Archive for the ‘CPS’ Category

January 26, 2010

Scott Stroud
San Antonio Express News

The air blowing overhead in the brightly lit courtroom made it hard to hear at times. Overhead projectors illuminated PowerPoint presentations on both sides of the room up front. There were microphones and laptops, too, some plugged into outlets along the walls.

And yet, with all the electricity thrumming through, nothing burned up CPS ratepayer dollars faster than the dozen-plus lawyers squabbling over the tattered relationship between CPS Energy and NRG Energy Inc., its co-owner in the floundering attempt to build two new nuclear plants at the South Texas Project.

Relationships being what they are, the most consistent comparison made since the dispute broke into the open late last year has been divorce. It seemed too easy at first, but then on Monday, Jelynne LeBlanc-Burley, the new interim general manager at CPS, wondered why my colleague, Anton Caputo, and I sat on the NRG side of the courtroom.

I always thought bride’s side-groom’s side traditions were for weddings instead of divorces, but there you go. And the more you think about what has happened here, the more unavoidable the parallel becomes.

As with an ugly divorce, this matter now lies in the hands of the lawyers, which is not a good place for it to be. It’s there in part because neither side took seriously the possibility that the deal might fall apart.

Blame-laying is rampant now, negotiations have been sluggish, and grandstanding is commonplace. There are no children in the drama, only San Antonio ratepayers, whose energy bills ultimately will underwrite this nonsense.

The part of the rakish rogue has been played convincingly by NRG, which often seems too slick for its own good. If CPS is correct in its claim that NRG negotiated to sell part of the nuclear project to Toshiba, which also happened to be the main contractor, without telling CPS, that dalliance looks unseemly at best.

That may be when the sex appeal of CPS’ considerable dowry wore off. It also might’ve dawned on NRG during CPS’ effort to sell the public on nuclear expansion last year that suddenly the conversation wasn’t so scintillating.

The latest slickness comes from NRG President and CEO David Crane, who met with San Antonio business leaders last week and then thanked them in a letter he released to the newspaper. I’m all for transparency, but the letter, which outlined NRG’s legal arguments briefly, fits my definition of grandstanding.

It’s the kind you write when you’re losing, and that appears to be NRG’s legal status at the moment. Judge Larry Noll didn’t buy their claim that CPS should forfeit its interest in the property because he found nothing to indicate that in the contract. He’s shown no interest in all the times CPS executives told the rest of us that they would lose the millions they’d invested if they walked away, saying he only cares about what’s in the contract.

That’s good news for CPS, which has made any number of statements contradicting its legal position, but it still doesn’t clean up the mess.

As for the divorce, it’s easy to say there should have been a prenuptial agreement here, which is true as far as it goes. But this was no California celebrity marriage. It’s a billion-dollar deal that affects us all more than a little bit. The lack of vigilance by CPS on the front end remains appalling.

The whole thing reminds me why I’ve never much cared for divorce court: The proceedings are often tawdry, both sides seem like losers, and you always end up wondering what will happen to the children – or, in this case, the ratepayers of San Antonio.

jstroud(at)express-news.net

January 26, 2010

By Anton Caputo
San Antonio Express-News

Nuclear Innovation North America looked to score a quick knockout Monday as the massive nuclear lawsuit filed by CPS Energy got under way.

408th District Court Judge Larry Noll was expected to announce Tuesday whether the tactic worked.

NINA, which is being sued by CPS over the teetering proposal to build two more reactors at the South Texas Project, asked Noll for a summary judgment, a move that would give NINA a victory in the first phase of the case.

NINA, which is a partnership between NRG Energy and Toshiba, contends that CPS should lose the roughly $350 million it has invested in the project and its ownership rights if it withdraws. Its attorneys argued an abbreviated version of the case Monday.

"It is pretty clear that NRG is intent on trying to convince a judge that our customers should lose all of their investment," said CPS acting General Manager Jelynne LeBlanc-Burley, adding that she still holds out hope for a settlement.

CPS is suing NINA for $32 billion, claiming the company pulled CPS into the deal by making fraudulent claims and then orchestrated a misinformation campaign through the media to force CPS out. The claims of fraud and conspiracy will be argued in a yet-to-be scheduled second phase of the trial.

The first phase, which began Monday, focuses on the two agreements that govern the partnership. Attorneys on both sides argued those contracts clearly favor their clients’ position.

CPS attorney Ricardo Cedillo argued that the agreements support the contention that CPS should be compensated for its investment in the project and its ownership stake if it withdraws.

Cedillo said the agreements state that the partners are tenants in common with a 50 percent stake each. This form of ownership, under state law, guarantees CPS’ "undivided interest" in the project even if it withdraws, he said.

This, Cedillo told the court, could lead to some kind of diluted interest for CPS if NINA continues with the project, and eventually to a partition of some sort where CPS is compensated for the value of its stake.

Currently, the project is worth at least $2 billion because of the engineering, permitting work and infrastructure, CPS claims.

In NINA’s case, attorney Greg Coleman argued that the agreements show that a partner that pulls out gets nothing. This leaves the remaining partner with the choice to pull out as well or carry on and take on all the risk and potential gain.

"That’s how project financing works," Coleman said. "When you make a gamble … that money is on the table and it remains on the table."

NINA has also asked for a change of venue to move the trial out of Bexar County.

Attorney Lamont Jefferson argued that a Bexar County jury is not appropriate to hear the case involving the municipally owned utility because "it’s like a parent trying to discipline its misbehaving children in public."

January 20, 2010

By Anton Caputo
San Antonio Express-News

A federal court judge Wednesday ordered a stop to all activity in the $32 billion nuclear lawsuit while he decides if the case belongs under federal jurisdiction.

Judge Xavier Rodriguez of the U.S. District Court for the Western District of Texas is expected to rule today on whether a citizens group that is trying to intervene has standing to get the case moved to federal court.

Until then, the opponents in the suit – CPS Energy and NRG Energy – have had to halt depositions they were conducting for a trial that was set to start Monday in state court.

The citizens group, the Ratepayer Protection Coalition, argues CPS has violated the coalition’s constitutional rights, which would make this a federal case.

The constitutional violation, the coalition argues, stems from CPS not being honest with the public during its presentations on the project, which "denied their First Amendment right to have an informed dialogue and a decision by their elected representatives."

"I believe the taxpayer needs to be granted some kind of representation in this case because they are not getting that from CPS," said coalition attorney Karen Seal.

This is the second attempt to move the case to federal court; Toshiba Inc., which was a party to the suit, tried last week.

That prompted CPS to drop the Japanese company from the lawsuit over the weekend. CPS attorneys said hearing the case in federal court could cause substantial delays.

CPS attorney Michael Moore said he expected the case to be remanded to state court, with the trial beginning on schedule.

"CPS Energy continues to believe that it is in its customers’ best interests for the case to be heard in a Texas state court on a quick timeline," said CPS General Counsel Carolyn Shellman.

The suit stems from the proposed multibillion-dollar expansion of the nuclear South Texas Project. CPS is partnering with Nuclear Innovation North America – which is a partnership between NRG and Toshiba – on the project.

CPS is asking a court to clarify its rights should it decide to pull out of the deal. It is also suing NRG and NINA for at least $32 billion, charging them with making false claims to lure CPS into the project and then distributing bogus information in the media to push it out.

NRG and NINA deny the allegations.

December 30, 2009

By Anton Caputo and Tracy Idell Hamilton
San Antonio Express-News

Nuclear Innovation North America argued in court Wednesday that CPS Energy had refused to pay its portion of January’s development costs for the nuclear deal, a move that could kill the project.

But later Wednesday, CPS said it would pay its share of January’s costs, eliminating one of the many legal points of contention between the partners.

"Our sole goal today was to ensure the ability of the STP expansion to continue past Jan. 1, and their decision accomplishes that goal," NRG spokesman Dave Knox said.

NINA is owned by NRG and Toshiba Inc.

The development came just hours after NINA tried to force the issue in court but failed when a Bexar County judge denied its request to force CPS to pay its portion of January’s costs.

NINA officials argued that failure to pay would stall the project, making it worthless and causing the partners to lose their investment. CPS has spent $300 million on the project’s engineering and licensing, a number that will rise to $375 million by February, acting General Manager Jelynne LeBlanc-Burley said.

Wednesday’s salvo was the first in a $32 billion lawsuit filed by CPS earlier this month over the proposal to build two more nuclear reactors at the South Texas Project outside of Bay City.

In its filings and through attorney Ricardo Cedillo, CPS argues that NINA lied to the city-owned utility in order to lure it into the project, and then undertook a "campaign of media misinformation, public threats and disclosure of confidential Project information" to push it out and take control.

Cedillo also alleged that NRG had a "sweetheart deal" with Toshiba, where Toshiba paid NRG roughly $150 million for the right to be the project’s contractor. The two companies then worked together to publicize high cost estimates in the press, Cedillo said, to sour the public and San Antonio City Council on the deal.

"They wouldn’t be the first slick guys from Wall Street that have ever pulled that off," Cedillo said.

NINA attorney Lamont Jefferson characterized the argument as a "vast conspiracy theory" with no evidence. He countered that NRG would have had to foresee that CPS executives would withhold the higher cost estimate from its board and that the resulting bad publicity would cause a political scandal in San Antonio.

An internal CPS investigation into why the cost estimate was withheld has caused two high-level resignations at CPS and prompted the board chairwoman to announce her resignation.

"His theory is we knew all of this is going to happen in advance and that we asked Toshiba, ‘Please, please give us a high cost estimate,’" Jefferson said.

Another point of contention is what happens to a partner’s stake if it pulls out of the project. CPS has not decided to do so, LeBlanc-Burley said, but wants clarification from the court in case it does.

She said that the utility is open to negotiations with NINA outside of the courtroom.

"I still maintain that a business solution is the best option for us, but we haven’t been able to get them to the table," she said.

December 30, 2009

By Tracy Idell Hamilton and Anton Caputo
San Antonio- Express-News

CPS Energy and its nuclear-expansion partner were scheduled to face off in a Bexar County courtroom for the first time Wednesday over the $32 billion lawsuit spawned by their now-faltering deal.

Wednesday’s hearing in district court likely would be limited to setting dates for more sessions in January, when the partners will begin arguments in what has become an increasingly nasty legal battle.

Both sides ratcheted up the rhetoric Monday with another round of filings.

CPS Energy alleged its partner, Nuclear Innovation North America, lied to CPS to "induce" it to participate in the project, and then undertook a "campaign of media misinformation, public threats and disclosure of confidential Project information … to endanger CPS Energy’s ability to continue in the project."

The utility sought $32 billion in actual and punitive damages from its partner.

"I think it’s an appropriate response," CPS Energy acting General Manager Jelynne LeBlanc-Burley said Tuesday. "We’re trying to protect the resources of CPS and protect ratepayers."

NINA, which countered that CPS Energy is in breach of contract and so forfeits its stake in the project, responded to its partner’s accusations with a filing Monday demanding that the utility offer specifics.

"The petition is filled with silly conspiracy theories, unfounded accusations and personal attacks," NINA President Steve Winn said in a statement last week. "CPS has grabbed a spectacular headline, but the allegations in the suit will soon be proven frivolous."

About two hours after NINA’s Monday filing, CPS Energy submitted an amended complaint that asked the court to order the project’s sale and split the proceeds between the partners, or to cancel it but allow them to retain their interest in the site near Bay City.

Despite the cranked-up volume, LeBlanc-Burley said, CPS Energy was still open to a business solution – although she acknowledged earlier talks between the partners had broken down and had not resumed.

The utility filed the $32 billion lawsuit in the face of what LeBlanc-Burley called a "very aggressive, highly escalated" response by NINA to CPS’ first filing on Dec. 7, which she characterized as simply seeking clarification about what would happen to either party’s share should it decide to withdraw from the project.

Officials with NRG Energy, which makes up 88 percent of NINA – contractor Toshiba Inc. makes up the other 12 percent – also said they’d still prefer to settle the matter out of court.

"We have always said that we do not feel that the courtroom is the location to come up with mutually agreeable solutions. That has to be done in discussion," NRG spokesman Dave Knox said Tuesday. "That said, we didn’t ask to bring it to the courtroom. It is there and we are going to defend ourselves vigorously."

Both parties asked the court to expedite the process, given the high stakes involved.

The U.S. Energy Department was expected to award its first loan guarantees to one of four nuclear projects in the next few days. Both CPS and NRG said the deal is not viable without the guarantees.

Winn contended that the expansion of the South Texas Project was considered first in line for a portion of the $18.5 billion available, but that the recent instability at CPS hurt it chances of securing the guarantees – to the point that it may receive nothing at all, effectively killing the project.

And while news reports suggested another project, proposed by the Southern Co., could receive the first approval for loan guarantees this week, LeBlanc-Burley said the Energy Department hadn’t given CPS any indication it could lose out altogether.

NINA’s Dec. 23 filing suggested CPS Energy had stopped, or at least had signaled that it would stop, making payments it was contractually obligated to make. NINA lawyers said that means CPS effectively withdrew from the project.

But LeBlanc-Burley said CPS Energy kept up its obligations and planned to continue doing so.

The lawsuit revealed hints that tension among the partners had been brewing for some time.

According to the pleadings, a final agreement among the parties, supposed to be finalized in February, remained unsigned and unexecuted, leaving the partners to rely on a pair of previous pacts.