Wind farm says Duke violated contract

Back to TopCommentsE-mailPrintBookmark and Share

The owner of a northern Indiana wind farm says Duke Energy Indiana Inc.—which had agreed to buy energy the 87-turbine operation produces—breached its contract, “proving disastrous.”

Benton County Wind Farm LLC, based in Earl Park, is suing Duke in federal court in Indianapolis for unspecified damages, claiming the power company has not honored its agreement.

wind-farm-factbox.gifThe suit alleges the company’s actions have resulted in the wind farm “frequently [being] forced to curtail operations. As a result, the Wind Farm’s electrical output and revenues have been sharply reduced.” But many of the details of Duke’s alleged contract breach are redacted in the 23-page complaint.

An executive for one of the wind farm’s parents, Orion Energy Group in Oakland, Calif., would not say whether the alleged payment shortcomings put the farm’s future in jeopardy.

“If it was not significant, we would not have filed the complaint,” said Jim Eisen, Orion’s general counsel.

A Duke spokeswoman would only say, “We’re reviewing the filing.” The utility’s attorneys had not filed an official court response to the lawsuit by IBJ deadline.

In 2006, the companies set up a 20-year contract in which Duke would buy 100 megawatts of electricity the wind farm produces once it went online in 2008. A 2007 agreement gives another 30 megawatts to Vectren, but Vectren’s obligations are “not an issue,” according to the lawsuit.

Orion Energy Group LLC began running the wind farm in 2008 as the state’s first commercial-scale operation. The farm’s 87 turbines tower over the 350-resident town of Earl Park northwest of Lafayette.

The wind farm has needed Duke’s business from its launch to cover the construction costs, the company says in its lawsuit. The project cost about $150 million.

Duke signed up to receive the energy as it was looking to diversify its energy portfolio with more renewable resources. The utility began searching as early as 2004 for a developer to build a 100-megawatt wind farm.

“Clean, carbon-free, wind-generated energy is a good addition to our power sources,” Jim Stanley, then-Duke Energy Indiana’s president, said in a statement soon after the wind farm began operating.

“The agreement was the first significant, long-term purchase of wind power in Indiana. It’s also a boost to the local economy.”

Duke takes the electricity and sells it onto the power grid through Midcontinent Independent System Operator Inc. in Carmel.

“The MISO re-sale prices are affected by many factors and fluctuate constantly, often within a single hour,” the lawsuit says. “Under the [contract], Duke bears all risks arising from these market fluctuations.”

Duke has to pay a fixed price, the amount of which was redacted from court records, to Benton County Wind Farm, regardless of what Duke earns reselling through MISO. Duke is only excused from its obligation to pay the wind farm in “narrowly defined” emergencies, the lawsuit says.

MISO’s pricing system and a glut of wind energy appear to be at the root of the court case.

A computer algorithm bases prices on two “significant factors”: bids that utilities submit when selling energy and costs relating to congestion on the grid.

Duke and other power sellers had to submit price bids for traditional forms of energy, such as coal and natural gas.

Companies selling wind energy did not have to bid until recently, when the renewable resource surged in popularity in Indiana.

Wind farms popped up around northern Indiana, which has become a hot spot for the energy source.

BP and Dominion Energy started the 600-megawatt Fowler Ridge Wind Farm, also in Benton County. And the county is now home to EDF Renewable Energy’s 106-megawatt Hoosier Wind Farm.

MISO’s transmission grid wasn’t able to handle the burst of new wind energy, according to an August 2012 report by Synapse Energy Economics Inc. in Cambridge, Mass.

“This leads to costly congestion and uneconomic curtailment, or spilling, of available wind,” the report said.

An oversupply congested the grid and drove down the prices at which utilities could sell the energy, which has happened nationally. In some cases, companies have to pay to dispense their power onto the grid. They will often claim tax credits that turn their upfront losses into profits.

MISO changed its rules in March, requiring sellers to submit bids for their energy, like they did for fossil fuels.

When bids are too high, MISO’s automated system electronically signals the energy producer—in this case, the Benton County Wind Farm—and tells it to reduce its output.

The lawsuit redacts what Duke specifically did, only noting the utility “curtail[ed] electrical production by refusing to offer the Wind Farm’s power to MISO at competitive prices and then refusing to compensate [the wind farm] when the Wind Farm is directed by MISO not to produce power.”

Eisen, from parent company Orion, would not elaborate on the situation beyond what documents say.

Contract terms say the wind farm is set up to produce 100 megawatts for Duke, so Duke must buy all 100 megawatts, without refusal.

“Duke’s refusal to [redacted] or to compensate BCWF for generation lost due to Duke’s bidding practices has proven disastrous for BCWF,” the lawsuit says. “As a result, the Wind Farm has produced substantially less power than it is capable of producing with a corresponding collapse of the Wind Farm’s cash and tax revenues.”•


Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. I am not by any means judging whether this is a good or bad project. It's pretty simple, the developers are not showing a hardship or need for this economic incentive. It is a vacant field, the easiest for development, and the developer already has the money to invest $26 million for construction. If they can afford that, they can afford to pay property taxes just like the rest of the residents do. As well, an average of $15/hour is an absolute joke in terms of economic development. Get in high paying jobs and maybe there's a different story. But that's the problem with this ask, it is speculative and users are just not known.

  2. Shouldn't this be a museum

  3. I don't have a problem with higher taxes, since it is obvious that our city is not adequately funded. And Ballard doesn't want to admit it, but he has increased taxes indirectly by 1) selling assets and spending the money, 2) letting now private entities increase user fees which were previously capped, 3) by spending reserves, and 4) by heavy dependence on TIFs. At the end, these are all indirect tax increases since someone will eventually have to pay for them. It's mathematics. You put property tax caps ("tax cut"), but you don't cut expenditures (justifiably so), so you increase taxes indirectly.

  4. Marijuana is the safest natural drug grown. Addiction is never physical. Marijuana health benefits are far more reaching then synthesized drugs. Abbott, Lilly, and the thousands of others create poisons and label them as medication. There is no current manufactured drug on the market that does not pose immediate and long term threat to the human anatomy. Certainly the potency of marijuana has increased by hybrids and growing techniques. However, Alcohol has been proven to destroy more families, relationships, cause more deaths and injuries in addition to the damage done to the body. Many confrontations such as domestic violence and other crimes can be attributed to alcohol. The criminal activities and injustices that surround marijuana exists because it is illegal in much of the world. If legalized throughout the world you would see a dramatic decrease in such activities and a savings to many countries for legal prosecutions, incarceration etc in regards to marijuana. It indeed can create wealth for the government by collecting taxes, creating jobs, etc.... I personally do not partake. I do hope it is legalized throughout the world.

  5. Build the resevoir. If built this will provide jobs and a reason to visit Anderson. The city needs to do something to differentiate itself from other cities in the area. Kudos to people with vision that are backing this project.