Appellate Court Rules In Favor Of Luminant Regarding Wind Farm

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An appellate court has overturned a lower-court ruling and opened the way for Luminant Energy Co. LLC (formerly known as TXU Portfolio Management Co. LP) to recover millions of dollars in damages from wind farms owned by NextEra Energy (formerly known as FPL Energy) that did not deliver the required amount of wind-generated energy and renewable energy credits (RECs).

According to the law firm Walker Sewell – the law firm that represented Luminant – the Dallas Court of Appeals also affirmed the lower-court's ruling rejecting NextEra's claims against Luminant in the case.

Luminant filed the lawsuit in 2004 and asserted that the owner of the wind farms breached contractual obligations to deliver energy and related RECs over a five-year period under the terms of three power purchase agreements (PPAs). NextEra claimed it was unable to provide wind-generated power due to a lack of transmission capacity and argued that Luminant was required to provide that capacity.

Luminant sought liquidated damages of $50/MWh for the megawatt hours the wind farms failed to deliver. Before the trial, however, the 116th Judicial District Court in Dallas County ruled that the liquidated damages provisions in the PPAs were unenforceable. As a result, Luminant sought actual damages at trial instead.

‘We are pleased with the ruling,’ said a Luminant spokesperson via e-mail. ‘We have worked with FP&L for years and continue to have a positive business relationship with them. We look forward to putting this matter behind us and continuing our leadership as the state's largest purchaser of wind energy, a valuable Texas resource.’

In 2007, a jury awarded Luminant a total of $8.9 million in damages and rejected the wind farms' counterclaims against the company. The trial court ultimately threw out the jury verdict and ruled that neither party could recover on its damages claims. The court also ruled that Luminant should return more than $3 million in security the company had accessed in partial satisfaction of the wind farms' failure to deliver energy. Both sides appealed the trial court's rulings.

The Court of Appeals reversed the trial court's judgment against Luminant. The appellate court held that Luminant was not required to provide transmission capacity for the wind farms to generate power. The court also ruled that the liquidated damages provision requiring NextEra to pay $50/MWh for the renewable energy and RECs the company failed to deliver is enforceable. In addition, the Court of Appeals rejected the trial court's ruling that Luminant should return the security funds it received. The case has been remanded to the trial court for a determination of the amount of liquidated damages Luminant will receive.

Steve Stengel, spokesperson for NextEra Energy Resources, says the company plans to appeal the court's latest decision.

‘We are disappointed and strongly disagree with the ruling of the appellate court and plan to appeal,’ he stated, via e-mail.

SOURCE: Walker Sewell

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