TEXARKANA -- A federal lawsuit on behalf of the city of Prescott and others accuses Southwestern Electric Power Co. of misconduct that has resulted in the accrual of millions in fees associated with the transmission of electricity.
The complaint was filed earlier this month in the Texarkana Division of the Western District of Arkansas. Named as plaintiffs in the suit are the city of Prescott doing business as Prescott Water and Light Co. and Prescott School District No. 14; Nevada County resident Tommy Poole; Bank of Delight; and Firestone Building Products Co.
All of the plaintiffs are suing in their capacity as customers of Prescott Water and Light Co. The plaintiffs represent three types of electric consumers: residential, commercial and industrial.
SWEPCO did not immediately respond to a request for comment from the Texarkana Gazette and had not filed a response to the complaint Monday.
Prescott bought electricity from Entergy until January 2006, when Entergy ended the contract and said it could no longer provide to Prescott, according to the complaint. Until January 2009, the city purchased electricity from American Electric Power, which owns SWEPCO, on a temporary basis and became a wholesale customer of SWEPCO in January 2009.
According to the complaint, SWEPCO's agreement included not only the delivery of electricity to Prescott but that it act as the city's agent for dealing with all transmission matters in the market. Because Prescott is a small municipality with limited financial resources, it is unable to build its own substation. When it started buying energy from SWEPCO, the company declined to build a Prescott substation, and the city's power was routed through an Entergy substation that already existed in the area, the complaint said.
In 2012, changes at Entergy led to concern that Prescott and the city of Hope, which is not a plaintiff to the suit, would be subject to "rate pancaking and congestion" charges because the energy SWEPCO sold to the cities crossed multiple energy transmission systems. The city filed objections to the proposed changes for Entergy, which were withdrawn later at SWEPCO's request and with SWEPCO's assurances that the fees would not materialize.
SWEPCO agreed in 2012 to construct a substation in Prescott, which would eliminate the need for Prescott to use Entergy's substation, according to the complaint.
In 2014, Prescott's bill for the wholesale electricity it provides began to include "substantial" transmission charges, according to the complaint. SWEPCO reneged on its promise to build a Prescott substation, with SWEPCO President Venita McCellon-Allen telling the city that SWEPCO representatives who'd agreed to the construction lacked the authority to make such promises, the complaint said.
"In and before December 2013, the charges attributable to Prescott's transmission and use of the Entergy Substation were approximately $65,000.00 per month," the complaint states. "Thereafter, even though Prescott's use of the Entergy Substation and load purchase remained consistent, the costs increased dramatically."
The city filed a complaint in February 2016 with the Federal Energy Regulatory Commission in an attempt to work out the problem and eliminate the "rate pancaking charges." That same year, Prescott was approached by a different company offering to replace American Electric Power/SWEPCO as the town's market participant for market transmission services.
"GridLiance proposed to build a 115 kv transmission line between Hope and Prescott with an interconnection to Entergy," the complaint states.
But when SWEPCO learned of the offer, it resumed discussions regarding the rate pancaking problem, the complaint states. SWEPCO made promises to Prescott and Hope in January 2017 that led to an end of talks with GridLiance, according to the complaint. When it became clear in the summer of 2017 that SWEPCO wasn't taking steps to alleviate the problem to Prescott's satisfaction, the city decided to look for another energy supplier.
To do that, SWEPCO, as the city's agent, had to request a study that it has refused to do, the complaint states. Without SWEPCO's cooperation, Prescott cannot move to a wholesale electric supplier with the Midwest System Operator Regional Transmission Organization.
In late 2017, SWEPCO attempted to alleviate the problem by promising Prescott that the increased charges would be reduced through SWEPCO's purchase of an Oklahoma wind farm, according to the complaint. In 2018, SWEPCO scrapped its plan to purchase the wind farm.
"Prescott's damages have totaled approximately $3,286,565 from January 2014 through December 2018, with such charges continuing through the investigation and discovery in this cause of action," the complaint states.
The plaintiffs allege several causes of action against SWEPCO, including detrimental reliance, breach of fiduciary duty and negligence. The complaint seeks damages to cover the amount Prescott says it has paid in fees because of SWEPCO's misconduct, plus any additional fees incurred from January 2019 forward. The plaintiffs also seek court costs and attorney fees.
State Desk on 04/17/2019