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WAPA Sued over Failure to Agree to Purchase Power

Aug. 10, 2004 – Caribe Waste Technologies, the company selected by the Turnbull administration four years ago to build and operate a state-of-the-art waste management system for the territory, has sued the Water and Power Authority, charging that it stonewalled from the start government directives to negotiate with CWT for the purchase of electricity to be generated by the system.
The lawsuit was filed July 26 in District Court on St. Thomas by attorney Treston Moore. It accuses WAPA of a litany of grievances: breach of contract, breach of contract-implied warranty of good faith and fair dealing, unfair competition, intentional violation of legislative provision, negligent violation of legislative provision, common-law fraud, fraudulent misrepresentation, negligent misrepresentation and "interference with prospective economic advantage."
A release dated July 28 from Interstate General Company LP, parent company of CWT, was delivered to V.I. media by FedEx on Tuesday, along with a copy of the complaint filed against WAPA. In the release, Mark Augenblick, president of IGC and CWT, states that his company "expended millions of dollars in responding to the procurement, successfully negotiating a waste-processing contract with the government, and trying to get WAPA to follow the law and honor its own agreement."
CWT alleges that WAPA over a period of three years has refused to negotiate the power-purchase agreement in violation of law and its own written agreement with CWT. The lawsuit charges that WAPA "arrogantly rejected the government's selection of CWT, questioned the technical judgment of the government's outside advisers and engaged in a course of conduct designed to intentionally harm CWT and prevent the project from succeeding."
The complaint states that "CWT would not have continued to expend resources during the delay caused by Defendant's misrepresentations had WAPA not made them." In the suit the company asks the court to award it "damages in an amount to be determined at trial" as well as unspecified punitive damages. It does not ask the court to order WAPA to contract to purchase power from the company.
"CWT and its alliance partners were selected in a competitive procurement in November 2000 to provide comprehensive waste management services to solve the islands' solid-waste crisis," the release states. "The government and CWT reached agreement in principle on their contract to process waste in late spring of 2001," the suit says. "All that remained for this contract and the project to proceed was for CWT to reach the statutorily mandated agreement with WAPA to purchase the facility's export electricity."
The government back in 2001 publicly put the price tag of the proposed gasification plant or plants at $180 million. The figure put forth regarding WAPA's purchase of power from CWT at that time was $10 million to $12 million a year over 30 years. Joseph R. Thomas Jr., then the authority's executive director, said WAPA did not need an outside power supplier and did not want to pay for power that it could produce on its own.
CWT Says Agreement Was Reached in 2001
According to the lawsuit, CWT and WAPA officials met in June 2001 and reached agreement that WAPA would purchase water from CWT at $9.75 per thousand gallons and electricity from CWT at "avoided cost." The term refers to how much money the utility would save by not producing the same amount of power. The suit states that WAPA asked to have a consultant determine that avoided cost and for CWT to pay half the cost of the study; it says CWT agreed and ended up paying $39,269.
But then, the suit states, WAPA told CWT it would not accept the consultant's report, and it hired a law firm "allegedly for the purpose of finalizing the new draft agreement" but in fact "stalling for time and engaging in a continuing course of bad-faith conduct."
In fall of 2001, the suit says, WAPA told CWT it would agree to purchase power only if the company received certification as a "qualifying facility," or QF, from the Public Services Commission. CWT applied for certification and received it on July 1, 2002. (See "PSC Certifies Caribe Waste as Power Producer".) But, the suit charges, "WAPA then refused to accept the PSC's decision and order."
According to the lawsuit, the utility by law is required "to negotiate power purchase agreements with a QF and to purchase power from a QF at WAPA's avoided cost."
Meantime, the suit notes, WAPA underwent a change of executive directors and the incoming chief executive (Alberto Bruno-Vega) asked in December 2002 for time to study the CWT matter. He met with company officials in March 2003 and "promised to instruct WAPA's lawyers to restart contract negotiations to purchase CWT's power."
The contract meeting was finally scheduled for July 31, 2003, the suit states, but at that time CWT was informed that "WAPA had received several other requests for power purchase agreements and was evaluating how to respond." In September WAPA informed CWT in writing that it was going to seek bids and that CWT's only option was to take part in the bidding process.
Much of the debate between WAPA and CWT has been played out openly before the Public Services Commission.
WAPA Suit against PSC Pending
WAPA sued the PSC last fall over the commission's directive that the authority negotiate with CWT for the purchase of water and electricity that utility officials contend they do not need or want to buy. Territorial Court Judge Audrey Thomas decided there was sufficient evidence for the case to go forward and so informed the two entities on Dec. 22. At last report a date had not been set for the trial to begin. (See "Court to Hear WAPA's Appeal of PSC's CWT Order".)
At its June meeting the WAPA board voted to hire Skadden, Arps, Slate, Meagher & Flom at a cost of $50,000 to assist the authority in developing a request for proposals for alternative sources of energy. It said the RFP will be sent to five companies: Caribe Waste Technologies, Florida Power and Light, Sea Solar, Renaissance Group and Caribbean Energy Resources Corp. Bruno-Vega said following that meeting that WAPA was moving toward finding an outside source of power because of increasing fuel costs.
The PSC, at its July 27 meeting – a day after the CWT suit was filed, but with no mention of it at the meeting – not surprisingly took issue with this. (See "PSC Critical of WAPA's Approach to Power Suppliers".)
According to the CWT suit, the company's technology "produces an energy-rich synthesis gas from the solid waste which is used to make electricity." And this, it says, "will enable WAPA to reduce its dependence on expensive and unpredictable foreign oil. It will also allow WAPA to rely less on old, unreliable and polluting oil-fired generators."

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