Batavia hires big-time lawyers for electricity cost problem
Batavia has hired big guns to find a fix for its electricity-price woes.
City leaders have asked the Jenner and Block LLP law firm of Chicago to advise them about what options, if any, the city can pursue to diversify its electrical portfolio. That includes investigating whether the city could sue to get out of its four-decade obligation to buy unexpectedly costlier power generated by the Prairie State Energy Campus, according to Mayor Jeff Schielke.
"We certainly are exploring that option," Schielke said.
It could also mean finding a way for the city to sell part of that obligation, or how to get the state to change laws regarding the city's ability to sell its excess electricity to more users, Schielke said.
"I think we are looking at this as a long-term investment in the electrical utility," Schielke said. "There is a lot at stake here."
Hiring the internationally renowned firm should send a message to utility customers, bondholders, Prairie State partners and the Northern Illinois Municipal Power Agency that Batavia officials are extremely serious about finding a solution, Schielke said. "I thought we needed to arm ourselves with some very strong legal experience," he said.
Jenner and Block fits the description. The 102-year-old firm, with 480 lawyers, has big cases under its belt, and Batavia officials are also counting on the firm's resources and legislative connections.
Among its victories was the 1980 decision that AT&T had violated antitrust laws, leading to the breakup of the telecommunications giant that had a near-monopoly at the time on long-distance telephone service. The law firm's chairman, former U.S. Attorney Anton Valukas, was the court-appointed examiner in the Lehman Bros. bankruptcy. American Lawyer magazine has named it one of the top 20 law firms in the nation.
The city council approved the letter of agreement with the firm Monday. Costs could range from $380 to $1,200 per hour, depending on the experience of the individual lawyers doing the work and whether they are associates or partners. Project assistants cost $195 an hour, and paralegals cost $195 to $355 an hour.
The bills will be paid out of the city's electric utility fund, which is mainly supported by user charges.
Last fall, the city named another law firm -- the one representing customers pursuing a class-action lawsuit over the electricity deal -- as city counsel, so the firm could examine confidential information regarding the city's decisions about getting involved with Prairie State. But so far, the city has not joined that federal suit as a plaintiff.
The suit contends that several firms made "negligent misrepresentations" to Batavia about the costs of building and operating the plant and the quality of the coal that fuels it. Prairie State is a mine-to-mouth plant. Batavia is obligated, through its membership in NIMPA, to buy at least 55 megawatt hours every hour, every day, for 26 more years. (A megawatt hour is one in which 1 million watts of power are used.)
At signing time, the cost was expected to be $46 per megawatt hour. The price has, however, been as high as $179 per megawatt hour, in the plant's first four years of operation. At the same time, Batavia's need for electricity did not increase as expected and market prices dropped, meaning that when the city does sell its excess, it is doing so below its cost.
Batavia agreed to pay NIMPA $240 million in principal related to the construction of the plant. The city is obligated to make payments of $15.5 million a year, through 2040.