Benton Cnty. Wind Farm LLC v. Duke Energy Ind., Inc.
| Decision Date | 06 July 2015 |
| Docket Number | No. 1:13-cv-01984-SEB-TAB,1:13-cv-01984-SEB-TAB |
| Parties | BENTON COUNTY WIND FARM LLC, Plaintiff, v. DUKE ENERGY INDIANA, INC., Defendant. |
| Court | U.S. District Court — Southern District of Indiana |
This matter comes before us on the parties' Motions for Summary Judgment. [Dkt. Nos. 53, 59.] The motions are fully briefed. Having considered the arguments and the uncontroverted evidence, we DENY Benton County Wind Farm LLC's Motion for Summary Judgment and GRANT Duke Energy Indiana, Inc.'s Motion for Summary Judgment, for the following reasons:
Introduction1
The term "wind power" describes the process by which wind's kinetic energy is converted into electricity by the use of wind turbines. A wind turbine works the opposite way that a fan works. Instead of using electricity to make wind, like a fan, wind turbines use wind to make electricity. The wind turns blades which spin a shaft that connects to agenerator to generate electricity. The electricity cannot be stored, however. The electricity passes through a grid and is transmitted through electrical wires to the consumer.
Although large-scale wind generation is relatively new, in the past decade it has become one of the fastest growing sources of electricity generation in the United States. Prior to 2008, wind power in Indiana was extremely rare, limited to individual, small-scale turbines. Over the past seven years, Indiana has increased its electrical output to 1,745 MW generated by 1,031 turbines on six wind farms. According to Wind on the Wires (a wind advocacy organization), within the next decade Indiana is expected to triple its wind energy generation to more than 5,000 MW.
Benton County Wind Farm was the first wind farm in Indiana, beginning operations in 2008, and consists of 87 turbines. These wind turbines (or their blinking red warning lights) are observable for miles, especially while driving on I-65 from Indianapolis to Chicago. Just one of these 87 turbines provides power sufficient to supply 600 homes per year. The towers for these turbines often exceed 200 feet in height, are costly to install (approximately $1-2 million per turbine), and are extremely large and heavy (weighing approximately 300,000 pounds per turbine).
This new and developing source of energy has given rise to new business entities and relationships as techniques for the commercial exploitation of this resource have evolved and progressed. The litigation before us here reflects all these factors, requiring the Court to review the contract entered into by the parties and to resolve the dispute that has arisen under it.
The parties agree as to nearly all of the relevant facts. Most importantly, the parties stipulate that the contracts at issue are "clear and unambiguous." [Dkt. No. 55-1 at 1 (Duke); Dkt. No. 63 at 17 (BCWF).] The parties' dispute has arisen over their respective contractual obligations in light of subsequent changes in circumstances relating to the sale and purchase of wind energy. The specific provocation for the filing of this lawsuit was Duke's submission of bids to the intervening grid authority the amounts of which fell below the threshold at which Benton County Wind Farm LLC ("BCWF") was able to run its wind farm at 100% capacity. BCWF asserts that Duke's actions constitute a breach of the parties' contract, which Duke denies.
In 2005, when Indiana's General Assembly enacted legislation to mandate utility procurement of renewable energy, Duke issued a solicitation for 100 megawatts ("MW") of renewable power generation requiring the successful bidder to develop, permit, construct, and operate a renewable power plant. In exchange, Duke offered to pay a fixed price per MW generated. BCWF became the successful bidder in response to this solicitation.
On September 1, 2006, Duke and BCWF entered into a Renewable Wind Energy Power Purchase Agreement ("PPA") whereby Duke agreed to purchase energy generated by BCWF's wind farm located in Benton County, Indiana (the "Wind Farm"). Severalspecific provisions of the complex arrangement embodied in the PPA are relevant to the parties' current dispute:4
[Dkt. No. 1-1 at Art. 4.]5 The parties defined the term "Electrical Output" as follows:
Electrical Output: Means the entire electric energy output of the Plant delivered to the Point of Metering, as measured pursuant to Article 8.
[Id. at Art. 1 (Definitions).]6 The Point of Metering is also a defined term in the PPA.
Point of Metering: Means the interconnection point with NIPSCO and/or RTO, which is more fully described in the Interconnection Agreement.
[Id.] With respect to the scheduling, delivery, and transmission of the energy generated by BCWF, the parties agreed:
The parties included provisions in their PPA addressing a termination of the agreement by either party. Section 15.4 states: "[T]he Parties acknowledge and agree that if this Agreement is terminated due to an Event of Default by either Party, the actual or direct damages incurred by the non-defaulting Party shall include: . . . ." [Id. § 15.4]. Damages in the case of termination by the Seller due to an Event of Default by the Buyer are to be calculated in the following manner:
(a) in the case of a termination by Seller due to an Event of Default by Buyer, the net present value of the difference, if positive, between (x) the amount that Buyer would have been required to pay to Seller pursuant to this Agreement for delivery of all Electrical Output that would have been...
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