities,” attorney Lorge said.
“It requires major utilities to purchase wind energy at their highest avoided cost.”
Avoided cost is what a utility would have to pay if it produced the electricity itself or bought it elsewhere. It also can be defined as the price it would pay to a qualifying facility, or QF, in utilities jargon.
“The original idea behind the law was that cleaner, alternative energy would replace the higher-polluting energy sources and also increase the supply,” Lorge said.
Prelude says it has been trying to negotiate with the co-ops since 2008. But for seven years, it says, Basin and the others would not give it a straight answer about their avoided costs.
Basin consistently set its “price for purchased power rate arbitrarily low to discourage development of alternative resources such as the wind power electricity of plaintiffs’ qualifying facilities,” and offered Prelude only half the going rate, according to the complaint.
Basin told Prelude in 2009 that it had “only limited interest in additional purchases at this time,” though Basin’s annual reports from 2009 through 2014 consistently projected “growing” energy needs from Basin’s members, the complaint states.
Prelude claims the defendants tried to interfere with property owners, such as Dostal, who might grant easements for its wind turbines. It claims a Basin agent told one landowner that “the Wisconsin guys (Prelude LLC agents and employees) needed to be run out of the country and stating that they (Prelude LLC) were fraudulent, and like slanders and defamation of the products and services of Prelude LLC.” (Parentheses in complaint.)
It was is all part of a scheme to “hinder, thwart, stifle, and unreasonably restrain trade and market competition, and artificially lower quoted or offered rate prices to undermine lawful competition,” Prelude says.
The defendants apparently do not oppose all wind energy. “Basin Electric Cooperative has received the benefit of low-interest loans in the development of their own wind farms,” which produce 25 percent of its power, Prelude says. The rest of Basin’s energy comes from coal and other fossil fuels.
Prelude operates over 143 wind farm options and easements in Tripp County and more throughout the state. It says it was on track to begin generating electricity from wind in January this year, but the defendants’ interference has pushed its completion date back to June 2017.
Prelude calculates its losses in paragraph 187 to 191 of the lawsuit, estimating them as $782 million.
It seeks that much in damages, and asks the court to determine the appropriate avoided cost rate for its energy.
Basin Electric did not respond to requests for comment.
Prelude’s local counsel is Richard Wehmhoefer, of Deadwood.
Lorge’s firm, Lorge & Lorge, is based in Madison, Wisc.
Prelude is based in Green Bay.
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